Energy Bill [HL]

Lord Lea of Crondall Excerpts

Wednesday 22nd December 2010 Lords Chamber

[Lord Lea of Crondall]

My Lords, we are obviously having a broad debate on energy policy and I welcome that. One of the difficulties has been the rather disjointed way in which all the various announcements have been made. Those announcements must have been coincidental, because I cannot think that they were made as part of the planning. We had hugely important announcements last week about the electricity market regime, and a very important paper, Carbon Price Floor, was recently produced by the Treasury and HM Revenue and Customs. Ever since Rio in 1992, we have known that the trend in policy, including the Climate Change Bill and so on, has involved two or three different rationales for big price increases, and I want to come on to some of the social problems associated with that. I do not want to labour the point but I find it astonishing that we have this Bill dealing with important, as well as less important, matters relative to the hugely significant announcement that we need £110 billion of new generation by 2020. That is 10 years away, and you do not need to be Einstein to figure out that that is more than £10 billion a year. Talk about Heathrow Airport, the railways, the roads and so on! This is a much bigger deal if these figures are correct.

Although I agree to a large extent with the speech of the noble Lord, Lord Lawson of Blaby, and I greatly admire his analysis, I think that we have now entered a new narrative period, because the incentives for new investment seem to have fallen short of the supply requirements for energy security. The situation is a bit like that of Heathrow Airport. We were all astonished last week when it was seriously stated that Heathrow was running optimally, at 98 per cent of capacity. I have never heard such an absurd statement. However, it is a national problem and this, too, is a big national problem. I agree with the noble Lord, Lord Lawson, that we cannot have a sort of Gosplan for energy but I would say—and I do not know whether the noble Lord would agree—that we need a more holistic narrative than the highly disjointed one that we have at present.

The Treasury has come up with this framework for a carbon price floor and I want to ask the Minister one question. I hope that the noble Lord, Lord Marland, is not going to say, “Well, these are all questions outside the scope of the Bill. My job is to get the Bill through. I am not interested in any other questions”, which I think could be his reply. He has indicated that it will be. I thank him but I am not going to sit down; I am going to continue my speech. You cannot have a carbon price floor in Britain without a number of questions arising about a price floor across Europe or any other price floor. I should like to ask him a question and, if he does not want to reply today, I am sure that the department will be able to write plenty of letters, provided that the Treasury agrees with Chris Huhne’s department. I am not trying to be nasty about this. Both Secretaries of State are wonderful people working in co-operation at the moment. However, I think that we need a wider view about the context of this carbon price floor.

It seems to me that there are three different rationales for this 30 per cent price increase, announced last week, by 2020—which, surprise, surprise, is the same year as the £110 billion should have been spent. One rationale for the price increase probably has something to do with finding £110 billion, but we do not think that a big percentage of the £110 billion will come from price increases.

[Lord Lawson of Blaby]

I was very interested to hear the noble Lord’s remarks on my intervention. Does he not recall that in the Treasury document to which he referred the rise in the wholesale price of electricity is projected as being between 68 per cent and 88 per cent?

[Lord Lea of Crondall]

Let me take that as a base from which to throw in my next suggestion. That is that these numbers are baffling to most people. I was in the middle of saying that there are three possible rationales for a 30 per cent price increase. One of them on the face of it has nothing to do with the £110 billion; it is to do with restricting consumption in line with the climate change targets. However, there is no ownership by the British people in the pubs or the HGVs that that is the price that they are to pay.

I had a debate with my noble friend Lord Rooker when the Climate Change Bill was going through three years ago. I had tabled an amendment that there be introduced a carbon tax industrial and consumer impact forum. Its role would have been to look at, first, the impact of increases in carbon taxes or other such taxes; secondly, the changes in relative costs between different sectors of the economy; and, thirdly, the role of the European globalisation adjustment fund, because those are big industrial structural adjustments. I said that the forum should include representatives from HMG, employers, trade unions and consumer organisations—I subsumed the Met Office and others in HMG. It would produce a report each budgetary period on the impact of all the things I mentioned.

Let me deal with one in particular, which was the real purpose of my amendment. If we are to get ownership of price increases, we need two things. One is a forum where representatives of consumers, trade unions and everyone else sit around the table looking at the energy framework. The second is that we need a degree of hypothecation of the money coming in. I think that the Treasury has stuck its toe into the water for the first time on hypothecation—just as my noble friend Lord Prescott did with the arguments about congestion charging. All the money raised from the Rolls-Royce going along Piccadilly is going to buses. People might start to understand if there were what I might call a hypothetical hypothecation, by which I mean that it would not be separate from the Budget Statement but there must be an understanding of who is paying what, where the money is coming from and why.

The third possible rationale for a 30 per cent price increase is to do with paying for things such as the Green Deal. None of these things come without a price tag attached.

When the House authorities consider what amendments are allowable on the Bill—my noble friend Lady Smith of Basildon will no doubt give me a steer on this—we need to test what amendments we can table to the Bill. Since the Bill has been published, we have had all these announcements of huge importance right in the territory of the Bill. We must look at that.

At minute 10, I shall make two final points. One is to say that, given the regressive nature of price increases on something as basic as electricity, there will be great social unrest unless we do some redistribution. There will, of course, be squeals from big industry about its competitive position, but we need a frank debate. We cannot just look separately at an argument about winter fuel payments. These are huge, important questions, and we need a holistic narrative which would include homes. I agree with the noble Lord, Lord Best, about blocks of flats which form a not-inconsiderable part of big cities such as London. I have been chairman of my residents’ association for a number of years. We have 99-year leases like many people. If you want to say to an individual, “Do this to your ceiling”, “Do this to your loft”, “Do this to your walls”, or “Do, this to your floors”, the managing agent will say, “No, you can’t play around with the building like that”. So even if the residents’ association wants to do something, the managing agent, on behalf of the ground landlord, can say, “I don’t agree”. There is a prima facie question along the lines posed by the noble Lord, Lord Best, and one or two others.

I take this opportunity to say that I am glad that the noble Lord, Lord Lawson, put in his usual plea for us not to rely on base load from wind power. It is not a joke any more. It is a fantasy, and we ought to recognise that. I also take this opportunity to congratulate the noble Baroness, Lady Noakes, with whom I almost always try to agree. However, on this occasion, her worry about what she calls the consumer is the same, essentially, as what you might call the social policy dimension as a whole. Again, we just have to test what amendments are going to be allowed in the course of the Committee stage on this Bill.

--- Later in debate ---

[Lord Marland]

My Lords, I thank all noble Lords for a wide-ranging debate and some very thought-provoking and some not quite so thought-provoking but none the less invaluable advice and comments. I will not go beyond the scope of the Bill, even though some of the advice and comments did, because this is a debate on the Energy Bill. I will therefore restrict my responses to that matter. We have had plenty of opportunity to debate in the past and will no doubt have plenty in the future and I am happy that we will debate the other issues that have been raised then.

For the purposes of this summing up, I will clarify that this is a framework Bill on which there is a lot of work to be done. I very much value the comments made by noble Lords. We have created the opportunity, which I am told is groundbreaking in this House, to hold breakfasts and discussions with noble Lords, to listen their views and to improve on them, and I shall continue to create those opportunities as the Bill progresses. That the Bill starts here is a good opportunity for us all to get it right, and to do so within the spirit of the Bill. I shall therefore deal with some of the broader issues that have been raised by noble Lords, take some of them together and refer to individual ones later. There have been, as noble Lords are aware, an awful lot of questions. In Committee, I shall pick up on those questions that have not been commented on, or I am very happy to correspond or discuss further with noble Lords.

The noble Lord, Lord Grantchester, raised the subject of consumer protection, as did the noble Lord, Lord Teverson, and others. It is fundamental that the consumer is protected in this whole endeavour. There are two risk areas—accreditation and assessment—and the best practices must be established.

[Lord Lea of Crondall]

The Minister said that he would discuss some broader points, but he is now on the narrower Bill points again. On this occasion, it is not acceptable—certainly to me—for him to say that he is just going to stick to the Bill when last week it was overtaken by events. The hugely important, historic announcements about electricity price restructuring and the carbon floor are relevant to this Bill; that is what we have all been talking about. It is an absurd use of parliamentary procedure to say, “My job is to get the Bill through. I don’t want to hear about anything else”. But that seems to be the Minister’s approach. There might be Front Bench agreement on this all being a love affair, but it is a greatly missed opportunity. I would ask the Minister to think again, to discuss the matter with the Treasury and Chris Huhne and to find out whether it is really sensible, given last week’s announcements, which have hijacked this Bill, to go on as if nothing has happened.

[Lord Marland]

Well, thank you for those very unnecessarily hostile remarks. Obviously, the noble Lord has been deaf to anything that I said at the start of this wind-up. I notice that he was one of the few who has not attended any of the opportunities to have briefings or discussions on this document, and chooses to take up our time on this particular issue, which is not relevant to this Bill. If he wishes to discuss things outside the context of this Bill—as I said earlier, and I shall repeat it, if he would not mind listening—he is entitled to do so, and he is entitled to ask for a debate on it himself. As I said earlier, we are perfectly happy to do that.

If I may, I shall go back to the substantive issues on the Bill. A lot of time has been taken up in this House in the past few days, and I think that people want to get on to other things in their life. To say that I have been unnecessary and not listening is a most unfair remark.

As I think I said, consumer protection is at the heart of this. The OFT will be fundamental to ensuring that best practice carries on, and through the Committee stage we shall enjoy noble Lords’ support. I was grateful to the noble Lord, Lord Best, and others in what they said on the rented sector, and the encouraging words coming from the associations that he mentioned. The noble Lord, Lord Teverson, and the noble Earl, Lord Cathcart, and the noble Baroness, Lady Noakes, also referred to that matter. Clearly, we want to encourage the rented sector to embark on this and embrace it with open arms. The noble Lord, Lord Best, suggests that it will do; clearly, if it does not want to utilise the market practices, we will have to review the provisions in 12 months and then we will have to use powers to ensure that it does. Cracking that is one of the most difficult areas of the Green Deal.

The local authorities issue mentioned by the noble Baroness, Lady Maddock, the noble Lord, Lord Teverson, and others, is largely a matter for the Localism Bill, which involves authorities going back to the local authorities and enhanced authorities. It is to their benefit to do something like that. They have a number of incentives to do this through carbon-reducing programmes that they have to adopt through government best practice. That in itself should be an incentive.

Fuel poverty, one of the biggest issues with which the Government currently have to grapple, was raised by the noble Lords, Lord McFall and Lord Lawson, and others. It is a critical issue. Clearly, there are a number of measures. Fuel poverty has exponentially increased year on year since 2004. We must reverse that trend. The Green Deal is part of the attempt to do so, along with all the other measures that I mentioned in my opening speech and, of course, the warm home discount, which will provide £250 million, rising to £310 million by 2015, to encourage people out of fuel poverty. As your Lordships know, we are going to conduct a review of fuel poverty to get into the detail and solve this terrible trend for those in great difficulty.

Incentives were mentioned by a number of noble Lords. There are incentive schemes. This is a free-market programme so the incentives will come from within the market. The noble Baroness, Lady Parminter, will know that councils have the opportunity to incentivise programmes through 60 schemes. We will be looking forward to them doing so.

The noble Baroness, Lady Parminter, also mentioned a level playing field, as did the noble Lord, Lord Grantchester. Through all our energy and endeavours, we are trying to get competitiveness into the market so that we can establish a level playing field. That is fundamental to this programme.

The noble Lord, Lord Jenkin, raised, among other things, Warm Front and how it interacts with the Green Deal. I am delighted to say that Warm Front has been fully subscribed early in the current year with the money that was made available. In 2011-12 £110 million will be available and a further £100 million in 2012-13. During that time, the Green Deal will have fed in and been excellent in its support of the Warm Front which, as I have said many times, was a good attempt at combating fuel poverty but has not worked in itself. We must grapple and deal with that.

The noble Lords, Lord Cathcart and Lord Teverson, talked about their energy bills and the reverse cost thereof. I undertake to review this during this process because it is an extremely good, fundamental point.

On specific points, the noble Lord, Lord Grantchester, said that there was a cap of £6,500. There is no cap. The golden rule will in itself impose a restriction on the amount that the house can utilise. He also asked a reasonable question about interest rates. We obviously have no control over interest rates, but are developing a model and will, through Committee, have developed a model into which we can build interest rates.

I am afraid that noble Lords would not expect me to have an answer on the timeframes of the second Energy Bill. Getting a timeframe for any Bills at the moment seems quite difficult. I thank noble Lords for their support in getting us to where we are today.