Shale Wealth Fund

Jim Shannon Excerpts

Monday 21st November 2016 Commons Chamber

[Caroline Flint]

The hon. Gentleman makes a good point. From what I understand of the places where shale gas could be recovered, it is an open question as to how much could be received in revenue. There may be difficulties in getting the gas out of the ground: it might be under the ground, but we might not be able to recover it all. It is an open question. At the moment, it is too early to know just how much could be gained. Now is the time to think about the principles for such a fund and about how we can ensure that it is not frittered away across Government on different schemes so that, at the end of the day, we cannot really see the power of good that it has provided for the nation.

As I said, the Norwegian wealth fund was quite amazing in how it was put together. First, the Norwegian Government said that they could draw down only 4% of the fund each year to spend, but March this year was the first time that they drew down 4%, and that is despite the fact that the fund was worth $890 billion. Secondly, they invested for the long term. The oil fund is Norway’s pension fund. We do not know exactly how much the shale wealth fund will generate, but it is forecast to generate £1 billion over 25 years, which is a considerable sum to put to good use, and it may be more.

To create a defined wealth fund is a start. The Government’s intention is that it should be a fund that is clearly separate from the general revenue pot. A further lesson would be to follow the Norway example and use the fund for a specific purpose. I am talking about one that everyone could see the point of—a big picture idea, with an impact that can be clearly seen.

Norway looked forward to a day when it no longer depended on oil. We could look forward to a day when we are not dependent on fossil fuels by reducing our long-term energy use. Energy efficiency in this country is at a crossroads, as existing programmes end or decline. As shadow Energy Secretary, I raised serious concerns about the coalition Government’s flagship proposal, the green deal. We were sceptical about how it would work. It lasted two years before it was scrapped.

I am a member of the Public Accounts Committee and we recently revisited the coalition Government’s household efficiency schemes. The Department of Energy and Climate Change’s financial model depended on large numbers of households taking out a green deal loan. The Government projected around 3.5 million green deals, yet a tiny 14,000 households signed up. That was bad policy making and, sadly, it wasted taxpayers’ money.

[Jim Shannon (Strangford) (DUP)]

The Prime Minister has indicated that 10% of tax revenue could be used for communities, which could amount to up to £10 million per eligible community. Does the right hon. Lady think that new infrastructure, skills training and long-term job opportunity could benefit each and every community?

[Caroline Flint]

Absolutely. The great thing about energy efficiency is that it has a multiplier effect. It not only makes our homes warmer and reduces bills, but creates jobs and encourages innovation, too. Although it will be a national fund, the delivery should be at a local level, and the leadership should be held regionally within our communities across the UK.

One bad scheme such as the green deal does not mean that we should give up. With the green deal gone, and the energy company obligation soon to exist solely to tackle fuel poverty, we need to be asking serious questions about how to move forward on energy efficiency. We know, because the Competition and Markets Authority told us, that 70% of bill payers are paying over the odds for their energy and even if the latest Ofgem measures are introduced, they will reduce bills for only a few. It is very likely that, even by 2020, we will still be talking about energy bills that are as high, if not higher, than they were in 2010. I am sure the Minister would agree that the cheapest energy is the energy that we do not use. A shale wealth fund could provide an opportunity to enhance a large-scale retrofit of the UK’s housing stock, protecting households from future energy price rises. The fund should not be the only programme for energy efficiency, but it would provide a new means beyond passporting the cost to the general bill payer.

For a moment, let us consider the future if we do not make energy efficiency a priority. Quite rightly, the UK has ambitious and legally binding emissions targets, and we shall have to meet those targets, with 80% of the UK built environment still existing in 2050. The UK building stock is a long way from the low-energy housing stock that the UK will need, and the challenge is still huge. The Government’s own figures for 2015 show that, overall, their largest energy efficiency scheme, ECO, installed one or more measures in around 5% of homes. Some 320,000 homes had cavity wall insulation installed, 230,000 had new loft insulation, and 50,000 had solid wall insulation fitted. Yet of the 620,000 green deal assessments, 89% of those homes were rated as D, E, F or G. There is a long, long way to go.

There is a huge job that needs to be done, and for whatever reason—poorly directed funding or lack of profitability—the hard-to-treat properties have been substantially ignored. Many of the easiest measures have been undertaken first. Now Britain needs to finish the job. An energy efficiency dedicated shale wealth fund could be a hugely positive step, and I am not alone in suggesting this. Neil Marshall, chief executive of the National Insulation Association, commented:

“There are still some 5 million cavity walls, 7 million solid walls and 7 million lofts that need insulating and therefore we welcome this proposal. Insulating these homes will combat fuel poverty and climate change as well as reducing energy bills and creating jobs.”

The association rightly identifies the fact that many homes have yet to be adequately insulated, including 95% of homes with solid walls.