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Madam Deputy Speaker (Dawn Primarolo): I now have to announce the result of a Division deferred from a previous day. On the motion relating to Schengen governance, the Ayes were 461 and the Noes were 23, so the Question was agreed to.
[The Division list is published at the end of today’s debates.]
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Solar Power (Feed-in Tariff)
Madam Deputy Speaker (Dawn Primarolo): I have to inform the House that Mr Speaker has selected the amendment in the name of the Prime Minister. Before we start the debate, I also have to inform the House that some 28 Members wish to participate, so we will need some adherence to the time limits, which Members will see is five minutes for Back-Bench speeches.
4.16 pm
Caroline Flint (Don Valley) (Lab): I beg to move,
That this House believes that solar power gives families, community organisations and businesses greater control over their energy bills and will help the UK meet its renewable energy targets and reduce carbon emissions; notes that since the creation of the feed-in tariffs scheme under the last administration, introduced with cross-party support, nearly 90,000 solar installations have been completed in the UK and the number of people employed in the solar industry has increased from 3,000 to 25,000; believes that the Government’s cuts to feed-in tariffs go too far, too fast, will hit jobs and growth in the solar industry, undermine confidence in the Green Deal and deter investment in the wider green economy; regrets that the cuts to feed-in tariffs were announced with just six weeks’ notice and come into force before the consultation has even finished; further regrets that the Government’s plans would exclude nearly nine out of ten households from installing solar power under the feed-in tariffs scheme, will disproportionately hit social housing and community projects, and could affect thousands of households which have already installed solar power; and calls on the Government urgently to withdraw the 12 December 2011 deadline and bring forward more measured proposals that guarantee the continued growth of the solar industry, put feed-in tariffs on a sustainable footing and are fair to the public.
Exactly a year ago today, in a speech to the Micropower Council, the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker), lauded the feed-in tariff scheme. He said:
“The coalition is absolutely committed to FITs…I have been really encouraged by the positive response that the FITs scheme has received since its introduction in April and hope this will continue. It’s still early days but early indications show that the scheme is working well”.
Well, they say a week is a long time in politics, but a year is obviously an eternity. However, at least the Minister is not on his own today, and we are glad to see the Secretary of State in his place. We all remember his famous energy summit, which went so well he decided to do a disappearing act. When his Department announced these cuts to feed-in tariffs, first, it tried to sneak them out in a written statement. Then, when I secured an urgent question, he sent his junior Minister to take the flack instead. Anyone would think he was trying to avoid me, or perhaps the Secretary of State is just very good at not getting caught at the crime scene. Either way, his fingerprints are all over this one.
Although talk of feed-in tariffs might sound technical, their impact could not be more real. Some 25,000 jobs are on the line. Thousands of businesses are at risk and tens of thousands of people who have already installed solar could still lose out. Millions more have been excluded from having solar under the Government’s new rules and have been denied the chance to control their energy bills. That is all because we have a Government who are out of touch, cutting too far and too fast, with no plans for jobs and growth.
Bob Russell (Colchester) (LD): Will the right hon. Lady give way?
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Caroline Flint: I will make some progress because a lot of people want to speak in this debate.
At the outset, let me deal with a few of the myths that the Government have desperately resorted to peddling in defence of their plans and that appear in their motion today. The first and most bizarre is the idea that we were opposed to the introduction of feed-in tariffs and that somehow the Tories and the Liberal Democrats introduced them. It takes some audacity to try to claim credit for a scheme that was enacted, introduced and came into force under the previous Labour Government, but to try to take credit for a scheme that they are scrapping really takes the biscuit. The record will show that while Labour began this growth industry, the Government’s policies have all but killed it in its infancy.
The second myth is the Government’s claim that the reason they are cutting the tariff level is that they are worried about energy bills.
The Secretary of State for Energy and Climate Change (Chris Huhne) rose—
Caroline Flint: I will give way to the right hon. Gentleman in a moment. This from a Government who have cut help for more than 12 million pensioners with their heating bills this winter and who have stood back and done absolutely nothing as customers’ bills have soared and energy companies’ profits have rocketed.
If the Secretary of State really wants to talk about energy bills, I will tell him a thing or two. Let us start with how much the average annual energy bill costs under this Government—£1,345—and how much feed-in tariffs cost the public. From what the Government have said, one might think that this is costing us all hundreds of pounds a year, but it is not. Is it perhaps £50 a year, or £20, or even £10? No, the actual figure, according to the independent regulator, Ofgem, is less than £1 per household per year—less than £1 at a time when the average energy bill stands at £1,345, when pensioners are seeing their winter fuel payments cut by £50 or more, and when standard tariffs are up by £175 only since June. Labour and I will not take any lectures on energy prices from this Government.
Caroline Flint: If the Secretary of State really wants a debate about this, let us start one.
Chris Huhne: There was only ever one vote in the House of Commons on feed-in tariffs, in April 2008, when the right hon. Lady voted against. What has made her change her mind?
Caroline Flint: There was an amendment tabled by the former Labour Member, Alan Simpson. My right hon. Friend the Member for Croydon North (Malcolm Wicks) said at the time:
“I sympathise with, and fully support, people’s yearning for appropriate incentives to encourage the faster take-up of microgeneration.”—[Official Report, 30 April 2008; Vol. 475, c. 393.]
He told my hon. Friend and the House that he wanted to go away and look at what could be possible. On 5 November in the same year, the Labour Government tabled an amendment in the House of Lords that paved
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the way for the scheme that we have today. We do not need any lectures by the Secretary of State on who created the opportunity for feed-in tariffs in this country—it was the Labour Government.
Mark Tami (Alyn and Deeside) (Lab): Companies such as Sharp in Wrexham have expanded and employed more people because they believed the Government on feed-in tariffs, only to find that they have pulled the plug.
Caroline Flint: My hon. Friend makes a good point about the damage that has already been done to many businesses around the country. I will come to his point about the impact not only on insulations but on manufacturing in Great Britain.
We are happy to have a debate about why the Government are cutting help for pensioners this winter, when they need it more than ever, and about why this Government have stood back and allowed the big six to increase their profit margins to record levels while energy bills have soared, but let us also have a debate about why this Government have failed to stand up to vested interests in the energy industry and failed to reform our market.
Let us not pretend that the Government’s approach to today’s debate is about some new-found concern for bill payers. However much Ministers like to claim feed-in tariffs cost the public, when 25,000 people lose their jobs—[ Interruption. ] Government Members might not like to hear this, but people may be laid off this Christmas as a result of an ill-thought-through strategy. When 25,000 people lose their jobs, when the Treasury loses the taxes and national insurance they pay, and when we have to pay out unemployment benefit, the costs will be a lot higher. This Government would rather pay people to be on the dole than support an industry of the future.
Andrew George (St Ives) (LD): I think we all accept that this is an extremely difficult issue to resolve. Given that the right hon. Lady is advancing the case that the Government are making the wrong decision, by how much is she prepared to see bills rise in order to sustain the tariff at the current level and in line with the level of income for people with solar PV?
Caroline Flint: I respect the fact that the hon. Gentleman has probably raised concerns about how his coalition Ministers have approached this issue. As I said, according to Ofgem, we are talking about less than £1 on people’s annual bills. What we said in our urgent question and have proposed in the motion is that we need to work to see how we can change the scheme as it moves forward, but in a sustainable way. The problem is that we have not had a chance to have this debate because the hon. Gentleman’s Ministers, in his Government, have chosen to set a cut-off date of 12 December even though they are still consulting until 23 December. When answering the questions about how we have got to where we are today, they have more to answer for than us.
Myth No. 3 is that the scheme would run out of money if it carried on as it is. In the past few weeks, I have spoken to a lot of people in the solar industry. I have yet to find a single person who argues that the scheme should carry on unchanged. I am sure that that
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has come across in the lobbying of Members on both sides of the House. Not even the industry is calling for that. It wants planned, sensible reductions in tariffs. That is exactly what we would have done. When we introduced the scheme in 2010, we made it clear that there would be a review in 2013, or earlier if needed, to look at tariff levels and whether the scheme was delivering value for money.
Let us get serious. We have a cut of more than 50% with just six weeks’ notice. Is that reasonable? Is that fair? Is that sustainable? I suggest that it is not. To make matters worse, the first that the industry heard of it was when it was summoned to the Department after the announcement had been made.
Frankly, the only reason that feed-in tariffs need reform is that this Government have managed the scheme so badly since coming to power. It is no good blaming us. Before the election, Conservative and Liberal Democrat Members accused us of lacking ambition. They said that what we set up did not go far enough. The Conservative party said that feed-in tariffs should be paid to solar installed before April 2010 and that it would raise the capacity threshold for qualifying schemes from 5 MW to 10 MW. The position of the Liberal Democrats was also clear. Far from saying that our scheme was too generous, they wanted it to be more generous. Their spokesman at the time, the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), said:
“Labour’s plans are too little too late.”
I tried to speak to him on Monday to confirm that that was still his position, but he spurned my advances. We wait to see whether he will join us in the Lobby this evening.
The fourth myth is that if we did not implement the Government’s cuts, solar power would be available only to the lucky few. However, it is the Secretary of State’s cuts that will exclude nearly nine out of 10 households from having solar power. It is his cuts that will prevent families living in social housing from having solar power. It is his cuts that will once again make solar power the preserve of the wealthy few.
Kate Hoey (Vauxhall) (Lab): Perhaps my right hon. Friend might like to tell Members who do not have any of these companies in their constituency or who do not understand this issue that they might like to walk five minutes from here across Westminster bridge and along Lower Marsh to visit Solar Century in my constituency. A large number of people there will be out of work precisely because of what the Government are doing.
Caroline Flint: I was pleased to take the opportunity to go to Solar Century on Monday with my right hon. Friend the Leader of the Opposition. It was very similar to the firm that I visited in Glasgow the other week with my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex). It is a company that employs young graduate engineers and other skilled people. It has links with small businesses and contractors around the country, including installers and fitters. Some people who had been working on the digital switchover have been trained up to do this work. There is a chain of despair and destruction throughout our country as a result of these proposals.
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Huw Irranca-Davies (Ogmore) (Lab): Will my right hon. Friend expand on that point, because this proposal has affected not only the solar industry, but general confidence in the Government’s handling of the renewables sector? I spent an interesting evening yesterday speaking in depth with farmers who are concerned about the handling of this matter and about its impact on confidence in the anaerobic digestion sector, the biomass sector and so on. They do not trust this Government any more and they never will.
Caroline Flint: That is an important point. Some people say to me, “Caroline, this is all just about solar.” I say, “No it isn’t. It is actually about confidence, about the direction of travel and about being able to rely on the goalposts not being moved on a whim to effect some crazy policy dreamed up by these coalition Ministers.” What Ministers are doing is destroying this growing industry.
Interestingly, some of the social housing projects that have been brought to my attention wanted to put solar panels on the roofs of some of their properties, but they were also looking to use some of the gain from the tariff for other energy efficiency schemes, so the tariff would also have provided benefits beyond using solar power.
On Monday Solar Century brought it to my attention that it knew of a number of farmers who were interested in establishing solar. They were not thinking of solar farms, which caused some concern last year; they just wanted to generate energy to run their farms. They are now rethinking and cancelling their plans. That is not good enough.
Laura Sandys (South Thanet) (Con): The mixed energy economy will include all renewables. Is it sensible or sustainable to subsidise solar at twice the rate of offshore wind? We have lacked an energy strategy for 13 years. At least we have now got ourselves in gear and there is a clear path ahead.
Caroline Flint: We are talking about things that are on totally different scales. Solar is pretty much for small businesses and communities. Of course we want a diverse mix, but the solar industry in our country—I will come to myth No. 5 in a moment—is 3% the size of Germany’s. Our industry is a baby in terms of what we need for the future and what we need from other energy sources. The Opposition will work consensually to tackle climate change and reduce our carbon emissions, but we cannot stand by when idiotic proposals are made that will strangle a growing industry at birth. That is just not good enough.
Caroline Flint: I shall make a little more progress before giving way.
Myth No. 5 is the idea that the Government’s plans are just like what has happened in Germany. Nothing could be further from the truth. The German Government invested €6.5 billion in solar last year; we are investing £860 million over four years. Germany has installed half the solar panels in the world and supports 250,000 jobs in solar; we have installed just 90,000 panels and have only one tenth of the jobs. This year the tariff for solar power in Germany was cut by 15%, in agreement with
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industry and only after installation levels reached a fixed benchmark: here the Government have announced a cut of more than 50%, with no proper consultation and only six weeks’ notice, which will take our solar tariff below that of Germany.
None of the Government’s excuses will wash, because the truth is that their cuts to the feed-in tariff for solar power are a triple whammy. They are bad for jobs and growth, bad for the public and bad for the environment.
The Minister of State, Department of Energy and Climate Change (Gregory Barker): The right hon. Lady is right to say that the German Government are reducing the tariff by a much smaller amount. In January they are reducing it by about 15%, but they are reducing it to €0.24, which is almost exactly equivalent to the 21p tariff that the Government propose. They are reducing the tariff to the same level as ours.
Caroline Flint: Dearie me! The Germans have been planning how to staircase down their tariffs for years. They have a mature industry that is the world leader. We are not in that ballpark. That is why we must ensure that we do not strangle our industry at birth.
The cuts are bad for jobs and growth, bad for the public and bad for the environment. When growth is flatlining and unemployment rising, solar is one industry that is growing and creating jobs. When the previous Government introduced feed-in tariffs, just 3,000 people were working in 450 firms; today more than 25,000 people work in 3,000 companies. By 2020, as many as 360,000 people could be working in solar—but not if the Government’s cuts go ahead. Be in no doubt that the Government’s current plans will strangle the solar industry and cost thousands, if not tens of thousands, of jobs.
A survey conducted by the Renewable Energy Association and the Solar Trade Association earlier this month forecast in excess of 10,000 job losses. Fifty-seven per cent. of companies anticipate having to lay off at least half their current staff, a third are worried that their business will be forced to close altogether, and fewer than one in six are confident that they can weather the changes. That is the reality.
John Healey (Wentworth and Dearne) (Lab): Is the Minister not missing the point about the comparison with Germany? The purpose of the tariffs in this country is to build up our industry and get it up and running, but cuts on this scale at this pace risk throwing the industry into reverse. Those production and new design skills that my right hon. Friend mentioned will be lost at a time when the Government should be helping to cut fuel bills for householders and cut the country’s reliance on fossil fuels.
Caroline Flint: I can add nothing to my right hon. Friend’s comments, except to say that there is another organisation that agrees with him—the CBI.
The Government claim, on page 2 of their impact assessment, that they can slash the solar industry by anything between 70% and 95% and still, as page 26 claims, increase the number of people working in it by up to 10,000. As someone I met at the lobby of Parliament
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yesterday put it, the Government may think that they can get full employment by shrinking the economy, but month after month we see that their plans are hurting but not working. We knew that the Government were out of touch, but today we see that they have lost the plot.
Richard Graham (Gloucester) (Con): I am grateful to the right hon. Lady for eventually giving way. It was she who said only one month ago:
“The Government do not understand the reality for families who struggle to pay the bills at the end of the month”.—[Official Report, 19 October 2011; Vol. 533, c. 937.]
Does she agree that today’s debate is not about whether we support solar power, which we are all in favour of, but about the cost of the subsidies for solar—a small-scale industry—which will cost families about £26 a month extra by 2020? Would that not be an unreasonable cost on hard-pressed families?
Caroline Flint: I am afraid that the hon. Gentleman has neither read his brief nor sought other views. Ofgem, the independent regulator, made it absolutely clear that the feed-in tariffs cost less than £1 a year per household. The bigger problem is how prices have been put up while energy companies are making exorbitant profits, and while this Government are cutting the support available to people this winter. That is a price debate that I would like to have. The hon. Gentleman’s comments imply that he is in favour of those businesses going under, of social housing not having solar panels, and of this industry not even getting out of the cradle. That is rich coming from a party that prides itself on being the small business champion.
Nic Dakin (Scunthorpe) (Lab): Does my right hon. Friend agree with a constituent of mine, Mr Robert Borrill, who described the Government’s decision as devastating, especially given that people have entered into commitments? Even those who have entered into financial commitments now will be penalised because of the six-week period. Surely, at the very least, the Government should consider that.
Caroline Flint: I absolutely agree, and I will come to that point later, because it is a travesty that the cut-off date has been set two weeks before the consultation finishes.
Caroline Flint: I want to make some progress, because I am conscious of time and lots of people want to speak.
For every job in the solar industry, many more in the supply chain are also at risk. According to the Minister’s colleagues in the Department for Business, Innovation and Skills, the solar industry and its supply chain employ about 39,000 people and resulted in nearly £5 billion of sales last year. All of that is in jeopardy. Sharp Solar, which was mentioned by my hon. Friend the Member for Alyn and Deeside (Mark Tami) and which is in the constituency of my hon. Friend the Member for Wrexham (Ian Lucas), currently employs about 500 people at its plant manufacturing solar panels. It is now warning that because of these cuts it is reviewing its presence in the UK, putting hundreds of jobs on the line. Given that we need to invest up to £200 billion in our energy
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infrastructure in the next 10 years, how can anyone have confidence in a Government who are so short-sighted that with just six weeks’ notice they are killing off a flagship policy that has cross-party support?
Gregory Barker: Before the right hon. Lady scaremongers any further, may I confirm that I spoke to the European head of sales at Sharp yesterday, and it has no plans to close its UK plant? It remains an important centre of European manufacturing.
Caroline Flint: Such companies are worried about the policies on the table, and they will be waiting with bated breath to see what happens. There are containers full of panels on our docksides all round the country not being used because sales orders are being affected by the Government’s policies.
Since we introduced feed-in tariffs nearly 90,000 families have benefited. That has helped those who want to do the right thing and green their homes, while also trying to protect themselves from soaring energy bills. However, under the Government’s plans nearly nine out of 10 households in England will be excluded from solar power and denied the chance to get just a little more control over their energy bills. That is because properties will be eligible for feed-in tariffs only if they have a minimum energy performance rating of C or above.
Andrew Bridgen (North West Leicestershire) (Con): Will the right hon. Lady give way?
Caroline Flint: No, I will not give way.
However, the most recent estimate showed that 86% of properties in England had an energy efficiency rating of D or below. Those households will be excluded from solar power. The Government’s plans are unfair, too, not least because they could hit people who have already installed solar power. In fact, the cuts could hit people who installed solar power before the Government even announced the changes. That is the problem with a six-week deadline, when it takes up to seven weeks to get a solar installation on the FITs register. Those people are going to lose out. In answer to a parliamentary question the Minister of State, the hon. Member for Bexhill and Battle, said:
“We recognise though that some prospective FITs generators who have incurred or committed expenditure may not be able to complete their installations and submit their applications for FITs before the proposed reference date.”—[Official Report, 10 November 2011; Vol. 535, c. 409W.]
What the Minister calls “prospective FITs generators” are people—thousands of them—who have already installed solar, but not yet registered. They will be caught up in a mess entirely of the Government’s making. They include, for example, the pensioners who wrote to me telling me that they had invested their savings in solar power to try to get their heating bills down and give themselves a little income in their retirement.
By cutting the tariff by an additional 20% for councils, housing associations and community groups, on top of the 50% cut, the Government’s changes will all but end solar power for social housing. Across the country, from Cambridge to Wrexham, Torbay to Leeds, Reading to Haringey, councils are already scrapping their solar plans; and last week it happened in Doncaster, too. As a result, those councils are forgoing funds that they could have invested—and that they planned to invest—in other energy efficiency measures for their tenants.
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All Governments get accused of not listening, but it takes a special kind of arrogance—not to mention a healthy dose of incompetence—to launch a consultation that is half the normal length and closes after the cuts on which it is consulting come into force. What happens when the consultation closes on 23 December and all the responses tell the Government that their cuts go too far, too fast, and will kill the solar industry? What happens to all the projects that have already been scaled back or scrapped altogether? What happens to all the families who have already decided to cancel their solar installation? What happens to all the firms that have had to lay off their staff—to all the engineers, technicians and installation teams who have lost their jobs before Christmas? What happens to them? What all this says is that the Government do not care what anybody thinks; and what it shows is that they are completely out of touch.
When the economy is flatlining, unemployment is rising and even the Prime Minister admits that his plan is failing, what sort of Government choose to kill an industry that is growing and creating jobs? When energy prices are at record levels and millions of families are struggling with their bills, what sort of Government choose to exclude nine out of 10 households and everyone in social housing from installing solar to cut their bills? When Ministers are flying halfway around the world to Durban next week to try and reach an agreement on climate change, what sort of Government choose to cut back on policies that will increase our supply of renewable energy and reduce our carbon emissions?
From the CBI, the Mayor of London and the man who installed the Prime Minister’s solar panels, all the way to the Welsh Liberal Democrats and Friends of the Earth, everyone is backing our campaign and telling the Government that they have got this badly wrong. Today we have come to a crossroads. Much damage has already been done. Many projects have been ditched. Confidence has been dented, with future investment possibly lost for good. However, we can step back from the brink. We can put feed-in tariffs on a sustainable footing, in a way that is fair to the public and which secures the future of one of our brightest industries. Today I call on all hon. Members to support our motion—to tell the Government to scrap their 12 December deadline, to stand up for an industry that is growing and creating jobs, and to stand up for people who want to do the right thing and protect themselves from rising bills. I commend this motion to the House.
4.44 pm
The Secretary of State for Energy and Climate Change (Chris Huhne): I beg to move an amendment, to leave out from “House” to the end of the Question and add:
“notes that the previous administration only introduced a feed-in tariffs scheme following pressure from Liberal Democrat and Conservative hon. Members; further notes that during the period up to October 2011 over 120,000 UK solar installations had been completed; further notes that this is three times the deployment expected by the previous administration; recognises that no commercial-scale solar PV schemes were expected by the previous administration; further notes that the cost of PV panels has fallen by at least 30 per cent. since the current tariff was introduced and that the previous administration set the tariff levels for solar PV to deliver a five per cent. index-linked return; regrets that the
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previous administration did not draw on the experiences of Germany in setting a sustainable and predictable digression of tariffs; further notes that failing to act could add £26 to the domestic electricity bill of all consumers in 2020 including the 5.5 million people left in fuel poverty by the previous administration; further regrets that the previous administration did not introduce a community tariff; believes that the Government is right to bring the tariff levels back in line with the rates of return envisaged; acknowledges that it is right to link support under feed-in tariffs to energy efficiency and the Green Deal ensuring the most cost-effective carbon abatement measures are introduced first; supports a consultation on the introduction of a community tariff; and further believes that the Government is putting feed-in tariffs on a long-term, fair and sustainable footing.”
We find ourselves here to debate a motion that would add at least £26 to an average consumer bill—that is, if we were to leave the scheme unchanged. The estimates are constantly being revised, and the figure may well reach as high as £80 on the current trajectory. The proposal would give bumper profits to solar companies and do little to tackle climate change. There seems to be no awareness whatever on the part of the right hon. Member for Don Valley (Caroline Flint) or other Opposition Members that those are real costs, being imposed on real people, who will be unable to spend the money on other goods and services as a result. Every corner shop across the length and breadth of the land would be affected if disposable incomes were hit in that way. Some of the people who are in the greatest fuel poverty—about whom Labour Members are meant to be most concerned—will be most affected by these increases.
Feed-in tariffs have been successful. They have helped many people produce green energy locally, which is why, before we were coalition partners, Liberal Democrats and Conservatives supported their introduction. Solar energy has been particularly popular, with more than 140,000 homes now generating some of their own electricity. Unfortunately, this promising scheme was built on shaky economic foundations. In setting the returns, the previous Government completely underestimated the potential for cost reductions in the sector. They assumed that solar panels would cost just 9% less to install in 2012 than they would in 2013. As we heard from the right hon. Member for Don Valley, Labour did not propose to review this matter before 2013. In fact, costs are falling and falling fast—at least 30% since the scheme started. The result is that returns on solar photovoltaic investments are double what was originally envisaged.
Mr Ben Bradshaw (Exeter) (Lab): What would the Secretary of State say to a company in my constituency, Sun Gift Solar—one of many in Exeter and the south-west that has contacted me—which clearly told me that its customers do not have any trust in what it calls this “erratic and inconsistent Government” whose actions have already immeasurably damaged confidence in this industry and will put tens of thousands of people back on benefits?
Chris Huhne:
I do not accept that at all. I will come on to some of the flaws in the original design of the scheme. I think it is regrettable that the Leader of the Opposition is not in his place alongside the right hon. Lady to defend the scheme that he introduced. I am going to be very clear—I am not going to pull my punches—about the mistakes made by the right hon. Member for Doncaster North (Edward Miliband) when
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he was Secretary of State for Energy and Climate Change and this scheme was introduced. I will deal precisely with that.
The right hon. Member for Exeter (Mr Bradshaw) has just mentioned an investor in his constituency, so let me quote another—Martin Bleasby, the business development manager of Driffield-based Dodds Solar who said:
“It was clear something had to happen. It was never supposed to be a get-rich-quick scheme. The way things were going, the budget was going to run out in a few months. Now we can look at building a business which is sustainable for years to come.”
Caroline Lucas (Brighton, Pavilion) (Green) rose —
Sheila Gilmore (Edinburgh East) (Lab) rose —
Chris Huhne: I happily give way to my hon. Friend the Member for Colchester (Bob Russell).
Bob Russell: My right hon. Friend is right to draw attention to the fact that the scheme is flawed. That is acknowledged. Does he agree, however, that where a social housing scheme or a community scheme has already commenced the process and panels are being installed almost as we speak, contracts should be allowed to roll even if they go beyond 12 December? Where the contract has already started, I say let it roll to completion.
Chris Huhne: My hon. Friend makes an important point. I have to say that since we announced this consultation I have received e-mails, as have a number of other hon. Members, from solar companies offering to install solar panels before the 12 December deadline. That does not suggest to me that we left inadequate time before the reference period.
Kate Green (Stretford and Urmston) (Lab) rose —
Chris Huhne: Let me come back to the point my hon. Friend made about social schemes and social housing, about which I care. Sadly, however, another design flaw that emerged from the inception of this scheme—again, the right hon. Member for Doncaster North was responsible for it—was that it did not have the ability to recognise social housing or social schemes. If we wanted a special scheme to help non-profit-making companies, we would not have the legal basis for achieving it.
Chris Huhne:
Opposition Members bounce up and down protesting about this issue, but they had the opportunity when they were in government to achieve this—and they did not do it. It is another one of the cock-ups for which, frankly, the Leader of the Opposition was responsible in designing this scheme. I feel for the right hon. Member for Don Valley as she does not have
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the support of the right hon. Member for Doncaster North, who is not prepared to stand up here and defend what he did when he introduced this scheme.
The fact is that these returns are funded by consumers through their energy bills, and they are unsustainable. If we allowed them to continue unchecked, they would burn through the entire budget in a matter of months. If we do not act now, the entire feed-in tariffs budget for the current spending review period will be fully committed by next spring.
Chris Huhne: Let me make this point, and then I will give way to the hon. Member for Brighton, Pavilion (Caroline Lucas).
With the current tariffs, each extra installation means that two fewer installations can be funded at the tariff levels. Every time the right hon. Lady or other Opposition Members say that we should not act—that we should defer dealing with the mistakes Labour made in introducing the scheme—they are condemning the industry to less growth than it would otherwise enjoy.
Caroline Lucas: I am frustrated by the Secretary of State’s implication that Opposition Members do not accept that the tariffs must come down, as of course they must. Does he accept that six months ago the solar industry itself asked for them to be reduced by 25%? The reason for the chaos we are experiencing is the incompetence of this Government.
Chris Huhne: I absolutely do not accept that. Not a single solar installer to whom I have spoken does not say that tariffs must fall, and on that point I entirely agree, but that was not the case before. This is another of the key cock-ups made by the Leader of the Opposition when he was doing the job that I am now doing. He failed to learn from the experience of Germany, which was very clear: those who introduce a scheme involving solar feed-in tariffs must introduce an automatic digression to take account of the real world. But of course Opposition Members are not very familiar or comfortable with the real world of business. The fact is that there should have been a reduction in the tariffs as a matter of automaticity.
Chris Huhne: I will give way to the right hon. Member for Don Valley.
Caroline Flint: If there was a provision for communities to take advantage of solar power, why are so many local authorities and housing associations cancelling projects? As a result of the right hon. Gentleman’s initiative, 100,000 social homes will not have solar power. Did not the Labour Government set in train a review to be completed by 2013, implicit in which was the need for a “staircasing down” of the tariff to achieve value for money?
Chris Huhne:
The right hon. Lady makes a good and serious point, which returns me to what I was saying before. We need to consider, and consult on, whether there should be a separate tariff for social schemes. Many social housing providers offer their tenants free electricity to encourage take-up—free electricity that has been rising in value because of the rise in world gas prices and the rise in UK electricity prices. That is an important part of the rate of return. If providers give
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all that to their tenants, the amount that is left from the feed-in tariff to compensate for their financing costs will be less. However, we are not legally able to provide a separate tariff, because the Labour party did not implement such an arrangement when it was in government. I regret that, because it would have given us some flexibility.
Dr Julian Lewis (New Forest East) (Con): I have been lobbied by a constituent, Jeremy Anson, who works for a photovoltaic providing company. He fully accepts the need for a substantial reduction, but says that while the industry could cope with a reduction of 30%, he would struggle with 50%. We wonder whether a phased or gradual reduction would be possible, given that the number of orders received by his firm has fallen from a average of 15 a month to zero after 12 December.
Chris Huhne: I shall explain what we are trying to do later in my speech, but let me reassure my hon. Friend that the returns that the new scheme will provide—if, indeed, we proceed with it following what is a genuine consultation—will be very similar to the returns that were originally intended when the scheme was announced by the Leader of the Opposition in April 2010. As with some of the Opposition’s other achievements, the intention was right but the execution was definitely not, so it falls to this Government to attempt to clear up the mess.
We want to secure the continued success of feed-in tariffs through sustainable growth, rather than boom and bust. That is why we are consulting on new tariffs for solar PV installations. As the climate change Minister, my hon. Friend the Member for Bexhill and Battle (Gregory Barker), just pointed out to the House, they are now in line with those being offered in Germany. If the former Secretary of State, the right hon. Member for Doncaster North, had bothered to find out how the Germans operated this scheme, we would never have been in this position in the first place.
Chris Huhne: Before I give way again, let me address this key point. To wait any longer would put at risk the entire feed-in tariff scheme. Anything that slows this process will substantially increase the risk that the scheme will run out of money. Each week of delay in changing the tariffs leads to additional annual subsidy costs of £4 million, but this is a 25-year scheme, and the figure over the spending review period is £14 million, or £87 million to £110 million over the 25-year tariff lifetime. A very small delay in tackling this problem will therefore result in substantial costs for electricity consumers over a 25-year period.
My experience tells me that when we face such a problem, we should not follow the advice of the right hon. Member for Don Valley and attempt to run away from it by pretending it does not exist. Instead, we must grapple with this problem, and deal with it quickly so the scheme can be put on a sustainable basis that will give the industry the opportunity to grow and prosper.
Charlie Elphicke (Dover) (Con):
This is a strange debate, as the Opposition seem to be on the side of big business, while we are on the side of the squeezed middle. Does the Secretary of State agree that the £1 figure Ofgem cited was for back in the summer when
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installations were running at about 2,000 to 3,000 a week, rather than the recent rate of 9,000 or so a month, and would that figure not have grown exponentially over time?
Chris Huhne: My hon. Friend is correct. I wish the House had facilities to show a PowerPoint presentation at this point, as I am now holding up a chart showing what has been happening with the scheme. The rising curve represents the installation rate increase. The Opposition cite the Ofgem figure of £1, but that applies down in the foothills of the curve, and we are dealing with a rather different real world today. Installed capacity has doubled since August, and has increased by three times since June and by tenfold since the start of the year. The right hon. Member for Don Valley is laughing; she has obviously had no experience of attempting to manage a budget, because if she had, she would not be laughing at all. This adds real costs to the electricity bills of real people—people the Opposition claim to represent.
Dr Alan Whitehead (Southampton, Test) (Lab): Will the Secretary of State provide the budget figures for the feed-in tariffs in the levy envelope up to 2015, along with the central analysis undertaken by his Department of how far over that budget we would be under present arrangements? Will he also explain the headroom his Department has for putting things right over that period, and compare that with how far over the budget his Department is according to its central impact assessments?
Chris Huhne: The hon. Gentleman is my neighbour in south Hampshire, so I was delighted to give way to him, and I wish we were able to address that fine granularity of detail, as he suggests. However, I shall place the graph I have been showing in the Library so that everybody can look at it. The situation is moving so swiftly that projections based on the current week’s figures would look rather more alarming than those for last week or the week before that. The real world is changing exceptionally rapidly. The impact assessment gives a clear statement of where we were at the point when the impact assessment was made. At that point, the figure was £26 on average energy bills for 2020 and the latest estimate is now up to £80—and at the high end of that if there is substantial growth. That takes me back to the point that if we do not deal with the issue quickly, we are not saving the industry, as the Opposition would like us to believe, but writing the death warrant for it. There would be a sudden cataclysmic fall in demand.
Chris Huhne: I will give way to the right hon. Member for Lewisham, Deptford (Joan Ruddock), who is a former Minister in this area and whose expertise is well known.
Joan Ruddock (Lewisham, Deptford) (Lab):
May I reiterate what was said by my right hon. Friend the Member for Don Valley (Caroline Flint), who speaks from our Front Bench? It is not about the fact the tariffs are being reduced but the way in which it is being done. Peabody housing association, which works in my constituency, was going to have installed 6 MW of
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provision by March of next year and the programme has been decimated. The Minister of State has said that it can get ahead with a 5% return but it was planning—and had received—a 7.5% return and its borrowing costs are 5.3%. It cannot be done. The Secretary of State must change his mind.
Chris Huhne: I listen to what the right hon. Lady says, but the reality is that the scheme takes us back to the rate of return when the scheme was introduced by the previous Government in April 2010. It was appropriate then and all we are doing is taking account of what has happened in the real world, where there has been a very dramatic reduction in the cost. I have yet to meet a single manager of a single scheme who has persuaded me that they will lose money by proceeding with their scheme. They might make less money than they previously planned—that occasionally arises—but the business of my Department is not to provide extra rate support grants to local councils but to ensure that we have a successful renewable energy scheme and that we get solar panels out there. It is not a back-door way of funding extra support.
Mr Edward Leigh (Gainsborough) (Con): I agree with everything my right hon. Friend is saying, but surely the problem is that all the schemes that subsidise renewable energy tend to distort the market and have perverse consequences, and therefore perhaps the Duke of Edinburgh had a point over the weekend.
Chris Huhne: The Duke of Edinburgh was not, I think, talking about solar panels, and I dread to think what his views are on them. He certainly made his views on wind pretty clear. I do not agree with my hon. Friend on the issue of distortions to the market because, curiously, solar photovoltaics are a clear example of a highly successful world market. The right hon. Member for Don Valley was talking about Sharp Solar as though it was dependent on the UK, but more than three quarters of the production in Wrexham goes overseas to the rest of Europe. We have already heard that the funding is exactly in line with that in Germany. The Chinese are exporting dramatic amounts of solar panels and what is fascinating, exciting and positive about the industry is the fact that in the long run—
Chris Huhne: I shall give way to my hon. Friend, who has been very patient.
The key point I want to make, which was drawn to my attention by the US Energy Secretary Steve Chu, is that almost uniquely among the renewable energy forms, solar panels are reducing in price by an average of 6% a year. As a result of that technological trend, which is a bit like the fall in the cost of computer memory that many of us will be familiar with, this area will have enormous potential in the long run. The argument for putting the industry on a more sustainable basis so that it can grow solidly and reliably with a tariff that reflects the fall in the underlying costs means that we will be in a position, when the costs of solar fall to grid parity, to make major and substantial increases in solar installation. I do not agree with my hon. Friend the Member for Gainsborough (Mr Leigh) that this is a waste of time. The world market is working, but the scheme has been
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thrown out by the fact that we have had a dramatic fall in the costs of solar panels in the past 18 months. Unfortunately, the scheme introduced by the previous Labour Government did not have the automatic reduction that it should have done.
At this point, I shall give way to my very patient and hon. Friend the Member for Brigg and Goole (Andrew Percy).
Andrew Percy: I am almost too tired to stand up now, Mr Deputy Speaker, but I thank the Secretary of State for giving way. It is precisely because of the arguments he has outlined that the Labour Government in New South Wales in Australia cut their tariff by two thirds.
I want to put a question to the Secretary of State on behalf of my constituents at Alexander Electrical Services. They support change and have said very clearly that they accept there has to be change, but one thing they want from the Secretary of State is more of an explanation about the December cut-off date.
Chris Huhne: I come back to the point that if we had not acted quickly on this we would have had a situation in which every installation at the old tariff rate would have meant two fewer installations at the new tariff rate. That would have meant massively over-subsidising when we could have got the deployment at the new tariff rate. There is no doubt about that. We have had many e-mails from reliable, long-standing solar installers who recognise that the scheme needed to be changed. They—particularly the reliable installers—want it to be put on a sustainable basis that will give them the ability to grow sustainably.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP): It is the rate of change that is concerning people, particularly in rural areas. A small domestic development of some constituents of mine would have been under threat had they not managed to make the cut-off. They are now looking for retrospective planning permission. Will the Minister look again at the situation, particularly in rural areas where getting basic parts can be a problem? Will he give more time before he introduces this draconian cut-off rate in rural areas?
Chris Huhne: I have to say that, to some extent, I rest my case in that regard. A substantial scheme that requires planning permission in the Western Isles will clearly be one for which, arguably, the solar yield will be very substantial. I do not know whether that is the case, but I come back to the point that if we do not deal with this issue we will deprive the industry of future growth prospects. The more we pay out at the higher rate the less we pay out at the lower rate. That is why we proposed the date of 12 December—to give well-advanced projects six clear weeks in which to finalise and thus receive the current tariffs. We are consulting on this and we are open-minded about it. Hon. Members should remember that schemes after that reference date will continue to receive the old tariff all the way through to April—only then will they go on to the new tariff. We are seeking views on this and on our other proposals, including the one to strengthen the link between FITs, energy efficiency and a new multi-installation tariff frame.
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Mr Russell Brown (Dumfries and Galloway) (Lab): Will the Secretary of State give way?
Chris Huhne: I must make a bit more progress.
We are also considering whether more could be done to enable genuine community projects to benefit fully from FITs. We will provide more detail on that in the second consultation on the comprehensive review.
Stephen Lloyd (Eastbourne) (LD): On that point, can the Secretary of State, first, give us a reassurance that local authority social housing, or at least social housing, will be included in that? Secondly, if there are problems with the budget, perhaps he could get some money from the nuclear budget.
Chris Huhne: My hon. Friend is mistaken if he believes that there is public subsidy in the nuclear budget. Nuclear power will be built without public subsidy, and I believe that position is shared across the House. I assure him, from the Dispatch Box as someone who is a very clear guardian, that, as we are spending £2 billion clearing up the nuclear industry mess from previous generations, there is someone here who has a very strong incentive to make sure that that never happens again.
On social housing, I have already said that we will consult on whether it is appropriate to have a separate tariff for genuine community projects. Those who have already installed solar PV and who are registered for feed-in tariffs will not be affected. The right hon. Member for Don Valley suggested that they might be but that is completely incorrect and is scaremongering. I can totally reassure anyone that this approach is consistent with our long-standing principle in the House of not making retrospective changes. We have to strike a delicate balance between acting quickly, for the reasons that I have given, and allowing people to finish work that is well under way. That means enabling well-progressed projects—[ Interruption. ]
Mr Deputy Speaker (Mr Nigel Evans): Order. May I inform the House that 29 Members have submitted a request to speak in the debate? We will clearly not be able to hear from everyone, but if there are constant interventions, we will hear from even fewer Members than anticipated.
Chris Huhne: I will take some more interventions with your forgiveness, Mr Deputy Speaker, but I will try to make progress too.
A consultation is under way, and we will consider carefully all the representations that are made, including on the proposed reference date and how best to implement an energy efficiency requirement. It is not the case, for example, that large numbers of people will be excluded, because it is possible to insist on a C rating. Many people could easily be upgraded to a C rating, which would increase the market enormously. Furthermore, we could make solar panels available to anyone who is prepared to take part in the green deal when it is launched and which, of course, is cost-free to the household. We will look at that, and we will announce our final intentions early in the new year. Our proposal is that the revised tariffs should take effect from 1 April 2012.
The decision to consult on revised tariffs and the proposed reference date was not taken lightly. I am sure that Members from all parts of the House agree that
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increasing the share of locally generated renewables is a good thing, not just for our carbon reduction targets, but for households and communities. However, spending the best part of £1 billion of public money to support soaring profits for one part of the energy sector is not the way to build a lasting low-carbon economy. It will not deliver more renewable energy or help more households. As that public money comes directly from the purses of bill payers, including people in fuel poverty, it is not the fairest way either. Many Members will have received letters from companies offering solar PV. Many of those letters are written in defence of the industry, but they are guided by a passion, quite rightly, for clean green energy as well as a stronger bottom line.
I am as disappointed as many of my constituents that the feed-in tariff scheme was not properly set up. To paraphrase the right hon. Member for Don Valley, we would not have to cut so far or so fast if the policy had been properly costed to begin with. A little more foresight then would have gone a long way now. I have described the mistakes that were made by my predecessor in failing to take into account what was happening in the marketplace, but another mess that we had to clear up after the Labour Government left office was the business-scale scheme, which was going off like a rocket. We had to deal with that earlier this year because, under the proposals introduced by the Labour Government, it was assumed that businesses were too stupid to respond to a substantial real return and would not install any solar PV for three years. If we had not acted, half of Devon and Cornwall would have been under PV panels.
Mr Russell Brown: Will the Secretary of State say something about remote rural areas, because I have a constituent who has had solar panels installed but, because of her remote location, she has to pay a further £21,000 for an off-grid connection? There is absolutely no way in which her supplier can connect her before 12 December.
Chris Huhne: By all means, the hon. Gentleman should give us the details of exactly that sort of issue, which we will consider as part of the consultation. However, his constituent might have been better served if there was a proper energy efficiency audit of her home so that she could make substantial energy savings beforehand.
John Robertson (Glasgow North West) (Lab): You don’t know what his constituent did.
Chris Huhne: We do not, but we do know that under the scheme promoting solar PVs or the scheme that was launched by the Labour Government in April 2010, there was a link to energy efficiency.
John Robertson: You’re making it up.
Chris Huhne: Opposition Members are getting terribly shirty about this, but there was a link to energy efficiency and that link was abolished with the introduction of the scheme by the right hon. Member for Doncaster North, the Leader of the Opposition, when he was the Secretary of State for Energy and Climate Change in April 2010. We need to deal with that.
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There are more efficient ways to clean our energy supplies and grow our green industries than using consumers’ energy bills to support one industry at well over the market rate. If we did nothing, by 2014-15 feed-in tariffs for solar PV would cost consumers about £1 billion a year. If we are to succeed in building a low-carbon economy, we must make sure that we show people that we are committed to value for money.
It is precisely because this Government are committed to a sustainable, long-term future for clean energy that we propose revising tariffs now. Encouraging a minority of companies to feast on bumper profits for six months, swallowing up the entire feed-in tariff budget for a four-year period, would be the acme of short-termism. It is worth keeping things in perspective.
Andrew Bridgen: Will the Secretary of State explain to the House what he believes the Labour Government meant when they said in a consultation document on feed-in tariffs that they did not expect to lower the tariff levels for new projects over the years? Given that, does he not detect more than a whiff of hypocrisy in the comments from the Opposition Front Bench?
Chris Huhne: My hon. Friend makes a good point. If the previous Government had bothered to find out how well-managed feed-in tariffs are run in countries such as Germany, they would have built in an automatic system which brought the tariffs down in line with the fall in costs, but they did not. The result was a massive over-compensation.
Contrary to the claims that we have heard from the Opposition, we are not shutting down an industry, which is what would happen if the money ran out. The revised tariffs will provide inflation-proofed returns for 25 years of around 5%. That remains competitive with other investment opportunities. A householder would still be able to get a 4.5% real post-tax return. This compares well, for example, with the 0.5% post-tax real return currently available through index-linked National Savings bonds.
Zac Goldsmith (Richmond Park) (Con): The Government are right to cut the tariff. That is the message that I have heard from many in the solar sector, but the 12 December deadline is causing panic. There is no doubt about that, so I ask the Government to publish as soon as possible some kind of cost-benefit analysis showing what the cost would be of sticking to the April deadline and what the cost to the sector would be of a 12 December deadline. That is the issue causing most fear. It is hard to exaggerate the level of that fear.
Chris Huhne: My hon. Friend makes a good point, but I have dealt with that issue in response to the hon. Member for Southampton, Test (Dr Whitehead). This is such a movable feast that every time we do a projection, we find that the budget is being eaten up even more rapidly, so we have put out, in the impact assessment, a very clear projection on the basis of the knowledge that we had when the consultation was launched about what would happen overall—that is, a very substantial increase in the overall budget and a £26 increase in household bills. The revisions that we have done since then suggest that, if anything, things will be moving even more rapidly.
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By the way, the returns still compare favourably with the returns intended when the scheme was set up. Our proposals are the difference between windfall profits from double-digit returns and a reasonable return—double-digit returns that would bring into the industry all sorts of curious people who never had any previous interest in it and who were operating tax avoidance schemes to raise money to invest in the industry. The scheme had been growing dangerously unbalanced. We are working to put it back on an even keel. I do not accept that putting right the feed-in tariffs scheme undermines confidence, for the reasons that I have given.
Aside from those such as electricians and scaffolders who have branched out into solar PV installation alongside other employment, our analysis suggests that the number of full-time equivalent jobs in the solar industry is between 8,000 and 14,000. We do not wish to see a single company stop trading or a single job lost, but we cannot continue to prop up unreasonable profits with consumer cash. Jobs created by a bubble of excessive returns and paid for by consumer energy bills are simply unsustainable. Companies that have prepared themselves accordingly are likely to continue. As I have said, I have not come across a single person in the industry who contests the fact that we needed to act, although we did not hear that loud and clear before we acted, contrary to what various Opposition Members have said. Companies that were going all out with installations for the next few months with no plans beyond that will be in a position that is only slightly different from what would otherwise have been the case.
Dr Sarah Wollaston (Totnes) (Con): The Secretary of State makes a compelling case for the need for change, but will he consider a concession for those businesses that have already paid a deposit? Pennywell farm in my constituency aims to be the first carbon-neutral tourist attraction in the country and has already received a gold business award for energy conservation. It has already paid a 10% deposit, but the costs of meeting the 12 December deadline will increase its costs by 11% and it faces great difficulty as a result.
Chris Huhne: I hear what my hon. Friend says, and she is not contesting the fact that there will still be a positive return. That comes back to the point I was making. People might not make as much money as they thought they would, because the scheme had not been brought into line with the fall in the cost of panels, but they will still make a positive return. My Department’s key objective is to ensure that we make the transition to a low-carbon economy, not to provide excessive subsidies where they are not warranted by the action that is to be taken. If she would like to write to me with the details of her example, we will take it into account as part of the consultation. I repeat that it is a genuine consultation.
The revised tariffs will allow the feed-in tariffs to work in the way they were intended to, supporting the industry and jobs in the long term, rather than burning brightly for a few short months before fading away. The right hon. Member for Don Valley might urge on us the attractions of becoming a sort of policy Catherine-wheel in which we are all fizz, but we do not particularly want to be followed by all phutt, which is exactly what we would have if the Labour party was to have its suggestion.
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I am sure that Members will join me in supporting long-term ambition across the whole green economy, rather than windfalls for the few.
The Government are committed to supporting sustainable low-carbon energy, but we cannot continue to write blank cheques. By bringing solar PV returns in line with other investment opportunities, we are guaranteeing the success of the feed-in tariff scheme as a whole, which will mean more renewable energy delivered to more households in a sustainable way.
Mr Deputy Speaker (Mr Nigel Evans): Order. A great number of Members wish to take part in the debate, so a five-minute limit has been introduced for Back-Bench contributions.
5.23 pm
Albert Owen (Ynys Môn) (Lab): It is a great pleasure once again to follow the Secretary of State, but I am afraid I cannot resist referring to his last remark on policy Catherine-wheels. He is the man who said that the nuclear industry was flawed and should not continue, but today he is Mr Nuclear. He said that solar panel feed-in tariffs were not ambitious enough, but now he says that they are flawed and too ambitious. He is the undisputed champion of flip-flops. Today he has told us that he is looking after the interests of the consumer, but he is doing exactly the opposite.
Since entering the House, I have been a consistent supporter of nuclear energy, renewable energy and energy efficiency as a package. I see no contradiction in that whatsoever. It will help consumers in the short term and the environment in the long term, which is what proper policy is about.
We do not have much time today, but, because of the country’s anger at the policy changes, we are here today, arguing the case for consumers. I shall read out a few examples, because they show how out of touch the Secretary of State and Government are on this important issue.
It was not just the industry, but ordinary individuals who took this Government on trust, and they have broken it. The Liberal Democrats know that, because they argued that the scheme was not ambitious enough. Indeed, the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), who is in the Chamber, said that the then Government were not going far enough.
Simon Hughes (Bermondsey and Old Southwark) (LD) rose —
Albert Owen: I am happy to take an intervention from the right hon. Gentleman. I wanted to wake him up and stir him so that I could get an extra minute and listen to his remarks. Is he prepared to intervene?
Chris Huhne: Will the hon. Gentleman take an intervention from me?
Albert Owen: I shall take an intervention first from the right hon. Gentleman’s previous boss.
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Simon Hughes: I did press for a scheme when we were in opposition, and a scheme was introduced, but it was not adequate. I support the fact that it has to be reviewed because of the take-up, and the answer lies in the Secretary of State’s answer, which I heard very clearly. It is to look at a new community tariff, to be announced as soon as possible, which I heard him say will be in January.
Albert Owen: But the right hon. Gentleman said in opposition that the rates were not ambitious enough. Those were very his words, and he has now done a flip-flop on that. Yes, we need a proper review; of course we do, because the industry is calling for it and everybody is calling for it, but it should be done on a sliding scale, not at the rate that the Secretary of State describes.
Chris Huhne: Will the hon. Gentleman please admit to the House that there has been a colossal fall in the cost of panels and, as a result, an enormous increase in the real rate of return? That is what has changed in the real world. Since my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) made those points, the world has changed. Government Members have responded to that; Opposition Members do not appear to have done so.
Albert Owen: The Secretary of State has not read the Opposition’s motion or listened to what the shadow Secretary of State said about the need for a sliding scale.
I shall read out three examples, because they speak not just for my constituents, but for constituents throughout the country. A Mr Jones wrote to me this month, saying:
“I am writing to you as a retired NHS employee, who recently decided to invest my pension lump sum monies into clean energy and have just installed PV solar panel system on my house. My decision was based on the Government’s existing tariffs and estimated returns on the substantial investment and proceeded with the installation in the last week of October. I was unaware of the Government’s consultation document before proceeding. I only recently heard about the changes on a news bulletin”.
He believes that the process is deceitful, because it cuts off before the consultation period is done. He says that he understands the rationale for changes, as do all of us, but the proposed changes will be made without any meaningful public consultation. Indeed, the Secretary of State has suggested that individual write in, and that the consultation changes will be made on a case-by-case basis. What a sham—for the Government of the day to say, “We will look at individual cases and maybe give a bit of leeway.” People want a proper strategy and consistency.
Another constituent, a young person who has been self-employed for 10 years—the kind of person whom the Government say they want to help—came to see me. He has moved from various installation projects, including central heating systems, to the PV system, and he has employed extra people. He says:
“I am writing regarding the recent feed in tariff problems as I am sure you are aware of. I have had to lay off two installers last week for two weeks so far”,
and he cannot see himself bringing them back. His office assistant is, he says,
“down to two days a week from five days”,
and he cannot honestly see his company trading: it will cease trading because of the proposals. That is the kind of reaction we are getting from communities.
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A third person who wrote to me put across her point straightforwardly, as Anglesey people do, saying:
“I was horrified to see the high handed fashion in which the Government has eliminated the…Micro Generation Industry. By…slashing the value of the electricity feed-in tariff, they are effectively ending the provision of free solar panels to the electorate and endangering the jobs of tens of thousands of people. Not since the Thatcher Government of the 1980’s have those in power set out to put an end to a sector of the economy overnight.”
That was not a Labour supporter who was known to me, but an ordinary constituent who took the trouble to write in. That is the situation that people are finding themselves in, and it is the scale of the downgrading of the tariffs that is concerning everybody.
I say to the Minister of State, the hon. Member for Bexhill and Battle (Gregory Barker), who is going to wind up the debate, that he should listen to the debate—I do not think he is listening at the moment. He should not just give the speech that has been written for him by civil servants, but he should listen to the debate and listen to what the people of this country are saying. They understand the need for deficit reduction, but they also have trust in Governments, and when they enter a scheme, they want to see it through. They want to help the country’s economy and create jobs, and jobs have indeed been created. They want to save the economy, but they also want to save the environment. That was why the scheme was set up. Yes, it needs to be reviewed, but the Government are destroying it, and I ask them to think again.
5.30 pm
Mr Mark Spencer (Sherwood) (Con): I am very grateful to you, Mr Deputy Speaker, for calling me early in this debate. Right at the beginning, I want to nail my flag to the pole as being very pro-solar. I believe that solar power offers us a great opportunity to change how we generate power, in a green way that protects the environment and lowers our carbon footprint. As a member of the Environmental Audit Committee, I have been very keen to push forward schemes such as solar and anaerobic digestion, which also offers us a great opportunity. Those schemes provide energy without having a great impact on neighbouring sites.
I am keen to set out the position in which the Government found themselves when they came to power. After 13 years of a Labour Government, we faced the real prospect of an energy crisis. We risked a gap in the supply to the general market and in this country’s ability to find energy to keep the lights on in our homes and ensure that our businesses can thrive and move forward. It is a damning fact that the previous Government did not grasp the nettle and sort out this country’s energy supply to ensure that we can operate securely.
To that end, I probably part company from the Secretary of State in saying that I think that the real answer to delivering large-scale energy production will be nuclear. The previous Government should have taken quicker action to deliver it. Coming from the constituency of Sherwood, and from the former coalfields of Nottingham, I believe that the other way in which we can solve the crisis is through carbon capture and storage, using coal-fired power in a green way so that it does not increase our carbon footprint.
The most important point to recognise is that a lack of action is simply not an option. We cannot continue the way we are going. We are a victim of the enormous
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success of the feed-in tariffs scheme. People have really embraced the opportunity to put solar panels on their own homes. Unfortunately, we pitched it at an unsustainable level, and the only option is to reduce the subsidy to a level that still allows the industry to continue and people to deliver solar panels.
Opposition Members have referred to what happens in Germany. The simple fact is that we are reducing our support to the same level that exists in Germany, and the industry is sustainable there. I am not an astronomer, but my understanding is that we share the same sun, and the strength of the sunlight is the same. If the industry can thrive in Germany at the same level of subsidy, I believe it can be sustainable in this country. The truth is that time will tell whether we are right or wrong. I believe that as we move forward, the industry will carry on and people will still be able to make use of the opportunities provided.
David Mowat (Warrington South) (Con): My hon. Friend makes a very interesting point about Germany. He will perhaps be aware that, in the last year of the previous Government, Germany was getting approximately 10% of its energy from renewables, while we were getting 2.5%. We have a lot to learn from Germany.
Mr Spencer: I agree with my hon. Friend. We can learn from some of the things Germany got right and some of the things it got wrong. That is the way to move forward.
Basically, there is a simple calculation. We need to get more solar panels for each pound we spend, and the Secretary of State’s suggestions would deliver more panels per pound. That is the simple calculation we have to make. The other thing we need to do is bring the technology into the mainstream.
Glyn Davies (Montgomeryshire) (Con): One of the issues the Opposition have been discussing today is that of jobs and lost jobs. Clearly, if twice as many panels are being built sustainably in the longer term, there will be a lot more jobs.
Mr Spencer: That is absolutely true.
As I was starting to outline, the other thing we need to do is to bring the technology into the mainstream. This is no longer some green dream. Solar panels are a real opportunity to deliver a credible energy source to our homes. Many companies that focus solely on solar power have been established, but we need to tackle the matter by ensuring that normal contractors—electricians and plumbers—look at such technologies as an alternative.
At the moment, an example of what happens is this. Mrs Jones’s boiler will break down and a plumber will come along. If the plumber does not have the expertise to say, “These are the alternative renewable sources of energy that you can look at,” she will have a normal gas-fired boiler fitted in her home. We need to bring such technologies into the mainstream, so that regular electricians and plumbers have the experience to deliver them. I hope that, as the scheme is successful, they will be able to tap into it and deliver that. I am not just talking about specialised solar companies, but normal, everyday contractors. That is starting to happen and will continue.
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I am very conscious of the time, so I shall summarise the matter quickly and leave my colleagues time to speak. We inherited an energy supply system that was in tatters. We have had to tackle that at the same time as greening our energy supply and lowering our carbon footprint. That is an enormous challenge. We have made some very good progress, but there is a way to go and, under the current Administration and with the support of the Secretary of State, we can make great progress.
5.37 pm
Sandra Osborne (Ayr, Carrick and Cumnock) (Lab): I share the concerns of Labour Members. The shadow Secretary of State made a very powerful speech, but I want to concentrate on a constituents’ case because the Secretary of State does not seem to think that the December deadline is a problem. However, my constituents’ case is a perfect illustration of why it is a problem.
On 2 November, my constituents learned that the Department of Energy and Climate Change had changed the date from 31 March 2012 to 8 December 2011 for reducing the feed-in tariff rate for solar panels fitted to domestic properties from 43%. At the 43% FIT level, they calculated that they could borrow £12,000 to install solar panels and that they would break even on the loan repayments. The week before, they signed a contract for solar panels to be installed before 31 March 2012 and paid just over £7,000 as a deposit. At that time, there was no indication that DECC was about to make a sudden change to the date for introducing the revised FIT rate.
My constituents immediately feared that the contractor may not be able to have the system installed and their registration complete within the new time frame set by DECC. If that happened, they would be trapped in a contract from which they would be making a monthly loss that they cannot afford for the next 25 years. They would not have signed up to the contract if DECC had made it known that it was about to change the time frame for introducing the revised rate. My constituents acted in good faith and believe that the original tariff agreement to 31 March should be honoured or maintained at that level for people such as them who have already signed contracts and paid significant deposits with no guarantee that work and registration will be completed before 8 December. That should be taken into consideration. It was completely unreasonable to give five weeks’ notice of such a significant change at a time when suppliers and installers are exceptionally busy meeting the demands of the original 31 March deadline.
Following this shock, my constituents have been working closely with panel suppliers and installation contractors to complete the work prior to the new cut-off date. Luckily for them, the work has been completed, the system is installed, and registration documents have been submitted to their energy supplier. The registration documents were sent to the energy company by special delivery on Saturday 19 November, and they breathed a sigh of relief because this gave, or so they thought, plenty of time for registration prior to the December cut-off. The energy company has now informed them that it cannot guarantee that the registration documents will be processed prior to the December cut-off date
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because it is receiving unanticipated levels of rushed applications to make the new deadline, and that has resulted in a significant slowing in the registration process.
My constituents believe that this is, by default, another way for DECC to ensure that fewer people are able to receive the previously agreed tariff, and the Secretary of State openly admitted that in his speech. They rightly believe that this looks like another example of people entering into contracts with this Government only to have the goalposts moved without due consideration or proper consultation and find that they are left to take the financial hit. They were already in the position that 60% of the costs had been paid to the contractor and they could not reasonably cancel the contract. Having fast-tracked the installation process, they are now faced with another barrier to registration whereby, through the Government’s action, they will be tied into a green energy contract rather than breaking even. This leaves them with making a significant loss for the next 25 years, through no fault of their own. They tried to do the right thing; perhaps the Government should now do the right thing and change the deadline.
5.42 pm
Dan Rogerson (North Cornwall) (LD): The introduction of the feed-in tariff came about after a long campaign by the parties now in government and by many people out in the community who had seen the gains that had been made in Germany. We keep coming back to the German example. I am sure that any German people watching this debate will feel very smug that much of it is about what they have achieved. I was a member of the Environment and Climate Change Committee during the previous Parliament, and we went over there to look at what had been achieved in Baden-Württemburg and Freiburg, as well as in Stuttgart, where the panels were being produced.
Labour Members on the Committee—who at that time were Government Members—were very impressed but despairing that their party would not listen. I remember the debates in this place when the feed-in tariff was raised repeatedly, and some Labour Back Benchers were bravely standing up and defying the Whips to argue for it. We have to remember that were it not for what happened in another place we would not have made the progress towards the feed-in tariff that we have. The right hon. Member for Don Valley (Caroline Flint) talks about the wonderful achievements of her Government and her conversion to believing in the feed-in tariff, but whatever she says about the right hon. Member for Croydon North (Malcolm Wicks)—
Katy Clark (North Ayrshire and Arran) (Lab): Does the hon. Gentleman accept that it was 60 Labour Members signing an amendment and negotiating hard within our party to get signed up to feed-in tariffs that led the Labour Government to introduce the legislation?
Dan Rogerson: I have already paid tribute to Labour Back Benchers who were arguing for the tariff—but I am talking about Labour Front Benchers and the official policy of the then Government until that point, which was to reject it. Obviously, that is a matter of historical record.
We now have the feed-in tariff in operation. As a Member of Parliament for Cornwall, where there are huge possibilities for the solar industry and fantastic
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community groups are coming together in the co-operative sector to drive this forward, I am very pleased that we have seen such growth. However, I am looking to Ministers to give a positive and consistent message on solar, because there is confusion out there, and that is damaging. The Secretary of State made a strong speech today setting out a clear direction. However, confidence has undoubtedly been affected by, as the Secretary of State would say, the success of the scheme, because there has been such a high take-up and high capacity.
Stephen Lloyd: On that subject, does my hon. Friend agree that one concern for many solar and renewables companies who have bought in to the green agenda is that they never know for sure whether the Government will change their mind midway through? Does he agree that this decision, though economically understandable, may feed that concern?
Dan Rogerson: That is the thrust of what has been said by several Government Members, and indeed Opposition Members, who have raised concerns. We accept the need to act, but we must ensure that there is now a consistent vision so that the message gets across.
I am excited about the possibilities. I believe that in the longer term, the message will be much better in terms of how much will be added to the bills of those who cannot take advantage of feed-in tariffs, because we will see a break-up of the small oligopoly of the big six energy producers and there will be a far more dispersed system. That will ultimately provide more competition and drive down price. Clearly the Secretary of State has been looking at this economic model, and he has to consider how much money is in the budget. I advise him to continue to focus on costs being put on to other domestic bills. I think that we can be far more positive about the long-term implications of this policy for all energy bill payers. If we have a far more diverse mix, it will create further competition and drive down prices, or at least will resist the upward trend in prices that we have had because of the issues with fossil fuels.
Huw Irranca-Davies: I ask the hon. Gentleman to agree, if not with Opposition Members, with that very good group within the Liberal Democrats, the Green Liberal Democrats, and with Welsh Liberal Democrat Assembly Members, who have written to the Secretary of State to ask him to delay this decision to ensure that there is an effective transition. That seems to be wholly good sense as a bare minimum. Will he agree with them and then support us in the Lobby to vote for the motion?
Dan Rogerson: As for how I will vote, I have looked at the motion and I am waiting to hear the Government’s position in the summing up. I have a number of issues, such as the need for certainty and the effect of the cliff edge in December, which other hon. Members have talked about. That is the real problem for investors. It would be very welcome if, in looking at the consultation, the Government could come up with any means of tapering that effect, particularly to help the community schemes and social housing schemes that are considering exciting ways to involve tenants and whole communities in taking advantage of the scheme. Those are people who might not be able to do so on their own, because they are not capital-rich enough.
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Chris Huhne: We would like to do that, but the legal basis for doing so is simply not there in the scheme that was introduced by the last Labour Government.
Chris Huhne: Well, we could do that, but it would have to be part of the longer-term consultation on the comprehensive review, which we will carry out.
Dan Rogerson: I thank my right hon. Friend for that intervention, as far as it goes. I hope that a huge amount of effort will be devoted to putting that problem right very quickly.
As other Members want to speak and as I have taken so many interventions, I will be brief. One other issue that I want to focus on, which has not been raised, is the concentration on energy efficiency for people who want to take advantage of the tariff. That is hugely problematic in areas such as mine that have older housing stock, which it will be very difficult to get up to the standard. I do not think that there is—
Dan Rogerson: I will not give way, but the Minister will have a chance to respond in his summing up.
Caroline Flint: Will the hon. Gentleman give way?
Dan Rogerson: I will not, because I need to complete this point.
I do not think that we need to connect this matter with energy efficiency so intimately. In the green deal and other schemes, there are advantages and pressures to encourage people to consider energy efficiency measures. I think that linking these things is unhelpful, particularly for people in areas such as mine.
Although I welcome the Secretary of State’s commitment to move forward with this scheme and the vision for solar that he has set out, I urge him to consider other means for getting the sector to grid price parity, so that we can have confidence that the sector will continue to grow in a sustainable way.
5.45 pm
John Robertson (Glasgow North West) (Lab): This has been an interesting debate. I wonder whether some Government Members live in the real world. The hon. Member for North Cornwall (Dan Rogerson) thinks the Germans will watch the debate, but I wonder how many will. He seemed to get excited because people will be worse off than they are now. The Secretary of State seems quite happy that jobs in the industry will go, and tells us that the industry will grow when everything else is not growing.
We should get back to what this is all about, which is looking after the people who need looking after. Thirteen and a half thousand of my constituents border on fuel poverty. I care about them more than I care about whether solar power is put into houses or whether the money for that is right or wrong. For those people to get their energy, and to ensure they can afford it, we must have solar power, wind farms and everything else that can send power into their homes to help to keep the lights on and give them cheaper energy.
Katy Clark: Will my hon. Friend give way?
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John Robertson: I am not going to give way. Government Members give way to waste time. Let them do it. We will make sure that we say what needs to be said. They can play games.
I should like to move on to fuel poverty, which is what I believe we are here to talk about, and people who will die. I asked the Secretary of State earlier whether the tax taken from the big six and the reduction in the money for solar power are worth the 2,700 lives that will be lost this year owing to the Government’s energy policies, but he never answered me. I am willing to allow him to intervene if he wants to tell me that his policies are worth more than 2,700 lives. We all hear that deafening silence. The money that the Government get from the tax and from reducing solar energy will amount to 2,700 lives. That is what the Hills report says, and the Secretary of State agreed with me when he was questioned about it.
Chris Huhne: The hon. Gentleman is completely misguided to quote the Hills report, which I commissioned because I want a real effort made to combat fuel poverty, which was not happening in the past few years; we saw fuel poverty increase under the Labour Government. He is quite wrong to say that I am not concerned about the big six. We want a competitive market. That is why we are introducing extra consumer safeguards, and why we are making the retail and wholesale markets more competitive.
John Robertson: I can only use the right hon. Gentleman’s own words. He told me that the Hills report said that 27,000 extra people would die this winter, and that 10% of those deaths would be down to the Government’s energy policies. That will be in Hansard for hon. Members to read for themselves. I asked him whether lives were worth more than the tax money, and he never answered me.
At the end of the day, people will make the difference. The Government cannot be trusted. If people cannot trust the Government or what they are saying, how can they move forward? There lies the biggest problem. The 13,500 pensioners who are approaching fuel poverty in my constituency, and the disabled people who need extra help, will not be able to work out whether they can trust the Government to see them through this winter. Everything that has been mentioned is for next year, not this winter, but we need to solve the problems this winter.
The money spent on solar power would have helped in the long term to keep people in jobs, to stimulate growth in industry and to get money circulating in the country, but the Government are cutting it. They want to halve the amount of money that would circulate. They want to halve everything. My hon. Friends the Members for Ayr, Carrick and Cumnock (Sandra Osborne) and for Dumfries and Galloway (Mr Brown) told us about their constituents who, through no fault of their own, will be caught up in this system and will find that they cannot afford what they thought they were going to get, although they did do their risk management.
When the Secretary of State was having a go at my hon. Friend the Member for Dumfries and Galloway, I asked him how he knew that the person in question had not done a risk assessment or worked out the financial situation, and he replied, “Well, I don’t.” So there we have it: we have a Secretary of State who makes policy
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on the hoof and statements that contradict my hon. Friend, who knows his constituent and knows the situation, and says that my hon. Friend is wrong—and then, when asked from a sedentary position, “How do you know the constituent didn’t do that?” turns round and says, “Well, I don’t.” He is basically saying, “I just don’t care.”
We see it more and more. We have a Government who always use the excuse, “It’s somebody else’s fault. A big boy did it and ran away.” That is their modus operandi. That is what they do. It is always somebody else’s fault and never their fault, but unfortunately it is the people who Labour Members, in particular, represent who will suffer at the end of the day. I want to ensure that the 2,700 extra people who might die this winter do not, but the sad truth is that this Government do not care, and never will care. That is why the people on this side of the House are better than them.
5.55 pm
Mr Peter Lilley (Hitchin and Harpenden) (Con): It is a pleasure to follow the hon. Member for Glasgow North West (John Robertson). I agree that we should focus on the costs and budgets of ordinary people, but I have sympathy for the businesses that were lured to invest by the promise of unsustainable subsidies. I have neither sympathy nor respect for the Labour Ministers who set up the scheme knowing full well that the subsidies were unsustainable, and I deeply regret the fact that my right hon. and hon. Friends on the Front Bench, in the previous Parliament and this Parliament, took so long to recognise, at least partially, the folly of the scheme.
No one in this place has any excuse for failing to recognise that the subsidies were never remotely justified. The House insists that when a piece of legislation is published, we publish alongside it an impact assessment of the costs and benefits, so that the House will not be so foolish as to go ahead with a measure whose costs exceed its benefits. Have any Labour Members actually read the impact assessment accompanying the scheme?
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): I have.
Mr Lilley: Then the hon. Lady should be even more ashamed of supporting it. The impact assessment published by the Labour Government when the scheme was originally introduced calculated the net present value of the scheme’s future costs to be about £8.6 billion, yet the Labour Government also measured the benefits of using solar rather than hydrocarbons and calculated the direct benefits in the shape of electricity and the indirect benefits—far more important—through the reduction in the damage caused by global warming owing to fewer CO2 emissions. They calculated that the net present value of all the future benefits, direct and indirect, compared with the costs of £8.6 billion, would be just £400 million. In other words, we knew when we introduced this scheme that the costs were 20 times the assessed benefits, but we went ahead anyway.
I brought that fact to the attention of the House, but more importantly it was brought to the world’s attention by George Monbiot, a distinguished campaigner—unlike me—for measures to stop global warming, when he wrote:
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“The government is about to shift £8.6bn from the poor to the middle classes. It expects a loss on this scheme of £8.2 billion, or 95%. Yet the media is silent. The opposition urges only that the scheme be expanded.”
We knew when we introduced the scheme that it would be nonsense even if it went according to plan. It was self-evidently unsustainable. Even halving it today means that we will merely waste £4 billion, or 90% of the expected expenditure.
When I have raised these issues, Ministers have employed two defences. The first is that the impact assessment excluded many knock-on effects. If it did they should have introduced a new one, because impact assessments are supposed to include all the indirect effects. It should not have been signed off by the hapless Minister, Lord Hunt of Kings Heath. Then Ministers pray in aid the fact that the cost of solar energy is declining. They attribute that decline to the scheme, but none of it is due to the scheme, and the idea that our scheme will in any way accelerate the decline in costs worldwide is ridiculous. If something like Moore’s law does indeed apply, so that costs are likely to halve every couple of years, that is a reason for not investing now, but instead waiting until it is economic to do so, which will not be long. If we invest in expensive stuff when inexpensive stuff is going to be available in a few years, we are wasting money.
Sarah Newton (Truro and Falmouth) (Con): I am grateful to my right hon. Friend for the background information, which is especially useful for us new Members, who were not here when the policy was discussed previously. He is highlighting an extremely important point. The Government have only so much money to invest in new sustainable energy. It is all the more important to ensure that it is spent wisely, otherwise there will be no opportunity to bring other technologies to market.
Mr Lilley: My hon. Friend is absolutely right, and the argument that such investment creates jobs is—as the Secretary of State will know, being a distinguished economist—completely bogus. We have a fixed amount of money. We can either spend it on gas, oil or nuclear, or we can spend it on solar. If we spend £8 billion on either, we will create roughly the same number of jobs. Spending £8 billion on solar means that many fewer jobs in gas, nuclear, coal and oil. We have not created any net jobs across the economy by means of this subsidy. One never does.
David Mowat: My right hon. Friend is making an extremely powerful speech. In addition to his point about the allocation of £8 billion, is he aware of the recent peer-reviewed research from Imperial college—it was the subject of a Parliamentary Office of Science and Technology note—that said that nuclear power has one third the CO2 emissions per kWh of solar over its life cycle? That is an extraordinary statistic, which goes right to the heart of the policy.
Mr Lilley: My hon. Friend is absolutely right. George Monbiot pointed out in his original article that it costs about £3 to save a tonne of CO2 by investing in geothermal energy, and £8 by building a nuclear power station, whereas the scheme that we are talking about costs more like £800 to save a tonne of CO2.
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Not only do we not create any net jobs; we also create only a tenth of the amount of electricity by investing £8 billion in solar than we would by investing in nuclear or something else.
Dr Whitehead: Will the right hon. Gentleman give way?
Mr Lilley: I am afraid that I will not give way again.
I will remind the House of something that may have escaped hon. Members’ attention. Even if the price comes down dramatically, solar will never be a substitute for other forms of energy. It will always have to be backed up and duplicated by an equal amount of capacity that can perform when solar is not available. It may have escaped the notice of the House, but the sun comes out only in the day. It is not available at night, when it is coldest and we need most energy. The sun is highest in the sky in the summer; it is lowest in the winter, when it is coldest and we need most energy. The sun is often blocked by clouds, and one cannot predict when that will happen. For every megawatt of solar capacity that we install, we have to install an equal gas capacity to back it up and replicate it. Unless we realise that, and abandon the scheme until solar becomes much more economic, we are wasting the nation’s money and, as George Monbiot says, transferring money from poor people’s and ordinary people’s pockets into the hands of richer people.
6.3 pm
Phil Wilson (Sedgefield) (Lab): If ever there was an example of how not to make an announcement in this House, the announcement of the review of feed-in tariffs is it. The Government tried to slip it out as a written statement, but our ever-vigilant DECC team on the Opposition Front Bench recognised its importance, and managed to get a Minister to the Dispatch Box only by tabling an urgent question. The Government’s code of practice on consultations states that they should last 12 weeks, but this consultation is to last only six weeks, with the changes coming into force nearly two weeks before it finishes. Given the dearth of proposed legislation before the Chamber, I would have expected the Government to allow an oral statement and a full- day debate on the issue—not least to discuss the implied loss of jobs. It would be laughable if it were not so serious.
The change will cost a lot of jobs in this sector, in which up to 30,000 people work. It will remove the opportunity for nine out of 10 households to take advantage of the feed-in tariff to reduce their energy bills at a time of rising fuel poverty. The 12 December deadline is causing planned solar projects nationwide to be shelved and millions of pounds of investment to be lost. A survey by the Renewable Energy Association reveals that 57% of companies now anticipate laying off at least half of their staff, while a third believe that their companies will go under.
Let us take the example of Mr Wayne Richardson, one of my constituents who runs Revolution Power—a small renewable energy company employing 17 people. It has been on the go for about six years. Revolution Power fits photovoltaic units and provides ground and air heat pumps. Mr Richardson tells me that he might have to lay off a third of his staff. He is a young man
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with a young family; he is an entrepreneur and a trier. We need more Wayne Richardsons in the north-east to promote and protect jobs in the private sector.
Pat Glass (North West Durham) (Lab): Does my hon. Friend agree that companies such as Romag—a major employer in my constituency that has been in the industry a long time and employs young people and young graduates in its research and development section—recognise the fact that feed-in tariffs are reducing, but are concerned about the shameful way in which this consultation has occurred and the very tight time scale? That is what is going to do them in.
Phil Wilson: My hon. Friend is right. We all agree that the tariff has to come down, but how it is implemented is important. We need to think about the best way of protecting jobs, particularly in the north-east, where I want to see more private sector jobs available.
Wayne Richardson agrees that the value of the feed-in tariff should be reduced, but the cack-handed way in which the Government have introduced this policy is hurting his company. The early reduction in the feed-in tariffs has created a vacuum in the market. As a consequence, parts and materials are in short supply, making it difficult for projects to be finished before 12 December.
One reason behind the reduction is the falling price of installations. Because of the arbitrary deadline of 12 December, however, the price of equipment is going up. The number of inquiries about PV has decreased by 90%, which does not bode well for the future. The FITs scheme is paid for by a levy on energy companies, which is passed on to consumers and costs, as I understand it, only £1 a year. We should compare that with the situation with wind farms. Eon wants to build 45 wind turbines in the constituency. The subsidy from the consumer in that case is close to £200 a year.
The FIT needs to be reduced, but not by 50% in seven weeks. In Germany, where 50% of all PV units are installed, the tariff was cut by 15% and it is being achieved step by step through negotiations and agreement with the industry. Plenty of time and notice has been allowed. I understand that reductions in the tariff there occur year on year so that the industry and consumers can plan ahead—something this Government are daily proving their inability to do. The fact that so little legislation is before the House proves to me that they have no plan and, I suspect, no future.
6.8 pm
Chris Kelly (Dudley South) (Con): Post-privatisation, more than a dozen utility companies provided a great deal of energy competition in this country. Sadly, under Labour, however, the energy market consolidated so that we now have, as the hon. Member for North Cornwall (Dan Rogerson) said, the big six. We also inherited feed-in tariffs in a shambles. It is my belief that the Government’s reform of FITs will protect our energy mix.
As the Secretary of State has pointed out, installation costs of solar photovoltaics have fallen by at least 30% since the FITs scheme began. The Government are
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controlling the cost of the subsidy because the average installation is now around £9,000—down from £12,000—so the rate of return has shot up.
If the Government’s proposed reforms are introduced, we will mirror Germany’s FITs subsidy levels from January onwards, while still spending £867 million over four years. Money intended to support decentralised energy will not now subsidise energy-inefficient buildings under new energy efficiency requirements, which can only be a good thing. Solar will still be the most subsidised renewable technology, receiving twice the subsidy available for inshore wind. The Government’s changes will also protect consumer energy bills. Labour Members must tell us by how much they would be prepared to increase the average household’s energy bill in order to maintain high tariffs for solar. The amount might be as much as £55 per household.
Julian Sturdy (York Outer) (Con): My hon. Friend is making some powerful points. It is true that we must make feed-in tariffs more sustainable, although, like many other Members who have spoken, I have concerns about the proposed time scales. Is this not about making the system fairer—fairer for those who are already signed up and going through the process, but also, as my hon. Friend says, fairer for households that are struggling with high energy bills?
Chris Kelly: I agree, but I believe that the consultation timetable is reasonable. I think that people will have time to plan and prepare, and to register installations that are currently under way. In September, 16,000 solar photovoltaic installations were registered, double the number registered in June. There are now 100,000 installations nationally, three times as many as were projected, and the costs of solar PV have fallen by at least a third since the FITs scheme began.
The scheme was designed to encourage deployment of additional small-scale low-carbon electricity generation, particularly by organisations, businesses, communities and individuals who had not traditionally been engaged in the electricity market, many of them in our constituencies. The Government rightly announced the largest reduction in tariffs for the large-scale solar projects. The Government’s proposed FITs reductions for domestic solar energy installations are out for public consultation until 23 December, and are due to come in to effect in April next year. I believe that that is a sensible time scale, and I hope that the Secretary of State will consider carefully the submissions he receives.
The Government are right to address payments for FITs from more than one PV installation located on different sites under single ownership. I am thinking of the likes of Asda, which was mentioned earlier. I think that 80% of the full subsidy is a sensible level. The scheme we inherited from Labour was based on wildly inaccurate projections and participation, and therefore on entirely unrealistic financial assumptions. Any programme in any Department must be sustainable and based on realistic finances. Without urgent action, the whole FITs budget would be swallowed up by solar alone within months, depriving other renewable technologies of support through FITs. Microgeneration, for instance, is a key part of the energy mix that we will need for future energy security. The FITs subsidy cannot go disproportionately to solar.
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Each week beyond 1 April next year on the old subsidy tariff would cost more than £500,000 per day, or about £3.8 million per week. While £867 million over four years is a sustainable subsidy, more than that would be unsustainable. None of these changes is retrospective, and fairness is therefore being safeguarded. There has been a big fall in solar PV costs, and a big increase in the rate of return. That will exhaust the FITs budget unless it is urgently addressed. The rate of return needs to be reduced from 12% to 5%. The irony is that Labour wants millions of families in fuel poverty to subsidise a few thousand well-off people with solar panels by adding up to £55 a year to the average bill, with no reform of the feed-in tariff.
Mr Speaker: Order. With immediate effect, I shall reduce the time for Back-Bench speeches to four minutes in the hope of securing the participation of another colleague.
6.14 pm
Susan Elan Jones (Clwyd South) (Lab): It is a pleasure to follow the hon. Member for Dudley South (Chris Kelly), not least because it gives me an opportunity to make the point about the six weeks’ notice and the arbitrary date of 12 December—before the official consultation ends—all of which were totally missing from his speech.
North Wales will be deeply affected by these changes. The following points were made in a column in a local newspaper:
“The Government needs to rethink…There could be considerable impact on jobs in North Wales as local electricians as well as local producers for solar panels are preparing to deal with the impact of cancelled orders for work. In Wrexham, major housing projects which included provision for Feed-in Tariffs are now at risk because of the UK Government’s decision.”
Those are not my words, nor are they the words of any Labour party representative; they are the words of the former leader of Wrexham county borough council, who now sits as a Liberal Democrat Member in the Welsh Assembly. Unfortunately, the Secretary of State is not present to answer the questions raised by that Liberal Democrat representative.
One business constituent of mine tells me customers are now refusing to go forward with work if it cannot be completed by the arbitrary deadline. He says that what the Minister has done to this industry is atrocious.
Nia Griffith (Llanelli) (Lab): Does my hon. Friend agree that this scheme unlocked thousands of pounds of private capital to create jobs in the local economy, and that this Government’s mad decision to impose a cut with six weeks’ notice will not only completely undermine confidence now, but will put future customers off for ever?
Susan Elan Jones: I entirely agree.
Sharp Solar was mentioned earlier. It has made it clear that big contracts, such as that with Wrexham council to install solar panels on 3,000 council houses, are now in doubt. The 900 installations completed before the 12 December deadline are safe, but no decision has been made on whether the others will go ahead. The
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stock for that work had to be ordered several months ago, however, and Sharp Solar is now stuck with it no matter what happens.
All the political parties agree that there had to be changes, but the changes could have been made in a way that was manageable, and a proper notice period could have been provided. The Government could have got businesses on their side in order to make the changes work. Instead, we have a total mess.
Businesses have tried to tell the Government about the problems the changes will cause them. Wrexham council leaders wrote to the Government to tell them about the impact of the 12 December deadline on their scheme. They received a reply inviting them to respond to the consultation, but that response will be read only after the deadline has passed. That is totally shambolic. North Wales needs a strong solar industry, but I fear that the so-called “greenest Government ever” have kicked the industry fully in the teeth.
6.17 pm
Nicky Morgan (Loughborough) (Con): I will try to be brief as I know that many Members want to take part in this important debate.
I do not agree with much that the hon. Member for Glasgow North West (John Robertson) said—
John Robertson: That’s a surprise!
Nicky Morgan: Exactly. However, I do agree with the hon. Gentleman that this debate is about people. We are talking about our constituents: those who generate energy, those who consume energy, and those who are innovators in the industry.
We have all been diligent constituency MPs this afternoon and have mentioned a number of constituents who have contacted us to say they are affected by this issue. I could talk about Mr and Mrs Willett, who have agreed to install a photovoltaic system with an installation date of 9 January 2012. I could talk about the company PG Plumbing and Heating Ltd in my constituency; it wants me to put a question to the Minister, and I will come back to that. I could talk about Loughborough Solar Technologies, which has contacted me, or the company C Gascoigne, which I mentioned when I asked the Minister a question earlier. I could also mention SmartGen. I thought I should mention all of them so that they can say, “Yes, she’s done what she should do as our constituency MP.” They are all affected by this decision, and they all have questions for the Minister. However, the key point is that this is ultimately about people—about people when they come to pay their energy bills, as my hon. Friend the Member for Dudley South (Chris Kelly) said.
All the political parties have agreed that there was a need for change. The feed-in tariff scheme as left to us by the previous Government did not add up. The shadow Secretary of State said there would have been a review, but as the Secretary of State pointed out, the last Government had not planned to undertake that review until 2013, which would have been too late.
What do we disagree on? Who is at fault. Is the need for change the fault of consumers who are prepared to generate energy and who wanted to install solar panels? Is it the fault of the companies that have taken advantage of the generous scheme that was on offer? No, the fact
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that we are having to change the scheme and affect the constituents who have contacted me as well as many others is the fault of the previous Government, who left us with a wholly unsustainable system.
Nicky Morgan: I am not going to take any interventions. I have been asked to be brief and it is only fair that I should be so that other hon. Members can speak.
This is the fault of the previous Government and the one word that was missing, as always, from the shadow Secretary of State’s speech—as it is from those of any shadow Secretary of State—was the word “sorry”. She should have said sorry to those consumers who face higher bills, who thought they had agreed things and who are now having to deal with the date of the cut-off and the changes to the tariff.
The House needs to discuss how to ensure that there is a sustainable system so that we have certainty for tariffs. As my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) said, it is not the Government’s role to support bubbles. Unfortunately, when we are left a bubble by the previous Government, this Government have to burst it. We have to face the realities of the situation and we will potentially get it in the neck, as we have with the other decisions we have had to take, for dealing with the mess left to us by them.
I have some points for clarification. First, will the Minister confirm whether the cut-off date in December is the date of installation or the date when the application for the tariff has been processed? Secondly, I and other Members would appreciate some explanation of how the consultation dates work. Obviously, we have been given the date of 12 December and the consultation closes after that. It is worth addressing that point. Finally, I mentioned the company Loughborough Solar Technologies, which would appreciate a clear commitment from the Government to the industry—
Mr Speaker: Order. We are extremely grateful to the hon. Lady.
6.21 pm
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): Like so many others, I am deeply concerned by the Government’s proposals for green energy and the devastating impact the cuts to feed-in tariffs could have on thousands of jobs within my constituency and across Britain, not to mention the sheer irony as the Government renege on their commitment to be the greenest Government ever.
In the past year, nearly 200 families within my council boundary have installed solar power. It is a great way for people to make their homes greener and more efficient and to protect themselves from soaring energy prices.
Laura Sandys: I must point out that although Opposition Members are talking about the total collapse of this industry, households will, on average, get £500 tax-free every year. That might not be £1,000, but it is an extraordinary incentive to companies to sell and households to purchase solar panel products.
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Mr Clarke: I am glad that the hon. Lady made her point but, if she does not mind, I shall continue to make mine.
Skyline, a local company in my constituency, made representations to me over the weekend. In partnership with the AVC Group, Skyline has recently opened a brand-new purpose-built premises in Shawhead in Coatbridge. The managing director, Mr Robert Bell, explained to me:
“In this new venture Skyline in partnership with the AVC Group are now introducing solar energy sales, installation and advice to our existing business. A new trade counter will be available covering all aspects of aerials, satellite and renewable energy products.
Skyline and the AVC Group share the new premises. This will help consolidate our main business activities and help Skyline to secure more jobs for local people.
Our training facility will also be used by external companies seeking to train their employees in ladder training at special heights underpinned with customer care.”
The level of entrepreneurship exhibited in my constituency is, quite simply, being placed at risk by the Government. Not only are the Government proposing to cut feed-in tariffs by half so that demand for solar power is reduced by a staggering 92%, they want to do so retrospectively. That means that people with businesses who have already invested in solar power will have to abandon their schemes if they cannot afford the new rate.
I suspect that councils up and down the country will have to pull the plug on thousands of solar panel installations for social housing and community projects. We have heard evidence of that this afternoon. I wrote to the chief executive of north Lanarkshire council and a variety of housing associations in an effort to establish the extent of the Government’s cuts to solar power. It is clear that the new regulations imposed by the Government alongside the tariff reduction will make solar energy inaccessible to most people in my constituency.
Mr Brian H. Donohoe (Central Ayrshire) (Lab): One issue to be addressed is that of customers who find themselves halfway through a contract and who will not now get solar power. They will be betwixt and between because they will not have the opportunity of getting that solar power up and running. Is that not a major issue that the Government have not looked at in the consultation?
Mr Clarke: My hon. Friend makes his point very effectively, and earlier our hon. Friend the Member for North Ayrshire and Arran (Katy Clark) highlighted what he has just said.
The Financial Times today reported that the Secretary of State for Energy and Climate Change is considering
“new limits...on subsidies for households that install renewable energy...as he looks to defuse anger”
about the cuts. I only hope that his words translate into action, as the Government’s own impact assessment reveals that nine out of 10 households will be locked out of the solar energy market. How can that be justified by the so-called greenest Government ever? I will continue to oppose the devastating impact of their attack on feed-in tariffs and I shall fight for a fairer deal for the people of my constituency who are finding it very difficult to cope with rising energy prices. Yes, the solar industry does need to be regulated and, yes, reductions in tariffs do need to be made as energy becomes cheaper,
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but not on this scale and not so that it is essentially wiped out as an alternative for the average household and small business. It cannot be right that the Government are hitting people who are trying to do the right thing by cutting their energy bills. Their proposals for feed-in tariffs will hit families, put thousands of jobs at risk and devastate the solar industry. That is the reality of what we are debating. The Liberal Democrats once again find themselves between a rock and a hard place as the Government plough ahead with irresponsible cuts that strike at the very heart of what we are told were their core beliefs. If the coalition Government truly strive to be the greenest Government ever, they cannot seriously expect the public to stand by as the solar industry is cut down in its prime—just as the number of companies operating in solar has risen from 350 to 4,000 and as clean energy jobs have soared from 3,000 to 30,000 since 2010. That would simply be unsustainable and unacceptable, certainly to my constituents and the small companies in my constituency.
6.28 pm
Sarah Newton (Truro and Falmouth) (Con): As I have written to my hon. Friend the Minister regarding the concerns raised with me by constituents, I shall not list them all this evening. I was very reassured by the Secretary of State’s assurance that the consultation on the proposed changes to the feed-in tariff is genuine. I am sure that he will listen very carefully to all the arguments and read carefully all the comments from my constituents that have been given to him.
Neil Parish (Tiverton and Honiton) (Con): I should very much like to ask the Minister to clarify the situation regarding the tariffs and whether they will be retrospective. Mid Devon council in my constituency has 1,800 homes on which it wants to put solar panels. Two thirds of those people are on housing benefit and they would get the benefit of £3 a week off their electricity bill, so I am very concerned about the retrospective side of the tariff.
Sarah Newton: I think my hon. Friend has made his point.
In the few moments I have left, I should like to develop the good points made by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) and my hon. Friend the Member for Dudley South (Chris Kelly), who rightly reminded us that the Government have only so much money to give away in subsidies and that they need to support a wide range of sustainable and green ways of producing energy.
Katy Clark: Will the hon. Lady give way?
Sarah Newton: I am sorry, I will press on so that more Members can speak.
I am concerned that we should not use up all our resources, as we need to support emerging technologies. It is vital that we do not spend all the money on FITs for PVs. The Government have introduced a wide range of really good policies that support the emergence of new technologies in my constituency. For example, recent investment by the regional growth fund in deep geothermal engineering will leverage in £42 million of private sector investment, alongside nearly £1.5 million from the Department of Energy and Climate Change to create the first deep geothermal power station in my constituency.