Lord Lilley
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Lord Lilley
That this House takes note of the impact of His Majesty’s Government’s climate agenda on jobs, growth and prosperity.
Lord Lilley (Con)
My Lords, it is a great and somewhat unexpected privilege to open this debate. I particularly look forward to the maiden speech of my noble friend Lady May of Maidenhead. It is fitting that her first contribution should be to this debate, since the net-zero commitment is very much her personal legacy. It also gives me a chance to thank her for what she and your Lordships may feel was a less wise part of her legacy, which was nominating me to this House.
It is hard to overstate how crucial cheap energy is for economic growth and prosperity. The quadrupling of oil prices in 1974 ended three decades of rapid growth in western economies. Energy price rises have invariably been followed by a slowdown in growth. On the other hand, thanks to shale oil and gas in America, that country has had cheaper energy and grown faster than other western economies, and China’s extraordinary growth has been fuelled by cheap coal.
Let me start with a few facts about climate change and the climate agenda impacts. First, Britain has reduced its territorial emissions of CO2 more than any other major economy and they are now back to the level they were in 1879. Secondly, Britain has more offshore wind power than any other country bar China, not to mention its onshore wind, solar and bio energy.
Thirdly, despite or because of this, British industry pays the highest electricity prices in Europe. They doubled in real terms over the two decades up to the start of the Ukraine war, even though real gas prices remained largely unchanged over that period.
Fourthly, we have already lost most of our aluminium industry and are losing our primary steel-making capacity and, with it, thousands of jobs. We are seeing the Grangemouth refinery turning into an import terminal and other British refineries under threat. We import an increasing proportion of energy-intensive goods, such as cement and bricks.
Fifthly, when our manufacturing industry moves abroad, it does not reduce global emissions at all—far from it. We now import many carbon-intensive products, so the reduction in Britain’s carbon footprint is only 36%, much less than the near halving of our reported territorial emissions.
Finally, the Government propose to accelerate the move to net zero regardless of cost, to prevent new North Sea exploration and instead import oil and gas, and to ignore or deny the impact this will have on our energy costs, growth and jobs.
This is an unusually significant debate because, as far as I can tell, it is the first time that Parliament has formally debated the impact on jobs, growth and prosperity of our decision to decarbonise our economy. Our failure to do so has been part of a collective institutional failure by Governments of all parties, both Houses of Parliament, the BBC, the Climate Change Committee and other public bodies to permit or promote an informed debate on the economic costs and benefits of net zero.
Costs were never discussed during the passage of the Climate Change Act in 2008, nor during the 90-minute debate committing us to net zero in 2019. It is extraordinary that we still have no official cost-benefit analysis of net zero, five years after embarking on the project.
Long ago, our national broadcaster formally decided not to give airtime to any views that might undermine public support for net zero. I discovered this when expressing doubts not about the science of global warming, which is rock solid, but about its scale and impact. The BBC published an apology “for giving voice to Peter Lilley”, removed the offending programme from the BBC iPlayer lest other people hear my voice, sent the producers on a re-education course and banished me from their studios on this issue ever since. Now my absence is no great loss to me or the nation, but our national broadcaster’s refusal to allow serious debate on the costs of the most expensive commitment since the welfare state is a travesty.
The most egregious failure has been that of the Climate Change Committee, which should have provided unbiased estimates of costs for public debate. I am glad that my noble friend Lord Deben will be able to explain why it has refused to do so. It even spent large sums of taxpayers’ money resisting a freedom of information request for details of its forecast that net zero would cost the nation 1% to 2% of GDP by 2050. Many assumed that this was the cost of getting to net zero but, actually, this is the cost we will face after 2050 once we have eliminated our emissions. The CCC has not calculated the cost of getting there; maybe its forecasting instrument is like one of those telescopes that can focus with great clarity on distant objects but renders anything near at hand a blurred and fuzzy image. There seems to be no other reason for not giving us the costs of getting to 2050.
The CCC’s reluctance to publish its workings was perhaps understandable given that it was so optimistic but, as it turns out, that is true of estimates produced by most public bodies. Sir Chris Llewellyn Smith—the lead author of the Royal Society’s report on the cost of large-scale electricity storage—recently pointed out that all official estimates were grossly optimistic, and he was honest enough to include his own, by the Royal Society. It is sad that we do not have the information on which we can have an honest and informed debate.
True believers in net zero are reluctant to discuss its costs because they have convinced themselves that there are none. It will give us cheap energy and boost growth by creating new jobs in new industries, exporting clean technologies worldwide, making the world greener and ourselves richer. How wonderful if that were true. There is an old saying that if something seems too good to be true, it probably is not true. I hope that wind power, in particular, because we have lots of it, will one day be cheaper than fossil fuels, but it patently is not yet. If wind and solar are cheaper, why have our electricity prices doubled as they have replaced fossil fuels? If renewables are cheaper, why is our electricity more expensive than in other European countries, which have less than us? If renewables are cheaper, why do they need subsidy?
Apologists say that those are the costs of old technologies and that the costs are coming down. The first part is true, although it is a shame they did not tell us at the time. Dieter Helm has calculated that Britain wasted up to £100 billion by investing prematurely in immature technology, rather than waiting until it was cost effective.
The Secretary of State assured us last month that, on the basis of recent auctions, renewables are the cheapest form of power to build and operate. Unfortunately, that is simply not true. The latest auction price for offshore wind was £82 per megawatt hour in today’s money, whereas his own department’s figures—for reference, on page 24 of the Electricity Generation Costs 2023 document—put the cost to build and operate a new gas plant at less than £60 per megawatt hour. Does the Secretary of State repudiate his own departmental figures?
Moreover, this is only half the story, because the comparison is not like for like. Wind is intermittent, and Dieter Helm advised the Government that, to make a true comparison, the costs of wind should include the cost of back-up generators or storage. Electricity that is not there when you want it is less valuable than electricity that is.
My economics lecturer taught us this by the old fable of the two New York bakers. One advertised bagels at 50 cents each, the other opposite at a dollar. A customer went to the cheaper baker and asked for a bagel. “Sorry, we’re out of bagels”, he was told. So he went to the other store and asked if they had any bagels. When the shopkeeper gave him one and charged him a dollar, he protested, “But the shop opposite only charges 50 cents a bagel”. “Well, why didn’t you go there?” “I did, but he’s out of bagels just now”. To which the other shopkeeper replied, “When I’m out of bagels, I only charge 50 cents”. Wind may be as cheap as other things when it is available, but it is a lot more expensive when it is not.
Electricity when it is not there when you want it is less valuable electricity, so you need back-up gas plants or storage. Back-up gas plants are doubly expensive because they can operate only when the wind is not blowing and they in turn need carbon capture and storage, which, even if it can be made to work with gas-fired stations, which it has not yet, will add further costs—again doubly so, because it will operate only part-time.
The second leg of the too good to be true story is that if we plough ahead with decarbonising our economy supply, we will enrich ourselves by generating new export industries. The Industry Minister, the noble Lord, Lord Vallance, who pursued the Sue Gray route to the upper echelons of the Labour Party, was given a little section of his own in the Labour manifesto, in which he said that
“by accelerating the transition to clean, homegrown energy”
we will not only
“end the era of high energy bills”
but be
“helping ourselves and exporting our solutions worldwide. But if we choose to go slowly, others will provide the answers, and ultimately we’ll end up buying these solutions rather than selling them”.
Where has he been for the past 20 years? Far from choosing to go slowly, we have outpaced other countries, but we have had to buy the solutions from abroad. Imports of renewable technologies vastly exceed our exports. Foreign suppliers have finally begun to make wind vanes in this country and assemble generators here, which is welcome, but they are largely for our fields, and those companies are not going to make us an exporter. The only turbines we export are gas turbines, which we are phasing out and urging others to do likewise. The only area where we might take the lead in developing a new industry is small nuclear, which I persuaded the Energy and Climate Change Committee to back a decade ago. I hope this Government will give that project more welly than my Government did.
An honest appraisal of the cost of net zero will conclude that it is bound to be costly. That does not necessarily mean that we should abandon it. If the costs are less than the likely benefits to the world in reducing the impact of global warming, it is worth the world bearing those costs. Of course, Britain’s contribution to global emissions is very small—less than 1%—so our impact alone is negligible. I accept that we must be prepared to make our proportionate contribution to that collective effort.
I know that many noble Lords believe that we should lead the world by going further and faster in that direction. I confess that I have always found the idea that we can lead the world somewhat hubristic—a hangover from our imperial past. So far, the big emitters —China, India and, in future, Africa and Latin America —have made it clear that they do not give a damn what we do. The one thing that we can be sure of is that if we impose such costs on our economy that we self-harm and reduce our emissions by exporting our industry abroad, other countries will take note, learn the lessons from our folly and make sure that they do not follow our lead.
I hope that we can now have an honest, frank, well-informed debate comparing the costs of action with the benefits of action. I am sure that will be a point that my bishop, the right reverend Prelate the Bishop of St Albans, will make in due course since, although we may not agree on this issue, we agree on the importance of honesty. We can have an honest debate only if it is well informed and if we stop trying to convince ourselves that fairy tales are true. I beg to move.
Lord Deben (Con)
My Lords, I remind the House of my declared interests, particularly as the former chairman of the Climate Change Committee. I particularly welcome the maiden speech of my noble friend. By talking about one nation and handing on to the next generation something better than we have ourselves received, she sums up why I am a conservative. Only when the Conservative Party follows those views are we actually conservative.
I thank the noble Lord, Lord Lilley, for producing this debate. He is a very old friend, so he will not mind me reminding him a bit about his past. When Margaret Thatcher was off in the United Nations pleading for international action against climate change, he was telling his colleagues in the Cabinet that he did not really accept the arguments about climate change or global warming—
Lord Deben (Con)
I remember the conversation. The noble Lord said, “I’m a statistician, and the statistics don’t prove this”. But it is perfectly true that he now believes it is rock solid, although he does not accept that, if it is, we have to do everything about it because it threatens us all. His speech could be made in any parliament in the whole world, saying, “Climate change is very serious, but not for us, because we’ve got to do this, that and the other. It’s rather bad for our economy, so we won’t do it”. Every country could say that. His is the “After you, Claude” policy: when other people do it, then we do it. That seems to me to be dishonourable—you cannot put that forward. If you believe in climate change and see it as an existential threat, you have to act.
I am proud of a cross-party attitude; all parties have supported this, although my noble friend Lord Lilley did not support the Climate Change Act. We have to realise that there is a difference between accepting the facts and being prepared to act on them. Action means that we do it ourselves first because, if we do not, as the Bishops’ Benches would accept, there is no point in asking people to do as you say.
And the effect of Britain doing it has been remarkable. If I look back to my first days as chairman of the Climate Change Committee, I have to say that I did not expect that we would ever get to the decision in Paris. Nor would I have expected from Boris Johnson, whose leadership was not my favoured one, the remarkable steps forward which we had at Glasgow. The result was that nations throughout the world have signed up to net zero and have begun to ratchet up what they are doing. That is why we have to get back the leadership we lost by doing entirely unacceptable things such as putting off the date by which we were going to have compulsory electric or equivalent cars. That meant that business, as the noble Lord, Lord Browne, pointed out, did not in any way feel the conviction and the certainty that it needs.
Apart from being a Minister for 16 years, I have been a businessman all my life and I know perfectly well that the most important thing in business is to find out the certainties, and the certainties are clear: that climate change will get worse every year and the cost of not doing something about it gets worse every year. The Climate Change Committee has produced a detailed statement about how much it will cost: it will be something around 1% of our gross national product every year. But that is only if we do it—of course, it builds up. If you do not do it, it costs you more and more. The cost of inaction is huge and it is already true.
Because people—who shall be nameless—pressed Mr Cameron, now the noble Lord, Lord Cameron, as Prime Minister, he rowed back on what was called the “green rubbish”. What did he do? It meant that every family in Britain has had to spend at least £1,000 more because we have not moved fast enough into renewable energy. I do get fed up with people who cherry-pick the facts; the facts are quite simple. The basic cost of gas today is £83 per megawatt hour; onshore and solar have just been agreed at £68 per megawatt hour and offshore at £80 per megawatt hour, so already it is clearly lower, and that is with gas not at its highest price. Do we really want to be in the hands of the volatility of the gas price? Do we want to be in the hands of some of the nastiest regimes in the world, or do we want to have our own energy source at a lower price and at a cost we can afford? The figures are all there. The Climate Change Committee has done it year after year, but I have not noticed my noble friend Lord Lilley present at any of the presentations or discussions. So I merely say to him that he should read the documents again and accept that he is on one side and that science, the Church and the Climate Change Committee are on the other.
Lord Lilley (Con)
My Lords, I am grateful to everybody who has made fantastic contributions to this excellent debate. I pay particular tribute to the Government spokesman, the noble Lord, Lord Hunt, whom we have just heard. His response to everybody and everything that was said was one of the most fair-minded and constructive that I have heard, not least in fairly representing what I was trying to say—though I am not accusing him of agreeing with me.
I want also to congratulate my noble friend Lady May of Maidenhead on an outstanding maiden speech. It was noteless; it was witty; it was compassionate. We are aware, obviously, of her other great legacy on modern slavery. The noble Lord, Lord Willetts, reminded us of her concern for the just about managing in our own country, and she emphasised her concern for the poorest, who are the greatest victims of climate disasters—when you are hit by a flood, it does not matter to you whether they are more frequent than floods in the past; they are still a disaster. But the reason the poor are vulnerable is that they are poor, and the reason that they are poor is that they do not have the access to cheap energy that makes us rich. If we deprive them of access to cheap and affordable energy they will remain poorer for longer. Even if we in this country think that we can afford excessively high energy costs, we should not try to impose them on the poor and slow down their growth.
I next thank the noble Lord, Lord Deben, who offered my greatest support for what I had to say, since, because he could not refute a word that I had said, he chose to criticise things that I had not said. He criticised me for saying, allegedly, that we should not make any contribution on this front. What I actually said was:
“I accept that we must be prepared to make our proportionate contribution”.
He went on to say that I had said something in Cabinet under Mrs Thatcher, which is simply untrue. I remind him of the exchange we once had in John Major’s Cabinet, which was not about this but about statistics, when he was wrong.
The noble Lord did not respond to the points about why he needed to take costly legal action to prevent publication of the analysis that his committee had done on the cost of climate change avoidance in 2050. My general view is that when people do not want to publish facts it is because they think the facts are rather weak. I assume that is why he did not refer to them.
On the general issue of costs, with the exception of the noble Lord, Lord Hunt, almost nobody who was enthusiastic for doing more and spending more and who generally goes around saying that we can do that in a costless fashion commented on the costs I gave. None of them referred to the fact that we have the highest costs of electricity for our industry of any country. One can only assume again that they are embarrassed by the facts. Likewise, when it came to new industries, apart from small nuclear, which I mentioned and have advocated for a long time, nobody gave detail of how these industries are going to generate new prosperity when we have doubled the amount of onshore wind, trebled the amount of offshore wind and quadrupled the amount of solar or whatever it is, when that has not happened so far.
There were a couple of important arguments that it is important for me to address because they go to the heart of the issue. One was on the issue of external costs, which was raised by the noble Baroness, Lady Bennett, and the noble Lords, Lord Willetts and Lord Browne. Theirs was the logical response to what I am putting forward, which is to say: “Yes, you’ve got to balance the costs of doing something against the damage that would be done if you don’t, and the logical way to do that is a carbon tax”. If we take the American Government’s estimates, for example, which say that the carbon tax should be $51 per tonne, which is about the equivalent to $10 per megawatt hour, it does not make any difference to the fact that renewables would still be uneconomic in this country.
Then came the most difficult issue, which people who take my position have to face up to, and that is the threat of existential crisis. If continuing to do nothing—I am not proposing that we do nothing—were likely to result in the extinction of the human race, or even its immiseration, almost no costs would be too great to avoid it. I accept that.
I put down a Question some while ago to the Government asking whether they knew of any peer-reviewed science, or science produced by the Intergovernmental Panel on Climate Change—whose job it is to consider the science—which forecasts that, if we do nothing over the coming centuries, it will lead to the extinction of the human race or even its immiseration. They said that no, there was no such peer-reviewed science, so those who invoke it are invoking something that is not peer-reviewed science, although that does not mean to say that it is wrong. Some things can turn out to be right that have not yet got through the peer review process. But let us not pretend that we are dealing with a threat that scientists have declared to be existential—they have not.
We are left with the central core of the debate: should we have an honest discussion about the costs and benefits of pursuing the path of net zero? I am glad to say that the Church was on my side on that front—that we want an honest debate. We can do that only if the Government and bodies such as the CCC, the National Grid and the Royal Society have the honesty and integrity to admit that about their information. The Royal Society—or the author I cited—has admitted that his figures were underestimates. We can have that debate only if we have that information from those sources in an unbiased way rather than in a campaigning way. I am grateful to everybody for contributing to the beginning of that debate for the first time in Parliament.