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Mr. Weir : Is there not a danger in relying too heavily on gas coming through the interconnector from the European mainland? When we have severe winters in the UK, there are also likely to be severe winters and increased demand in the northern European continent, which will also seek the gas coming through its territory. Is there not a danger of that gas being diverted, rather than coming through the interconnector?

Sir Robert Smith: We need an open market with similar storage regimes at both ends of the interconnector so that forward supply and planning can be built into the risks and the models for trading on that market. That will not work if there are two different markets. The market is further distorted by the fact that the quality of gas in mainland Europe is different from that of UK gas. It would be interesting to hear from the Minister how his Department intends to take account of
 
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gas quality standards, and how we will adapt our trading arrangements to deal with gas of a different quality that flows from the European market.

Norwegian supplies will improve the situation in the next two years. Alarm bells have been set off by what happened in Ukraine. The upside of that was that the Russians saw that if they want to reach their markets, they need to continue to make supplies. No matter how rogue the nation, the nation at the other end of the pipeline will not get the money unless it provides the goods. Sellers need money as much as consumers need supplies. I welcome the legal changes that are coming to encourage more storage. That will greatly improve the situation on this side of the market.

The North sea must be recognised for its major contribution to the UK economy, in capital investment, jobs, tax and supply of fuel. The Department of Trade and Industry has done much to encourage the maximisation of its continuing potential. The North sea still has much to offer. The fallow fields initiative and the access to infrastructure have been extremely welcome, but as has already been remarked in the debate, it seems perverse for the Chancellor to increase the tax regime during his pre-Budget report at such a crucial time when we are trying to encourage more investment in gas and more supply, exploration and production.

What is even more perverse about the way the Chancellor has treated the industry this time round with his tax shock is the fact that he introduced it two thirds of the way through the financial year, making the planning environment even more unstable for investors. Also, as I said in my intervention, he will not reduce the tax if oil prices fall. The tax is clearly not designed to send signals to investors that he is interested in encouraging their investment. On top of the previous tax shock, it has sent disturbing signals to the market about investment.

The Chancellor should consider abating petroleum tax on older fields, because they are the hubs that allow us to explore the smaller fields around them. He should also consider how the tax impacts on tariffs, because the Department of Trade and Industry is trying to encourage the maximum use of pipelines and infrastructure, so it is perverse for the Chancellor to increase the cost of using the pipelines through extra tax. A lot of gas remains to be extracted, so it is important that we get the matter right.

The North sea has an important role to play in carbon capture and storage to reduce the environmental impact of carbon fuels. The Miller project off Peterhead is a good example of the North sea's potential as a place to dispose of carbon rather than putting it out into the atmosphere, which causes environmental disruption. Preserving activity in the North sea while we develop the technology is vital, and if we get ahead in that technology there are markets in China and India, which must produce carbon in meeting their energy needs. We must therefore find a solution on carbon capture, which, as we heard in yesterday's Westminster Hall debate, also offers a potential future for coal.

Our nuclear industry has left us with a massive clean-up bill for historic waste of £56 billion and rising. Nuclear energy was originally described as too cheap to meter, but it is leaving us a major legacy. It makes sense to use the existing plant for its maximum life, because
 
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the cost has already been incurred, but we need a permanent solution on waste. The incentives to build new capacity for nuclear power would be better directed towards dealing with the problem, which the hon. Member for Rutland and Melton (Mr. Duncan) mentioned earlier, of the signals to the different renewables sectors, in which we need to encourage diversification.

Daniel Kawczynski : Are the Liberal Democrats totally opposed to any future investment in the next generation of nuclear power stations?

Sir Robert Smith: The Liberal Democrats are not opposed to research, but we are opposed to the development of a new generation of nuclear power stations, which would be a mistake. Research in nuclear fusion offers potential long-term benefits for this country's economy and science base.

Britain is an island with a huge coastline, and wave and tidal power have major contributions to make in the long term. The Scottish Executive have already seen the problem of the imbalance of incentives sent to the renewables sector by encouraging the marine sector with their tripling of the renewables obligation, which will restore the investment balance and encourage marine renewables.

Mr. Duncan: Following on from my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski), under what conditions would the hon. Gentleman favour investing in a new generation of nuclear power stations?

Sir Robert Smith: At the current time, we do not believe that it would make sense to invest in nuclear power stations, because we do not want to waste large sums of consumers' and taxpayers' money when there are better options. We do not want the environmental impacts, security concerns and terrorist risks that nuclear power could offer this country. A new generation of nuclear power stations is not the right solution, because we should not produce more waste when we do not have a proper solution to the current problem.

The skills developed in the hostile environment of the North sea have a lot to offer the marine renewables sector. Biomass is a major renewable that also has a lot to offer: our rural economy is currently going through major change, and given what has happened to farming and forestry, the new markets that biomass could produce would benefit our rural economy, our security of supply and our environment.

Gas is in the headlines but high oil prices also hit sectors of our economy that do not have access to gas. Farming, contracting, fishing and transport as well as domestic and industrial heating away from the gas main suffer from high oil prices. Perhaps the Minister could expand in his winding-up speech on how the European Union dialogue with the Organisation of Petroleum Exporting Countries is progressing on tackling long-term stability through exploring and producing enough oil from OPEC to stabilise world oil prices.
 
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People say that we should not depend on the rest of the world but we cannot escape the fact that we live in an interdependent world. The Secretary of State mentioned the G8 and what we are trying to achieve at the World Trade Organisation. It is crucial that we do not allow protectionism and do not accept the argument that the national interest would be best served by cutting ourselves off from the rest of the world. The only way to protect ourselves from global forces and world markets is to ensure that they operate efficiently and effectively. We cannot run away from them; they will have an impact on us, no matter how much we try to be self sufficient.

The Government need to redouble their efforts on energy liberalisation and ensure that their proposals for storage capacity stabilise the market. In the long-term, we need to use our scarce energy resources with greater efficiency, make full use of our potential to capture carbon and unlock the renewable resources that nature has given us.

4.21 pm

Mr. Eric Illsley (Barnsley, Central) (Lab): I greatly welcome the debate but it is a pity that we have been given only three hours for it, approximately an hour and 40 minutes of which will be taken up by Front Benchers, given the length of time that they have already taken and the winding-up speeches later. It is a shame that we get such a short debate on an issue that is so important.

The debate is timely. Although I listened carefully to the Secretary of State's comments on our current energy supplies and our security, we read newspaper articles that refer to the "crisis" in our electricity and gas power supplies. Although we have probably not yet reached the crisis, given the long lead-in times for any new development—nuclear, gas, coal or anything else—we must start making decisions now and not wait any longer while establishing reviews, investigations and consultations about how to progress.

The Secretary of State pointed out that we face several problems with our existing energy supply. We are a net gas importer; our nuclear plants are ageing; our oil supplies in the North sea are expiring; our coal mines have been neglected, ignored, mothballed or simply closed; renewable sources have not come on stream as fast as they should; and perhaps we rely too much simply on windmills. While all that is happening, demand, which we have to meet, increases relentlessly year after year.

I am surprised that the Government have decided on yet another review, because the previous one took place only in 2003. The White Paper that was produced then states:

"By 2020 we could be dependent on imported energy for three-quarters of our total primary energy needs . . . we may become potentially more vulnerable to price fluctuations and interruptions to supply caused by regulatory failures, political instability or conflict in other parts of the world".

What more do we need to know? Those words were in a White Paper three years ago. How many times do we have to say it? We need to take some action now.

I went to the Library this morning and dug out a list of the Energy Committee's reports between 1987 and 1992. It is depressing that Energy Committee reports 16 years ago have the same titles as Trade and Industry
 
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Committee reports now. The reports then, as now, were on nuclear power, gas, renewables, clean coal technology and so on. We have known about the problems for a long time and we need to take action to deal with them now.

We have a diverse selection of fuel sources, and every commentator tells us that security of supply will be achieved through that diversity, by ensuring that we have several energy sources. However, each source has its own problems. The problem with nuclear power is its ageing reactors and the cost of dealing with the existing nuclear waste, which is estimated at £56 billion. What are we to do with that waste? We do not even know how to get rid of it yet, and we are probably talking about tripling the amount that we produce if the proposed new stations go ahead. We do not know what to do with the nuclear waste that we already have.

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