Public Ownership of Energy Companies

Margaret Greenwood Excerpts

Monday 31st October 2022 Westminster Hall

[Margaret Greenwood (Wirral West) (Lab)]

It is an honour to serve under your chairmanship this afternoon, Mrs Murray. I pay tribute to everybody who has signed the petition.

Energy is a necessity for all of us, yet people are at the mercy of big business when it comes to deciding who can afford to heat their homes or run their businesses. Profits at the world’s biggest oil companies have soared to nearly £150 billion so far this year. At the same time, as the e-petition acknowledges, people are having to choose between heating and eating. That cannot be right. As Lord Sikka has written:

“It is Christmas every day for oil and gas companies, and their shareholders and executives are laughing all the way to the bank, leaving the rest of us to pick up the cost in higher energy prices, inflation, bankruptcies and a deepening cost of living crisis.”

Labour called for a windfall tax on oil and gas back in January so that some of the eye-watering profits that are being raked off by big business could support people to pay their bills. However, it took months for the Government to U-turn and follow Labour’s lead, and even then the then Chancellor, now Prime Minister, could not resist resorting to his instinct to put big business first and everyone else last. He allowed those energy giants to shield most of their profits from the very levy that he was announcing. The Energy (Oil and Gas) Profits Levy Act 2022, which the current Prime Minister designed, allows energy companies to apply tax savings worth 91p in every £1 invested in fossil fuel extraction in the UK. Promoting fossil fuel extraction instead of investment in renewables is irresponsible as we face the climate emergency, and it is an insult to young people and to future generations. Labour has called for the tax to be tightened to remove the option for energy firms to claim tax relief on 91% of the levy if the money is reinvested.

It is notable that, during the passage of that Act, the Government voted against a Labour new clause that would have required an assessment within three months of the Bill becoming law of how much extra revenue would have been raised if the levy had been introduced on 9 January 2022 rather than 26 May 2022. The 9th of January is significant because that is when Labour first called for a windfall tax—four and half months before the Government came forward with their U-turn. Why did it take the Government so long to act? I would be grateful if the Minister could respond on that point. There have been reports over the weekend that the windfall tax on energy companies could be raised to 30% and extended by three years. Perhaps the Minister could give us more information today, and let us know what discussions have taken place about that in Government.

It is clear that there is a need for long-term change where energy is concerned. As the independent campaign group We Own It has highlighted, of the top 10 countries in the world that are leading the energy transition to renewables, only the United Kingdom does not have a publicly owned renewable energy generation company. Of those that do, Sweden owns 100% of Vattenfall, one of Europe’s largest producers of electricity and heat; Norway owns 100% of Statkraft, Europe’s largest renewable energy producer; Switzerland owns 100% of Axpo, the country’s largest producer of renewable energy; Iceland owns 100% of Landsvirkjun, the country’s largest electricity generator; and France will soon own 100% of EDF, a world leader in low-carbon electricity generation and a company that many of us in this country use—despite the fact that the French people will own 100% of it fairly shortly. The other countries—Denmark, Austria, Finland and New Zealand—all own at least 50% of renewable energy generation companies.

There is a lot of public support for the United Kingdom to go down a similar path. There are no profits for shareholders in a publicly owned energy company. A poll for We Own It, carried out by Survation, found that 66% of those surveyed wanted energy in public ownership. Earlier this month it was reported that a YouGov poll found that 55% of more than 1,700 adults who were surveyed across Great Britain favoured public ownership of energy. In August, a poll by 38 Degrees found that 73% of voters would favour temporarily renationalising energy companies if they cannot offer lower bills.

Public ownership of services is understandably popular, whether that be energy, water, buses, trains or the NHS. The NHS has been massively opened up to the private sector on the Conservative’s watch, with billions of pounds of taxpayers’ money being handed to private companies to treat NHS patients. Privatisation is never a guarantee of quality. According to a study by the University of Oxford, private sector outsourcing in the NHS corresponded with significantly increased rates of treatable mortality, potentially as a result of a decline in the quality of healthcare services.

To return to energy, Common Wealth reported recently that 72% of voters think it is a good idea to set up an energy company that is Government owned and aims to create low-cost environmentally friendly energy. Labour has announced a plan to establish Great British Energy, a new publicly owned, clean-generation company that will harness the power of the sun, wind and waves to cut energy bills and deliver energy security and independence for our country, as well as good, secure, high-paid jobs.

[Margaret Ferrier]

On that point, in September, in response to a written question on an impact assessment for nationalisation, the then Minister, the right hon. Member for Beverley and Holderness (Graham Stuart), said:

“The Government does not intend to make such an assessment. Nationalisation will not solve the current challenge of high global fossil fuel prices and the impact this is having on the cost of energy.”

Does the hon. Member agree that it is difficult to see how Ministers can speak with such certainty if they will not even make a full assessment?

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[Margaret Greenwood]

The hon. Lady raises a really interesting point, and I thank her for it. To me, it speaks of ideology rather than taking a practical approach to what needs to happen to secure our energy and bring down our energy costs.

Among other things, GB Energy will enable long-term investments in a range of new and emerging technologies. It will also ensure that home-grown research and development leads to domestic manufacturing, and nurture partnerships with small and medium-sized enterprises and large local employers. It will enable the UK to retain the strategic assets that we need to build national resilience.

To reiterate my earlier point, of the 10 countries in the world who are leading the clean energy transition, only the UK does not have a public generation company. The Government should reflect on that and be bold, as a Labour Government would be.

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[The Minister of State, Department for Business, Energy and Industrial Strategy (George Freeman)]

It is a great pleasure to serve under your chairmanship, Mrs Murray. May I take this opportunity to say what a pleasure it is to be back on the Front Bench after the turmoil of the last few months?

Let me first congratulate the hon. Member for Linlithgow and East Falkirk (Martyn Day) on securing the debate, and David and the 100,000 public petitioners who triggered it. As an open democrat, I welcome the fact that the public are able to trigger debates. It is important that we respond, and I am glad that the public will be able to see the response both in real time and recorded. I thank hon. Members for their contributions, and I am grateful to all those who have taken an interest in the topic.

The petition received over 100,000 signatures and calls on the Government to do two things: to set out a coherent 25-year plan for UK energy security and strategy, and to take back ownership of our strategic energy assets. As the Minister for Science, Technology, Research and Innovation in the Department, I am delighted to be replying on behalf of the Minister for Climate, my right hon. Friend the Member for Beverley and Holderness (Graham Stuart).

Let me put everyone out of their misery of expectation and anxiety about what I might say. I absolutely agree that we need a 25-year coherent plan for energy, which is why the Government have put just that in place. I also agree that we need to think much more strategically about our energy security resilience and energy economy, but the Government do not agree that nationalisation is the right way to achieve the objectives that many, but not all, of us share. I say that not in the spirit of complacency at all.

It is fair to say that successive Governments over the last 40-odd years have taken cheap energy rather for granted, and have not foreseen the urgency of decarbonising our energy supply nor the geopolitical perils of being dependent on overseas suppliers, often from hostile or unsavoury regimes.

[Margaret Greenwood]

rose—

[George Freeman]

I will just finish this list, if I may. I approach this issue with no ideology, either. All parties have had their problems in the past: in the ’60s and ’70s Labour was rather heavily dominated by the union barons, and the nationalised industry did not do nearly enough to promote innovation. I notice no Liberal Democrat Members here; theirs and the Scottish National party’s tribal opposition to nuclear leaves them playing one-club golf. I do not think there are any easy solutions to this issue, but I do not want to dismiss the urgency of the problem.

[Margaret Greenwood]

The Minister is talking about a 25-year strategy. Given that we are facing a climate emergency, could he explain what the thinking was, and presumably still is, on allowing companies to shield 91% of their profits from a windfall tax designed to tax profits? That means that they are able to invest those profits in fossil fuels.

[George Freeman]

I will happily set out the explanation for our position, which I think will deal with that point. If it does not, I am sure that the Climate Minister will want to follow up with the hon. Lady. We profoundly believe that the way to deliver a low carbon, net zero, sustainable, resilient British energy market and supply chain is to harness the market—the enterprise, the investment, the leadership and the management excellence of the free market—but not in an untrammelled way. I will set out in a moment how our approach is not at all about the free market but about harnessing the market with a lot of regulations, shape and structure, harnessing the genius of the market to public ends. That is a fundamental difference.

[Margaret Greenwood]

I thank the Minister for giving way; he is being generous with his time. He talks about harnessing the market, but he is talking about directing that investment at fossil fuels. How does he square that with our need to meet net zero? That does not make sense.

[George Freeman]

I will deal with that point as I come on to explain our position on net zero and the extraordinary success that the market has had, with appropriate regulation.

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[George Freeman]

I am not totally sure I understand the question. The point is that we live in a modern global economy. I do not think anyone other than political dinosaurs would think we can ring-fence all investment to only one country. We live in a global economy, and that is all to the good. This country benefits hugely from that investment. A huge risk of the proposed renationalisation is that, internationally, it would destroy investors’ confidence in the UK, and that is something we have to think seriously about. We do not have a right to attract international investment. We need to be competitive, and this debate has lacked that point.

We are a world leader in offshore wind, with an ambition to deliver up to 50 GW of offshore wind power by 2030, including 5 GW of floating wind. That is something to be proud of. In my part of the world in East Anglia, the southern North sea is rapidly becoming the Saudi Arabia of wind energy. With proper interconnected offshore grid connectors, we will be able to use off-peak energy to generate green hydrogen. That is an exciting development and it has all been provided by the market—not the free and untrammelled market of the profiteering stereotype, but businesses investing in partnership with Government.

We continue to break records in renewable energy, which has more than quadrupled since 2010, with low-carbon electricity overall now giving us more than 50% of our total generation. It would have been nice to hear Members at least pay tribute to that achievement, rather than attack the profiteering businesses that have been at the frontline of delivering it.

We have installed 90% of our solar capacity in this country since 2010, which is enough for 3 million homes. That has happened—

[Margaret Greenwood]

Will the Minister give way?

[George Freeman]

No, I am going to make some progress.

That capacity has happened by harnessing the power of the market. I do not think anyone would suggest we have had an untrammelled free market. I am not here to make that case; others may. It has been a partnership of the private and public sector. That is why the Government continue to believe in properly regulated markets.

I have written and spoken widely about the opportunity Brexit gives us to set our own regulatory standards—not in a race to the bottom, but in a race to the top—and to set the standards in the smart grid, in digital energy and in new forms of energy. There is a huge opportunity for us to use that freedom to incentivise private capital to invest in the energy system, provide the best outcomes for consumers, and promote market competition as the drivers of efficiency, innovation and value.

My party believes profoundly that private ownership of energy assets, properly regulated, improves performance and reliability, and offers consumers greater choice and higher standards of products and services. No market is perfect. There are always pay-offs and balances, but it is very difficult to see how nationalisation would work, particularly as it has been set out this afternoon, with no detail, vague assumptions that there will be lots of money, which would come in the end only from taxation or borrowing, and very little understanding of how it would be done. Anyone listening to this debate has not heard a serious proposal for how nationalisation would happen. They have simply heard a ragtag of arguments against the private sector and against business.

The argument becomes even more important when we look at the global market and the international energy market in which we find ourselves. These days, no energy market exists in isolation. We do not exist in a vacuum. The pandemic and the war in Ukraine have revealed painfully the interdependence of our global energy supplies. We are not in a position where we can unilaterally declare independence from the global markets. Any renationalised energy company would still have to buy its gas on the global market at the same price—there is no way round that. But it does heighten the urgency of reducing our dependency on foreign actors, hostile states and those who might use their energy power to exercise geopolitical influence on us.

We are absolutely committed, as we have set out, to diversifying our energy supply and resilience. We understand that sky-high global energy prices, caused by Russia’s appalling invasion of Ukraine, are having real consequences for consumer bills across the country, exacerbating the consequences of the pandemic shutdown of the global economy and its refiring up and opening, which has driven inflation into the system. European gas prices soared by more than 200% last year, and coal prices by more than 100%, leading to an inevitable increase in the cost of energy, which drives the cost of living across our economy.

That is why, through our British energy security strategy, we are absolutely committed to—and are already implementing—support for diverse sources of home-grown energy to provide greater energy security in the longer term. Let me unpack that: we have set out, first, a comprehensive long-term plan, just as today’s motion calls for, to 2050 for our energy system in 2020’s 10-point plan for a green industrial revolution and the energy White Paper. It needed doing and it has been done. Secondly, the British energy security strategy, published in April this year, charts a pathway to reducing our vulnerability to international energy prices by reducing our dependence on imported oil and gas.

We will achieve our ambitions by accelerating the deployment of wind, solar and new nuclear energy, supercharging our production of low-carbon hydrogen, and within my portfolio supporting next-generation energy sources including fusion and small modular nuclear. We will support North sea oil and gas in the near term for security of supply, and the important work that is being done in Scotland, particularly on the North sea transition, to turn that infrastructure into the infrastructure for clean, green energy.

Thirdly, we will ensure a more flexible and efficient system for both generators and users, undertaking our comprehensive view of electricity market arrangements to ensure that consumers fully benefit from the next phase of our energy transformation. That is why we have committed to publishing, with Ofgem, a strategic framework this year on how networks will deliver net zero. Fourthly, not only are we thinking about reforming energy supply, but we have an ambitious programme of energy efficiency measures to lower demand, and to bring down bills and emissions.

Nationalisation, however, will not solve or help to tackle those challenges, for a number of reasons. First, as I have said, nationalised energy companies would still have to buy gas on the international markets. There is no price reduction that comes with being nationalised. Secondly, if a Labour Government, or perhaps more likely a Labour-SNP-Lib Dem coalition, who were committed to renationalisation came into office, their measures would mean that the British taxpayer would have to compensate directors, shareholders and creditors to the tune of tens of billions of pounds—money that would otherwise be spent on schools, hospitals and public services. Thirdly, the sort of nationalisation that has been talked about blithely but not explained would hugely damage our ability to attract the international investment that I have set out, which is key to delivering net zero.

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[Margaret Greenwood]

I thank the Minister for giving way; he is being very generous with his time. Recent reports have shown that a lot of people on prepayment meters are not taking up the support. What steps can his Government take to make sure that 100% of people can take up the support that they need, because my big concern is that the most vulnerable people will struggle in this situation?

[George Freeman]

The hon. Lady makes an important point about the particular circumstances of those people on prepayment meters and those who are most prone to energy poverty and vulnerability. Again, I am not the energy Minister so, with permission, I will allow the Minister for Climate, my right hon. Friend the Member for Beverley and Holderness, to follow up that point with her.

This is a long journey. It is one that we, as a country, started on a little late, but we have led the world in moving at pace, and that is a tribute to all the parties involved, to be fair. The last Labour Government before 2010 began some important measures; we in the coalition took things forward; and the Conservative Governments have pursued things at pace since. I believe that we are on the road to success and I have no doubt that consumers will be at the heart of Government policy every step of the way.

Right now, that means we are focused on doing all we can to support consumers through the very difficult winter ahead, but nationalisation is not the right solution. I will just say that it has been rather extraordinary for me this afternoon to see how strongly the old anti-capitalist politics of the hard left have been shown to continue to thrive in the Labour party and the Scottish National party. We have heard aeons about anti-business millionaires and profiteering, and there has been no talk about companies generating the profits that drive dividends that supply pensioners with revenue, or public sector workers with their pensions, or, for that matter, the trade unions with their pensions.

We have heard nothing serious from the SNP about how it would pay for independence, which has traditionally been based—on its own assumptions—on the revenues from oil and gas. The SNP is anti-nuclear—it appears to be anti-everything that will score a point—but there is no serious and costed plan for how Scotland could be in the vanguard of the new energy economy. The Liberal Democrats, who are not present here today in Westminster Hall, have described Labour’s policy of nationalisation as “pointless and costly”.