Examination of Witnesses (Quesitons 60-79)
RT HON
JOHN HUTTON
MP
20 NOVEMBER 2007
Q60 Miss Kirkbride: I want to turn
to the Companies Act investigation into Rover. That attracts a
great deal of interest in my constituency. Can you give us an
update on how that stands at the moment?
Mr Hutton: It is still proceeding.
I am not sure I can tell the Committee when that inquiry will
end. It has certainly cost a great deal of money; so far the cost
of that inquiry is about £10 million.
Q61 Miss Kirkbride: Does your department
have any idea when it will be completed?
Mr Hutton: Maybe I should write
to the Committee and provide more detail, but I cannot tell you
precisely when the report will be finalised. It is for the investigators
to decide when they feel their work is completed. They must be
given the time to do that.
Q62 Miss Kirkbride: Do you think
that has been a good use of public money?
Mr Hutton: We will find out.
Q63 Miss Kirkbride: Do you have your
suspicions that it might not be?
Mr Hutton: I have no views on
it yet. We will have to see what is in their report.
Q64 Miss Kirkbride: You are happy
with a process which allows £10 million to be spent on something
that takes two years to complete. Is that an efficient way of
operating?
Mr Hutton: I do not think there
is any suggestion of inappropriate use of resources during this
inquiry. I have not seen any evidence of it. It is a complicated
issue. The inspectors are talking to a very large number of people.
I want their report to be produced as quickly as possible, but
I do not want to pluck a date out of thin air because it is not
in my gift; it is for the investigators to complete their inquiry
and produce a report in a timely fashion as soon as it is done.
It is up to them when they report and I am afraid I cannot try
to anticipate when their work will be completed.
Q65 Chairman: Are not the lawyers
on the other side just running rings around the process and making
a mockery of it? Justice delayed is justice denied. This report
is taking too long.
Mr Hutton: Do you have evidence
that is happening?
Q66 Chairman: I am asking you the
question. The supposition is that the lawyers on the other side
are delaying the process deliberately and kicking it into the
long grass so it is hardly worth having the report.
Mr Hutton: I have not seen any
evidence of it.
Q67 Chairman: It is not fair to ask
you about it in detail and this is not the appropriate moment
at which to do it, but it is an area about which your department
needs to be very concerned. This kind of Companies Act investigation
is taking too long, as they tend to happen for precisely this
reason.
Mr Hutton: They want to be thorough.
I want the report to be completed as quickly as possible but obviously
that is a matter for the investigators.
Chairman: We will change gear and turn
to the "E" that I thought ought to be in your title:
energy. We have a series of questions on your department's annual
report and its approach to energy matters.
Q68 Mr Weir: On climate change, the
annual report states that the UK will meet the Kyoto targets for
greenhouse gases but not the Government's own target for reducing
carbon emissions. How can you say the Government is on course
to meet this part of its energy PSA when it does not expect to
meet its own target for carbon emissions?
Mr Hutton: Certainly, the Government
is doing a good job in relation to Kyoto. I think we will exceed
our Kyoto targets which is the most important thing. Government
has tried to do more in relation to its own estate. The Prime
Minister made some announcements yesterday in relation to low-carbon
schools, colleges and so on which I hope will be welcome. Do we
need to do more? Yes. Are we trying to do more? Yes, certainly.
But I do not think there is any question that we will not hit
our Kyoto targets which I believe is the most important thing.
Q69 Mr Weir: The Climate Change Bill
looks for a 60% reduction in carbon emissions, but if the Government
is not on course to achieve its current target how realistic is
that, given that yesterday the Prime Minister suggested that it
would have to be increased beyond 60%?
Mr Hutton: We will do what we
can and continue to try to do more in relation to the public sector
and the government estate. We have set a target for reducing carbon
emissions by at least 60% on the basis of the scientific evidence
provided by the Committee on Environmental Pollution some time
ago. We might need to do more, and that is where many scientists
say we should be heading. The Climate Change Bill will be the
framework within which we set those eventual carbon budgets and
targets. We are the only country in the world to legislate to
do that. I think it would be an unfair inference to draw from
the report or anything that the Government has done that it is
not serious about and committed to the subject of climate change
and reducing CO2 emissions. Do we need to do more? Yes, of course.
Can we be criticised? For sure. Are we sensitive to that criticism
and want to respond to it? Yes, we do.
Q70 Mr Weir: Given the PSA at the
moment and your desire to reduce emissions, it specifically mentions
energy efficiency and renewables. It has been widely reported
in recent weeks that the department was sceptical about meeting
the existing renewable energy targets. Yesterday the Prime Minister
appeared to suggest that we would have to increase these renewable
energy targets. Are you satisfied that we shall be able to meet
the new targets for energy from renewables?
Mr Hutton: I do not think the
Prime Minister said that we needed to increase our renewables
target; he was committing the Government to meeting the existing
EU renewables target and an EU-wide reduction of 20%. I think
he was referring to the possibility that we might have to do more
in relation to climate change and greenhouse gas emissions where
we have been clear that our approach must be guided by the science
about what is necessary if we are to keep any global rise in temperature
in the range we have set, that is, less than 2 degrees. We are
not sceptical about the renewables target. The UK led the debate
in the spring council about having an effective target. We were
amongst those who were most strongly in favour of it. What we
have to do—again, the Prime Minister made it clear in his
speech yesterday—is set out a process whereby we can reach
that target. It will be a very significant challenge for the United
Kingdom. I do not think that anyone who has studied the economics
or arithmetic about renewable energy would fail to reach that
conclusion. At the moment about 2% of our total energy comes from
renewable sources and they account for about 4½% of our electricity.
We currently plan—we intended to do it anyway—to treble
the amount of electricity that we get from renewables over the
next seven or eight years. That will require a massive effort,
but it will not get us anywhere near what is likely to be our
share of the EU target; we will have to do significantly more
than that. Therefore, work is going on across government at the
moment to see what more we can do to support an expansion in renewable
energy. No one is arguing that we do not need a very significant
expansion in renewable energy. We must focus on how we can do
that in the most cost-effective way particularly for industry
and business. If we take our eye off the "cost-effective"
box we will have a problem. It is my job to make sure that we
do not lose our focus on how to source more power from clean and
secure sources but also that they are affordable in the long term.
I do not want to fix UK electricity consumers, domestic or industrial,
with extra costs that are avoidable. Our view in a wider sense
has always been clear. There are two big drivers: we need independent
competitively regulated energy markets in the UK if we are to
make progress; we also need a diverse range of energy sources
so we do not have all of our eggs in one basket because that is
not a sustainable, secure strategy. I do not believe that there
is one single technology that will be the magic wand to wave over
the whole problem of climate change. We should be looking, as
we are, at low-carbon technologies, nuclear and developing carbon
capture and storage. One other very important conclusion going
forward is that despite what will be a very significant growth
in renewables coal and gas will be important sources of Britain's
energy for the foreseeable future. We have to make them as low
carbon as possible. That is why the carbon capture and storage
project, which the Prime Minister has confirmed will go ahead,
will be so important. It is important for us in the UK but it
has global significance. China is opening two new coal-fired power
stations every week and that is what we have to deal with. We
need technology that is capable of being retrofitted to coal and
we have chosen coal and post-combustion for the CCS demonstration
project because we think it has the widest global application.
Q71 Mr Weir: You mentioned energy
markets. Do you believe that the charging regime that Ofgem is
putting in place for connection to the grid and also the new proposal
for locational distribution charging is a system that will deliver
for renewables especially as many of them tend to be in more remote
areas and have a longer distance to travel to market, as it were?
Mr Hutton: We have to get right
two or three things. Certainly, we have to improve grid connection.
The transmission access review currently under way will, I think,
be quite important. We certainly need to deal with the bottlenecks.
I and everyone accept that is an issue and we are trying to find
a sensible solution to it. The renewables obligation has been
a very effective mechanism, as is borne out by the fact that we
have more than doubled the output of electricity from renewables
sources by that means. It fits with our energy market in the UK.
In relation to the argument about feed-in tariffs and everything
else, we should look at what more we can do to support micro-generation,
distributed energy and combined heat and power. All of these are
very important issues going forward on which we need to focus
more work, and we shall do that. Looking at the fundamentals,
the best way to get sustainability and cost-effectiveness into
the drive towards a low-carbon economy is through independently-regulated
markets that function effectively and give the consumer real power
and choice. We do that at the same time we support power companies
by reform of the planning regime, making sure they have open access
to some of the new technology to generate power when they want
to. I think that is how we will solve this problem; there is no
other sustainable way.
Q72 Mr Weir: Do you not believe there
is a contradiction in that a lot of the renewables—wave,
tidal and wind—are in fairly remote areas, perhaps in locations
where the grid is not at its strongest? To set up a locational
charging mechanism that makes it more expensive to generate electricity
in those areas contradicts your laudable ambition to have greener
energy.
Mr Hutton: The renewables obligation
cannot trump the geography or physics of renewable energy. No
one can develop a financial instrument that will suddenly make
wind blow more strongly in the channel than in Scotland.
Q73 Mr Weir: The point is that any
sort of generation, not just renewables, in a remote area has
to pay more both to connect to the grid and, if Ofgem has its
way, transmit that electricity across the grid. I suggest that
is a block particularly to renewables which tend to be in more
remote areas. Does that not contradict government policy to have
a larger amount of electricity generated by renewables?
Mr Hutton: I accept there is a
technical issue about access to the grid which the transmission
access review can help to resolve, but I still think we are left
with the fundamentals of reality that particularly around the
coasts of Scotland there is significant potential for renewable
energy, electricity in particular, and we have to make sure we
have grid access and interconnectors to take the power where it
is generated, which is in remote parts of Scotland, to where it
is consumed.
Q74 Mr Weir: We all agree with that.
It is the charge to be imposed by Ofgem to do that which is the
issue here.
Mr Hutton: We are looking at all
of these issues in the transmission access review. What is a much
bigger impediment is the fact that Scottish local authorities
will not consent to wind farm schemes. We have wind schemes of
several gigawatts stuck in the planning system in Scotland with
many local authorities simply not consenting them. You can solve
the grid problem, the interconnector problem and renewables problem
but it all rather depends on local councillors saying that, yes,
the country needs clean energy and they will consent to it. At
the moment they are not doing that and that is a real block to
Britain making faster progress on renewables. The problem is not
the transmission or grid connections but the fact that increasingly
local authorities say no to renewable energy, and that is a huge
mistake.
Q75 Roger Berry: You announced a
few weeks ago a major feasibility study into tidal power in the
Severn estuary. Indeed, I have just heard the media congratulating
you on that. What happens next? What is the timescale? As you
have rightly said repeatedly, it is a very serious issue. What
has happened since you made that announcement?
Mr Hutton: Government departments
are meeting to scope out the detail of the feasibility study.
I hope that we shall be able to announce the go-ahead of the feasibility
study early next year, or as soon as possible. It has been knocking
around for a very long time. I think the last feasibility study
was 20 years ago. Frankly, we really need to make up our minds.
We have to look at the things which have changed between the mid-1980s
and this part of the new century. Technology and the economics
are different. Basically, we have to come to a decision as quickly
as possible as to whether or not this is a "goer". The
potential is fantastic. Can we overcome some of the other obvious
difficulties particularly in relation to environmental and habitat
protection which are very significant? My personal view—it
takes me well outside the brief—is that we have a fundamental
choice in which to engage. We have had 30 years of very strong
development of habitat and environmental protection laws, some
here and some in the European Union, which now meets head on a
growing demand for more renewable and clean sources of energy.
How are we to reconcile those two? I do not know the answer to
that yet, but we will have to do it. There is provision in the
Habitat Directive, rightly so, for compensating, offsetting measures
if you are to make changes that affect the natural habitat. I
think that two-thirds of the mudflats in the estuary will be permanently
flooded if the barrage goes ahead. How we recreate those natural
habits is something else. I am not a scientist, but I find it
difficult to imagine how that can be done. Does that mean we cannot
go ahead with the Severn barrage? I hope not. We have to find
a way forward on this. The feasibility study has to take into
account not just the economics; the science has to take into account
the new Habitats Directive and what it means for these sorts of
projects. It may help the Committee to know that we are looking
not only at the Severn but other potential tidal barrages.
Q76 Mr Hoyle: Morecambe Bay?
Mr Hutton: Possibly and perhaps
the Mersey as well. We should be open-minded. We need to source
more clean energy. Tidal is a fantastic resource. We need to see
whether we can really plug into this. I hope that early next year
we will go ahead with the full feasibility study. Work is going
on between various government departments to scope the detail
of that work and hopefully we shall make an announcement on it
in the very near future.
Q77 Roger Berry: As I understand
it, the feasibility study will look at alternative technologies,
perhaps tidal lagoons or tidal streams. As you rightly say, there
are opportunities around the UK for the development of those technologies.
If this feasibility study is set up in January what kind of timescale
are you looking at in terms of a report that will precipitate
the action that you rightly say government should take?
Mr Hutton: I do not think that
it will be set up in January but it will be early next year. Would
it be sensible for us to fix an arbitrary timescale for this report?
Probably not.
Q78 Roger Berry: You must have thought
about it in general terms.
Mr Hutton: The one matter that
we are thinking about is the potential scope of the Severn barrage
in the context of the 2020 renewables target, in which case if
it is to play any role at all we had better get on with it. This
will not be an exercise to punt something into the long grass.
Sometimes—I will not give any examples—work is done
to postpone decisions. All sorts of studies are commissioned.
This is not such an example; this is a case where we want to get
on with the decision. We cannot make a proper decision on this
until we have had a proper investigation into the environmental,
habitat, economic and scientific issues raised by this project.
It would be wrong, for example, to base a decision on the feasibility
study of the 1980s; I just do not think that would be sensible.
We have no choice but to do the work, but we want to get on with
it. Time is short and the clock is ticking. If it is to make any
contribution to our share of the 2020 EU target we need to pull
our finger out. I do not think that we shall be setting a requirement
to report within a certain period; I have not yet received any
advice about that, but we should get on with it. We should task
them to report as quickly as possible with a view to allowing
decisions to be made that are relevant to the EU renewables target.
There is no point punting this into the 2030s or 2040s; we just
do not have the luxury of time.
Q79 Roger Berry: I entirely agree.
Having praised you on that aspect of energy policy, can I move
to an aspect where your annual report notes slippage, namely in
relation to fuel poverty. The target of eliminating fuel poverty
in vulnerable households by 2010 is looking problematic, is it
not, given that between 2004 and 2006 the number of such households
increased by a million? What steps are you going to take to achieve
the target by 2010?
Mr Hutton: Later this month we
shall publish some figures and actions that we intend to take
to address this problem. You are right that we can expect a rise
in the figures because of the volatility of gas and electricity
prices. The total numbers are still very significantly down from
1997. There are things we have done like winter fuel payments,
of which you will be aware, that we do not take into account in
measurement of fuel poverty even though we are providing specifically
targeted financial resource to deal with energy-related issues,
keeping homes warm in winter in particular. We do not take into
account the hundreds of millions of pounds we pay out in winter
fuel allowance when we measure fuel poverty. If we did we might
lose a million or so from those figures. I do not propose that
we do that; it would be quite wrong. It is for ONS to decide what
to take into account. It has made its decision which we fully
respect, but it is worth putting into the pot more than simply
the statistics that are published on fuel poverty. We do not currently
take into account the impact of winter fuel payments which would
otherwise have a dramatic effect on the figures. There are a number
of other things we could do and are looking at. People have talked
a lot about switching and what we could do if we organised consumer
decision-making around sourcing lower priced energy. I think it
would make a very significant impact on these figures if we could
do that. We have been talking to the power companies virtually
all of which have responded positively to our request to look
at this and support those who are fuel poor. We are making headway
in all those areas. The CSR has outlined some new resources through
the carbon efficiency reduction target—the old energy efficiency
commitment—where we shall see welcome additional resources
brought to bear in this general area. It is a tough question.
We do not need a PSA target because we have a statutory commitment
to tackle fuel poverty.
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