Ed Davey
Main Page: Ed Davey (Liberal Democrat - Kingston and Surbiton)
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
I am grateful for the opportunity to discuss the measures the Government are taking to help people and families who are struggling to make ends meet. No party in the House has a monopoly on compassion. We know that there are problems, and that families and people are struggling, not least because of increases in prices, including global energy prices. The issue is that the Government must tackle those problems with no money, as we were reminded by the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), the former Chief Secretary to the Treasury. We must create a better fiscal position while tackling that difficult problem to ensure that we help people. And we are doing just that. We are cushioning people from the impact of rising prices and protecting the most vulnerable. We are trying to make these big, difficult decisions in as fair a way as possible, to be fair to those who work hard while helping those who fall on hard times.
Geraint Davies (Swansea West) (Lab/Co-op)
On that very point, does the Secretary of State agree that food and energy comprise the highest proportion of expenditure for the very poorest—they are escalating out of all proportion—and that he is cutting money for those very people, namely those on benefits? Is not the harsh reality of this Government that they are hurting the poor most because of the bankers’ recklessness?
Mr Davey
The picture is rather more complicated than the hon. Gentleman says. We have a range of measures to help the most vulnerable with their energy bills, which I will come to during my speech.
One way to help people is to ensure that work pays. We must ensure that we are creating jobs in the economy and that there are links from benefits into employment. That is rightly one of the Government’s obsessions. We are introducing a range of policies to help people. Interest rates are at record lows. Income tax cuts are making a big difference: this year, 24 million employees will have an income tax cut of £600; next year, the cut will be £700. Some 2.5 million of the lowest paid will be taken out of income tax altogether. The income tax bill for people on the national minimum wage will be cut in half. That is a good record.
Pete Wishart (Perth and North Perthshire) (SNP)
The Secretary of State mentions Government obsessions. Does he believe that the lofty ambitions he describes will be better achieved in or out of Europe?
Mr Davey
It did not take long for someone to mention Europe. The hon. Gentleman will be shocked to hear that, as a Liberal Democrat, I strongly support Britain’s membership of the EU.
The Government are taking other measures. We are cutting fuel duty, we have capped rail fares, and we are helping the most vulnerable with their energy bills. We are extending free nursery provision and helping working parents with child care costs. The Opposition do not like to talk about the Government’s record on jobs. We have helped to create 1 million private sector jobs since we came to power. We have 1 million apprenticeships. That is a record we should be proud of, and one the Labour party was not capable of delivering.
Caroline Lucas (Brighton, Pavilion) (Green)
The Secretary of State says he is helping the poorest with their energy bills, yet this is the first time for 30 years that there is no taxpayer-funded energy efficiency scheme. The energy company obligation does not have enough money in it. It is also funded by a levy on everybody’s fuel bills, which is regressive—it pushes more people into fuel poverty than it draws out. When will he put in place measures that will protect the poorest?
Alec Shelbrooke (Elmet and Rothwell) (Con)
My right hon. Friend mentions the creation of 1.2 million private sector jobs. Does he agree that that is probably why, it has now been revealed, that the country avoided a double-dip recession?
Mr Davey
My hon. Friend is absolutely right. It is worth reflecting on the Government’s record on jobs. The Opposition do not like to talk about it, but the truth is that, despite the difficult circumstances—despite the Government having no money because we must pay down the deficit, and despite not having the growth that we would like in the world, European or UK economies—we have created jobs. That is a very good record.
Huw Irranca-Davies (Ogmore) (Lab)
Against the glowing backdrop that the Secretary of State paints, why do I now have a food bank in every single village in my constituency when there was only one three years ago? Why has there been a quadrupling of food banks under this Government? His record cannot be that good, given the backdrop of the inexorable rise of food poverty.
Mr Davey
People who run food banks are doing an extremely good job and deserve credit for their work. However, it is completely wrong to suggest that there is a statistical link between the Government’s benefit reforms and the provision of food banks. It is good that people are helping others. I hope the hon. Gentleman supports that.
I wish to make progress and to talk about energy and climate change policy. My Department has three major objectives. The Department wants to ensure that energy is as affordable as possible for consumers and business; that we keep the lights on with energy security; and that we decarbonise the power sector. With the Energy Bill, the green deal and many other policies, we have the most coherent energy and climate change policy of any Government in Europe—and indeed of any Government in this country for many, many years. Our approach also tries to maximise the jobs and growth potential from our energy and climate change policies. We also try to ensure that the impact on the bills of consumers and businesses is as low as possible, and we have policies to try to meet the climate change challenge.
David T. C. Davies (Monmouth) (Con)
The total increase in average global temperatures since we started industrialising is approximately 0.7° Celsius. How much of that is due to carbon emissions and how much is due to the natural warming that was going to take place anyway as the earth came out of a cool period?
Mr Davey
I am disappointed that my hon. Friend seeks to deny the science of climate change. He may have heard Sir John Beddington, the Government’s recently retired chief scientist and a very distinguished scientist, say that the science showing climate change was human-made was “unequivocal”. When it comes to science, I like to listen to the experts.
It is important that we gain jobs, especially green jobs, through our investment in low carbon. We also need to ensure that these are profitable enterprises in which people can invest. We need £110 billion of investment in our energy infrastructure over the rest of this decade. That will be in low carbon, in gas and in other energy security measures.
On prices, we have to drive a wedge between the rising global prices and the bills that people have to pay. We also have to rise to the climate change challenge. We need to recognise that the challenge is serious and that—contrary to what my hon. Friend suggests—the science tells us that we have to act.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
The Secretary of State talked about investments in our infrastructure. The green investment bank could be fuelling jobs in the green sector if it were also investing in SMEs that are developing and bringing to market technology in this area. Why are the Government failing to deliver on that?
Mr Davey
The Government have delivered on the green investment bank. The hon. Lady should know that investment banks are not controlled by Government. They are given a remit to make investments, and the green investment bank is doing so and is extremely effective. Indeed, it is world leading. I am sorry that the hon. Lady is criticising it and I hope that she will look at what it is doing and realise that it is making a big difference. Our performance on green growth and green jobs shows that we are delivering on the coalition agreement promise to build a new economy from the rubble of the old.
We have this massive infrastructure opportunity because nearly a quarter of our capacity will close over the next decade. We have to replace that to keep the lights on, but at the same time we can begin, and really go for, the transition to a low-carbon energy economy. We need to do that by investing especially in energy efficiency. I have stressed that from day one as Secretary of State. We have several policies already, such as the green deal and the energy company obligation, but in the last year we have developed some very interesting proposals on electricity demand reduction. We will publish the response to our consultation on that shortly.
Around 1 million people work in the green economy, and the support that we are giving to clean energy will fuel the rise in the area. Between now and 2020, the support we give to renewables will increase year on year to £7.6 billion—a tripling of the support for renewable energy and a record the Government can be proud of. We already have 110,00 jobs in the renewable energy sector directly, and 160,000 jobs in the supply chain. By 2020, we believe the sector will have more than 400,000 jobs.
We also have the prospect of a new generation of nuclear power stations. I am engaged in discussions with EDF for a proposed nuclear reactor at Hinkley Point C. If we reach agreement, it will result in more than 5,500 jobs during construction, more than 1,000 ongoing jobs at Hinkley Point C and more in the supply chain. Our proposals on carbon capture and storage—we have two preferred bidders, Peterhead in Aberdeenshire and White Rose in Yorkshire—will also result in lots of jobs and deliver a pathway to commercial CCS in the next decade, which will be very important in meeting our climate change targets.
We sometimes forget the oil and gas sector, perhaps because it is not as green as renewables, nuclear and CCS, but it will be essential as we make the transition from a fossil-fuel economy to a low-carbon economy. We will still need an awful lot of gas and oil during that process and in the next few decades. I am delighted to report to the House that investment in the North sea is booming. We are seeing record levels of investment in the North sea, which is good for our energy security as we do not have to import so much gas from other parts of the world. I hope that right hon. and hon. Members will welcome that.
I have made it clear that we will also support the development of shale gas. If it has potential—and we do not know that yet—it could be beneficial, especially to our energy security. We are going to need gas for many decades. It replaces coal, so it can help us to meet our climate change targets. At the moment, we have to import increasing amounts as the amount coming from the North sea is declining. If we can exploit shale gas commercially, that will make sense, and I hope that we can reach agreement on that. We are going about this in a way that is designed to keep the public with us. In other countries that have rushed headlong into it, the public have reacted very badly, leading to moratoriums and bans. We want to ensure that we think things through carefully, which will help us do it properly.
Derek Twigg (Halton) (Lab)
The oil and gas industry is well represented in the Heath business and science park in my constituency, which is one of the most important employment sites. If the Secretary of State is keen to promote jobs, why does his Department still have a planning recommendation before it that it has had since Easter? It is very simple, involving just the removal of an electricity line, but the delay is holding up investment, jobs and housing. Why has he not made a decision on that, given that he has had the papers since Easter?
Mr Davey
The House will not be surprised to learn that I am not aware of that particular planning application. Of course I will go away, look at it and write to the hon. Gentleman.
All our policies, whether on energy efficiency, renewables, new nuclear, CCS or oil and gas, add up to the proposition that my Department is about growth. We are seeing a lot of jobs created and we will see more in the future. However, I am also concerned about the bills and the cost of energy, and how those affect our constituents and industry. We have seen global gas prices increase dramatically. UK wholesale gas prices were 50% higher in the five years to 2011 than in the previous five, and they have continued to rise since then. That is the global context. People talk about the reduced price of gas in north America, but they forget to look at the price of gas in other markets, which has gone up significantly.
We need to provide a cushion or wedge between the prices going up in global markets and the bills that our constituents have to pay, and we have several policies to help. We have direct payments, including the winter fuel payment, the cold weather payment and the warm home discount. This last goes to 2 million of the lowest income households in the UK, taking £130 directly off their bills and helping 1 million of the poorest pensioners. We are trying to promote greater competition in the retail markets through our proposals on tariff reform and the work we are doing on collective switching. We are driving competition in the retail market, which is already having an effect for those who have benefited from the collective switching.
Through the Energy Bill, we are trying to ensure that we achieve wholesale market reform, and this will no doubt be debated on Report and in the other place. We welcome the fact that Ofgem is consulting on proposals to improve liquidity in the wholesale market. We look forward to its conclusions, and they will play a part in ensuring that competition can drive lower prices. When we talk about the cushion and the wedge between the global prices and the bills that people actually pay, energy efficiency is at the heart of the solution, whether in product standards, the green deal or energy company obligation. I am pleased that we are already seeing real interest in the green deal, and a huge number of assessments have already taken place.
John Penrose (Weston-super-Mare) (Con)
I am pleased to hear that my right hon. Friend is interested in promoting competition, particularly in the retail and wholesale markets. Does he agree that there may also be significant opportunities, not just in the energy sector, but more broadly across the other utility sectors too, in reducing the infrastructure costs of the transmission network—be they wires or pipes for water, energy or whatever—using investment more effectively and efficiently and trying to regulate down those costs in a much more determined fashion?
Mr Davey
I am sure my hon. Friend is right. In a previous incarnation, I was Minister with responsibility for competition and was extremely keen to make sure that the UK had the most robust and rigorous competition regime in the world. The changes going through this House have delivered on that. I am not an expert on every single utility sector, so I will be careful about making any particular points about the water industry, or any other industry, but I am sure he is right that competition has an important role to play.
The impact of our climate change and energy policies has been to reduce household bills by 5%. By 2020, bills will be 11% less than they otherwise would have been. We know, of course, that energy prices are going up globally, but we have the policies to try to cushion people. As a result, people will pay lower bills than they otherwise would have done.
Huw Irranca-Davies
I thank the right hon. Gentleman for giving way, and I will not abuse his graciousness any more. Against that backdrop, why is it that independent analysis from the Fuel Poverty Advisory Group shows that an additional 300,000 people went into fuel poverty last year, and the Hills review suggests that 200,000 will be driven further into fuel poverty in the next four years? Against the glowing backdrop he has set out, why is that happening?
Mr Davey
I agree with the hon. Gentleman that fuel poverty is a real problem. [Interruption.] Opposition Members, from a sedentary position, say that the number of those facing fuel poverty is going up. Indeed, with global gas prices going up we have a challenge to keep bearing down on fuel poverty, but we are completely committed to doing that. Later this year we will produce a fuel poverty strategy, the first to be produced for more than a dozen years. One reason why he can quote the Hills review is that the Government commissioned that review to look into the exact nature of fuel poverty to ensure that it is being measured correctly. It shows that the previous Government could not even measure fuel poverty correctly. We will ensure that we measure it correctly, so that our policies can be targeted far more effectively to help the fuel poor. Opposition Members are not the only people in this House who are compassionate about the fuel poor.
It is important that we are concerned about the high cost of energy for all businesses, and energy-intensive industries in particular. That has to come through greater energy efficiency and we have a number of programmes to deliver that. There also has to be compensation and extra help for energy-intensive industries. I am grateful for the work and co-operation of the Treasury and the Department for Business, Innovation and Skills to ensure that we have a package to address the problem, particularly for energy-intensive industries. We have not had one before.
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
The right hon. Gentleman was critical of the previous Government’s definition of fuel poverty and praised Professor Hills’ proposals. The problem is that no one can understand them. Will he please explain to the House the Hills’ definition of fuel poverty?
Mr Davey
The interesting thing is that that definition has two parts: it tries to measure overall fuel poverty in terms of energy efficiency; and, most importantly—it has not been done before—it looks at the depth of fuel poverty. If we consider not just fuel poverty statistics, but income poverty statistics too, we should be most concerned about those in poverty year in, year out—the grinding fuel and income poverty. Unless we have measures that show what is happening to deep fuel poverty and allow us to attack it, we will not be able to deal with fuel poverty. Our measures are more effective and more sophisticated than anything produced by the Labour party.
We must ensure that business energy costs are, through climate change policies, similar across the EU and the globe. One measure that the UK and the EU have pushed is the European carbon market, which is often known as the EU ETS. It is important that the EU ETS carbon price provides incentives and signals to the markets for investment in low carbon, and that it creates a level playing field for industries across the EU. I regret that the vote in the European Parliament on the back-loading proposals was lost by 19 votes. The proposals were part of the reform of the EU ETS. We need to do a lot better. I hope that the ENVI Committee in the European Parliament can come forward with another package so that we can reform the carbon market. That is in everyone’s interest, not just on climate change, but to ensure that we have competitive industries on a level playing field across the European Union.
I want to end by talking briefly about climate change. Some will say that we should put off action on climate change until we get to better financial times, and some will say that we should not be looking at this issue at the moment given our financial and economic problems. I reject those arguments completely. The science of climate change is unequivocal: we have to act now and we should have acted before. That is why we need to reform the EU ETS. It is about not just the back-loading proposals, but structural reform. I am working with fellow EU Ministers and have set up a like-minded group—the Green Growth group—to try to build a coalition at the European Council, so that we can achieve these vital reforms on climate change.
There has been a big debate during the passage of the Energy Bill—a carry-over Bill in the Queen’s Speech—on the proposal for a decarbonisation target, which has a role to play in tackling climate change. Of the general election manifestos from the Liberal Democrats, the Conservatives, the Labour party and even the Green party, guess how many mentioned a decarbonisation target for the power sector? Not a single one. When we published the draft Energy Bill in May 2012, it did not contain a decarbonisation target, and there was no decarbonisation target promised in the coalition agreement. Now we have one in the Bill. The Government have looked at the issue and put the target in the Bill. We are the first Government ever to do that, and it is a very strong move. We are an early mover. The Opposition want to carp at one or two details, but I am afraid that they fail to acknowledge what we have done and what we have delivered.
Alec Shelbrooke
Does my right hon. Friend agree that, whether or not people are sceptical about climate change, reducing our reliance on fossil fuels and carbon is equally as important to energy security as it is to climate change? This policy is very important in making sure that we have energy security in this country.
Mr Davey
My hon. Friend is absolutely spot on. I believe that the climate change science is unambiguous and that we have to act on that basis, but he is absolutely right: there are other reasons to invest in low carbon and energy efficiency. It is important that this country takes a lead on climate change by working with EU colleagues to reform the EU ETS and the European carbon market, by including the decarbonisation target in the Energy Bill, which we have done, and by taking various other measures. Other countries are looking at our measures on electricity market reform and our green deal because they believe that we are leading the way.
All those measures are critical in the run-up to 2015, which is when the climate change talks will take place in France, probably in Paris. During the climate change talks in Durban in 2011 the world agreed to sign a legally binding global treaty at the climate change talks in 2015. This will be a critical moment in the global battle against climate change. We need to ensure that our international legal obligations apply to everyone in the world, not just to Europe or the Kyoto protocol nations. Having agreed in Durban to do that in 2015, we now have to prepare the way to make it a success. Our work here and with the EU is critical because it will enable us to sign a treaty in 2015.
Whether we are trying to keep down costs for people or creating jobs, the package of measures introduced by the Government—not just my Department or the Department for Communities and Local Government, overseen by my right hon. Friend the Secretary of State—are focused on helping people in our country. On the longer-term challenges, we have rejected short-term fixes and the siren calls of vested interests. If we are interested in building a new and sustainable economy, we must make it a low-carbon economy and consider the long-term challenges.
I am grateful to the Opposition for how they have debated energy policy over recent months, particularly on the Energy Bill. I have seen a desire to build a consensus, which is really important, because investment to tackle our energy challenges and climate change are, by their very nature, long term, and the investment framework that one builds needs to span not just one Parliament or one Government, but several Parliaments and Governments into the foreseeable future. Building a consensus is critical for successful policies that are as cheap and effective as possible. I look forward to hearing what the right hon. Member for Don Valley (Caroline Flint) has to say. I am sure that she wants to add to that consensus.
Caroline Flint
I want to make some progress, because there are only six minutes per speech, and I am sure that many right hon. and hon. Members want to get in.
Let us take a closer look at the real lives of hard-working Britain. On energy bills, the facts speak for themselves. In just three years, bills have risen by more than £300, and, despite falling between 1997 and 2010, fuel poverty is now increasing sharply. There has been a doubling in the number of pensioners dying from hypothermia compared with five years ago. What have the Government done about it? The Secretary of State mentioned the energy company obligation, the ECO. But less than half the budget of that will go to people in fuel poverty. He has tried to claim credit for the warm home discount, but he will not want to talk about the hundreds of thousands of low-income families with children that are missing out on help. He mentions the green deal, which is going so well that the Government still will not tell us how many people have taken out a package.
But one thing I am sure he does want to talk about is the Prime Minister’s now infamous pledge to force the energy companies by law to put everybody on the cheapest tariff. I will not forget Wednesday 17 October 2012 when the Prime Minister said:
“I can announce…that we will be legislating so that energy companies have to give the lowest tariff to their customers.” —[Official Report, 17 October 2012; Vol. 551, c. 316.]
It sounded great; it is a shame his own Ministers did not know about this announcement until it happened. When the Government finally published their proposals in February, it confirmed what we knew all along; that this was an impossible promise from an out-of-touch Prime Minister making it up as he went along.
You do not have to take my word for it, Mr. Speaker. We can look at the Government’s Energy Bill, which categorically does not require the energy companies to put everybody on the cheapest tariff. All it says in clauses 121 to 124 is that the number of tariffs the energy companies are allowed to offer will be limited and that those tariffs may have to be standardised, and that customers will have to be provided with more information about cheaper deals. If the Secretary of State disagrees, I am more than happy to let him intervene to tell us that all energy companies will be required by law—as the Prime Minister promised—to put everyone on the cheapest tariff, the date on which the switchover will happen, how many of 22 million households will be affected and how much money on average they will save.
Caroline Flint
There we have it, Mr Speaker. They cannot explain it because it was a false promise. The Prime Minister told this House 12 times that his Government would legislate to put everyone on the cheapest tariff; that is just not going to happen.
Caroline Flint
I refute that accusation; investment in energy was up, there were more starts in terms of renewables, some of which will be completed under this Government—that is our legacy—and by tackling fuel poverty, the insulation programme through Warm Front and the decent homes programme we helped millions of households.
To answer honestly, I have witnessed things over the past three years that have made me challenge what we need to do for the future in terms of how the energy market works. It is up to all of us to reflect on where we are today and on what has happened in the past three years and try to put it right. That is why we believe that we need to encourage new entrants, increase competition and ease the upward pressure on prices.
One of our other proposals is to deal with Ofgem. Ofgem removed price controls a decade ago, so in the belief that competition had developed sufficiently and that privatisation had delivered a functioning competitive market. I believe it is clear now that that was a mistake. We need to create a tough new regulator that people can trust and ensure that the regulator has the power it needs to protect consumers. That is why we would abolish Ofgem and create a tough new regulator with a statutory duty to monitor the relationship between the prices that energy companies pay for their energy and the bills the public pay and the power to force them to cut prices when wholesale costs fall. We believe that that is very important.
Mr Davey
The right hon. Lady has explained to the House the Opposition’s policy to get rid of a regulator and to replace it with another regulator. Given that we need to attract £110 billion of investment in energy to this country, is she aware that one of the things that investors prize about the UK is regulatory stability and certainty? Will her proposal improve that or make it worse?
Caroline Flint
Investment in the renewables sector in this country has gone down; we are a less attractive place to invest. The Secretary of State makes much of the so-called “decarbonisation target” in the Bill. The truth is that there is no such target. Investors say to me that they need certainty, which is why we need to have strength behind a decarbonisation target to make sure that that investment comes forward.
I also believe that we cannot have a regulator that people do not trust. It has not been doing the job it was asked to do; it is not fit for purpose. To get our energy market and sector into a better place, we need consumers to have confidence in the regulator, which is why it needs to change. There is no point in trying to hold up a regulator that does not command confidence. We need a regulator that does just that and can move us to a better place, where energy has the certainty it needs for investment but also has the confidence of consumers.