Examination of Witnesses (Questions 84-99)
ANGELA EAGLE
MP
3 FEBRUARY 2009
Q84 Chairman: Minister, good morning
and thank you very much for coming. As you know, this is an annual
event for us. We are grateful to you for coming to see us in this
parliamentary way. I do not think we need introductions. We know
you and therefore we know who the officials are. Could I start
by asking you this? There have been quite a lot of criticisms
of the Pre-Budget Report about the fact that the scale of green
investment was much too small. We have heard some of that repeated
in the evidence we heard this morning. How do you respond to that?
Angela Eagle: I think the first
thing I would say is that the green fiscal stimulus part of the
Pre-Budget Report is only a very small part of the overall plan
and approach that the Government is taking in this whole area,
so it would be wrong to mix up the £535 million of green
stimulus that was in the Pre-Budget Report with the £50 billion
that we think is a conservative estimate of future investment
we are putting into greening our economy as a whole. I would probably
also say that the £535 million is effectively part of the
£3 billion of investment brought forward. By definition,
that has to be an investment that was planned for in the CSR period,
brought forward in order to be part of a fiscal stimulus, not
extra investment, although there are small amounts of that that
are extra, such as £100 million of new funding for Warm Front
to do more insulation.
Q85 Chairman: We will look at some
of the specifics in a moment. We heard last week from Professor
Tim Jackson from the Sustainable Development Commission, which
is a government watch-dog. He was very outspoken in his criticisms,
and he also said that there had been no response from the Treasury
to what he had said. Does that mean you do not pay much attention
to the work that the SDC does on economic issues?
Angela Eagle: No. We do pay attention.
I have not seen the evidence that he gave last week but I am quite
happy to give you a written response if you want me to respond
to it.[18]
We are used to people being impatient, I suppose, about progress
in these areas, and understandably, given the urgency of the problem,
we have to have appropriate responses. I think quite a lot of
the approach to this underestimates or discounts the major changes
that we are making. We have the basic infrastructure of law in
place now with the Climate Change Act; we have changes forthcoming
in the Planning and Energy Act; we have the work we are doing
with the European Union to meet the targets that have been agreed
there, specifically obviously the renewables target, which is
extremely challenging, the shift from where we would be without
any action, about 5% to 15% of renewables by 2020. The Department
for Climate Change (DECC) is doing a series of publications with
BERR on some of the implications of that with a forthcoming Strategy
for Heat. There is a great deal of work going on. I think sometimes
people miss the shifts that are actually being made, not only
in legislation but in the way Government is gearing up to make
the re-engineering of our economy, which we clearly need to tackle—the
threat of uncontrollable climate change. I suppose I would be
rather worried if there was not impatience and outspoken criticism
of the Government from this sector. That is partially why they
are there, but I think it is slightly unfair to discount some
of the changes we have made already and the plans already in train.
Q86 Chairman: I do not think you need
have any anxiety about the impatience or criticisms.
Angela Eagle: I understand it.
Q87 Chairman: You mentioned the £535
million package and I think you said that £100 million of
that was new money. Is that right?
Angela Eagle: That is right; that
was the new funding for Warm Front. We brought £50 million
of extra funding forwards but we included £100 million of
new funding for the insulation and improved energy efficiency
in houses.
Q88 Chairman: Part of that package
was to pay for 200 new rail carriages. Do you know where they
are going to be manufactured?
Angela Eagle: That is still in
procurement and so it would be quite wrong of me to speculate
on that, but I can tell you that the contracts are due to be awarded
by April. With a little bit of patience, we will all be able to
see in due course.
Q89 Chairman: Should we find that
it was not possible for them to be manufactured in Britain, it
would not be a very big stimulus to our economy, would it?
Angela Eagle: I accept that argument
but I have to be very careful as a Minister for Procurement not
to make it look like we have a view ahead of the procurement contract
itself as to who is going to win the business. It has to be won
in a competitive environment, but I hear what you say.
Q90 Chairman: It will not be a case
of British jobs for British workers?
Angela Eagle: I think that you
will have to wait and see what happens with the contract. I am
not going to rise to that kind of provocation, Mr Chairman.
Q91 Chairman: Quite a bit of the
£535 million is capital spending, which has just been shifted
from future years forward a bit. What is going to happen after
the earlier years? Does that mean we are going to have a collapse
in capital spending?
Angela Eagle: By definition, that
is money that has been shifted forward from already allocated
monies from the Comprehensive Spending Review, which was announced
prior to the economic circumstances we now find ourselves in.
I think if you look at some of the latest developments you will
see that there was extra money allocated that was unallocated
at Comprehensive Spending Review time; for example, the £1
billion of loans to the automotive industry to fund investment
in fuel-efficient vehicles, which is entirely new; and the £250
million package for ultra low carbon vehicles, which the Department
for Transport announced as part of—what I know is controversial,
and perhaps more so in this Committee—the Heathrow expansion.
Q92 Chairman: We will come back to
that as well.
Angela Eagle: I am sure you will.
Q93 Chairman: Are you anxious at
all about the financial difficulties in PFI schemes, that that
might have an impact on environmental programmes; for example,
on recycling programmes?
Angela Eagle: Clearly, we are
in the circumstances of the credit crunch where conditions in
the financial sector are not what they were. There are difficulties
in world financial markets, but the Treasury is working closely
with departments and contracting authorities to ensure that those
projects which are in procurement at the moment can reach financial
closure. We are keeping a very close eye on it. I can say that
certainly in waste, with the investment we have made already at
CSR, we will meet our 2010 target. We have 14 projects on waste
and recycling delivered already; there are 13 more in procurement,
and obviously we are working closely with the relevant departments
and areas to ensure that we can bring those to an effective close.
Q94 Chairman: The PBR referred to
the investment of £50 billion in the low carbon economy.
In fact, you have mentioned that yourself earlier this morning.
Is that just a summary of ongoing programmes or does it include
some new investment?
Angela Eagle: It is a summary
of some ongoing programmes, but it is also interesting what it
does not include. We actually think it is quite a conservative
estimate of the investment we will see going forwards to transform
our economy. For example, it does not include the value of EU
ETS allowances or R&D tax credits for low carbon technologies;
it does not include any investment in the gas distribution grid,
enterprise investment schemes, venture capital trusts or the UK's
fund on low carbon technologies in developing countries. It does
include all of our aspects of technology support through the Technology
Strategy Board, the Carbon Trust, and enhanced capital allowances;
it includes renewables support, energy efficiency, the municipal
waste PFIs we were just talking about, transmission and electricity
distribution infrastructure and public transport. The £50
billion we think is a conservative estimate. You could say that
we are spending a lot more if you look at things like EU ETS allowances.
Q95 Colin Challen: Lord Stern has
recently suggested that the percentage of GDP spent on tackling
climate change should be 2%. Does the Treasury accept that figure
and would that be new money?
Angela Eagle: I think that we
are in a circumstance which changes constantly here as the science
shifts. We have certainly accepted Lord Stern's analysis in his
report. Obviously, we are understanding the science more. We have
just recently I think come to realise that we need larger cuts
in greenhouse gas emissions than were originally in play when
Lord Stern wrote his report than we thought we did, which is why
we have increased our target to 80%, and the Committee on Climate
Change has just reported on how we should be dealing with that.
So clearly, this is a rolling analysis, and we have to look to
see, as progress goes on, whether the percentages of GDP go up.
I am not going to sit here and say Lord Stern is wrong at all.
I think it is important that we take action as timely as possible.
The more we spend now, the cheaper it will be in terms of GDP
allocated, and we will know also that we have to get international
agreement in order to make that a reality in terms of preventing
catastrophic climate change, simply because we are only 2% of
the world's emissions. So we have to get international agreement.
I think all of us agree that doing nothing is the far more expensive
option.
Q96 Colin Challen: If we did accept
the 2% figure and we did accept it was new money, which is worth
between £26 billion and £30 billion a year at the moment,
how long would it take us to ramp up to that level of effort?
Angela Eagle: Obviously, it takes
an amount of time by definition to ramp up, as you put it. If
we take, for example, the issues around renewables and the shift
we have to make into renewables energy, if you look at the BERR
analysis, which was published late last year, it is a great stretch
for us to make 15% by 2020. As we have all said before, and I
think the Committee on Climate Change has confirmed, the more
investment we make now, the cheaper it is in the long run. We
can ramp up but there are practical constraints. Since we are
such a small percentage of current world carbon emissions, we
also have to remember that we have to get agreement and use credits
elsewhere to try and help other countries also to reduce their
emissions. In the end, it is overall global carbon emissions that
matter. The ones we produce are important but that is not the
only solution to the problem.
Q97 Dr Turner: You have given a £2.3
billion loan package to car manufacturers. Will this act as a
green stimulus, do you think? Will it do anything to promote the
production of greener cars?
Angela Eagle: The extra £1
billion that was announced by the Business Secretary is specifically
for encouraging investment in low carbon technologies and speeding
them along. In fact, one of the ways of assessing whether these
loans should be given is not only that they should offer value
for taxpayers' money but they should also enable Britain to further
its objectives of low carbon or green technologies in engines.
It is one of the explicit things that has to be met before this
£1 billion of loans are made available to the automotive
industry.
Q98 Dr Turner: Can you tell us how
those loans are structured? Is the Government actually lending
like a bank or is it underwriting loans?
Angela Eagle: You will have to
discuss the work on the detail of that with BERR because that
is the department that is putting together the process to deliver
these loans. I know that they are in contact with the European
Union as well to get the appropriate approvals on state aid grounds.
I suspect that you will probably have to ask them the details
of precisely how it is going to work but I know that they are
working on all of those details now.
Q99 Dr Turner: Over what sort of
timescale?
Angela Eagle: As quickly as possible,
clearly. I know that they are trying to get the European Union
permission to have a look on state aid grounds and give its approval
as quickly as possible.
18 See PBR16 Back
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