Chris Huhne
Main Page: Chris Huhne (Liberal Democrat - Eastleigh)Solar Power (Feed-in Tariff)
Chris Huhne Excerpts(13 years, 1 month ago)
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Caroline Flint
I will make some progress because a lot of people want to speak in this debate.
At the outset, let me deal with a few of the myths that the Government have desperately resorted to peddling in defence of their plans and that appear in their motion today. The first and most bizarre is the idea that we were opposed to the introduction of feed-in tariffs and that somehow the Tories and the Liberal Democrats introduced them. It takes some audacity to try to claim credit for a scheme that was enacted, introduced and came into force under the previous Labour Government, but to try to take credit for a scheme that they are scrapping really takes the biscuit. The record will show that while Labour began this growth industry, the Government’s policies have all but killed it in its infancy.
The second myth is the Government’s claim that the reason they are cutting the tariff level is that they are worried about energy bills.
Caroline Flint
I will give way to the right hon. Gentleman in a moment. This from a Government who have cut help for more than 12 million pensioners with their heating bills this winter and who have stood back and done absolutely nothing as customers’ bills have soared and energy companies’ profits have rocketed.
If the Secretary of State really wants to talk about energy bills, I will tell him a thing or two. Let us start with how much the average annual energy bill costs under this Government—£1,345—and how much feed-in tariffs cost the public. From what the Government have said, one might think that this is costing us all hundreds of pounds a year, but it is not. Is it perhaps £50 a year, or £20, or even £10? No, the actual figure, according to the independent regulator, Ofgem, is less than £1 per household per year—less than £1 at a time when the average energy bill stands at £1,345, when pensioners are seeing their winter fuel payments cut by £50 or more, and when standard tariffs are up by £175 only since June. Labour and I will not take any lectures on energy prices from this Government.
Caroline Flint
If the Secretary of State really wants a debate about this, let us start one.
Chris Huhne
There was only ever one vote in the House of Commons on feed-in tariffs, in April 2008, when the right hon. Lady voted against. What has made her change her mind?
Caroline Flint
There was an amendment tabled by the former Labour Member, Alan Simpson. My right hon. Friend the Member for Croydon North (Malcolm Wicks) said at the time:
“I sympathise with, and fully support, people’s yearning for appropriate incentives to encourage the faster take-up of microgeneration.”—[Official Report, 30 April 2008; Vol. 475, c. 393.]
He told my hon. Friend and the House that he wanted to go away and look at what could be possible. On 5 November in the same year, the Labour Government tabled an amendment in the House of Lords that paved the way for the scheme that we have today. We do not need any lectures by the Secretary of State on who created the opportunity for feed-in tariffs in this country—it was the Labour Government.
The Secretary of State for Energy and Climate Change (Chris Huhne)
I beg to move an amendment, to leave out from “House” to the end of the Question and add:
“notes that the previous administration only introduced a feed-in tariffs scheme following pressure from Liberal Democrat and Conservative hon. Members; further notes that during the period up to October 2011 over 120,000 UK solar installations had been completed; further notes that this is three times the deployment expected by the previous administration; recognises that no commercial-scale solar PV schemes were expected by the previous administration; further notes that the cost of PV panels has fallen by at least 30 per cent. since the current tariff was introduced and that the previous administration set the tariff levels for solar PV to deliver a five per cent. index-linked return; regrets that the previous administration did not draw on the experiences of Germany in setting a sustainable and predictable digression of tariffs; further notes that failing to act could add £26 to the domestic electricity bill of all consumers in 2020 including the 5.5 million people left in fuel poverty by the previous administration; further regrets that the previous administration did not introduce a community tariff; believes that the Government is right to bring the tariff levels back in line with the rates of return envisaged; acknowledges that it is right to link support under feed-in tariffs to energy efficiency and the Green Deal ensuring the most cost-effective carbon abatement measures are introduced first; supports a consultation on the introduction of a community tariff; and further believes that the Government is putting feed-in tariffs on a long-term, fair and sustainable footing.”
We find ourselves here to debate a motion that would add at least £26 to an average consumer bill—that is, if we were to leave the scheme unchanged. The estimates are constantly being revised, and the figure may well reach as high as £80 on the current trajectory. The proposal would give bumper profits to solar companies and do little to tackle climate change. There seems to be no awareness whatever on the part of the right hon. Member for Don Valley (Caroline Flint) or other Opposition Members that those are real costs, being imposed on real people, who will be unable to spend the money on other goods and services as a result. Every corner shop across the length and breadth of the land would be affected if disposable incomes were hit in that way. Some of the people who are in the greatest fuel poverty—about whom Labour Members are meant to be most concerned—will be most affected by these increases.
Feed-in tariffs have been successful. They have helped many people produce green energy locally, which is why, before we were coalition partners, Liberal Democrats and Conservatives supported their introduction. Solar energy has been particularly popular, with more than 140,000 homes now generating some of their own electricity. Unfortunately, this promising scheme was built on shaky economic foundations. In setting the returns, the previous Government completely underestimated the potential for cost reductions in the sector. They assumed that solar panels would cost just 9% less to install in 2012 than they would in 2013. As we heard from the right hon. Member for Don Valley, Labour did not propose to review this matter before 2013. In fact, costs are falling and falling fast—at least 30% since the scheme started. The result is that returns on solar photovoltaic investments are double what was originally envisaged.
Mr Ben Bradshaw (Exeter) (Lab)
What would the Secretary of State say to a company in my constituency, Sun Gift Solar—one of many in Exeter and the south-west that has contacted me—which clearly told me that its customers do not have any trust in what it calls this “erratic and inconsistent Government” whose actions have already immeasurably damaged confidence in this industry and will put tens of thousands of people back on benefits?
Chris Huhne
I do not accept that at all. I will come on to some of the flaws in the original design of the scheme. I think it is regrettable that the Leader of the Opposition is not in his place alongside the right hon. Lady to defend the scheme that he introduced. I am going to be very clear—I am not going to pull my punches—about the mistakes made by the right hon. Member for Doncaster North (Edward Miliband) when he was Secretary of State for Energy and Climate Change and this scheme was introduced. I will deal precisely with that.
The right hon. Member for Exeter (Mr Bradshaw) has just mentioned an investor in his constituency, so let me quote another—Martin Bleasby, the business development manager of Driffield-based Dodds Solar who said:
“It was clear something had to happen. It was never supposed to be a get-rich-quick scheme. The way things were going, the budget was going to run out in a few months. Now we can look at building a business which is sustainable for years to come.”
Chris Huhne
I happily give way to my hon. Friend the Member for Colchester (Bob Russell).
Bob Russell
My right hon. Friend is right to draw attention to the fact that the scheme is flawed. That is acknowledged. Does he agree, however, that where a social housing scheme or a community scheme has already commenced the process and panels are being installed almost as we speak, contracts should be allowed to roll even if they go beyond 12 December? Where the contract has already started, I say let it roll to completion.
Chris Huhne
My hon. Friend makes an important point. I have to say that since we announced this consultation I have received e-mails, as have a number of other hon. Members, from solar companies offering to install solar panels before the 12 December deadline. That does not suggest to me that we left inadequate time before the reference period.
Chris Huhne
Let me come back to the point my hon. Friend made about social schemes and social housing, about which I care. Sadly, however, another design flaw that emerged from the inception of this scheme—again, the right hon. Member for Doncaster North was responsible for it—was that it did not have the ability to recognise social housing or social schemes. If we wanted a special scheme to help non-profit-making companies, we would not have the legal basis for achieving it.
Chris Huhne
Opposition Members bounce up and down protesting about this issue, but they had the opportunity when they were in government to achieve this—and they did not do it. It is another one of the cock-ups for which, frankly, the Leader of the Opposition was responsible in designing this scheme. I feel for the right hon. Member for Don Valley as she does not have the support of the right hon. Member for Doncaster North, who is not prepared to stand up here and defend what he did when he introduced this scheme.
The fact is that these returns are funded by consumers through their energy bills, and they are unsustainable. If we allowed them to continue unchecked, they would burn through the entire budget in a matter of months. If we do not act now, the entire feed-in tariffs budget for the current spending review period will be fully committed by next spring.
Chris Huhne
Let me make this point, and then I will give way to the hon. Member for Brighton, Pavilion (Caroline Lucas).
With the current tariffs, each extra installation means that two fewer installations can be funded at the tariff levels. Every time the right hon. Lady or other Opposition Members say that we should not act—that we should defer dealing with the mistakes Labour made in introducing the scheme—they are condemning the industry to less growth than it would otherwise enjoy.
Caroline Lucas
I am frustrated by the Secretary of State’s implication that Opposition Members do not accept that the tariffs must come down, as of course they must. Does he accept that six months ago the solar industry itself asked for them to be reduced by 25%? The reason for the chaos we are experiencing is the incompetence of this Government.
Chris Huhne
I absolutely do not accept that. Not a single solar installer to whom I have spoken does not say that tariffs must fall, and on that point I entirely agree, but that was not the case before. This is another of the key cock-ups made by the Leader of the Opposition when he was doing the job that I am now doing. He failed to learn from the experience of Germany, which was very clear: those who introduce a scheme involving solar feed-in tariffs must introduce an automatic digression to take account of the real world. But of course Opposition Members are not very familiar or comfortable with the real world of business. The fact is that there should have been a reduction in the tariffs as a matter of automaticity.
Caroline Flint
If there was a provision for communities to take advantage of solar power, why are so many local authorities and housing associations cancelling projects? As a result of the right hon. Gentleman’s initiative, 100,000 social homes will not have solar power. Did not the Labour Government set in train a review to be completed by 2013, implicit in which was the need for a “staircasing down” of the tariff to achieve value for money?
Chris Huhne
The right hon. Lady makes a good and serious point, which returns me to what I was saying before. We need to consider, and consult on, whether there should be a separate tariff for social schemes. Many social housing providers offer their tenants free electricity to encourage take-up—free electricity that has been rising in value because of the rise in world gas prices and the rise in UK electricity prices. That is an important part of the rate of return. If providers give all that to their tenants, the amount that is left from the feed-in tariff to compensate for their financing costs will be less. However, we are not legally able to provide a separate tariff, because the Labour party did not implement such an arrangement when it was in government. I regret that, because it would have given us some flexibility.
Dr Julian Lewis (New Forest East) (Con)
I have been lobbied by a constituent, Jeremy Anson, who works for a photovoltaic providing company. He fully accepts the need for a substantial reduction, but says that while the industry could cope with a reduction of 30%, he would struggle with 50%. We wonder whether a phased or gradual reduction would be possible, given that the number of orders received by his firm has fallen from a average of 15 a month to zero after 12 December.
Chris Huhne
I shall explain what we are trying to do later in my speech, but let me reassure my hon. Friend that the returns that the new scheme will provide—if, indeed, we proceed with it following what is a genuine consultation—will be very similar to the returns that were originally intended when the scheme was announced by the Leader of the Opposition in April 2010. As with some of the Opposition’s other achievements, the intention was right but the execution was definitely not, so it falls to this Government to attempt to clear up the mess.
We want to secure the continued success of feed-in tariffs through sustainable growth, rather than boom and bust. That is why we are consulting on new tariffs for solar PV installations. As the climate change Minister, my hon. Friend the Member for Bexhill and Battle (Gregory Barker), just pointed out to the House, they are now in line with those being offered in Germany. If the former Secretary of State, the right hon. Member for Doncaster North, had bothered to find out how the Germans operated this scheme, we would never have been in this position in the first place.
Chris Huhne
Before I give way again, let me address this key point. To wait any longer would put at risk the entire feed-in tariff scheme. Anything that slows this process will substantially increase the risk that the scheme will run out of money. Each week of delay in changing the tariffs leads to additional annual subsidy costs of £4 million, but this is a 25-year scheme, and the figure over the spending review period is £14 million, or £87 million to £110 million over the 25-year tariff lifetime. A very small delay in tackling this problem will therefore result in substantial costs for electricity consumers over a 25-year period.
My experience tells me that when we face such a problem, we should not follow the advice of the right hon. Member for Don Valley and attempt to run away from it by pretending it does not exist. Instead, we must grapple with this problem, and deal with it quickly so the scheme can be put on a sustainable basis that will give the industry the opportunity to grow and prosper.
Charlie Elphicke (Dover) (Con)
This is a strange debate, as the Opposition seem to be on the side of big business, while we are on the side of the squeezed middle. Does the Secretary of State agree that the £1 figure Ofgem cited was for back in the summer when installations were running at about 2,000 to 3,000 a week, rather than the recent rate of 9,000 or so a month, and would that figure not have grown exponentially over time?
Chris Huhne
My hon. Friend is correct. I wish the House had facilities to show a PowerPoint presentation at this point, as I am now holding up a chart showing what has been happening with the scheme. The rising curve represents the installation rate increase. The Opposition cite the Ofgem figure of £1, but that applies down in the foothills of the curve, and we are dealing with a rather different real world today. Installed capacity has doubled since August, and has increased by three times since June and by tenfold since the start of the year. The right hon. Member for Don Valley is laughing; she has obviously had no experience of attempting to manage a budget, because if she had, she would not be laughing at all. This adds real costs to the electricity bills of real people—people the Opposition claim to represent.
Dr Alan Whitehead (Southampton, Test) (Lab)
Will the Secretary of State provide the budget figures for the feed-in tariffs in the levy envelope up to 2015, along with the central analysis undertaken by his Department of how far over that budget we would be under present arrangements? Will he also explain the headroom his Department has for putting things right over that period, and compare that with how far over the budget his Department is according to its central impact assessments?
Chris Huhne
The hon. Gentleman is my neighbour in south Hampshire, so I was delighted to give way to him, and I wish we were able to address that fine granularity of detail, as he suggests. However, I shall place the graph I have been showing in the Library so that everybody can look at it. The situation is moving so swiftly that projections based on the current week’s figures would look rather more alarming than those for last week or the week before that. The real world is changing exceptionally rapidly. The impact assessment gives a clear statement of where we were at the point when the impact assessment was made. At that point, the figure was £26 on average energy bills for 2020 and the latest estimate is now up to £80—and at the high end of that if there is substantial growth. That takes me back to the point that if we do not deal with the issue quickly, we are not saving the industry, as the Opposition would like us to believe, but writing the death warrant for it. There would be a sudden cataclysmic fall in demand.
Chris Huhne
I will give way to the right hon. Member for Lewisham, Deptford (Joan Ruddock), who is a former Minister in this area and whose expertise is well known.
Joan Ruddock (Lewisham, Deptford) (Lab)
May I reiterate what was said by my right hon. Friend the Member for Don Valley (Caroline Flint), who speaks from our Front Bench? It is not about the fact the tariffs are being reduced but the way in which it is being done. Peabody housing association, which works in my constituency, was going to have installed 6 MW of provision by March of next year and the programme has been decimated. The Minister of State has said that it can get ahead with a 5% return but it was planning—and had received—a 7.5% return and its borrowing costs are 5.3%. It cannot be done. The Secretary of State must change his mind.
Chris Huhne
I listen to what the right hon. Lady says, but the reality is that the scheme takes us back to the rate of return when the scheme was introduced by the previous Government in April 2010. It was appropriate then and all we are doing is taking account of what has happened in the real world, where there has been a very dramatic reduction in the cost. I have yet to meet a single manager of a single scheme who has persuaded me that they will lose money by proceeding with their scheme. They might make less money than they previously planned—that occasionally arises—but the business of my Department is not to provide extra rate support grants to local councils but to ensure that we have a successful renewable energy scheme and that we get solar panels out there. It is not a back-door way of funding extra support.
Mr Edward Leigh (Gainsborough) (Con)
I agree with everything my right hon. Friend is saying, but surely the problem is that all the schemes that subsidise renewable energy tend to distort the market and have perverse consequences, and therefore perhaps the Duke of Edinburgh had a point over the weekend.
Chris Huhne
The Duke of Edinburgh was not, I think, talking about solar panels, and I dread to think what his views are on them. He certainly made his views on wind pretty clear. I do not agree with my hon. Friend on the issue of distortions to the market because, curiously, solar photovoltaics are a clear example of a highly successful world market. The right hon. Member for Don Valley was talking about Sharp Solar as though it was dependent on the UK, but more than three quarters of the production in Wrexham goes overseas to the rest of Europe. We have already heard that the funding is exactly in line with that in Germany. The Chinese are exporting dramatic amounts of solar panels and what is fascinating, exciting and positive about the industry is the fact that in the long run—
Chris Huhne
I shall give way to my hon. Friend, who has been very patient.
The key point I want to make, which was drawn to my attention by the US Energy Secretary Steve Chu, is that almost uniquely among the renewable energy forms, solar panels are reducing in price by an average of 6% a year. As a result of that technological trend, which is a bit like the fall in the cost of computer memory that many of us will be familiar with, this area will have enormous potential in the long run. The argument for putting the industry on a more sustainable basis so that it can grow solidly and reliably with a tariff that reflects the fall in the underlying costs means that we will be in a position, when the costs of solar fall to grid parity, to make major and substantial increases in solar installation. I do not agree with my hon. Friend the Member for Gainsborough (Mr Leigh) that this is a waste of time. The world market is working, but the scheme has been thrown out by the fact that we have had a dramatic fall in the costs of solar panels in the past 18 months. Unfortunately, the scheme introduced by the previous Labour Government did not have the automatic reduction that it should have done.
At this point, I shall give way to my very patient and hon. Friend the Member for Brigg and Goole (Andrew Percy).
Andrew Percy
I am almost too tired to stand up now, Mr Deputy Speaker, but I thank the Secretary of State for giving way. It is precisely because of the arguments he has outlined that the Labour Government in New South Wales in Australia cut their tariff by two thirds.
I want to put a question to the Secretary of State on behalf of my constituents at Alexander Electrical Services. They support change and have said very clearly that they accept there has to be change, but one thing they want from the Secretary of State is more of an explanation about the December cut-off date.
Chris Huhne
I come back to the point that if we had not acted quickly on this we would have had a situation in which every installation at the old tariff rate would have meant two fewer installations at the new tariff rate. That would have meant massively over-subsidising when we could have got the deployment at the new tariff rate. There is no doubt about that. We have had many e-mails from reliable, long-standing solar installers who recognise that the scheme needed to be changed. They—particularly the reliable installers—want it to be put on a sustainable basis that will give them the ability to grow sustainably.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
It is the rate of change that is concerning people, particularly in rural areas. A small domestic development of some constituents of mine would have been under threat had they not managed to make the cut-off. They are now looking for retrospective planning permission. Will the Minister look again at the situation, particularly in rural areas where getting basic parts can be a problem? Will he give more time before he introduces this draconian cut-off rate in rural areas?
Chris Huhne
I have to say that, to some extent, I rest my case in that regard. A substantial scheme that requires planning permission in the Western Isles will clearly be one for which, arguably, the solar yield will be very substantial. I do not know whether that is the case, but I come back to the point that if we do not deal with this issue we will deprive the industry of future growth prospects. The more we pay out at the higher rate the less we pay out at the lower rate. That is why we proposed the date of 12 December—to give well-advanced projects six clear weeks in which to finalise and thus receive the current tariffs. We are consulting on this and we are open-minded about it. Hon. Members should remember that schemes after that reference date will continue to receive the old tariff all the way through to April—only then will they go on to the new tariff. We are seeking views on this and on our other proposals, including the one to strengthen the link between FITs, energy efficiency and a new multi-installation tariff frame.
Mr Russell Brown (Dumfries and Galloway) (Lab)
Will the Secretary of State give way?
Chris Huhne
I must make a bit more progress.
We are also considering whether more could be done to enable genuine community projects to benefit fully from FITs. We will provide more detail on that in the second consultation on the comprehensive review.
Stephen Lloyd (Eastbourne) (LD)
On that point, can the Secretary of State, first, give us a reassurance that local authority social housing, or at least social housing, will be included in that? Secondly, if there are problems with the budget, perhaps he could get some money from the nuclear budget.
Chris Huhne
My hon. Friend is mistaken if he believes that there is public subsidy in the nuclear budget. Nuclear power will be built without public subsidy, and I believe that position is shared across the House. I assure him, from the Dispatch Box as someone who is a very clear guardian, that, as we are spending £2 billion clearing up the nuclear industry mess from previous generations, there is someone here who has a very strong incentive to make sure that that never happens again.
On social housing, I have already said that we will consult on whether it is appropriate to have a separate tariff for genuine community projects. Those who have already installed solar PV and who are registered for feed-in tariffs will not be affected. The right hon. Member for Don Valley suggested that they might be but that is completely incorrect and is scaremongering. I can totally reassure anyone that this approach is consistent with our long-standing principle in the House of not making retrospective changes. We have to strike a delicate balance between acting quickly, for the reasons that I have given, and allowing people to finish work that is well under way. That means enabling well-progressed projects—[Interruption.]
Mr Deputy Speaker (Mr Nigel Evans)
Order. May I inform the House that 29 Members have submitted a request to speak in the debate? We will clearly not be able to hear from everyone, but if there are constant interventions, we will hear from even fewer Members than anticipated.
Chris Huhne
I will take some more interventions with your forgiveness, Mr Deputy Speaker, but I will try to make progress too.
A consultation is under way, and we will consider carefully all the representations that are made, including on the proposed reference date and how best to implement an energy efficiency requirement. It is not the case, for example, that large numbers of people will be excluded, because it is possible to insist on a C rating. Many people could easily be upgraded to a C rating, which would increase the market enormously. Furthermore, we could make solar panels available to anyone who is prepared to take part in the green deal when it is launched and which, of course, is cost-free to the household. We will look at that, and we will announce our final intentions early in the new year. Our proposal is that the revised tariffs should take effect from 1 April 2012.
The decision to consult on revised tariffs and the proposed reference date was not taken lightly. I am sure that Members from all parts of the House agree that increasing the share of locally generated renewables is a good thing, not just for our carbon reduction targets, but for households and communities. However, spending the best part of £1 billion of public money to support soaring profits for one part of the energy sector is not the way to build a lasting low-carbon economy. It will not deliver more renewable energy or help more households. As that public money comes directly from the purses of bill payers, including people in fuel poverty, it is not the fairest way either. Many Members will have received letters from companies offering solar PV. Many of those letters are written in defence of the industry, but they are guided by a passion, quite rightly, for clean green energy as well as a stronger bottom line.
I am as disappointed as many of my constituents that the feed-in tariff scheme was not properly set up. To paraphrase the right hon. Member for Don Valley, we would not have to cut so far or so fast if the policy had been properly costed to begin with. A little more foresight then would have gone a long way now. I have described the mistakes that were made by my predecessor in failing to take into account what was happening in the marketplace, but another mess that we had to clear up after the Labour Government left office was the business-scale scheme, which was going off like a rocket. We had to deal with that earlier this year because, under the proposals introduced by the Labour Government, it was assumed that businesses were too stupid to respond to a substantial real return and would not install any solar PV for three years. If we had not acted, half of Devon and Cornwall would have been under PV panels.
Mr Russell Brown
Will the Secretary of State say something about remote rural areas, because I have a constituent who has had solar panels installed but, because of her remote location, she has to pay a further £21,000 for an off-grid connection? There is absolutely no way in which her supplier can connect her before 12 December.
Chris Huhne
By all means, the hon. Gentleman should give us the details of exactly that sort of issue, which we will consider as part of the consultation. However, his constituent might have been better served if there was a proper energy efficiency audit of her home so that she could make substantial energy savings beforehand.
John Robertson (Glasgow North West) (Lab)
You don’t know what his constituent did.
Chris Huhne
We do not, but we do know that under the scheme promoting solar PVs or the scheme that was launched by the Labour Government in April 2010, there was a link to energy efficiency.
Chris Huhne
Opposition Members are getting terribly shirty about this, but there was a link to energy efficiency and that link was abolished with the introduction of the scheme by the right hon. Member for Doncaster North, the Leader of the Opposition, when he was the Secretary of State for Energy and Climate Change in April 2010. We need to deal with that.
There are more efficient ways to clean our energy supplies and grow our green industries than using consumers’ energy bills to support one industry at well over the market rate. If we did nothing, by 2014-15 feed-in tariffs for solar PV would cost consumers about £1 billion a year. If we are to succeed in building a low-carbon economy, we must make sure that we show people that we are committed to value for money.
It is precisely because this Government are committed to a sustainable, long-term future for clean energy that we propose revising tariffs now. Encouraging a minority of companies to feast on bumper profits for six months, swallowing up the entire feed-in tariff budget for a four-year period, would be the acme of short-termism. It is worth keeping things in perspective.
Andrew Bridgen
Will the Secretary of State explain to the House what he believes the Labour Government meant when they said in a consultation document on feed-in tariffs that they did not expect to lower the tariff levels for new projects over the years? Given that, does he not detect more than a whiff of hypocrisy in the comments from the Opposition Front Bench?
Chris Huhne
My hon. Friend makes a good point. If the previous Government had bothered to find out how well-managed feed-in tariffs are run in countries such as Germany, they would have built in an automatic system which brought the tariffs down in line with the fall in costs, but they did not. The result was a massive over-compensation.
Contrary to the claims that we have heard from the Opposition, we are not shutting down an industry, which is what would happen if the money ran out. The revised tariffs will provide inflation-proofed returns for 25 years of around 5%. That remains competitive with other investment opportunities. A householder would still be able to get a 4.5% real post-tax return. This compares well, for example, with the 0.5% post-tax real return currently available through index-linked National Savings bonds.
Zac Goldsmith (Richmond Park) (Con)
The Government are right to cut the tariff. That is the message that I have heard from many in the solar sector, but the 12 December deadline is causing panic. There is no doubt about that, so I ask the Government to publish as soon as possible some kind of cost-benefit analysis showing what the cost would be of sticking to the April deadline and what the cost to the sector would be of a 12 December deadline. That is the issue causing most fear. It is hard to exaggerate the level of that fear.
Chris Huhne
My hon. Friend makes a good point, but I have dealt with that issue in response to the hon. Member for Southampton, Test (Dr Whitehead). This is such a movable feast that every time we do a projection, we find that the budget is being eaten up even more rapidly, so we have put out, in the impact assessment, a very clear projection on the basis of the knowledge that we had when the consultation was launched about what would happen overall—that is, a very substantial increase in the overall budget and a £26 increase in household bills. The revisions that we have done since then suggest that, if anything, things will be moving even more rapidly.
By the way, the returns still compare favourably with the returns intended when the scheme was set up. Our proposals are the difference between windfall profits from double-digit returns and a reasonable return—double-digit returns that would bring into the industry all sorts of curious people who never had any previous interest in it and who were operating tax avoidance schemes to raise money to invest in the industry. The scheme had been growing dangerously unbalanced. We are working to put it back on an even keel. I do not accept that putting right the feed-in tariffs scheme undermines confidence, for the reasons that I have given.
Aside from those such as electricians and scaffolders who have branched out into solar PV installation alongside other employment, our analysis suggests that the number of full-time equivalent jobs in the solar industry is between 8,000 and 14,000. We do not wish to see a single company stop trading or a single job lost, but we cannot continue to prop up unreasonable profits with consumer cash. Jobs created by a bubble of excessive returns and paid for by consumer energy bills are simply unsustainable. Companies that have prepared themselves accordingly are likely to continue. As I have said, I have not come across a single person in the industry who contests the fact that we needed to act, although we did not hear that loud and clear before we acted, contrary to what various Opposition Members have said. Companies that were going all out with installations for the next few months with no plans beyond that will be in a position that is only slightly different from what would otherwise have been the case.
Dr Sarah Wollaston (Totnes) (Con)
The Secretary of State makes a compelling case for the need for change, but will he consider a concession for those businesses that have already paid a deposit? Pennywell farm in my constituency aims to be the first carbon-neutral tourist attraction in the country and has already received a gold business award for energy conservation. It has already paid a 10% deposit, but the costs of meeting the 12 December deadline will increase its costs by 11% and it faces great difficulty as a result.
Chris Huhne
I hear what my hon. Friend says, and she is not contesting the fact that there will still be a positive return. That comes back to the point I was making. People might not make as much money as they thought they would, because the scheme had not been brought into line with the fall in the cost of panels, but they will still make a positive return. My Department’s key objective is to ensure that we make the transition to a low-carbon economy, not to provide excessive subsidies where they are not warranted by the action that is to be taken. If she would like to write to me with the details of her example, we will take it into account as part of the consultation. I repeat that it is a genuine consultation.
The revised tariffs will allow the feed-in tariffs to work in the way they were intended to, supporting the industry and jobs in the long term, rather than burning brightly for a few short months before fading away. The right hon. Member for Don Valley might urge on us the attractions of becoming a sort of policy Catherine-wheel in which we are all fizz, but we do not particularly want to be followed by all phutt, which is exactly what we would have if the Labour party was to have its suggestion. I am sure that Members will join me in supporting long-term ambition across the whole green economy, rather than windfalls for the few.
The Government are committed to supporting sustainable low-carbon energy, but we cannot continue to write blank cheques. By bringing solar PV returns in line with other investment opportunities, we are guaranteeing the success of the feed-in tariff scheme as a whole, which will mean more renewable energy delivered to more households in a sustainable way.
Albert Owen
I am happy to take an intervention from the right hon. Gentleman. I wanted to wake him up and stir him so that I could get an extra minute and listen to his remarks. Is he prepared to intervene?
Albert Owen
I shall take an intervention first from the right hon. Gentleman’s previous boss.
Albert Owen
But the right hon. Gentleman said in opposition that the rates were not ambitious enough. Those were very his words, and he has now done a flip-flop on that. Yes, we need a proper review; of course we do, because the industry is calling for it and everybody is calling for it, but it should be done on a sliding scale, not at the rate that the Secretary of State describes.
Chris Huhne
Will the hon. Gentleman please admit to the House that there has been a colossal fall in the cost of panels and, as a result, an enormous increase in the real rate of return? That is what has changed in the real world. Since my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) made those points, the world has changed. Government Members have responded to that; Opposition Members do not appear to have done so.
Albert Owen
The Secretary of State has not read the Opposition’s motion or listened to what the shadow Secretary of State said about the need for a sliding scale.
I shall read out three examples, because they speak not just for my constituents, but for constituents throughout the country. A Mr Jones wrote to me this month, saying:
“I am writing to you as a retired NHS employee, who recently decided to invest my pension lump sum monies into clean energy and have just installed PV solar panel system on my house. My decision was based on the Government’s existing tariffs and estimated returns on the substantial investment and proceeded with the installation in the last week of October. I was unaware of the Government’s consultation document before proceeding. I only recently heard about the changes on a news bulletin”.
He believes that the process is deceitful, because it cuts off before the consultation period is done. He says that he understands the rationale for changes, as do all of us, but the proposed changes will be made without any meaningful public consultation. Indeed, the Secretary of State has suggested that individual write in, and that the consultation changes will be made on a case-by-case basis. What a sham—for the Government of the day to say, “We will look at individual cases and maybe give a bit of leeway.” People want a proper strategy and consistency.
Another constituent, a young person who has been self-employed for 10 years—the kind of person whom the Government say they want to help—came to see me. He has moved from various installation projects, including central heating systems, to the PV system, and he has employed extra people. He says:
“I am writing regarding the recent feed in tariff problems as I am sure you are aware of. I have had to lay off two installers last week for two weeks so far”,
and he cannot see himself bringing them back. His office assistant is, he says,
“down to two days a week from five days”,
and he cannot honestly see his company trading: it will cease trading because of the proposals. That is the kind of reaction we are getting from communities.
A third person who wrote to me put across her point straightforwardly, as Anglesey people do, saying:
“I was horrified to see the high handed fashion in which the Government has eliminated the…Micro Generation Industry. By…slashing the value of the electricity feed-in tariff, they are effectively ending the provision of free solar panels to the electorate and endangering the jobs of tens of thousands of people. Not since the Thatcher Government of the 1980’s have those in power set out to put an end to a sector of the economy overnight.”
That was not a Labour supporter who was known to me, but an ordinary constituent who took the trouble to write in. That is the situation that people are finding themselves in, and it is the scale of the downgrading of the tariffs that is concerning everybody.
I say to the Minister of State, the hon. Member for Bexhill and Battle (Gregory Barker), who is going to wind up the debate, that he should listen to the debate—I do not think he is listening at the moment. He should not just give the speech that has been written for him by civil servants, but he should listen to the debate and listen to what the people of this country are saying. They understand the need for deficit reduction, but they also have trust in Governments, and when they enter a scheme, they want to see it through. They want to help the country’s economy and create jobs, and jobs have indeed been created. They want to save the economy, but they also want to save the environment. That was why the scheme was set up. Yes, it needs to be reviewed, but the Government are destroying it, and I ask them to think again.
Chris Huhne
We would like to do that, but the legal basis for doing so is simply not there in the scheme that was introduced by the last Labour Government.
Chris Huhne
Well, we could do that, but it would have to be part of the longer-term consultation on the comprehensive review, which we will carry out.
Dan Rogerson
I thank my right hon. Friend for that intervention, as far as it goes. I hope that a huge amount of effort will be devoted to putting that problem right very quickly.
As other Members want to speak and as I have taken so many interventions, I will be brief. One other issue that I want to focus on, which has not been raised, is the concentration on energy efficiency for people who want to take advantage of the tariff. That is hugely problematic in areas such as mine that have older housing stock, which it will be very difficult to get up to the standard. I do not think that there is—
Dan Rogerson
I will not give way, but the Minister will have a chance to respond in his summing up.
John Robertson
I am not going to give way. Government Members give way to waste time. Let them do it. We will make sure that we say what needs to be said. They can play games.
I should like to move on to fuel poverty, which is what I believe we are here to talk about, and people who will die. I asked the Secretary of State earlier whether the tax taken from the big six and the reduction in the money for solar power are worth the 2,700 lives that will be lost this year owing to the Government’s energy policies, but he never answered me. I am willing to allow him to intervene if he wants to tell me that his policies are worth more than 2,700 lives. We all hear that deafening silence. The money that the Government get from the tax and from reducing solar energy will amount to 2,700 lives. That is what the Hills report says, and the Secretary of State agreed with me when he was questioned about it.
Chris Huhne
The hon. Gentleman is completely misguided to quote the Hills report, which I commissioned because I want a real effort made to combat fuel poverty, which was not happening in the past few years; we saw fuel poverty increase under the Labour Government. He is quite wrong to say that I am not concerned about the big six. We want a competitive market. That is why we are introducing extra consumer safeguards, and why we are making the retail and wholesale markets more competitive.
John Robertson
I can only use the right hon. Gentleman’s own words. He told me that the Hills report said that 27,000 extra people would die this winter, and that 10% of those deaths would be down to the Government’s energy policies. That will be in Hansard for hon. Members to read for themselves. I asked him whether lives were worth more than the tax money, and he never answered me.
At the end of the day, people will make the difference. The Government cannot be trusted. If people cannot trust the Government or what they are saying, how can they move forward? There lies the biggest problem. The 13,500 pensioners who are approaching fuel poverty in my constituency, and the disabled people who need extra help, will not be able to work out whether they can trust the Government to see them through this winter. Everything that has been mentioned is for next year, not this winter, but we need to solve the problems this winter.
The money spent on solar power would have helped in the long term to keep people in jobs, to stimulate growth in industry and to get money circulating in the country, but the Government are cutting it. They want to halve the amount of money that would circulate. They want to halve everything. My hon. Friends the Members for Ayr, Carrick and Cumnock (Sandra Osborne) and for Dumfries and Galloway (Mr Brown) told us about their constituents who, through no fault of their own, will be caught up in this system and will find that they cannot afford what they thought they were going to get, although they did do their risk management.
When the Secretary of State was having a go at my hon. Friend the Member for Dumfries and Galloway, I asked him how he knew that the person in question had not done a risk assessment or worked out the financial situation, and he replied, “Well, I don’t.” So there we have it: we have a Secretary of State who makes policy on the hoof and statements that contradict my hon. Friend, who knows his constituent and knows the situation, and says that my hon. Friend is wrong—and then, when asked from a sedentary position, “How do you know the constituent didn’t do that?” turns round and says, “Well, I don’t.” He is basically saying, “I just don’t care.”
We see it more and more. We have a Government who always use the excuse, “It’s somebody else’s fault. A big boy did it and ran away.” That is their modus operandi. That is what they do. It is always somebody else’s fault and never their fault, but unfortunately it is the people who Labour Members, in particular, represent who will suffer at the end of the day. I want to ensure that the 2,700 extra people who might die this winter do not, but the sad truth is that this Government do not care, and never will care. That is why the people on this side of the House are better than them.