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Mr. Graham Stuart: In a globalised world, which the hon. Gentleman may regret, the high earning individuals to whom he refers will simply go to another financial centre and set up in another country and none of the money will go into our coffers. Surely even he can see that that might be counter-productive.

Alan Simpson: No, I do not think that that is so at all. Let us consider what this country produces. I go back to
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a point made from the Conservative Benches. If we want to begin with the question of the creation of wealth, it is fair to say that there are a few dynamic entrepreneurs in the UK who have not only invented things to make, but have gone on to produce them. We ought to consider how to reconnect with support for domestic manufacturing. Many of the countries that are far more successful than we are at that are in that position because they have much more interventionist policies in their markets. There is a presumption that it is not enough to talk about inventions if one does not create the domestic circumstances in which those inventions have markets.

That is the point that I want to come to on the climate change challenge. One of the big criticisms that we hear from the parts of the manufacturing industry in the UK that are involved in the development of new technologies and sustainable energy systems is that we should look at what is happening in other parts of Europe. The Governments of those countries have created a market in sustainable energy systems and renewable technologies because they have changed the rules and financial subsidies in relation to those markets. Germany is streets ahead of the UK in doing that. It has captured 15 per cent. of the world market in renewable technologies because its firms have a domestic market in which to sell. In Berlin, 80 per cent. of all new buildings that are going up are generating their own energy. Is that just a foible of Berliners? The answer is no. The market rules about buy-back pricing of electricity were changed so that people get back four times the price for energy they generate in relation to the cost of energy that they take from the system. Of course, that transforms the way in which energy suppliers begin to look at the energy market.

I just happen to have completed my own eco-house, which will generate more energy than it consumes and which puts the surplus back into the national grid, but it is a crap deal. For every £1 of energy that I put into the system, it will cost me £7 to get it back. That is the nature of a rigged market. We can change the nature of that market so that there is less sense of theft and a dash for cash in the present and so that we have a market that genuinely invests to deliver in a sustainable way for the future. The rules are not God-given; they are Government-created. One can create competitive markets, but on a different presumption.

In that sense, when we talk about the need for liberalised markets, I would just point out that, in the UK, in a liberalised market mentality, we are currently paying more for our energy supplies than our European competitors. The best point of comparison is Denmark. In 1970, after the last oil crisis, it looked at the short-term pressures, realised that it needed to come up with long-term solutions and began to invest systematically in decentralised energy systems. It did so knowing what most people in today's UK energy sector know: we have a monumentally inefficient national grid energy supply system. Some 70 per cent. of the energy input is lost in energy production or transmission. In Denmark and the Netherlands, decentralised energy systems, using co-generation techniques of combined heat and power, are 90 to 95 per cent. efficient. Those countries recognised that they could meet their energy needs, and their energy security needs, through decentralised energy systems using the energy that we throw away.
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Why do we not take the opportunity to change the fiscal rules relating to energy markets to allow a paradigm shift, not into the absurdity of a new generation of nuclear power stations or the presumption that we are under some obligation to prop up a grossly inefficient national grid, but in the way we think about energy generation and supply? The Dutch are building roads that incorporate solar power generation so that the energy needs of 400 houses can be met by every new kilometre of motorway. Why are they doing it, but we are not? It is because their Government intervene to structure the market towards renewables rather than short-term consumption or profit generation.

Mr. Vaizey: I have listened to the hon. Gentleman's speech with intense interest and, if I had the opportunity, I would reply to it in detail, not least because Thames Water is planning to build a reservoir in my constituency and because I have had the Thames Valley energy centre round to my home to reduce my emissions. I hope that the hon. Gentleman will put on his website the details of how he created an eco-home. I completely agree with him about fiscal rules. Will he congratulate Braintree council, a Conservative council that has reduced council tax for energy-efficient homes? Does he also agree that the Government could ensure that all new homes meet the highest environmental standards possible? It is in their hands to do that today.

Alan Simpson: The Government could do that and I would encourage them to do so. They could require new homes to meet not only the decent homes standards, but the standards that are being set for other parts of Europe, which are considerably higher than the decent homes standards. Those new standards make our requirements seem like the last generation.

The reality in the UK is that 80 per cent. of the population is likely to live their lives in 80 per cent. of the existing stock. The question is what we do about those who are living in existing housing stock. That position is profoundly affected by other changes. Since 2003, gas prices under British Gas have risen by 80 per cent., and its electricity prices have risen by 38 per cent. The incomes of the fuel poor have risen by nothing like that amount. I am proud of the fact that my Labour Government made the first legally binding undertaking to eradicate fuel poverty in this country. I am proud of the initiatives that have been adopted under the warm homes programme, but the recent burgeoning of oil and gas prices is taking people back into fuel poverty far faster than the programme is lifting them out of it.

By 2003, we had reduced the numbers of households in extreme fuel poverty to some 1 million. We were on track to eliminate fuel poverty in the most vulnerable households by 2010. As matters stand, the figure has risen to 2.7 million and is projected to exceed 3 million by the end of the year. The only way to reverse that is through a step change in intervention in the market, both to reward those who are able to adopt energy conservation measures in their own homes and to require standards to be met by those who wish to lease out properties and those who are building properties that are energy guzzlers, rather than energy generators.

David Howarth (Cambridge) (LD): Does the hon. Gentleman accept that the Government could have
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effected energy efficiency in existing houses at the 80 per cent. to which he referred if they had decided to apply the new part L of the building regulations to house extensions? However, the Red Book confirms that they are not prepared to do that.

Alan Simpson: That is certainly one measure that could have been used, but not the only one. As has been suggested, we could tie such a provision to exemptions or reductions in council tax, to stamp duty or to licensing for rented houses of multiple occupancy, all of which could be conditional on energy efficiency. However, there is a cost involved. We need to be honest about that and take the cost on the chin now, because the cost of not using energy efficiently will be paid in people's lives. That is the real challenge against which this Budget and future Budgets will increasingly be judged. To what extent will we offer more than lip service to making profound, demanding, changes in energy costs or climate change that affect people's lives or their ability to stay alive? All future Budgets will have to be judged against those criteria.

I have a final observation about the experience of building my house. It feels morally uplifting to have done that—

Mr. Vaizey: Put it on your website.

Alan Simpson: The architect and I will have lots of fun doing just that.

One of the things that experience taught me is that there are no individual solutions. My contribution to energy generation would be infinitely more efficient if it could be fed into a decentralised energy system for Nottingham, in which co-generation—the interaction between the energy needs and energy generation of houses, shops and businesses—was part of an integrated whole. We shall achieve that only when fiscal measures make such a shift possible. That is an admission of the limits of the contribution I can claim in lightening the ecological footprint of my existence on the planet. My contribution would be much more significant if my footprint was lightened alongside others and in conjunction with them.

In budgetary terms, we need to look at the management of markets and the management and deployment of fiscal incentives on energy. Recently, we handed out a public, taxpayer subsidy to clear up the £85 billion waste management costs of the last generation of nuclear power stations. Soon, we shall be asked to believe that there will be no similar costs in future for a subsequent generation. I have to say to the Chancellor, his colleagues and colleagues on both sides of the House that the public, taxpayer subsidy for that next round of follies would run off with the budget for all the other interventions that would bring about fundamental change towards a sustainable energy system for the UK in the 21st century.

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