Examination of Witness (Questions 180-199)
3 JULY 2008
Q180 Michael Connarty: It does seem
that everyone is looking for popular selfishness to get votes.
It worries me that, in fact, we are not willing to take on the
big issues and say we really have to do something unique in the
developed countries, particularly in the EU, half a billion people
who are quite well off in the privileged world, particularly in
our very advanced economies. We do not seem to be willing to do
that because it is all about the voting side.
Mr Brown: The worst thing that
could happen in this particular period is that the world resorts
to an old form of protectionism, and there is a danger, yes, of
protectionist sentiment rising. It is rising because people can
see the losses from globalisation and are not appreciating the
gains. People see their jobs being lost as a result of the big
transfer of manufacturing strength in which about a million jobs
a year are going from America, Europe and Japan to the developing
and emerging market economies, and people are, therefore, worried
about the cost of living. What they are not appreciating, of course,
is that they are able to buy cheaper consumer goods as a result
of that, that our economies are capable of adapting and developing
high value added goods and services, that we are actually capable
of competing in an open global economy, but it has got to be an
inclusive economy. In other words we have got to make sure that
we take care of the needs of people who are being forced to make
Q181 Michael Connarty: Tell me specifically
about biofuels in the EU. The recommendation of the European Environment
Agency Scientific Committee is that the ten per cent target which
has been set should be abandoned because of its effect on food
prices. Do you think the UK should be pushing the EU to focus
on sustainable biofuels, for example, using sugar rather than
the general biofuels policy it has at the moment?
Mr Brown: I think this debate
has veered from over-optimistic predictions about what biofuels
can achieve and now very pessimistic views of the damage that
biofuels are doing to basic food production without actually making
for better environmentally sensitive products. I think probably
in the end we will get to a better equilibrium in this debate,
that there are good biofuels and there are bad biofuels, which
is the implication of your question. We will be publishing very
soon the Gallagher Report on biofuels. We have looked at the scientific
evidence, or the review has, very carefully. It will make its
recommendations, and on that basis we will approach the European
Union with our proposals for any changes that are necessary in
policy. I think it is really important, as your question implies,
to look at the scientific evidence.
Q182 Michael Connarty: Can I turn
to the wider economic institutions. We referred generally to the
Bretton Woods Institutions, but I have been in discussion with
people who are interested in development aid and growth, and they
say the World Bank, the IMF and the body which later became the
World Trade Organisation were established in 1944. Are they really
equipped to deal with the commodity price problems and the changes
in the world that we now face, or do we need a new Bretton Woods,
which has been talked about in the context of the twenty-first
Mr Brown: I think you are absolutely
right. We are part of a group of the Commonwealth countries as
well as part of a discussion in the European Union about major
reform of the international institutions. I think we found with
the financial crisis, the credit crunch, that we have got no proper
early warning system about issues of financial stability for the
world economy. We have got the Financial Stability Forum, which
we actually played a part in setting up, but I think the International
Monetary Fund, which used to deal with balance of payments crises
that countries had in what were basically sheltered economies,
has got to change for the new global economy; so we need that
early warning system, we need to be better at dealing with issues
of financial stability at a global level. You have national regulators,
but you have global capital markets you need to change. I think
the World Bank has got to change fundamentally. It has got to
be able to deal not just with the problems of poverty but the
problems of the environment and climate change, and if we are
to get an agreement at Copenhagen on climate change which would
cut emissions substantially, then there is no way that the poorest
countries in the world, the emerging markets or the developing
countries in the world can finance the climate change changes
that are needed without substantial injections of finance, whether
in loan finance or grant finance, and you will need a body with
the size and capacity of the World Bank to be able to guarantee
that there are flows of money for the investment needed in alternative
sources of energy. I also think, as far as the United Nations
are concerned, that we will see over time, whether it be Burma
or Zimbabwe or before that Darfur or Rwanda or countries in the
eastern part of Europe around the break up of Yugoslavia, we will
need better ways of establishing stability, reconstruction as
well as peacekeeping and humanitarian aid, and we do not have
the international organisations that can help us by moving into
countries on request with civil society as well as military people
that can help reconstruct these societies when they are failed
states or failing states.
Malcolm Bruce: I wonder if we could turn
to the domestic impact of rising fuel prices.
Q183 Peter Luff: Prime Minister,
I was very glad to hear you say earlier on that we are not at
the mercy of world events entirely when it comes to energy, you
said there is a great deal in the UK to do with rising energy
prices. Let us look at what the British Government can do in respect
of energy, security, cleanliness and affordability. The first
thing we can probably do is make sure the European markets are
properly liberalised. I do not mean progress in respect of electricity,
but the wholesale gas market is a scandal. Should you not be spending
your time persuading our European colleagues to liberalise their
gas markets rather than giving lectures to the King of Saudi Arabia
about how he should invest his money?
Mr Brown: I was not actually giving
lectures to anybody about how they should invest their money.
I am trying to find a way that, instead of a conflict of interest
between oil producers and oil consumers, we can find whether there
is a common interest in us working together to reduce our dependence
on oil. You are absolutely right that we want to see greater progress
in the liberalisation of gas, electricity and energy markets in
Europe. There was progress made at the June European Council,
but there is a lot more to do and the single market has over time
to become a reality in all areas.
Q184 Peter Luff: You have been saying
this for years, Prime Minister, and there is progress
Mr Brown: There is progress.
Q185 Peter Luff: ---but wholesale
gas markets in Europe are still desperately illiquid, and that
has huge consequences for British consumers, domestic and industrial.
Mr Brown: Yes, and one of things
that we have tried to do of course is to increase competition
in these markets, but at the same time, I am telling you today,
we want to reduce our dependence on oil and gas and there are
ways that we can make domestic decisions about nuclear energy
and renewables to do so, and that is where the environmental agenda
and the economic imperatives of our times come together.
Q186 Peter Luff: Well, I agree with
you about that and that is what I want to ask you next in fact.
The 2003 White Paper on Energy was really disappointing. Really,
it relegated nuclear power to two paragraphs, it said very little
about carbon capture and storage and virtually nothing about gas
storage, so that means that here we are five years on, we are
still talking about building nuclear power stations and actually
we are not much further forward
Mr Brown: I do not accept that.
Q187 Peter Luff: Well, five years
on and we still have not got any sign of a starting point.
Mr Brown: I do not accept that.
The issue is, first of all, are we going to replace existing nuclear
power stations as they themselves reach the end of their lives,
and that is the decision that we made and, secondly, will we need
to do more, and that is a decision that we are looking at. I just
have to say that we are leading the debate around the world about
the expansion of nuclear energy. Sixteen out of 27 of the European
countries are now either expanding their existing nuclear energy
or considering it, or considering having nuclear power for the
first time, so we are leading this debate and will continue to
Q188 Peter Luff: But, if we had been
there five years ago, as we could and should have been, we would
not be where we are now, we would not be facing the loss of electricity
supplies in a few years' time and we would not be facing competition
for the skills and resources to build those nuclear power stations.
Mr Brown: I just do not accept
that. I think the right time to make decisions about nuclear power
is as we look to replace existing nuclear power stations, and
of course there is the debate now about whether we should go even
further than that and whether we should have more of our electricity
supplied by nuclear, but I think we have actually led the world
and other countries still have not followed. Italy announced a
few weeks ago that it was going to do something about nuclear,
and we have been debating this and making decisions on this in
the last few months. Over the last year, not with all-party support,
I may say, not with all-party support, we have made a decision
on nuclear, we have made a decision on the planning system that
will allow us to speed up the development of these new energy
sources and we have made big decisions also about housing and
big decisions about infrastructure, so we are trying to make the
long-term decisions that are essential for our country.
Q189 Peter Luff: You will understand
that I do not accept the point about all-party support. I think
my Party's policies on nuclear power are more robust than yours
and I think the planning policies you have brought out have sacrificed
democracy unnecessarily to achieve an objective which is not secure.
I think national policy statements on their own would have done
it, we do not need such a planning regime, but, never mind, that
is the difference between us.
Mr Brown: I just do not accept
that. A national policy statement on its own will not deliver
the result that is necessary; you will still have six-and-a-half-year
planning inquiries or seven-year planning inquiries
Q190 Peter Luff: No, that is not
true, Prime Minister.
Mr Brown: We had to have a way
of speeding it up.
Q191 Peter Luff: That is not true.
If you look at Sizewell B, it was overwhelmingly dominated by
national issues and, if you take them out, you can address local
issues properly, but, never mind, let us move on. Gas supplies
Mr Brown: I think it is probably
better for you if you do move on!
Q192 Peter Luff: I think you are
on very weak ground there, Prime Minister.
Mr Brown: I do not think so.
Q193 Peter Luff: What about gas storage?
We have a fraction of European gas storage levels and that means
that our industrial consumers, in particular, suffer very real
levels of price volatility as they try to plan their businesses
Mr Brown: You probably know, and
perhaps it is not really the best time to go into it in detail,
but we are discussing the very substantial changes in how we can
guarantee the supply of gas to this country in the future, and
there will be announcements made soon.
Q194 Peter Luff: But again, if we
knew this was happening ten years ago, this should have happened
Mr Brown: The truth is that for
the last 30 years we have had oil and gas from the North Sea.
That has provided a very substantial amount of the energy needs
of this country. As the North Sea oil and gas runs down, as it
is running down, we are making alternative arrangements. We have
led the way on nuclear, and I just remind you that your Party
was against nuclear, we have led the way on renewables, we have
led the way
Q195 Peter Luff: Prime Minister,
we have never, ever been against nuclear power.
Mr Brown:we have led the
way on renewables and we have now published last week our proposals
for dealing with the renewables issue. We are now about to become
the world leader in the amount of offshore wind power, basically
using the North Sea, which was used for oil, for wind power as
well, so we are moving forward with that agenda, and, I agree
with you, it is necessary to move quickly on this agenda to reduce
our dependence on oil and gas.
Q196 Peter Luff: Well, we could debate
nuclear power at greater length, but we will not now. Just one
last question on energy efficiency: quite understandably, you
have targeted a lot of your assistance on the vulnerable pensioners
who have experienced very real price increases which they cannot
tolerate as a result of rising fuel prices worldwide, but you
do not seem to do quite so much for other vulnerable households,
particularly those with young disabled people in them, for example.
In that context, after years of welcome increases in the Budgets
for the Warm Front Programme, why are you planning over the next
three years to significantly cut support for the Warm Front Programme?
Mr Brown: I think you will find
that we have just signed an arrangement with the utility companies
that will help exactly the low-income households that you are
talking about, particularly those that use meters. Up to now,
about £50 million has been made available by the utility
companies for this. The arrangement is that it rises to £100
million and £150 million and that is money that will go directly
to low-income families. As far as Warm Front is concerned and
measures to improve the insulation, the draught-proofing and the
energy efficiency of homes, we are doing more than we used to
do and I think you will find that we will be doing even more after
further announcements later.
Q197 Peter Luff: Well, the announcement
you made on 30 June, in a written answer, showed you were cutting
the budget over the next three years. That is 30 June, the parliamentary
answer I have here, so that answer is inaccurate, is it?
Mr Brown: I think you will find
that in times like this, where the need for greater energy efficiency
through insulation and draught-proofing can both save energy and
cut the bills of households, there will be further measures that
will be announced soon.
Q198 Malcolm Bruce: Just before we
move on to the effect on transport, you have mentioned the North
Sea, Prime Minister, and not only did you go to Saudi Arabia and
encourage them to increase production, but you met oil companies
in Aberdeenshire to have a similar discussion. We are currently
still 90 per cent self-sufficient in oil and 70 per cent self-sufficient
in gas and the estimate is that there is probably as much oil
to be got out of the North Sea as we have yet produced, so can
you tell us what you are prepared to do to ensure that we maximise
the production from our own resources for oil and gas in the UK
and, if I may make a local point, what you will do to support
the infrastructure on the ground that is necessary to enable the
companies to deliver that degree of extra oil and gas resources
from the UK rather than from Saudi Arabia?
Mr Brown: It is true to say that
some estimates suggest we have only taken half the oil from the
North Sea that is available and, therefore, there is a considerable
amount of resource there. The difficulty is we are moving to a
new stage of exploration and development where you are dealing
with small fields, you are dealing with difficult-to-recover oil
and you are dealing with the West Shetlands, so there are three
specific types of problem that have got to be dealt with. That
is why we are looking at the incentives for exploration and development
and we will bring forward proposals, if we think it is right to
do so, and that is why the activity in the North Sea has tended
to move from the big majors to smaller companies who are more
willing to spend their energies developing particular fields that
are more difficult for extraction and demand special expertise.
Q199 Malcolm Bruce: Those are the
ones who could do with the unexpected tax changes that you imposed
upon them in the past.
Mr Brown: Well, we have given,
as you know, special tax incentives for exploration for these
particular types of companies and we will look at what we can
do. There is this other issue about existing fields where we have
only extracted about 40 or 50 per cent of the oil, but it is harder
to get to the rest of the oil and we are going to look at that
as well, so these are the three problems, the small fields, hard-to-extract
oil in big fields and the West Shetland activity, and we are looking
at all of these things.