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6.31 pm

Mr. Bob Blizzard (Waveney): It is difficult to look 50 years ahead. If we went back 50 years from today, few people would have foreseen the massive contribution that

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natural gas from the North sea would make to our energy supply. The world and its technology are changing ever more quickly, so looking ahead is very difficult.

The first principle of any energy policy must be to keep the lights on. Woe betide any Government of any party who cannot achieve that. When people argue against any particular source of energy, they should bear that warning in mind, because we might end up with not enough energy. The second principle is not to waste energy. Energy saving is a prerequisite of any policy, but that issue has been well covered by other hon. Members today.

We have to start from where we are, with oil and gas representing 85 per cent. of total UK energy production, with our own oil and gas supplies constituting 75 per cent. of all the energy we consume. Some 40 per cent. of electricity generation, on which we have concentrated today, is currently from gas. The hon. Member for Twickenham (Dr. Cable) put the gas supply industry fairly in context. It is our gas, so it would be difficult to find a more secure supply. It has enabled us to reach the Kyoto targets and the dash for gas happened because the economics were good, delivering energy without the Government needing to put in taxpayers' money.

An important plank for energy policy, therefore, is to maximise our own gas production and to delay for as long as possible the moment when we have to import big gas supplies. If we look at our gas reserves, we see that 58 trillion cu ft have been produced so far, but it is estimated that 72 trillion cu ft remain. Thirty-five years ago, people said that we had only 20 years' supply left. People now say that we have only 20 years' supply left, but who knows what new technology will bring?

My hon. Friend the Minister was right when he said that we must squeeze every last drop of energy out of the North sea, and that is what the DTI's Pilot strategy has aimed to do. It is against that background that we should consider the tax measures in the Budget. I must say that they came as a bombshell to me and many others, and we will have to look carefully to see whether they prove to be so in terms of what wreckage they may cause. They certainly do not sit easily with the direction that was being pursued by Pilot. My first reaction was to ask how one could take so much money out of an industry and retain the investment in it. I must admit that the Treasury proposals are very clever, because while they increase the tax on existing developments, they provide generous capital allowances that will—at least on paper—make the return on future developments look better.

Those are powerful arguments. I am concerned, however, that decoupling upstream and gas corporation tax from general corporation tax will offer less fiscal stability, pose a greater fiscal risk, and, therefore, have an effect on investment. The Treasury is saying, basically, that we now have fiscal stability, as the 1997 review has been concluded. I am not sure that the industry will necessarily see it that way, however, as the Budget announcement was a surprise compared with the direction in which we had been going. Although Government can say, "Yes, we are not going to change the tax regime for the remainder of this Parliament", that also implies that it could change again after three or four years. Consequently, those investors who have just been burned might not be as keen as they were before.

What can we do under the new regime proposed by the Treasury? We must focus on how to generate the most investment. We should give particular attention to the

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smaller companies and new entrants, which are the feature of mature provinces around the world. We must focus on the current proposal on financing costs because access to capital is absolutely crucial to the companies. At the moment, it is proposed that financing costs should not be offset against the supplementary charge. Will my hon. Friend the Minister ask the Treasury—as I have asked the Treasury—to reconsider whether that is really necessary? The Treasury says that it is necessary to make the supplementary charge work. I think that that is disputable. There is a risk that double taxation might deter American investment. As we must accept that the Treasury wants to impose a supplementary charge, we should consider again whether there is another way to deliver that without disallowing firms from claiming their financing costs. That is a crucial element in getting the investment needed to realise the underlying assumption of the PIU report—that we must maximise our own gas supplies. That is in line with my hon. Friend the Minister's argument.

One of the advantages of persisting with energy produced from gas is that it is relatively easy to transfer to imported supplies. Our most obviously secure next supply is from Norway—one could hardly ask for a friendlier, more stable neighbour—because we can connect relatively easily to Norwegian gas. It is worth noting that the PIU report says about security of gas supply that those countries about which Members have raised doubts today need the revenues from their gas as much as we need their gas. I know that gas pipelines are vulnerable to terrorism, but that is true of just about any other generating plant, whether a nuclear power station or another type of power station. Somehow, we have to live with terrorism, because if we say, "Terrorism rules this out", we will not be able to do anything in the world. Again, I thought that the hon. Member for Twickenham put security of supply for imported gas in proper perspective.

Clearly, we need a diverse energy policy, and we must focus particularly on renewables. We must look at what is our most obvious natural asset—wind. After all, we are the windiest country in Europe. We must get over some of our self-imposed obstacles to energy production from renewables, however, as we need to make sure that we can create a market in which they can flourish. I was very impressed by what we found on a recent visit of the all-party group on renewable and sustainable energy—PRASEG—to Germany, where there is a kind of feed-in law that gives people a price on which to rely to encourage investment in renewables. I hope that our 10 per cent. obligation to encourage such investment will work. Above all, however, we must sort out the planning laws. We must pursue and persist with the Green Paper's ideas. If it takes 10 years to get planning permission for whatever power source we choose, we will not get very far. The planning system will be one of the biggest obstacles to achieving our energy policy.

We must ensure that we have supply chains in place for the offshore wind industry so that we can develop an indigenous wind turbine manufacturing industry. That would make the economics much better and would enable us seriously to get into renewables and to convince people to invest in them. My one doubt about nuclear power is that, if the Government step in and solve the problems of decommissioning and waste management for the industry, they may deter people from investing in renewables. We need that investment.

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6.40 pm

Mr. Robert Key (Salisbury): In the 10 minutes left to me, all that I can do is thank the Members on both sides who have taken part in the debate—in particular, I thank my right hon. Friend the Member for Fylde (Mr. Jack) and my hon. Friends the Members for Croydon, South (Richard Ottaway), for Castle Point (Bob Spink) and for Galloway and Upper Nithsdale (Mr. Duncan)—and try to set down an agenda for the future.

It was perhaps a disappointment that so few people who have spoken in the debate have looked forward to 2050 and taken this important opportunity to do so. In the next 40 or 50 years, the issues will be carbon emissions and literally saving the planet. However, the issues will also involve education, and everything from the conservation of energy, the reduction in energy use and the efficiency of energy use in distribution, industry, generation or the home.

The issue is also about science. From primary schools onwards, we have an anti-science popular culture in this country, and that is damaging. It means that we do not have the engineers that we need for the future and that we shall not have the scientists to work in any sophisticated energy field if we are not careful. From primary schools to postgraduate research, we need to devote far more attention to science.

The debate has also been about engineering, engineering and engineering. Whether we are talking nuclear or whether we are talking wind, we are talking engineering. We are desperately short of engineers, and they are perhaps the key to finding the way forward in energy over the next 50 years.

We need to make it clear that renewable energy and nuclear power are part of the same agenda. We will come to different conclusions and different points of balance, but those two sources of energy are not mutually exclusive—far from it. They are part of the same agenda, because they are both carbon-free. If we are serious about carbon emissions, we should not rule out nuclear power. The handling of nuclear waste is a separate issue—a red herring, distraction and diversion. It is a problem and a challenge, but it does not involve the future of the nuclear industry.

The hon. Member for Bolton, South-East (Dr. Iddon) spoke about housing stock and he was entirely right. If we want to do something practical comparatively quickly to start to save energy, we must replace deficient housing stock. The Carbon Trust is doing a fantastic job. Its chief executive, Tom Delay, has said:

I could not put it better myself.

The fact is that whole areas of energy production have hardly been mentioned in the debate—solar power, for example. We are near the longest day in the year and nights will start to draw in from tomorrow. Cloudy, grey old Britain is perhaps not the ideal place to install solar power. However, it is not the climate that is holding back solar power, but cost. Photovoltaics have an important future, but we face the problem of the high system costs—£10,000 to £12,000 a house—and that investment will take years to pay back.

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Solar power—converting sunlight into electricity—is one thing, but water heating units on the roof cost about £2,000 to install. There is great scope for them. There is also huge scope for geothermal heating and air-conditioning systems using heat pump technology. Chesterfield borough council is using them. Why cannot more? That interesting technology is widely used across the United States and more used in Europe than it is here. Energy efficiency is the key to solving most of our problems.

Another important issue that has been mentioned by one or two hon. Members is the possible use of liquid and solid biofuels. The National Farmers Union is right to be keen that we take the idea seriously. We know what the problems are with the energy input into sowing and harvesting those crops and transporting them to central units for burning. We need to explore that further.

We also need to concentrate on nuclear fusion. It is crucial to the future, certainly in 2050. That new nuclear technology is safe. It joins nuclei rather than separating them and is nearer than we think—in fact, it is at Culham now. I have seen the tokamat there and it is extraordinary to realise how close we are to having that technology. The director at Culham pointed out that it is up to politicians to decide how seriously they want to take the technology. Culham can deliver electric generation using fusion in 50 years if we go at the speed we are at now or in 30 years if we increase the budget a bit. However, the budget is being cut this year as a result of a European Commission decision. Although that is not the Minister's fault, I hope that he and the Government's chief scientist will argue strenuously for nuclear fusion to receive a higher priority. Were people to see the process of the creation of nuclear plasma on a television screen inside the tokamat with their own eyes, they would realise that it is not science fiction but today's reality.

Future fuels are important. We cannot ignore transport. The Government are groping their way through a huge range of alternatives as we decide what to do about the motorist and the commercial vehicle. Some important fuel experiments are taking place, none more so than the hydrogen revolution, which will be relevant much sooner than we think. It does not matter whether one believes BMW, which says that it will take 15 years to arrive, or Ford, which says 17. What we know is that it will happen in that time scale because it is market-led by the greatest producers in the world. They want to do it but have not decided which way to go. With hydrogen generation, the fuel will either have to be pressurised and liquefied before it is put into car tanks, which means that it will have to be transported, or there will have to be fuel cells on each vehicle. We do not know what those companies will do. Perhaps the Government could think about giving a steer, if I can put it that way, in that direction.

Much is happening. For example, there are dual-use vehicles. Toyota has produced the Prius which allows electric power and petrol to be used in the same car depending on the type of motoring. Those are great realities. The biggest message that we should give to the Government, however, is that we recognise that it is possible to have a mixture in future. It would not just be a strategic mix, in the interests of the United Kingdom, but an engineering and technology mix. That will ensure that we beat the devil of carbon emission at the same time as providing more efficient use of resources and fuel in our homes and at work.

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We should rule nothing out. We should have an open mind. We all have vested interests, which are perfectly legitimate. The coalfield communities must, of course, contribute. They will be part of the future equation. Similarly, we must be cautious about the costings of, for example, wind. We should never forget the cost of transmission. We know that a change is happening between embedded generation and transmission over long distances. We need to access technology and put behind us some of the prejudices and battles of the past. In that way, we will set an agenda for 2050 that will work.

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