Shale Wealth Fund

Graham P Jones Excerpts

Monday 21st November 2016 Commons Chamber

[Caroline Flint]

I entirely agree. Some of those problems come down to planning. As in any other planning arrangements, there should be mitigation by any developer of any undue impacts caused in the community. It is important to emphasise that not every place that is the subject of an application will get through, because of the drawbacks that the hon. Gentleman outlines. There are many different ways that compensation could be found from shale gas development, whether through the planning process, the £100,000 per well, 1% of revenues to local communities, or the shale wealth fund, which I believe has a particular role to play in addressing a massive problem in this country—the lack of energy efficiency.

IGas has decided to focus its community fund awards this year on local renewable energy generation and long-term conservation. In its submission, INEOS argued:

“The Government may wish to consider allocating a portion of funding towards energy efficiency initiatives or developing renewable technologies. This will also help to debunk the myth that it is an either/or between gas and renewables.”

Let us remember that INEOS is one of the firms that has had to import shale gas from the USA to meet its current needs.

Lancashire County Council argues in its submission that as part of a devolution deal the shale wealth fund in Lancashire

“could be focussed on green and renewable technologies and also ensuring that ordinary families in the county can help reduce their energy costs through energy efficiency measures in the home.”

[Graham Jones (Hyndburn) (Lab)]

I am delighted that my right hon. Friend has secured this debate, as it is extremely important. The topic is being discussed to some extent in Lancashire, and it is certainly being discussed among MPs. In my constituency 40% of properties have category 1 hazards—cold and damp—yet shale gas in the Bowland basin sits underneath it, as it does under the rest of Lancashire. Is it not imperative that we examine the problems, and is it not to the Government’s shame that they have abandoned housing regeneration programmes in the north that retrofitted many of those hard-to-treat properties?

[Caroline Flint]

It is certainly demoralising that in the coalition Government five years were wasted advancing methods to tackle the tricky problem of energy efficiency. I would not claim for a minute that all the schemes before that were perfect, but I know that the decent homes programme did a huge amount to bring our social housing stock up to a better standard, and that some of the work that we were doing through the Warm Front programme and other schemes was making an impact. Unfortunately, we wasted five years not learning from what worked and what did not work, and we ended up with something that did not work. We have lost time and we need to get back on track.

It is important to understand that there does not have to be a top-down approach. The past decade or more of energy efficiency programmes have generally shown that national targets need local delivery. Energy companies found that they could deliver their programmes more quickly and reach more households if they had a trusted local partner, such as a local council, acting as the face of the project.

Local authorities have lots of the data needed to create the heat maps, and they are well placed to pull together the records of the elderly and the vulnerable and the lists of the most inefficient properties. When they can see a street where 80% of properties are eligible and 20% are not, they can fill the gap to make sure that we do not leave streets with some properties done and some not done, with all the rage that follows in our communities.

Nor should we underestimate the significance for local economies. Home insulation is a skilled job, requiring high standards. These jobs are delivered locally. There are ready-made training providers to skill up apprentices. This is an ideal opportunity for tradespeople to retrain or to adapt a small business to provide this service. These are jobs for people in every town in Britain, with local investment producing jobs in every local economy—for installers, supply chains and British manufacturers. This fund can help to stimulate growth, jobs and innovation. With the fund’s principles and priorities set nationally, with regional co-ordination and leadership, and with local delivery, our communities can benefit in a more profound way, beyond compensation grants.

At Treasury questions, I recently asked the Chancellor for his views about a shale wealth fund providing for energy efficiency. He said:

“We have a serious challenge on this country’s energy capacity over the next 20 years, and we are going to have to invest eye-wateringly large sums of money—perhaps £100 billion—just to ensure that the lights stay on. Of course it makes sense to look at ways of reducing demand for energy through energy conservation measures.”—[Official Report, 25 October 2016; Vol. 616, c. 140.]

The Minister knows I will never shirk from holding the Government to account. I will continue to press for bill payers to get fairer energy prices, for shale gas to be produced responsibly and for communities to benefit from local funds. We may disagree from time to time, but I have worked with her before—not least to change the law on tax transparency. I will not allow party advantage to prevent the sharing of good ideas or the possibility of finding consensus to meet a problem or find a solution. This debate, and the Government’s consultation, may be such an occasion. Let the shale wealth fund become a warm Britain fund: a fund that is a friend to those households who have yet to see the benefits of energy efficiency; a fund that foresees a low-carbon Britain and contributes to that goal; a fund that creates jobs in every community, uniting politicians and the public for the common good—a fund that truly leaves a legacy.

[The Financial Secretary to the Treasury (Jane Ellison)]

I thank the right hon. Member for Don Valley (Caroline Flint) for bringing this debate to the House and for a typically thoughtful and constructive speech. I also thank other hon. Members who have stayed to make their contributions on this important topic.

I should say straight away that I absolutely agree that energy efficiency is one of the best ways to reduce energy bills in the long run, so we start on a note of consensus. As the right hon. Lady will know, and as I will make clear in my remarks, the fact that the consultation closed relatively recently inevitably limits a little what I can say. However, I enjoyed her speech, and I would like to make some general comments about where we are in terms of shale and the shale wealth fund.

The Government are backing the safe development of shale gas. We have over 50 years’ experience of regulating onshore oil and gas. The UK has the experience to develop our shale gas industry while at the same time ensuring the most robust and stringent protections for our environment, too.

We believe, as I sense other Members do, that shale gas is an important step forwards in a number of respects. It is a way to secure our energy supply by using our own domestic resources, as we have heard. It also brings with it the potential for tens of thousands of new jobs across various sectors, from the oil and gas industry to construction and engineering. I was very struck when I recently chaired our oil and gas forum in the Treasury just how many jobs are created in supply chains by these industries—it was one of the most striking things to come out of that discussion.

Of course, natural gas will continue to play an important role in our energy system as we move towards a low-carbon economy. We are absolutely committed to reducing our carbon emissions by at least 80% by 2050, compared with 1990 levels. Members on both sides of the House will recognise the fundamental importance of our doing so as part of the collective— indeed, global—efforts to stop climate change in its tracks. We are the first country to propose a phase-out of unabated coal, with gas and nuclear forming the secure base of our future energy mix as we continue to develop renewables and improve energy efficiency. I could not agree more that that is a really important part of the mix.

Shale will be a new, domestic source of gas, which adds to our energy security as we make the shift from coal to reduce our carbon emissions. Gas is the cleanest fossil fuel, producing half the carbon emissions of coal when it comes to generating power. Studies have shown that the carbon footprint of our shale gas would be significantly less than coal and comparable to the liquefied natural gas we import. In short, the shale gas resources beneath Britain could contribute to our security of supply, to jobs, and to increasing tax revenue, while providing a bridge to the greener future we all support.

That is why, in the previous Parliament, we put in place the right fiscal framework to make sure that the incentives are in place for investment in shale gas. It is worth reminding the House that there is an estimated potential cumulative investment in the region of £33 billion. As we explore our shale gas resources, we are also exploring how we can make the most of the benefits that the industry could bring to our economy. Specifically, we want to ensure that the communities and regions that host shale activity will benefit directly from doing so. By that, I mean that they should benefit beyond the boost to the local economy that one would expect them to receive in any case from the development of this new industry. The Prime Minister has been very clear on this. Local people must come first, not only in their involvement in the planning decisions that affect them, with all shale gas applications requiring a full consultation with local people, but in sharing the benefits with the areas in which the industry is developed, with a significant proportion of this expected in the north. That means that the shale industry could play an important role in the economic development of parts of the northern powerhouse, helping to drive local growth, investment and jobs even further.

[Graham Jones]

The autumn statement of 2015 said that the community dividend benefit of 1% is expected to rise to 10%. Are the Government going to make good, to local communities specifically, on that statement that the 1% dividend will rise significantly?

[Jane Ellison]

I am about to come on to the dividends for local communities and how we see that working through.

The shale wealth fund is a big part of how we are going to deliver these benefits for local areas. It will consist initially of up to 10% of all the tax revenues arising from shale gas production, all of which should be used for the benefit of the communities that host shale sites. I want to be clear on two points: first, this is new funding, not money used to replace any existing Government funding; and secondly, it will be in addition to any benefits provided by the shale industry itself, because, as Members know, the shale industry has independently committed to making payments to communities that host shale gas developments. The industry’s benefits scheme currently commits to providing £100,000 for each well site of hydraulic fracturing, as the right hon. Member for Don Valley said, as well as 1% of revenues from any site that enters into commercial production. The shale wealth fund is in addition to that. We estimate that it could provide up to £l billion in total and each community could receive up to £10 million. We want this money to go towards leaving a positive legacy for the future of these areas. I note that the issue of legacy was also on the right hon. Lady’s mind.

The shale wealth fund will be the latest in a line of local benefits schemes designed to support communities. For example, a number of renewable energy firms have made a voluntary commitment to provide community benefits of £5,000 per MW of installed capacity.

[Graham Jones]

The Minister says that this wealth fund is going to be available. I am Lancashire MP, so let us just talk Lancashire, where development of fracking is predominant at the moment. What discussions has she had with Lancashire County Council, Lancashire authorities, the local enterprise partnership or other interested parties about how the wealth fund may be delivered? How does she see it being delivered at a regional level in Lancashire?