Green Economy

Kelvin Hopkins Excerpts

Thursday 28th June 2012 Commons Chamber

[Laura Sandys (South Thanet) (Con)]

I beg to move,

That this House urges the Government to promote the right fiscal and regulatory framework to accelerate green growth as an intrinsic part of the UK’s economic recovery strategy.

I want to thank the Backbench Business Committee for providing time for this important debate at this moment in the economic cycle, when we are considering the draft Energy Bill, which will reform the electricity market, and different issues relating to the renewables obligation and other fiscal measures. I also thank the Economic Secretary to the Treasury for agreeing to respond to the debate and so many colleagues on both sides of the House for signing the motion.

Few terms in today’s industrial dictionary are as loose and ill defined as the word “green.” People talk about “the green economy” and “green jobs.” The word—I mean no disrespect to the hon. Member for Brighton, Pavilion (Caroline Lucas)—places a set of philosophical values around policies that, I believe, are not about debating sandal economies. I strongly believe that the measures the Government have put in place are aimed at increasing productivity, improving output, supporting greater competitiveness and building a resilient economy that is both lean and keen for the future.

In my constituency, I have seen at close hand the construction of a multi-billion pound wind farm. It is much more about heavy engineering than traditional green jobs. Those working at the cutting edge of new energy sources, vibration technology, surface engineering and friction reduction will deliver the so-called green revolution, but those individuals hold degrees in mechanical engineering, not sustainability. The green deal will implement energy efficiency measures in homes and offices throughout the country thanks to skills that are as wide ranging as construction innovation, research in plastics and synthetic materials and, of course, practical installation. From heavy engineering and the white coats in our university laboratories to those who fit cavity wall insulation, all these jobs and all these opportunities comprise part of that wide term, “the green economy.”

Today, the green economy is no sideshow; it represents a significant part of the UK economy, with more jobs than in information and communications technology, finance and insurance, and the motor trade. With low-carbon and environmental goods and services growing by 4.6% in 2009-10, it is a growth sector. However, we also need to talk about our industrial and energy policy in an international context. Why are South Korea, China and other Asian countries placing renewable energy and energy efficiency at the core of their industrial growth strategies? They are not overburdened with Green party candidates, and in some cases, such as China, they do not even need to secure votes. They are trying to build what is absolutely essential to this country: a strong, sustainable and resilient economy in which energy consumption and fossil fuel inputs are considered vulnerabilities, not assets.

[Kelvin Hopkins (Luton North) (Lab)]

I note in the papers that have been provided for the debate that the Foreign Secretary has apparently been strongly converted to green energy, but that some of his Cabinet colleagues have not. Will the hon. Lady make every effort to get more people on the Foreign Secretary’s side in these matters?

[Laura Sandys]

I do not think that the Foreign Secretary has needed much persuasion or that there is any lack of will or determination in the Government. As I will continue to iterate, it is absolutely crucial that the policies we have put in place are sustained consistently into the future to attract the significant investment we need in the energy sector and the green economy.

If we look internationally, we will see that the so-called tiger economies are combining economic policies, subsidies, industrial focus and energy efficiency solutions to build their stronger economies. It is that co-ordinated model that I propose to the Minister today. Globally, there will be a race for resources, including energy, water and food. Energy consumption will grow by 33% over the next 20 years, with 50% of that growth coming from China and India. Even the Governor of the Bank of England has acknowledged that we must be cautious about our exposure to fossil fuels and that they could be considered a risk to financial security. Any country that is serious about future economic competitiveness, not least this one, will ensure that it limits its reliance on fluctuating and politicised energy inputs. Energy security, domestic production and low-input process re-engineering are not, in my view, things that it would be nice to have; they are a total necessity.

In many ways that creates a challenge for politicians. We need to come clean with the public and the private sector. We cannot con them that energy prices will come down today, tomorrow or even any time soon. The increase in global consumption is so marked that even the great shale gas discoveries in the US will not have a long-term impact on global costs. From the domestic perspective, Ofgem has calculated that domestic energy prices will rise by 60% by 2016.

It is the Government who will need to take an important role in the development of a long-term, secure and resilient energy supply. Frankly, there are some of us in the Energy and Climate Change Committee who believe that, whatever energy solution we adopt in the next few years, the Government will have to stump up a lot more money than they thought to keep the lights on, but that is a debate for another day. We need to deliver a strong and sustainable energy sector that delivers as much value as possible to the energy consumer and jobs and economic growth at the same time. To do that, we must look at energies in similar terms, whether tax incentives on fossil fuels or subsidies for the renewables sector.

--- Later in debate ---

[Kelvin Hopkins (Luton North) (Lab)]

I defer to the previous two speakers on their knowledge of energy matters, but I have some points I wish to make. I was interested in the suggestion from my near neighbour, the right hon. Member for Hitchin and Harpenden (Mr Lilley), who seems to be strongly in favour of getting rid of the EU’s restrictions on state aids. I completely agree. I am completely in favour of state aids, where appropriate, and we should not be constrained from applying them by the EU—but then my Eurosceptic views are, I think, fairly well known. My hon. Friend the Member for Southampton, Test (Dr Whitehead) made a thorough, erudite speech that I will read in detail with interest later.

My concern is about energy conservation. Massive investment in energy conservation has everything to commend itself, while investment in nuclear generation has nothing to commend itself. With energy conservation, every home, office, public building and factory in the country can save enormous amounts of energy, so rather than generating energy, we need to conserve it. It is cheaper, too, particularly for the less-well-off living in constituencies such as mine, where some people still do not have roof insulation—aerial photographs at night show the infrared glow from those homes. These are poor people who cannot afford to invest, so it is something that the Government have to attend to.

Investment in energy efficiency would be enormously cheaper than focusing simply on generation. The Association for the Conservation of Energy has produced a report in the past few months demonstrating that such investment would be as much as £1 trillion cheaper over time than investment in generation and would create hundreds of thousands of jobs. Many of those jobs, in home insulation, would not be high skilled, so a lot of unemployed people, particularly young people, in my constituency who do not have high skills would be ideally suited to working in the sector. We desperately need these sorts of jobs at every level.

Energy conservation would be labour-intensive, rather than capital-intensive, which is what nuclear investment is about. I have been informed this week that officials in the Department of Energy and Climate Change are doing a deal that will be massively beneficial to EDF. All the other energy companies have dropped out of the nuclear programme in Britain, leaving EDF the monopoly supplier. It is effectively owned by the French Government—they own 85%—and our DECC officials are so obsessively pro-nuclear that they are going to strike a deal that will effectively subsidise EDF to the tune of £5 billion. That money will go to EDF, a French company, and will be used to benefit French taxpayers, French consumers and, no doubt, the French nuclear industry as well. It will not benefit us at all. That £5 billion could be spent in many other ways, particularly on energy conservation.

The right hon. Member for Hitchin and Harpenden is right that we need a base provision of core generation for peak times, but if we invest heavily in green energy of every kind in order to maximise energy provision in other ways, we could reduce that core requirement to its very lowest level. Germany has already done it. I understand that it has invested gigantic amounts in all sorts of alternative energy, such that, on warm summer weekend days, they can effectively shut down their power stations and tick over on the alternative energy provision.

[Zac Goldsmith (Richmond Park) (Con)]

The hon. Gentleman is absolutely right about energy efficiency and nuclear power. I echo everything he has said. Will he join me in urging the Government to put more emphasis on energy efficiency in the proposed electricity market reforms, the original intention of which was to introduce the concept of “negawatts”, which would put energy saved on a par with energy generated and therefore revolutionise the energy market and fundamentally change the dynamic?

[Kelvin Hopkins]

I thank the hon. Gentleman for his informed intervention. The problem is that the energy companies have been far too influential in DECC and have been able to bend the arms of even our Secretaries of State, because the central core of government decided years ago that it wanted to keep the companies and nuclear power on side. Those companies make money out of selling energy, not conservation or solar power at a local level; they do not make a profit out of that kind of energy provision. Indeed, we must have strong Government intervention to achieve that. In Germany, they have done it; with their feed-in tariffs being brought in years ago, the Germans are effectively decades ahead of us. In just a decade or two, half of their energy will be provided by alternative means. We are talking about enormous proportions of energy, and we have to go for that.

It has been said so many times, but we have wind on our shores and we are surrounded by sea and tides. We are aware of a positive move towards using the Severn barrage, that will produce enormous amounts of our energy, but there are other forms of generation, too, which could be flexible and provide us with base load, such as generation by burning organic waste, or anaerobic digestion. Unlike with wind and sun, we can turn that on and off. If we invested heavily in anaerobic digestion, so that all the organic waste was used to produce methane, which could be used either directly or to generate electricity, it would provide a massive contribution to the core base load of our electricity and energy provision. We have to go in this direction. We have to resist the power and controls of the energy companies and go for an alternative energy and green energy society.

I congratulate the hon. Member for South Thanet (Laura Sandys) on securing this important debate. If we do not move in this direction, we will be in serious economic trouble as well as environmental trouble.

--- Later in debate ---

[Caroline Nokes]

I thank my hon. Friend for that comment. He makes exactly the point I was moving on to.

Last year, the Environmental Audit Committee went to visit the Sustainable Building Centre in Leamington Spa, where we learned that if everyone in the UK with gas or oil central heating installed a high-efficiency condensing boiler, we would save more than 6.5 million tonnes of CO₂ every year—and that is only one aspect.

[Kelvin Hopkins]

The hon. Lady makes a good point, but a 20% VAT charge is still made, when it could be only 5% VAT. That would be one simple subsidy to encourage people to invest in better and more efficient boilers.

[Caroline Nokes]

I thank the hon. Gentleman for that, but my point is that if home developers were obliged to pay into a central fund, we could start to ensure that people in social housing and those on the lowest incomes do not merely think about cheaper energy-efficient measures, but have a grant to enable them to achieve that. The hon. Gentleman mentioned insulation earlier, but improvement is possible from double glazing, too.

Particularly at a time when my constituency and parts of the south-east are under water stress, we must start to look at finding better ways to use our water. We need to be more efficient through rain water harvesting, using grey water and taking simple measures to improve sanitaryware systems, so that the cistern from the lavatory uses less water. All these measures could be done very cheaply indeed.

According to the Energy Saving Trust, each person in the average UK home currently uses 150 litres of water a day. Level 6 of the code for sustainable homes seeks to reduce that usage to just 80 litres—but, significantly, that applies to new-build properties. As I have already said, however, they are a tiny proportion of our housing stock, and far greater savings—both in litres per day and cost to the consumer—can be achieved through working on older properties.

Independent research has indicated that by shifting the focus on to the existing housing stock of 25 million homes, rather than on the already energy-efficient new-build sector, great efficiencies and more value for money can be delivered for the nation as a whole. That scheme would mean that existing home owners would see reduced energy bills, social housing associations would benefit from reduced maintenance costs and local employment would receive a boost, thanks to the number of trades people needed to carry out the work. New home buyers would be spared additional costs, which would in turn help to ensure the viability of many development projects—a critical factor for the UK economy given the already chronic under-building due to economic constraints.

--- Later in debate ---

[Mr William Bain (Glasgow North East) (Lab)]

I congratulate the hon. Member for South Thanet (Laura Sandys) on securing this timely and important debate, and the Backbench Business Committee on granting it.

The OECD has estimated that this year in the UK total economic demand will be only a tenth of that in Japan or the United States. The fiscal stance adopted by the Chancellor towards the economy as a whole, and particularly towards the green sector, is disappointing, given that our green economy accounts for 7% of gross domestic product and is the sixth largest in the world. It sustains 900,000 jobs and is growing at a rate of 4.7% a year, whereas, as the Office for National Statistics established this morning, the economy as a whole has shrunk by 0.2% since the comprehensive spending review in autumn 2010, although the Office for Budget Responsibility had predicted that in the six quarters following June 2010’s emergency Budget, the economy would grow at 3.7%. It seems that the green economy is one of few areas in which there is any growth at all.

China and South Korea are investing hugely in the low-carbon sector, which, it is estimated, will be worth $2.2 trillion by 2020. China’s share of the low-carbon economy is set to rise to 24% by that year. The Chancellor’s lack of foresight risks leaving the UK in the economic slow lane. It is extraordinary that it is not only the Governor of the Bank of England who now writes letters to the Chancellor about the state of the economy but, we have learned, the Secretary of State for Environment, Food and Rural Affairs, the Secretary of State for Energy and Climate Change and, perhaps most surprisingly, the Foreign Secretary. Perhaps there is only 24 hours to save the green economy, based on their concern that Government policy is simply not going far enough to generate growth in an innovative sector that, after the financial crash of 2008, provides an opportunity to rebalance a growth model that many people believe has failed.

This morning, Paul Krugman and Richard Leyard set out in the Financial Times how we have become mired in the slowest climb out of a slump since the 1870s, largely because of a lack of productive economic output. We face endemic long-term unemployment and mass underemployment, with 2 million people forced into part-time or temporary work because not enough full-time jobs are being generated in the economy. Investment in the green sector is the key to ending that trend. Krugman and Leyard conclude in their powerful piece:

“Companies will only invest when they can foresee enough customers with enough income to spend. Austerity discourages investment.”

[Kelvin Hopkins]

I support everything that my hon. Friend is saying, but is he aware that in a survey recently reported by the CBI, 94% of employers wanted, above all, markets so that they could sell their goods? They were not concerned about regulation and all the other things that the Tories talk about.

[Mr Bain]

For many months, my hon. Friend has identified the real problem—a jobs and demand crisis, which is what fiscal policy and investment in the green sector must address.

Lack of confidence means that private sector surpluses amounted to £99 billion last year, and £700 billion of private-sector assets are not in productive use in the economy. In the first three months of this year, global green investment fell to the lowest level for three years, according to Bloomberg New Energy Finance. It is clear that Governments have to act quickly if they are not to find themselves in a classic example of what Keynes called the paradox of thrift, in which the pressure to save overwhelms the need to invest and grow.

Although they are somewhat more reticent in their self-promotion, it is worth remembering that this is the Government who asserted that they were “the greenest Government ever”. Regrettably, this year’s Budget did little to redress the lack of green investment. The principal failure was the failure to improve the capital and borrowing powers of the green investment bank. As a concept, the bank is quite unique. It draws support from the CBI and the New Economics Foundation. Before the Budget, James Meadway, senior economist at the New Economics Foundation, called on the Chancellor to bolster proposals for the green investment bank with higher capitalisation and earlier borrowing powers.

Ernst and Young estimates that £4 billion to £6 billion of public capital is necessary over the course of this Parliament for the bank to be effective in tackling the investment barriers in offshore wind, carbon capture and storage, and associated infrastructure. Lord Stern, a leading climate change economist, notes that that is not state aid or subsidy, as the institution is needed because of market failures in finance, particularly those associated with risk and policy risk. However, the green investment bank will not have borrowing powers until April 2017, which casts huge doubt on its ability to raise the £200 billion estimated to be necessary to meet the UK’s CO₂ reduction targets by 2020. While immediate borrowing powers are essential, so is timing. As the Environmental Audit Committee reported in March last year, investors may put off investment while there is uncertainty about how the bank will operate. A bank that is slow in building its balance sheet may not meet our emissions and renewable energy targets by 2020.

The London School of Economics recently issued a report showing the link between the effects of the current crisis of demand and the flailing prospects of the green economy in the UK. In its recent report on green investment and innovation, the LSE argues:

“Investment has slumped mainly because households, businesses, and banks are nervous about future demand and have responded by forgoing more risky investment in physical capital.”

That is the crisis that must be addressed now. The LSE also points out that the Government

“can still steer spending and investment through a mix of policies including pricing, regulation and institutional reform”

that need not cost more money now.

Consensus on this issue comes from a surprising source—the Foreign Secretary, who said in his letter of 19 March to the Chancellor that

“we could get more mileage from this without additional commitment of expenditure or fiscal risk.”

Uncertain economic times need not mean an uncertain approach to the transition to a green economy.

Sir David King, as the hon. Member for Brighton, Pavilion (Caroline Lucas) discussed in her speech, has argued that the quantitative easing programme could also be aimed at the green economy. In an article published in The Guardian this Tuesday, he wrote:

“This laissez-faire attitude that is gospel at the Treasury is not the right one at the moment. We do not have time to play about with this—we need to move quickly to get out of the financial crisis and the resource crisis”,

and he suggests that preference could be given to projects that promote environmentally responsible and sustainable development, modernising infrastructure and marking a shift away from the present high-carbon, resource-intensive economy.

In opposition, the Chancellor highlighted the need to

“bring to an end the stale argument that we have to choose between economic growth and the environment.”

In government he has so far, sadly, forsaken both, but this is the season for Treasury U-turns. The motion and this debate give him the opportunity to get serious and to generate real green growth and green jobs, so let us have the largest U-turn yet—a fully capitalised and properly borrowing green investment bank and proper levels of investment in the green economy.