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16 Oct 2008 : Column 960

Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): The Minister is right that we are now in a globally dependent market, but it is very important that we maximise production from our own market. Is he aware of the growing concern in north-east Scotland that although the big companies—I declare an interest as a shareholder in Shell—have enough cash to invest, much of the future production and investment in the North sea has been from smaller companies entering the market. The smaller companies rely on the capital markets, which are frozen at the moment. Will he ensure through PILOT that a strategy is in place to tackle the impact of the credit crunch on that vital investment in the next round of North sea exploration and production next year?

Mr. O'Brien: The hon. Gentleman is quite right that we need to ensure that the credit crunch and problems in the financial markets do not prevent the long-term investments that we need in the North sea and off the coast of Scotland to ensure that we get the maximum benefit. There is still a lot of benefit to be obtained from the oil and gas that is still accessible. The need to ensure that some of the smaller companies—particularly some of the American companies, but others, too—can access the more difficult-to-access resources is enormously important.

Of course, with the credit crunch problems there are likely to be some issues with the accessibility of finance. We want to use PILOT, as the hon. Gentleman suggests, and work through some of the issues with the companies to see whether we can maintain as much of that financial long-term investment as possible.

We must remember that that investment is long term and that many of the companies will already have sorted out some of the finance. They may well produce some problems as a result of what has happened in the past month or so. If we can work through some of those issues with them, and see whether we can get some recognition that there is a stable, long-term Government interest in ensuring that the investment happens, we can provide some element of reassurance. I cannot promise that we will solve all the problems, but we are certainly very alive to them.

Mr. Jim Devine (Livingston) (Lab): Does my hon. and learned Friend agree that although there might be sustainable oil, we should not base an economy on it, recognising the fluctuations that we have seen over the past five or six months?

Mr. O'Brien: My hon. Friend knows that oil and gas is depleting, and although it still provides about two thirds of the oil and gas needed for our economy as a whole, it is depleting at a rate of about 10 per cent. a year. Basing a whole economy on that is obviously not the way forward. A diverse economic base is needed, and the Government have tried to encourage the diversity of that economic base. I only wish that we had a level of co-operation from the Government in Scotland that would enable much more of that diversity, rather than a pretence that they can rely on resources that are merely depleting at the moment.

We need to ensure that we deal with the issues to do with fuel poverty and the high bills that people are being forced to pay because of the world energy markets.

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Mr. David Anderson (Blaydon) (Lab) rose—

Mr. Elliot Morley (Scunthorpe) (Lab) rose—

Mr. O'Brien: I shall give way to my hon. Friend the Member for Blaydon (Mr. Anderson) and then to my right hon. Friend the Member for Scunthorpe (Mr. Morley). I am conscious that time is limited in this debate, and I therefore do not want to give way too often as other Members will want to speak.

Mr. Anderson: May I raise with the Minister the reality of the increase of up to 80 per cent. in the cost of domestic coal? A constituent of mine is now paying £9 a fortnight more than he was this time last year. In the debate about the cost of oil, electricity and gas, we should not forget that a lot of people in this country still rely on domestic coal.

Mr. O'Brien: Domestic coal will certainly play a role in a diverse energy supply, and we want to ensure that it does.

Mr. Morley: I welcome my hon. and learned Friend to his new post. I want to pick up on the point made by my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) during the statement about the windfall profits from the carbon credits to the generators. They are not exposed to international competition. That money basically goes straight on to their balance sheet. Is the Minister satisfied that there is proper scrutiny of where that money is being used and of whether it could be used to help the fuel-poor?

Mr. O'Brien: We must ensure that we have the policy right. We are ensuring that that is so, but we also have to ensure that we balance the way in which the policy is developed over the coming months. We want to ensure long-term investment, too, and it is important to get substantial investment from companies in new infrastructure. Those companies will say that they want to make a good return on that investment. We will have to strike the right balance, but my right hon. Friend is right to suggest that we must always be aware that that balance needs to be struck with a great deal of care, bearing in mind the fuel-poor.

I now wish to make progress. There is a limit on the length of my contribution, as I am sure those who want to contribute to the debate will recognise.

My right hon. Friend the Prime Minister set out a new package of proposals for dealing with fuel poverty, and this debate is our first opportunity to outline what it contains. The new measures aim to reduce the amount of energy that households need, not just this winter but in the long term. They could help an extra 2 million households improve insulation and efficiency, and save them up to £300 a year in fuel bills. An additional £560 million obligation on energy companies is to be provided under the supplier’s carbon emissions reductions targets to fund home improvements such as loft and cavity wall insulation. Eleven million elderly and low-income households will qualify for those measures, at no extra cost to themselves.

This is about not just individuals, but communities. Gas and electricity suppliers and electricity generators will also contribute a further £350 million to a new community energy savings programme. That will support new and existing partnerships between local authorities,
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voluntary bodies and energy suppliers, and will provide intensive help to some of our most deprived communities on a house-by-house, street-by-street basis.

Mr. David Drew (Stroud) (Lab/Co-op): Will my hon. and learned Friend give way?

Mr. O'Brien: Given the time constraints, I regret to say that I will not be able to.

Experience with existing schemes such as Warm Front suggests that a locally based approach, which offers householders face-to-face contact and advice, maximises the take-up of help available and addresses the problem of reaching every part of the community. As well as helping people to save energy this winter and in the long term, the measures announced will help households keep their bills affordable. This time last year, there were 365,000 customers on social tariffs; today, the energy companies tell me that there are more than 670,000, around three quarters of whom are guaranteed that there will be no price rise this winter.

Earlier in the year, the Pensions Bill that I piloted through the House was amended to allow data to be shared with energy suppliers to help them to identify those poorer pensioners at risk of fuel poverty. When it is passed, the legislation will help suppliers to ensure that some of the most vulnerable customers have access to social tariffs and other measures.

The measures that we have taken help the most vulnerable people pay their bills. We have trebled cold weather payments this winter, raising them from £8.50 to £25 a week. Homes that benefit from the community programme will also receive benefit entitlement assessments, which can add significant sums to the incomes of vulnerable households. The average annual increase in income where a household is found to be under-claiming is around £1,400, and of course we have increased winter fuel payments for pensioners over 60 from £200 to £250, and for those over 80 from £300 to £400.

When I began, I said that the global context shapes our choices. When global prices rise, our circumstances and choices at home change. Thankfully, there has been a reduction in the oil price in recent weeks, and we want that to feed through into gas and electricity prices. The fact that gas companies buy ahead from their suppliers means that there will be a lag of about six months. However, given the movements of gas wholesale prices in a better direction, we told the gas companies at the meeting we held yesterday that we want them to give some indication about what they are going to do. We want the benefits of price changes to feed through to individuals who have to pay their bills, and as a boost to the economy as whole.

Today, the Government have made it clear that the 80 per cent. target shows our commitment to ensuring that we give a high priority to dealing with climate change and to ensuring that we have an affordable energy supply. That is our commitment, and it is one that we will deliver on.

1.44 pm

Charles Hendry (Wealden) (Con): May I begin by welcoming the Minister warmly to his position? Perhaps it would be more appropriate to welcome him back, as he held the post for a few months four years ago. I also
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welcome his new ministerial colleagues, and I think that there will be some interesting discussions among that team. The Under-Secretary of State will be required to consent to new nuclear power stations and to the proposed facility at Kingsnorth, and that will be a fascinating process to watch.

May I also use today’s greetings as an opportunity to pay a warm tribute to the right hon. Member for Barrow and Furness (Mr. Hutton), who is now Secretary of State for Defence but who used to have responsibility for these matters when he was Secretary of State for Department for Business, Enterprise and Regulatory Reform, and to his former Minister of State, the hon. Member for Croydon, North (Malcolm Wicks)? Both really had begun to come to grips with the size of the energy challenge that we face. They did not do enough, but they had begun to understand the problem.

We wish the Minister of State well in this important role, but we also have to recognise that people outside are frustrated at the number of changes that have taken place. The hon. and learned Gentleman is the 10th energy Minister in 11 years, and he was also the sixth—just as his predecessor was the seventh and the ninth. That shows this Government have a true commitment to recycling, but many people are frustrated about the changes that have taken place.

There is also no doubt that this is a very challenging time for the Minister to take up his post. There is massive pain in households as fuel bills go up, and there is a real threat that companies may close as a result of the lack of competitiveness in our electricity pricing. In November, the forward price for electricity for business is one third higher in this country than it will be in France. We face an energy gap in less than a decade, when the lights may go out, and the current financial pressure makes the targets on renewables even more challenging.

However, the charge against the Government is that they have made problems worse than they needed to be by failing to make decisions at the right time, and sometimes failing to make them at all. The Government have received warnings since the spring about fuel poverty, which was completely inevitable given the huge price rises coming through. Gas prices have risen by 50 per cent. since January, and electricity by 30 per cent., but the Government did not act until September. Of course we all agree that energy efficiency is vital, but it is not possible for enough to be done before winter starts, even though the warning signs were there.

That will have catastrophic consequences for the Government’s fuel poverty targets. They want to remove all vulnerable households from fuel poverty by 2010, and that is a legally binding target, but the numbers are shooting up in the wrong direction. We need clarity from them about whether they think that those targets can still be met.

Mr. David Winnick (Walsall, North) (Lab): The winter fuel allowance has been of considerable help since the Government have been in office. If the Conservative party is elected at the next general election, will the hon. Gentleman say that the allowance will be retained?

Charles Hendry: We shall make our financial commitments clearer as we get closer to the election. We have no idea whether the shortfall in public spending
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this year will be the £40 billion that was predicted, or the £100 billion that is now expected. We cannot begin to make spending predictions at this stage. The other thing to recognise is that this year’s increase is for one winter only and not a lasting commitment.

Mr. Mike O'Brien: The hon. Gentleman has attempted to lambast the Government for failing to make decisions. Will he make a decision about winter fuel payments, as many pensioners will be very disturbed by what he has just said? While he is at it, what is the Conservatives’ attitude to nuclear power? Does he still agree with his party leader that wind turbines are merely bird blenders?

Charles Hendry: The Minister could have addressed some of those issues in his own contribution. On winter fuel payments, we will make our position on financial matters clear as we move towards the election. That is not likely to happen for 18 months, and we expect to be able to make our spending commitments clear at that time. However, given that we have no idea of the extent of the mess that this Government will leave us with, we cannot give that clarity at the moment.

I refer the Minister to the comments made by the previous Secretary of State with responsibility for nuclear power. He thanked the Conservative party for the constructive way in which we engaged with him and his officials to try to provide a secure platform for nuclear investors. We have said that we will work with the Government to provide security and a stable investment scenario. If the Minister had talked to his officials before making those comments in the House, he would have been better informed.

However, the Government have rejected some of the proposals that would have helped them to deal better with the problem of fuel poverty. In the Energy Bill that is going through Parliament, we proposed that the Secretary of State should have powers to set social tariffs. That would mean that he would not have to consult, let Ofgem consult and then consult again: the necessary powers could have been included on the face of the Bill, so that he would be able to act if he decided that that was necessary. Without those powers, he will need to have primary legislation before he can act, and this winter will be over before he has that ability. It is a shame that our proposals were not accepted.

The Government have abolished Energywatch and now, under pressure from other Governments, there are moves afoot to allow the European Commission to slip off the hook of tackling liberalisation.

At the heart of this debate about energy providers is the issue of energy security. How can we keep the lights on in 2014-15, by which time most of our nuclear power stations and one third of our coal-powered stations will be out of commission? The Government have failed to establish a framework to bring forward investment in new energy generating capacities. As a result, we are seeing higher prices in this country, especially for business users. The prices are now above the European average.

Critically, the Government have also failed to address the issue of gas storage. We have 14 days of gas storage in this country compared with 100 in Germany and 120 in France. In the cold period at the end of 2006, when we desperately needed gas to be imported through the interconnector with France, France was unable to provide it because it had legal requirements to keep gas
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storage facilities topped up. We need a real determination from the Government to push forward gas storage. That will be fundamental to our energy security.

In spite of what the Minister says, the Government have been timid on the issue of carbon capture and storage. Even when they were telling us that the economy was doing well and the coffers were flush, they did not invest in more than one pilot project. They said that they would fund three projects from the receipts from the EU emissions trading scheme. [ Interruption.] The Secretary of State intervenes from a sedentary position. However, two potential technologies have been ruled out. Far from our being in a position to export expertise to China, China has opened its pilot project while we are still deciding who might win ours and it is determined to export its technology to us. We could have shown true global leadership and established a tremendous lead in a vital new sector, but the Government have allowed the opportunity to slip away.

The Government should also be looking to show leadership by following our approach to emissions performance standards. We looked at the matter carefully. Initially, we had a concern about it; we have been persuaded that it is the right way forward. We need to be clear that it is not an anti-coal policy, but it is crucial for future investment that a clear framework be established.

Mr. Eric Illsley (Barnsley, Central) (Lab): The hon. Gentleman talks about carbon capture and storage. There are other methods of dealing with carbon. One is coal gasification and the other is burning coal in integrated combined cycles. All the prototype technology for our clean fluidised bed coal gasification programmes was abolished by the Conservative Government in 1988.

Charles Hendry: The hon. Gentleman makes a point about what happened many years ago, but we are now—as the Secretary of State said—in a very different set of circumstances. We have seen a significant move to gas, which has enabled us to meet our Kyoto commitments. We have not seen the necessary investment in new plant, and we have to look again at how we can give new life to coal. We have not reluctantly accepted this policy; we are passionately committed to delivering it because we think that coal has an important role to play in the future.

The other aspect of the debate is low-carbon energy. While the Government have talked the talk in this area, they have not walked the walk. We have seen lots of targets, but we have not seen enough real action. The Government set up the marine renewables deployment fund with £15 million, but not one penny has been spent. They should be helping to market emerging technologies in which we can lead the way rather than setting rules that companies cannot meet.

The Government consented to 33 GW of offshore wind, but they did not consult anyone in the industry about the feasibility of building that by 2020. The wind industry says that it cannot do more than 20 GW, so the Government have set a target that the industry does not believe it can deliver.

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