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28 Apr 2009 : Column 202WH—continued
10.48 am
The Parliamentary Under-Secretary of State for Scotland (Ann McKechin): I welcome today’s debate, which was initiated by my hon. Friend the Member for Ochil and South Perthshire (Gordon Banks). I also welcome the contributions of other hon. Members this morning. Although we have been around the track with the issue in the past, I think that we all believe it is essential to consider the matter—for the UK but, particularly, for Scotland.
As a number of hon. Members have pointed out, my hon. Friend advanced a well-balanced argument for the need for a balanced energy mix. The Government strongly believe that we require such a diverse energy mix for Scotland. In doing so, we acknowledge that we face two long-term energy challenges: first, tackling climate change and, secondly, dealing with energy security, both of which are global issues that require global solutions.
However, there are also vast opportunities, and that has been mentioned by hon. Members on both sides of the Chamber during the debate.
Investment in energy will drive forward jobs and growth—potential growth that Scotland needs to harness and capitalise on, not only in the UK, but in the global market. Energy supply is an increasingly important part of any nation’s security, and we cannot become over-dependant on one source of energy. That is why we require a balanced energy policy that ensures that we can keep the lights on, maintain economic competitiveness and help to protect the environment. We need energy that is affordable, secure and sustainable, as my hon. Friend rightly pointed out.
My hon. Friend raised several issues that I would like to address briefly. He raised concerns about the need for the planning system to adapt to increasing applications for renewable energy. Those will not only be for wind energy, because we will increasingly see energy generation from combined heat and power, biomass and solar panels, as the hon. Member for Dunfermline and West Fife (Willie Rennie) mentioned. We will see an uptake in applications across a variety of fields, so it is important that planning systems are able to adapt and adjust to that demand to ensure we can increase our capacity rapidly in a short time.
Comments were made on nuclear energy and the planning system, and the Calman commission will look at that. The Marine and Coastal Access Bill represents an important new move forward in how we view policy frameworks and how planning fits within them. The hon. Member for Angus (Mr. Weir) made several interesting comments on his desire to see an expansion of the offshore grid. That is an interesting long-term idea, but it is important that we have the right framework in place. The Marine and Coastal Access Bill, on which we have worked closely with the Scottish Government, provides an interesting test case: the Scottish Government have agreed to work within a UK strategic framework but will have the planning powers that will work within that framework. I mention that as a way of suggesting that we should not regard matters that have already been settled in legislation as remaining in stone. We need to adapt and consider whether new developments in other legislation might point the way forward.
Last week the Chancellor delivered the world’s first carbon Budget, which included measures to address energy consumption, supply and efficiency, and it provided more than £1.4 billion of additional targeted support for the low-carbon sector. I welcome the stress that my hon. Friend the Member for Ochil and South Perthshire put on renewables. That Government investment is in addition to measures announced in autumn 2008, which means that around £10.4 billion of additional investment will be pumped into the low-carbon and energy sectors over the next three years, along with around £375 million to improve energy efficiency, which hon. Members have referred to.
We are still facing tough times in the coming years. Our European-wide target is for renewable energy to account for 20 per cent. of energy generation by 2020, and the UK share of that will be 15 per cent. At the same time, the infrastructure is getting old, as my hon. Friend the Member for Glasgow, North-West (John Robertson) rightly pointed out. All Scotland’s ageing conventional generation capacity will need to be replaced by 2020, and by 2025 Scotland will need to replace all
its non-renewable generation capacity, which currently amounts to 68 per cent. Those are considerable challenges, so we should not rule out any forms of energy.
I was interested to note that the hon. Member for Angus said that Scotland does not need nuclear energy and went on to explain how we could export energy from wind power and other renewables to other parts of Europe. That view seems to be on the opposite side of the arguments. Investment will drive technology, which he said was the main reason for investing in offshore wind. I fully accept that, but he then said that the £5.3 billion was not an investment in nuclear power in Scotland, but a cost. Well, it would also be a cost if it were used to expand other forms of renewable energy or carbon capture. There are risks involved, as there are with all types of energy. It is about getting a balance of those risks, a point made by my hon. Friend the Member for Ochil and South Perthshire.
Several questions were asked on pricing, which I would like to touch on briefly. Over the past 10 years the UK has benefited from some of the lowest electricity and gas prices in Europe. The Government certainly want to ensure that we maintain pricing at a competitive level for both industry and consumers. That is why we have called on Ofgem to publish the wholesale and retail prices of energy quarterly so that we have greater transparency in future prices. That is also why we want an early resolution of Ofgem’s initial finding about the energy retail market and why we want energy companies to tackle issues about power cards and pricing. If it does not, we will certainly introduce legislation to tackle that problem, as we have already indicated. We have maintained and increased the winter fuel allowance this year and reached a voluntary agreement with the energy supply companies, which will spend an additional £225 million on reduced tariffs and other social programmes over the next three years.
With regard to transmission charges for the islands, which the hon. Member for Orkney and Shetland (Mr. Carmichael) mentioned, I can confirm that there will be an announcement on that shortly, and I have taken his concerns on board. He and other hon. Members also mentioned development west of Shetland, which we rightly consider to be important for the development of the energy sector in Scotland. The Secretary of State for Scotland is fully supportive of the west of Shetland taskforce and pilot, and has already discussed it with Total, which is running the pipeline from there. We continue to keep in contact on that, but obviously the Department of Energy and Climate Change is the lead Department. Members can be assured that we are fully supportive of that area.
The hon. Member for Dunfermline and West Fife rightly spoke about the potential for carbon capture and storage, which we believe offers exciting opportunities in Scotland and throughout the UK. As he will be aware, the project at Longannet is one of three in the current competition, and we expect an announcement on that later in the year. Significant developments are occurring in Scotland and we welcome the co-operation with the Scottish Government to develop that area further.
Scotland is rich in renewable energy sources. We can rely on our geography in tandem with our geology, and wind and tidal power will play their part. The foundations are firm: we have tripled the amount of renewable
electricity generation since 2001 and are now the world’s leading country for offshore wind power. Our policy is geared to provide a stable, long-term climate for investment. However, let me be clear that neither wind energy nor nuclear energy can provide the flexibility needed to handle fluctuating electricity demand, a point to which my hon. Friend the Member for Glasgow, North-West rightly referred. Coal and gas will still play an important back-up role for the foreseeable future. It is interesting to note that in Denmark, which is currently Europe’s most wind-intensive state and has more than 6,000 turbines producing 19 per cent. of the country’s total electricity needs, not a single conventional power plant has been closed since 2002. That back-up power is still needed in our systems.
We certainly want to ensure that carbon capture and storage is successful because it could cut carbon emissions from coal by 90 per cent. The hon. Member for Angus made some comments on the Peterhead project, but we believe that it was important to have an open and transparent competition to choose which project to support. Both the UK and Scottish Governments are working closely on carbon capture and storage. We believe that, although it is scientifically possible, issues remain about its commercial potential, which is why we are not gambling our entire investment on only one energy supply.
In conclusion, as the 2007 White Paper made clear, a key plank of our energy strategy involves not only alternative sources of power, but the adoption of alternative forms of behaviour. Reducing consumption shows that the cheapest and cleanest unit of energy is the one not used, often referred to as the negawatt. Both before and in the Budget, the UK Government have introduced measures to address that, and our work through the Energy Saving Trust and the Carbon Trust has been helping businesses and householders for many years.
The world is moving to a low-carbon economy and we are determined that Scotland and the UK will not be left behind. The Budget underlined the desire for the UK to be in the vanguard of change, leading the way and putting UK business at the forefront to take full advantage of the emerging global opportunities presented by this historic shift. Scotland must now get the benefit of that growth and the jobs that will come from the energy revolution. That revolution is not restricted to renewables, but also includes clean fossil fuels and nuclear energy.
Pub Ownership
11 am
Dr. John Pugh (Southport) (LD): It is easy to become sentimental and emotional about the British pub—indeed, it is easy to become sentimental and emotional in the British pub—and get wrapped up in the images and clichés beloved of producers of soaps: the Rover’s Return, the Queen Vic, “Heartbeat”, the traditional village pub, and so on. Reality, though, is sometimes different. There are pubs and pubs: good pubs and others.
I recall a particularly sobering visit to a pub when out campaigning during a by-election in a constituency that shall remain nameless, but which, for the sake of argument, we will call Hodge Hill. Such was the intense demand for Lib-Dem literature on a hot day, my team felt it necessary to repair to a hostelry, parched and in need of refreshment. We identified a nearby pub, but we should have inferred something from the fact that the entrance had two swing doors, one with hardboard instead of glass and the other with neither glass nor hardboard. Our suspicions should have been confirmed by the sticking grip of the floorboards as we approached the bar and the baleful glance of the locals, which was somewhat reminiscent of “The League of Gentlemen”. The barmaid smoking behind the bar dismissed the thought of food ever being present as ridiculous and we sat on rickety chairs at a less than clean table with a chipped ashtray on it. We will draw a veil over the state of the toilets.
Reality is more diverse than we tend to recognise. It is said sometimes that the pub is a community asset, which is certainly true and, in many places, that is exactly what it functions as. But I visited, with the Select Committee, a part of Manchester where the pub was moved, with regeneration money, from the heart of a difficult sink estate to a nearby main road, simply to catch the passing trade and ensure a more varied mix of customer, so that not all of them were from the community. We Campaign for Real Ale types praise the controlled drinking atmosphere of the pub, particularly when criticising supermarket cut-price sales. I know of pubs in some particularly tough urban environments where the controlled environment is less than obvious.
I say all this as a preamble, because I accept that the pub economy is in dire trouble and that we need action and progress, but any debate will achieve nothing unless it is grounded in hard reality and is truly engaged with all the interests, including the owners of the pubs, and is not simply a rehearsal of mantras, slogans and received wisdom. We have to get real about the state of pubs, because despite Select Committee and all-party reports, industry studies and previous debates and despite some wise, sensible recommendations, from the industry’s point of view matters have got worse still. Pubs are continuing to close and sales are declining, whereas alcohol consumption is rocketing. The suggested causes are multiple and include supermarket competition, inappropriate taxation—there has been an emphasis on that recently in the run-up to the Budget—the smoking ban, which is mentioned by many publicans and the pub owners, the effects of economic recession and changing social habits. However, I want to concentrate primarily in my contribution on the industry’s self-inflicted wounds, which are a major cause of decline.
The area that is the easiest to address, but also the thing that the industry is least inclined to talk about is the tie: the economic model of the British pub, or at any rate 50 per cent. of them. Most publicans that I have surveyed bring that up as the big issue. It is what the Fair Pint Campaign and the Save the Pub group were set up to address, and they make a considerable amount of noise about it. It is a big issue across the piece.
Let us look at some stats. Some 40 pubs a week are closing: the figures change and it might not be precisely 40, but that is the latest figure that I have seen. A current figures shows that, annually, 32 per cent. of the tenants working for the biggest companies give up doing that. Beer on-sales are down by 10 per cent. Some 50 per cent. of pubs are owned by the biggest companies that have their roots in private equity. That has severe consequences, because it means that they run with £20 billion of debt to service, quite apart from any dividends or generous salaries that they may wish to pay their chief executive officers. For the two biggest companies, the debt is equivalent to a repayment of £750 million a year or having to find £50,000 per pub per year. That is the situation that the owners of 50 per cent. of British pubs are in.
Bob Spink (Castle Point) (Ind): I am delighted that the hon. Gentleman has brought this subject to the House. It is important to many of our constituents and to the fabric of our communities and our society as we know them. But who is to blame for the demise of the pub? Is it the Government, with their 2p tax escalator each year till 2012, which will be unfair and unhelpful, or is it the pub landlord companies, through their high rent and beer charges, or is it a bit of both? What should we do about it? Today we saw Whitbread’s profits go up considerably.
Dr. Pugh: Clearly, taxation makes a difference. It is not the main subject of this debate, but were the taxation to be more benign, from the point of view of the companies, there is no guarantee that their saving would be passed on to the tenants and the industry as a whole and would not go on the repayment of outstanding loans.
David Taylor (North-West Leicestershire) (Lab/Co-op): I congratulate the hon. Gentleman on securing this debate. He will be aware of the Axe the Beer Tax campaign, about which I have had hundreds of e-mails and much of which I support. The point about taxation has to be read in context, because for the first 10 years or so of this Government the tax did not rise particularly in excess of inflation—I understand that that is not true of the last two to three years—but still pubs were closing at the present rate of perhaps 2,000 a year from a stock of 60,000 pubs. We shall lose the vast majority of our pubs in a generation if something is not done quickly.
Dr. Pugh: That tends to reinforce my point, which is that taxation may not be the main issue. The evidence that the hon. Gentleman has put forward seems to underline that.
The repayment that the pub companies need to make to the people that they have originally borrowed from has to come from somewhere and it comes from high rents to tenants and from wholesale tied beer sales to tenants at extortionate prices—50 per cent. above the
normal wholesale price. It also comes from other side-deals that are done and which saddle tenants, such as compulsory provision of other poor-value ancillary services, including accountancy and legal services. Examining that dispassionately as an economic model, it is unsustainable, unless we live in a time of buoyant increased leisure spending and in a world where people have few leisure choices but going to the pub. This analysis is not shared simply by people who care about or visit pubs, or by people who are passionately interested in beer, the social life of the pub or the pub tradition, but by hard-headed men of finance, be they teetotallers, drinkers or whatever, who see the current model as near suicidal in a strictly commercial sense. Talk in the boardroom is now coinciding with talk in the taproom.
My analysis is reinforced by my own experience, which I pick up anecdotally by talking to my local publicans. I meet really enterprising people, such as Adrian at The Falstaff in Southport, who struggled to escape a remote, unworkable accountancy arrangement that frankly profited no one, not even the owners of the pub, Scottish and Newcastle. Adrian would like to provide local beers, because he knows there is a demand for them. One of the Southport beers, Sands, has just won an award as the best beer in the north-west, but people have to leave Southport to get it, because Scottish and Newcastle forbid it to be provided in local hostelries. I meet people such as Darren Thomas and his wife Sharon, who tried to revive another pub called the Oasthouse, but were unsure as to brewery intentions. These stories are replicated across the piece. Tenants are struggling, not with taxation, per se, not with a lack of ideas and not always with the economic climate, but with the people who own the establishment that they are renting.
There is success in the pub industry in my neck of the woods, but it is more commonly found in the free houses, which seem to be doing reasonably well, and the chains, some of which are doing extremely well—managers are backed up with sound investment from the companies. Above all, I am seeing more and more enterprising, innovative tenants who are willing to take on the hard job of running a pub for relatively little reward but an extraordinary amount of energy and commitment. Those people are being hogtied by ridiculous wholesale charging and restrictive covenants that are ultimately in no one’s interest. That is the point that I want to emphasise. They end up dealing with remote organisations that own the establishment and with which they do not always have a good dialogue. Trying to contact Scottish and Newcastle about a pub is extraordinarily convoluted. There are precious few contact numbers on its website.
That is the situation, but there is hope of improvement. I do not want the pubcos to treat this as simply the usual thing that people such as me say. I recognise that the pubco debt will not go away, but the pubcos should not just listen to the debate and take it on the chin, because they are as exposed as any tenant. Their route to safety is not the old recipe—take the money and run, pay off debts, pay a dividend, take the profit and do not invest—but dropping the bad, old, introverted private equity habits with which they came into the business, and linking the boardroom with the taproom, engaging properly with tenants, communities and MPs, backing and supporting tenants who are innovative, enterprising and hard-working—plenty are still coming forward—
investing in people, loosening up the supply chain, and producing a model that works. There will still be failures, lack of demand, unsuitable tenants, predatory supermarkets and so on, but what other option is on the table other than presiding over a rapidly declining business?
I am not counting on pubcos’ altruism or even good sense. I do not believe in my heart of hearts that they have as much freedom to act as I would like them to have. Private equity does not care about the village pub. It believes in the free market and cares about the bottom line—end of story. That is why the Government have a genuine role in the drama. They must act, and introduce new regulation, which is overdue. The Tories introduced the beer orders that got us into this fix and provided the opportunity for private equity to move in and take over the lion’s share of the industry. Regulation can get us out of that.
In an era when even public servants must bid competitively to keep their jobs, why should an arcane institution such as the tie persist? Frankly, it should have gone out with the corn laws. The regulatory environment can and should be changed, because it matters. Equally, in shepherding the pubcos into making the right choices, we must ensure that the planning environment does not encourage them to cut losses and move on by selling off pubs for conversion to flats and so on. If the Government provided the right planning regulations and regulatory regime—they have both those levers at their disposal—and gave the pubcos the right options, they might choose them. That would benefit the pubcos, the tenants and the communities that they serve, and provide a solution to the problem.
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