Dr Matthew Offord (Hendon) (Con):
In recent weeks, I have held many meetings with organisations, including the Community Security Trust, to talk about the issue of extremism on university campuses. In fact, on the day of the Woolwich murder, I met the vice-chancellor of Middlesex university to discuss a recent incident in my constituency. I tell the Prime Minister that not enough is being done to prevent radicalism on university
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campuses, and I ask him to meet me and representatives from the CST, so that we can tell him of problems where they exist, and remedies that may address them.
The Prime Minister: I am very grateful for what my hon. Friend says. I have met the CST relatively regularly. It is an excellent organisation, and I commend the work that it does to keep people in our country safe. I will look carefully at its research and at his work to see what more we can do.
Kelvin Hopkins (Luton North) (Lab): Austerity policies are causing serious economic damage across the European Union. Among other things, they are causing mass unemployment, particularly among young people. We are now suffering from a threat of civil disorder, which has already started—even in peaceful Sweden. Was there any discussion at the EU Council of unemployment and the threat of civil disorder?
The Prime Minister: There was a discussion about unemployment because, of course, the rising unemployment in many European countries is an issue of huge concern. The rates of youth unemployment in some southern European countries, such as Spain, Portugal, Greece and Italy, are truly horrific, so more work will be done, including at the next European Council, to look at what lessons we can learn from each other—at what we can learn from countries such as Holland and Germany, which have very low rates of youth unemployment—and I will take a full part in those discussions.
Charlie Elphicke (Dover) (Con): I congratulate the Prime Minister on the excellent work that he has done in the European Union on tax transparency. Has he had a look at the comments made recently by Tim Cook of Apple and Eric Schmidt of Google, who say that it is worth reworking the tax system as a whole and making it fit for the internet and globalised age? Would my right hon. Friend consider making it much simpler, and enabling a much lower rate of corporation tax, to make this country even more competitive?
The Prime Minister: I thank my hon. Friend very much for that question. Of course, we are cutting the rate of corporation tax down to 20%, and I think we therefore have an even greater right than usual to say to companies, “Look, we have a low tax rate in this country; you now really should be paying it.” The point that I would make is this: of course tax evasion is illegal, but I think there is a case for saying that very aggressive tax avoidance also raises moral issues that companies should consider. That is a conversation that I have had with the CBI and others, who back that view, but we should make it easier for these companies by having international agreements that make it easier for them to make the right choice.
Mr David Hanson (Delyn) (Lab): Funding for the Prevent programme over the past three years has faced public sector pressures, as have many Departments. In policing alone, the funding has fallen from £47 million to £18 million. Will the Prime Minister agree to look at the Prevent strategy again, and to publish alongside it what he believes the envelope should be for funding that stream of activity?
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The Prime Minister: I think I am right in saying that for the past three years Prevent funding has been £39 million in the past year, £36 million in the previous year and £37 million in the year before that, but much of the responsibility for spending and for the individual choices is for local authorities. Of course there are always issues of resources, but there are equally important issues about making sure that we have the right policy and take the right approach in combating both extremism and violent extremism.
Mr Speaker: Order. I am keen to accommodate remaining colleagues but there is some considerable pressure on time. Therefore I am looking for a sharp mind and pithy expression, and I need look no further than Dr Julian Huppert.
Dr Julian Huppert (Cambridge) (LD): The Prime Minister is right to say that we should not be cowed by terror and to reject knee-jerk reactions. Will he therefore join me in criticising those who seek to make use of the brutal murder of Drummer Rigby as a reason to advocate the full powers of a snoopers charter, which would not have prevented this tragedy from happening but would treat us all as suspects?
The Prime Minister: I do not think it is helpful to refer to taking action on communications data as a snoopers charter. We use communications data now—our police and Security Service use it now to combat rape, to trace children who have been abducted, to combat murder. In 95% of serious crimes, the police are using not the content of a phone call, but the data about the phone call—when it was made and who it was between. That is vitally important and we must have a mature and grown-up debate in this House about what we do as telephony moves on to the internet. If we do not have that debate, we are not keeping our country safe.
Nia Griffith (Llanelli) (Lab): I welcome the pan-European resolve to tackle aggressive tax avoidance, but can the Prime Minister tell us whether on 20 May he used his resolve to challenge Eric Schmidt on Google’s behaviour in that respect?
The Prime Minister: As I said at the press conference after the EU Council, I raised at the meeting of my business advisory council my G8 agenda on tax transparency and aggressive tax avoidance and said how important it was that companies followed that, and Eric Schmidt contributed to that conversation. He supported the steps that we are taking in the G8, which is welcome. There is an important point here: one country taking action on its own will not solve the problem. We need to make sure that we do this not just across the EU, but in the G8.
Mr Ben Wallace (Wyre and Preston North) (Con): When our security services and the police are trying to piece together a terrorist attack, they need to pore over comms data to find out where and when events were planned and by whom. Will the Prime Minister make it clear to those who oppose the comms data proposals that far from being a knee-jerk reaction, those proposals were first mooted in 2007 by the previous Government, who produced a draft Bill, and that this Government produced a draft Bill way before the recent attack?
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The Prime Minister: My hon. Friend makes an important point. The draft Bill that we produced also had huge amounts of pre-legislative scrutiny. We have to recognise that there will always be civil liberties concerns about this issue, so we should look at how we can start moving the debate on, recognising that a block of telephony is covered by fixed and mobile telephony. As we move to more internet-based telephony, how are we going to help the police deal with that? We may have to take this in short steps, so that we can take the House with us and listen to concerns about civil liberties, but I am convinced that we have to take some steps, otherwise we will not be doing our job.
Mr Ian Davidson (Glasgow South West) (Lab/Co-op): I welcome the statement from the European Council and the Government, which says that proper information on “who really owns and controls each and every company” will be provided. Will the Government co-operate with the Scottish Affairs Committee in establishing who owns and controls the great landed estates in Scotland, in order that they can minimise both tax avoidance and subsidy milking?
The Prime Minister: That is the intention of this move. Having all countries sign up to an action plan for putting together registers of beneficial ownership by companies and the rest of it will help tax authorities to make sure that people are paying tax appropriately. That is a debate that we are leading at the G8 and in the European Union, and that should apply—we hope—to every country.
Alec Shelbrooke (Elmet and Rothwell) (Con): Some of the comments that I received after the Woolwich attack could perhaps be most generously described as reactionary. Does my right hon. Friend agree that those who pick on a religion and the people of that religion would do better by visiting Auschwitz-Birkenau and understanding where intolerance may lead? Above all, it should be recognised that these people are no more than cold-blooded psychopathic murderers.
The Prime Minister: My hon. Friend puts it very well. The point is that there is nothing in Islam that can justify that appalling level of violence. Islam is a religion of peace and we should show respect to Muslim communities and people of the Muslim faith by recognising that and repeating it. As we do that, we also need to recognise that there is a problem with a perversion of Islam that is being used to poison young minds, and we will not defeat that ideology unless we take it on, argue against it and clear it out of universities, Islamic centres and other parts of our country. That is the battle we need to be engaged in, but we will not win the battle unless we take Muslim communities and British Muslims with us. I believe that we can.
Heidi Alexander (Lewisham East) (Lab): Last week, the Lewisham Islamic centre discovered that it was the intended destination of a BNP march, which was subsequently rightly restricted to central London. Does the Prime Minister agree that following the horrific murder of Drummer Lee Rigby, now is the time for all of us to stand with the vast majority of Muslims for whom the actions of Michael Adebowale and Michael Adebolajo were an affront to their religion as much as an affront to our shared way of life?
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The Prime Minister: The hon. Lady is absolutely right to say that the actions that were taken were not representative of Islam or Britain’s Muslim communities, the Muslim religion, or anything to do with Islam, which is a religion of peace. She is also right to say how important it is that we take action to stop marches and whatever when they are going to inflame tensions and passions in the way that she says.
Henry Smith (Crawley) (Con): Tomorrow, Defence Secretaries from across NATO member countries meet in Brussels. Whether it be Syria or any other international security issue, may I seek reassurances from my right hon. Friend that NATO remains the cornerstone of our international defence, not the European Union?
The Prime Minister: My hon. Friend is absolutely right. NATO is the cornerstone of the UK’s defence and should remain as such. It has been very important to try to stop the EU in its endless efforts to try to duplicate NATO’s military structures. That is not at all helpful or sensible.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): I appreciate that the Prime Minister has set up the taskforce, which is an important step, but we know that most of the real issues are at a very local level. What support and discussion will the taskforce provide for people such as parents, teachers and other community leaders who spot someone who is being radicalised and need help then and there? Perhaps the forced marriage unit could be used as an example, as head teachers locally tell me that it does very good work in this respect.
The Prime Minister: The hon. Lady is absolutely right that in order to respond to the challenge we need not just national taskforces and speeches and a narrative about how we confront violent extremism, but for that to filter down to the local level. We need local councils to take action as well, and to make sure that they support good practice in schools and help parents who are getting into trouble, and all the rest of it. We need to make it easier for people to seek help when they need it and to recognise the signs of radicalisation in their communities.
Dan Byles (North Warwickshire) (Con): I, too, welcome the Prime Minister’s strong support for developing UK shale gas. Is he aware of the comprehensive Institute of Directors report published last month which showed that a UK shale gas industry could support up to 74,000 direct and indirect jobs, and that by 2030 it could supply up to a third of UK peak gas demand?
The Prime Minister: My hon. Friend makes an important point. I have not seen that specific report, but I will seek it out. Different conditions apply in America, but one sees there the growth of an enormous industry employing thousands of people, lowering energy costs, making the country more competitive, and ending much of its reliance on gas from overseas. We would be really foolish if we did not learn from that.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op):
How many other EU member states supported the UK Government in their wish to end the arms embargo on Syria? Is there not a danger that our Government’s
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policy, and that of France it would appear, is likely to result in a Europe more divided on the issue, thereby weakening our ability to influence a successful outcome to the proposed peace conference?
The Prime Minister: At the European Council for Heads of State and Government, which I attended, there was not a long discussion about the Syrian arms embargo. The work was done by my right hon. Friend the Foreign Secretary. There was strong support, though, from the French Government and there was some support from the Italian Government. Some of those countries that have newly joined the EU from the Balkans recognise the arguments that I was making about the mistakes that the west made with respect to Bosnia, so it is important to listen to them as well. The point about the EU arms embargo—this may be a point that colleagues on the Government Benches will particularly recognise—is that we decide our foreign policy as a nation state. In Europe, if we can agree something unanimously, we can have a combined position, but in the end this is something that we decide as an independent nation state.
Andrew Jones (Harrogate and Knaresborough) (Con): I thank my right hon. Friend for his comments on the single market in energy. Does he agree that it is important to prioritise the safe exploitation of shale gas, as the opportunity for a cut in energy costs would be significant, especially for the manufacturing industry? That would bring a disproportionate benefit to communities in the north, which have a proud tradition of manufacturing.
The Prime Minister: My hon. Friend is absolutely right. The figures are striking if we look at what happened with shale gas exploration in the US and at how much of their energy it is now supplying and the effect it has had on their gas prices. Their gas prices are now half the level of those in the UK, so this is an important industry for consumers and for our competitiveness.
Mr William Bain (Glasgow North East) (Lab): It has been revealed in its five most recent years of published accounts that on UK revenues of £11.5 billion, Google paid less than £11 million in tax over that period. If the Prime Minister is to offer the right leadership on the issue at the G8 and the EU Council, does he not have to admit to the country that that is just plain wrong? [Interruption.]
The Prime Minister: As someone behind me has just said, that is what happened under Labour. We need to make sure that we put in place rules, regulations, transparency and international action to ensure that companies pay their taxes properly. What I am pleased about is that over the past year, we have made some real progress on this agenda.
Sir Bob Russell (Colchester) (LD): Twenty-four hours before Drummer Rigby’s murder, I bid farewell to the last Ministry of Defence police officer at Colchester garrison. Some 33 MOD police once provided security to military families in Colchester, but the Labour Government started the process of scrapping that dedicated service. In noting the Prime Minister’s support for the armed forces covenant, and in the absence of any Defence Minister, will he order the immediate reinstatement of MOD police at Colchester garrison?
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The Prime Minister: I will ask the Ministry of Defence to look carefully at that. MOD police do important work, but as a House of Commons and a country we should be frank about the fact that our communities positively welcome having military bases and barracks at their heart. That is what I found in Woolwich and what I find in my own constituency with RAF Brize Norton. We should recognise that we do not protect our services by surrounding them with some ring of steel; we protect our services because we love and revere what they do.
Debbie Abrahams (Oldham East and Saddleworth) (Lab): On Syria, like many Members and many people across the country I am increasingly uneasy about the potential escalation of the conflict with the lifting of the EU arms trade embargo. It seems a bit like cat and mouse tactics. I urge the Prime Minister to focus—I am sure that he is doing so—on the peace conference and a negotiated peace settlement. What plans are there, and what discussions have taken place, concerning support for Syria’s post-conflict position? We must learn the lessons from history, as other Members have said.
The Prime Minister: The hon. Lady is absolutely right. Any peace process worth its name has to start with a peace conference, getting the parties around the table and trying to work out the elements of the Syrian opposition and the Syrian Government that could form a transitional Government, but then we have to plan what the Syrian Government and a Syrian political settlement will look like afterwards. One of the lessons from history is that we do not want to see the institutions of the state destroyed. We want to see them properly serving the people.
Philip Davies (Shipley) (Con): Did the Prime Minister mention at the EU Council the private Member’s Bill promoted by my hon. Friend the Member for Stockton South (James Wharton)? Did he make it clear that if the British people voted in any in/out referendum to leave the EU, that result would be accepted and we would not keep having a rerun of the referendum, as the EU normally does until it gets the result that it wants? If he did not make that clear, would he like to take this opportunity to do so?
The Prime Minister: My hon. Friend will be pleased to know that there was some interest among my fellow Heads of Government in the private Member’s Bill. I absolutely agree that we must have a referendum, not a neverendum. It is very important that, as with the referendum about Scotland’s future in the United Kingdom, we give the people the chance to decide and then obey their decision.
Jim McGovern (Dundee West) (Lab): The Prime Minister mentioned the Government taskforce, and I think he said he would welcome input from the Scottish Government via the hon. Member for Moray (Angus Robertson), and also consider including membership for my right hon. Friend the Member for Salford and Eccles (Hazel Blears). Will it be a Government taskforce or a cross-party taskforce?
The Prime Minister:
Let me be clear in case I have misled anyone. It is a Government taskforce, but it should listen to the expertise of people who have ideas
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and policies to help us tackle radicalisation. There are individuals in our country who have been radicalised, but who have seen the light and now realise how their minds were poisoned and have written persuasively about the issue. There are also Members of the House—I singled out the right hon. Member for Salford and Eccles (Hazel Blears) because she did such good work in government on this issue, and it would be worth while listening to her as well. That is how it will work. It is a Government taskforce but it will, of course, listen to the best ideas, wherever they come from.
Rehman Chishti (Gillingham and Rainham) (Con): As someone from a Muslim background whose father was an imam, I very much welcome the statement from the Prime Minister. Will he reiterate that the actions of those two criminal thugs has nothing whatsoever to do with Islam and the Muslim community?
On Syria, will my right hon. Friend clarify what role he sees President Assad playing in any transitional Government, as that was not dealt with at the Geneva conference?
The Prime Minister: I thank my hon. Friend for what he says and confirm that, in my view, the acts that took place on the streets of Woolwich had nothing to do with Islam, nothing to do with Muslim Britain, and nothing to do with this religion of peace. My hon. Friend knows that as well as anyone.
I do not believe that President Assad can play a part in a transitional Government. We need a process so that people can see that elements of the Alawite community and the Syrian national opposition are properly represented, and so that people in Syria are able to unite behind a transitional Government. In my view, someone who has seen the murder of up to 80,000 people, the destruction of so many communities and the use of chemical weapons has no part to play in the Government of a civilised country.
Andrew Bridgen (North West Leicestershire) (Con): On the inside cover of Chairman Mao’s little red book of revolutionary war, which remains a terrorist handbook, are printed only five words: “Kill one, intimidate a nation.” Does my right hon. Friend agree that our nation will never be intimidated by acts of extremists, be they from the Muslim community, the English Defence League, or anybody else?
The Prime Minister: My hon. Friend is absolutely right. Regrettably, this country has suffered from terrorists over many years. We suffered dreadfully at the hands of the IRA, but I think that taught us a lesson that if we stand true to our principles, we stand up for freedom and democracy and the terrorists can never win.
Mr David Nuttall (Bury North) (Con): As my right hon. Friend the Prime Minister may be aware, Drummer Lee Rigby joined the Army as a cadet in the borough of Bury, which has long and historic links with the Royal Regiment of Fusiliers. Will my right hon. Friend join me in paying tribute to all those in Bury who have paid their respects and sent their condolences to his family, in particular the peaceful and law-abiding members of the Muslim community in Bury who are just as shocked and horrified at this heinous crime as those of other faiths and those of none?
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The Prime Minister: My hon. Friend says it all, and it is fitting that his should be the last contribution—[Interruption.] I am so sorry; I am sure the contribution of my hon. Friend the Member for Kettering (Mr Hollobone) will be equally fitting. My hon. Friend the Member for Bury North (Mr Nuttall) made an important point about the connection that our communities feel to our armed forces, which is felt by people from every community, including the British Muslim community. Let us not forget how many British Muslims serve in Britain’s armed forces.
Mr Philip Hollobone (Kettering) (Con): Following the question from my hon. Friend the Member for Bury North (Mr Nuttall), Her Majesty’s armed forces represent and promote the very best of British values, yet it is a sad fact that Muslim recruits can face estrangement from their friends and family if they sign up. In the wake of the hateful murder of Drummer Rigby, what more can we do to promote Muslim support for, and participation in, Her Majesty’s armed forces?
The Prime Minister: My hon. Friend raises an important point. First, we should pay tribute to British Muslims, Sikhs and Hindus who serve in our armed forces and the brave things that they do. I argue that for all institutions—the Army, just as for a political party, the judiciary or anyone else—it is not enough just to open the doors and invite people in. We need to get out into minority communities and encourage people to join up and serve. Only when people see others from their background and community serving in the Army or on these Benches in politics will they truly feel empowered to do the same. As I said, that is a very good point on which to end.
Mr Speaker: I thank the Prime Minister, the Leader of the Opposition and all 62 Back Benchers who took part in those exchanges.
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Energy bill (Programme) (No. 2)
Motion made, and Question put forthwith (Standing Order No. 83A(9)),
That the Order of 19 December 2012 (Energy Bill (Programme)) be varied as follows:
(1) Paragraphs 4 and 5 of the Order shall be omitted.
(2) Proceedings on Consideration and Third Reading shall be concluded in two days.
(3) Proceedings on Consideration shall be taken on each of those days as shown in the following Table and in the order so shown.
(4) Each part of the proceedings shall (so far as not previously concluded) be brought to a conclusion at the times specified in relation to it in the second column of the Table.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on the second day.—(Gregory Barker.)
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Energy Bill
[1st Allocated Day]
[Relevant Documents: First Report from the Energy and Climate Change Committee, Session 2012-13, on the Draft Energy Bill: pre-legislative scrutiny, HC 275, and the Government response, Cm 8504, Oral Evidence taken by the Energy and Climate Change Committee, Session 2012-13, on Investment in energy infrastructure and the Energy Bill, HC 749 i-iii.]
Consideration of Bill, as amended in Public Bill Committee.
Power to make capacity market rules
‘(1) The Secretary of State may make capacity market rules which, subject to subsection (2), may contain any provision that may be made by electricity capacity regulations.
(2) Capacity market rules may not make—
(iii) paragraphs (f) or (g) of section 22(4);
(v) paragraphs (b), (c), (d) or (f) of section 23(2);
(vii) section [Provision about electricity demand reduction];
(b) provision for the Secretary of State to require a person to provide information or advice to the Secretary of State.
(3) Electricity capacity regulations may make provision to confer on the Authority, to such extent and subject to such conditions as may be specified in the regulations, the power to make capacity market rules.
(4) The conditions may in particular include conditions about consultation; and provision made by virtue of subsection (3) must provide that, before any exercise of the power to make capacity market rules, the Authority must consult—
(a) any person who is a holder of a licence to supply electricity under section 6(1)(d) of EA 1989;
(b) any person who is a capacity provider.
(5) Provision made by virtue of subsection (3) may include provision—
(a) for the reference to the Secretary of State in section27(2)(c) to have effect, for the purposes of capacity market rules and to such extent as may be specified in the regulations, as a reference to the Authority;
(b) for section27(3) to apply in relation to a disclosure required by virtue of the capacity market rules.’.—(Michael Fallon.)
Brought up, and read the First time.
4.55 pm
The Minister of State, Department of Energy and Climate Change (Michael Fallon): I beg to move, That the clause be read a Second time.
Mr Speaker: With this it will be convenient to discuss the following:
Government new clause 9—Capacity market rules: procedure.
Government new clause 10—Capacity market rules: further provision.
‘Schedule [The Expert Panel] has effect.’.
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‘The Expert Panel
1 Regulations shall establish a panel of experts (in this Act referred to as “the Expert Panel”) in accordance with paragraphs (2) to (6) below.
Duty to consult
2 (1) Regulations made by virtue of paragraph 1 shall provide that before—
(a) any contracts for differences are entered into under Part 1; or
(b) any investment contracts are entered into under Schedule 3
the Secretary of State shall seek advice from, and the opinion of, the Expert Panel in relation to the matters specified in sub-paragraph (2) below.
(2) The matters in relation to which advice and opinion is to be sought from the Expert Panel are—
(a) any advice provided to the Secretary of State by the national system operator;
(b) the financial and other terms on which it is proposed a contract for difference or an investment contract be entered into;
(c) whether the agreed strike price (or equivalent) and the term of the contract represents value for money for consumers; and
(d) whether, in all the circumstances, it is appropriate for the CFD Counterparty to enter into the relevant contract.
(3) Where the Secretary of State proposes to disregard in whole or in part any of the advice or opinion provided by the Expert Panel, he shall be under a duty to ensure the Expert Panel is provided with his reasons for disregarding or disagreeing with the advice or opinion and place a copy of the reasoning in the Library of the House.
3 (1) provide that it shall be the duty of the Secretary of State and the national system operator to provide the Expert Panel with all such information as it may require;
(2) require the Expert Panel to provide the Authority and Parliament with details of any advice and opinion provided under this Part;
(3) require the Expert Panel to publish minutes of its meetings; and
(4) permit the Expert Panel to publish such information as the Expert Panel thinks fit about the advice it gives.
Membership etc. of the Expert Panel
4 The members of the Expert Panel shall be appointed by the Secretary of State and shall comprise a Chairman, a consumer representative, a representative of the Committee on Climate Change, a representative of the Authority and such other members as the Secretary of State may decide.
5 (1) In appointing persons to be members of the Expert Panel, the Secretary of State must secure, so far as practicable, that the Expert Panel—
(b) is comprised of technical, academic, economic, legal and such other experts necessary to give the informed advice required.
(2) The Expert Panel must not include any person who is—
(a) employed by an eligible generator, or who has been employed by an eligible generator in the previous 12 months;
(b) employed by an electricity supplier, or who has been employed by an electricity supplier in the previous 12 months; or
(c) employed by the national system operator.
(3) The Chairman and every member of the Expert Panel—
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(a) shall be appointed for a fixed period, specified in the terms of their appointment, but shall be eligible for reappointment at the end of that period;
(b) shall not serve on the Expert Panel for longer than eight years in total;
(c) may at any time be removed by a notice from the Expert Panel to the Secretary of State following a majority vote.
Committees and other procedures of the Expert Panel
6 The Expert Panel may make such arrangements as they think fit—
(a) for committees established by the Expert Panel to give advice to it about carrying out the Expert Panel’s functions, providing such committees only include persons who are members of the Expert Panel;
(b) for regulating its own procedure and for regulating the procedure of committees established by them, including timescales of giving advice, as it sees fit;
(c) as to quorums and the making of decisions by majority.’.
Amendment 162, in clause 5, page 4, line 42, at end add—
‘with predominating weight given to (2)(c) the cost to consumers.’.
Amendment 163, in clause 6, page 5, line 21, at end insert—
‘(c) which is a public document and will be made available, together with all related documents, by the Secretary of State and the parties to the contract.’.
Amendment 23, page 5, line 28, at end insert—
‘, with the exception of electricity generated from nuclear power stations’.
Amendment 32, page 5, line 29, at end insert—
‘ “Biomass” means fuel used in a generating station where—
‘(a) at least 90 per cent of its energy content is derived from relevant material (that is to say, material which is, or is derived directly or indirectly from, plant matter, animal matter, funghi or algae), and
(b) if fossil fuel forms part of it—
(i) the fossil fuel is present following a process—
(aa) to which the relevant material has been subject, and(bb) the undertaking of which has caused the fossil fuel to be present in, on or with that material even though that was not the object of the process; or
(ii) it is waste and the fossil fuel forming part of it was not added to it with a view to its being used as a fuel.
“Qualifying combined heat and power generating station” means a combined heat and power generating station which has been accredited under the CHPQA.’.
Government amendments 53 to 60.
Amendment 33, in clause 10, page 8, line 28, at end insert—
‘(10) A direction may not be given under this section to a fossil fuel or renewable energy plant with a rated capacity of 15MW or greater that use any biomass unless they are—
(a) a qualifying combined heat and power generating station; or
(b) an operational carbon capture and storage plant.’.
Amendment 24, in clause 11, page 8, line 37, at end insert—
‘(3) Payments offered under a contract for difference relating to the supply of electricity generated by nuclear power must not exceed payments offered under any contract for the supply of electricity from renewable sources.
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(4) For the purposes of subsection (3)—
(a) the calculation of payments must include both the strike price and the duration of the contract;
(b) renewable sources are defined in accordance with Article 2 of Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources.’.
Government amendments 62 to 65.
Amendment 152, in clause 17, page 11, line 6, at end insert—
‘(2A) In determining for the purposes of an order under subsection (1) whether the maximum cost provided for by the order has been reached, or a cost greater than that maximum would be incurred, a cost is to be taken into account if, and only if, it has been incurred, or is to be incurred, in connection with low carbon electricity generation.
(2B) The Secretary of State may give a direction suspending the effect of an order under subsection (1) for such period, and in relation to costs of such description, as are specified in the direction.
(2C) Before giving a direction under subsection (2B) the Secretary of State must consult such persons as the Secretary of State thinks appropriate.’.
Amendment 164, in clause 18, page 11, line 33, at end insert—
‘(i) All consumers of electricity upon whom the costs of the regulations will fall.’.
Amendment 27, page 11, line 35, at end insert—
‘(3) Before making regulations under this Chapter which relate to nuclear electricity generation, the Secretary of State must ask the National Audit Office to carry out an examination of and produce a report on whether the terms of the contract for difference offer value for money.
(4) The Secretary of State may ask the National Audit Office to carry out an examination and produce a report on the terms of a contract relating to non-nuclear generation.
(5) The National Audit Office report and recommendations must be published one month before a contract is laid before Parliament.’.
Amendment 48, in clause 21, page 12, line 40, at end insert—
‘capacity may be secured by capacity auctions or by the establishment of a strategic reserve or by other means’.
Amendment 165, in clause 22, page 13, line 15, after ‘agreement’ insert—
‘is a public document to be made available, together with all related documents, by the Secretary of State and the parties to the agreement; and’.
Government amendments 101 and 102.
Amendment 29, in clause 22, page 13, line 21, at end insert—
‘(2A) Electricity capacity regulations may not make provision in respect of fossil fuel plants.
(2B) For the purposes of subsection (2A) “fossil fuel plant” means an electricity generating station which satisfies the conditions in Chapter 8, Section 42(4)(b).’.
Amendment 28, page 13, line 23, at end insert—
‘(3A) Capacity agreements may not be made in respect of nuclear electricity generation.’.
Amendment 49, page 14, line 6, at end insert—
‘(e) conferring on the Secretary of State the power by regulation to introduce a system of strategic reserve of supply; and
(f) conferring on The Secretary of State by regulation the power to designate a nominated person to hold and manage the Strategic Reserve on his behalf (“the Strategic Reserve Operator”).’.
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Amendment 50, page 14, line 9, at end add—
(a) A person is eligible to be designated as the Strategic Reserve Operator if the person is—
(i) a company formal and registered under the Companies Act 2006; or
(ii) a public authority, including any person whose functions are of a public nature.
(b) The Strategic Reserve Operator must contract with the System Operator for the circumstances under which the Strategic Reserve Operator supplies power to the System Operator.
(c) The Secretary of State must approve the drawing up of any contract between the System Operator and the Strategic Reserve Operator and may from time to time vary the terms of the contract should circumstances require.
(d) The Secretary of State must lay before Parliament a reasoned case for any change of content under subsection (5).
(e) Strategic Reserve regulations may make provision for payments to be made by electricity suppliers or capacity providers to a settlement body for the purposes of enabling the body—
(i) to meet such descriptions of its costs that the Secretary of State considers appropriate;
(iii) to make payments to the Strategic Reserve Operator for the purpose of securing and operating Strategic Reserve capacity.’.
Amendment 166, in clause 27, page 15, line 40, leave out ‘may’ and insert ‘must’.
Government amendments 105 to 107.
Amendment 94, in page 23, line 5, leave out clause 38.
Amendment 151, in clause 38, page 23, line 34, at end add—
‘(5) The Secretary of State may not exercise the power under subsection (1) if the consequence would be to raise the price of electricity for consumers.’.
Amendment 153, in clause 41, page 25, leave out lines 35 to 42.
Amendment 154, page 27, leave out lines 9 and 10.
Amendment 155, page 28, line 17, leave out ‘may’ and insert—
‘must, so as to make good the shortfall,’.
Amendment 156, page 27, line 14, before ‘make’, insert—
‘and insofar as subsection (12) applies must,’.
Amendment 157, page 29, line 8, leave out subsection (6).
Amendment 158, page 29, line 7, leave out ‘(10)’ and insert ‘(9)’.
Amendment 159, page 34, leave out from line 8 to end of line 37 on page 35.
Amendment 160, page 36, leave out from line 1 to end of line 46.
Amendment 161, page 37, leave out lines 18 and 19.
Amendment 167, page 36, line 5, leave out ‘the costs’ and insert ‘the publicly substantiated costs’.
Amendment 168, page 36, line 8, leave out ‘the income’ and insert ‘the publicly substantiated income’.
Amendment 169, page 36, line 24, at end insert—
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Amendment 170, page 38, line 10, leave out
‘A certificate purchase order may provide for’
‘A certificate purchase order will require at least the same level of information as required under the Renewables Obligation and may provide for’.
Amendment 171, page 38, line 37, leave out ‘may’ and insert ‘must’.
Amendment 172, page 38, line 38, leave out ‘subsection (3)’ and insert ‘Section 32X’.
Amendment 95, in page 42, line 27, leave out clause 42.
Amendment 173, in clause 42, page 42, line 28, at beginning insert—
‘Unless the Secretary of State or the Regulator permits otherwise in the consumer interest,’.
Amendment 174, page 42, line 31, leave out ‘7.446’ and insert ‘8.760’.
Amendment 179, page 42, line 35, at end insert—
‘( ) Section 42(1) is not to apply in relation to CCS plant until completion of the commissioning and proving period that shall last no longer than 3 years.’.
Amendment 150, page 42, line 36, leave out ‘2044’ and insert ‘2029’.
Amendment 96, in page 43, line 41, leave out clause 43.
Amendment 175, in clause 43, page 43, line 43, at end insert—
‘or significant risk of other disadvantage to the consumer.’.
Amendment 97, in page 45, line 14, leave out clause 44.
Amendment 98, in page 45, line 32, leave out clause 45.
Amendment 99, in page 46, line 36, leave out clause 46.
Amendment 176, in clause 50, page 50, line 16, leave out
‘As soon as is reasonably practical’
and insert ‘Within one month’.
Amendment 177, page 50, line 16, leave out ‘five years’ and insert ‘one year’.
Amendment 178, page 50, line 31, at end insert—
‘(d) assess and detail the impact on electricity prices to the various classes of consumers of the measures described in the Act.’.
Government amendments 119 to 125.
Amendment 21, in clause 121, page 92, line 15, leave out from ‘objects’ to end of line 17.
Amendment 22, page 92, line 17, at end insert—
‘(f) requiring a licence holder to ensure that—
(i) customers on prepayment meters shall be charged the lowest tariff available from that licence holder;
(ii) no more than 20 per cent. of each payment made goes towards meeting outstanding debt.’.
Government amendments 126 to 133, 68 and 134.
Amendment 26, page 106, line 40, in schedule 2, at end insert—
‘(2A) Before entering into an investment contract, the Secretary of State must ask the National Audit Office to carry out an examination of and produce a report on whether the terms of the contract offer value for money.
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(2B) The National Audit Office report and recommendations must be published one month before a contract is laid before Parliament.’.
Amendment 25, page 107, line 43, in schedule 2, at end insert—
‘(6A) An investment contract may not include provision to underwrite or provide state guarantees for all or part of the construction costs of nuclear generation plants.’.
Amendment 9, page 108, line 24, at end insert—
‘( ) For the purposes of paragraphs 1 and 2, information is “confidential information” only if it constitutes a trade secret.’.
Amendment 8, page 108, line 26, leave out paragraph 3.
Government amendments 73 to 90.
Amendment 148, page 119, line 13, in schedule 4, at end insert—
‘(iii) substantial pollution abatement equipment dealing with oxides of sulphur, oxides of nitrogen, heavy metal emissions or particles is fitted to the generating station.’.
Amendment 149, page 119, line 39, leave out ‘42(5)(b)’ and insert ‘42(6)(b)’.
Michael Fallon: I rise to speak to Government new clauses 8, 9 and 10, and Government amendments 52 to 66, 68, 71 to 90, 101 to 107, and 119 to 135. I should also like to respond to the amendments tabled by hon. Members. I ask the indulgence of the House if my speech is necessarily fuller than it might be so that I can do justice to each of the six main areas in the group, namely the transparency of investment contracts; the counterparty arrangements; the capacity market; nuclear power; other issues including biomass, emissions performance standards and the costs of electricity market reform; and consumer tariffs.
I thank Opposition Members and other hon. Members for their contributions in Committee. The Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), said at the time that the Bill needed clear accountability and that Parliament must have the information it needs to scrutinise the delivery of electricity market reform properly.
New clause 5 and new schedule 1 seek to establish an expert panel to scrutinise electricity market reform. Let me assure hon. Members that development of the contracts for difference and investment contracts will be informed by close consultation with relevant experts. We have already taken a number of steps in that regard, which is why I suggest that new clause 5 and new schedule 1 are unnecessary.
Our decisions on strike prices for CFDs will be informed by analysis from the National Grid. The robustness of that analysis will be scrutinised by an independent panel of technical experts who will report to the Government. Their report will be published. Any divergence of opinion between the panel, the Government and National Grid will be reported and explained. Given the existing role of the panel of technical experts, I do not see a wider remit for another expert panel to look at CFDs.
I agree that investment contracts should be subject to rigorous scrutiny and the best available advice, which they will be. For investment contracts relating to renewables projects, I am minded to use the draft CFD strike prices informed by the robust process just
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outlined. For other low-carbon technologies, which are bilaterally negotiated, specialist advice will be sought as appropriate and there will be rigorous scrutiny. For example, for Hinkley Point C we have appointed technical and financial specialists to advise on whether any proposal represents value for money. We will publish details of that contract when and if it is negotiated.
Mr Mike Weir (Angus) (SNP): I am listening closely to the Minister. Does he share the worries of many hon. Members? The Bill will presumably finish its progress in the House tonight, but we still do not know what the strike prices are. We have been promised the publication of a document setting out details including strike prices for months, but it keeps being put back. I am told that it will not appear before July. Does the Minister understand the concern about the transparency of the process because we will not know what the strike prices are before the Bill completes its passage?
Michael Fallon: The Bill is before the House today and tomorrow, and has some way to go before it completes its passage through Parliament. Let me assure the hon. Gentleman that he will have an indication of the draft strike prices before the Bill completes its passage. If he will allow me, I want to say more in a moment about how we can improve transparency.
Amendments 8 and 9, tabled by the right hon. Member for Don Valley (Caroline Flint) and the hon. Members for Rutherglen and Hamilton West (Tom Greatrex) and for Liverpool, Wavertree (Luciana Berger), focus on the important issue of transparency of investment contracts. The Bill requires all investment contracts to be laid before Parliament alongside a statement of their importance to Government objectives. For Hinkley Point C, we have also committed to publishing summaries of reports from our external advisers. There is a difficult balance to be struck between publishing as much as possible about a contract, while also allowing some commercially sensitive information to be withheld from publication. It is crucial that developers provide the information we need to show that a contract represents value for money, but it would be inappropriate to publish information that damages a developer’s commercial interests.
This point is relevant to amendments 163, 165, 166, 171 and 172, which were tabled by my hon. Friend the Member for Daventry (Chris Heaton-Harris) and relate to information acquired or produced under the Bill. It would not be appropriate to release commercially confidential information provided under the provisions, but let me reassure the House and the hon. Member for Angus (Mr Weir) that we will publish details on the CFDs and capacity agreements signed each year through annual updates to the EMR delivery plan, and details of how much of the budget has been expended. Secondary legislation, such as that under the capacity market provisions, will set out details of the information flows, transparency and handling of sensitive information. That includes information acquired under clause 27. Ofgem will continue to publish information gathered from generators about the biomass they have used.
John Robertson (Glasgow North West) (Lab): On the rules governing what is considered sensitive, who will set the criteria: the companies themselves or the Government?
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Michael Fallon: The judgment will be one for the Government, and I want to come on to a proposal on that. I also want to assure my hon. Friend the Member for Daventry, in relation to amendment 164, that there will be public consultation on the draft regulations in the autumn. On amendment 170, relative to what is currently required under the renewables obligation, we would remove only redundant information requirements under the fixed price certificate scheme. However, in answer to the hon. Member for Glasgow North West (John Robertson), I am mindful of the points made in Committee on the need to maximise transparency.
There are a number of other improvements we can make to investment contracts. First, following the good points made in Committee by the hon. Member for Brent North (Barry Gardiner) on the distinction between withholding and redacting information, I will make a commitment to publish a description of any information that is withheld and the reason for that. Secondly, I have tabled amendments 71 and 72, which remove the Secretary of State’s discretion to withhold information from a contract after it has been agreed, but before it is laid before Parliament. That means that any confidential information will have to be clearly identified as such during contract negotiations, and there is no further discretion then to withhold information once those are concluded.
Martin Horwood (Cheltenham) (LD): The Minister is, however, describing a process in which information is published and laid before Parliament after the contracts have been signed. If, as is likely in the case of Electricité de France, we are talking about a 30-year contract, does he agree that it is practically pointless to have scrutiny after the event, when we would in effect be locked in for nearly a generation? What exactly does he expect Parliament to do if it then looks at the published details of the negotiations and does not like them?
Michael Fallon: I will describe in some detail the arrangements for the scrutiny of any deal done or any negotiations concluded at Hinkley, but I would suggest to my hon. Friend that Parliament is pretty good at scrutinising such arrangements, including through its various Committees. Likewise, it is of course also open to the National Audit Office to provide scrutiny.
Joan Walley (Stoke-on-Trent North) (Lab) rose—
Michael Fallon: I must make some progress, if the hon. Lady will forgive me.
The third improvement I am suggesting through amendment 52 is to place a duty on the Government to publish a report each year setting out how they have exercised their powers and carried out their functions under part 2 of the Bill. I hope that that provides particular comfort to my hon. Friend the Member for Daventry, who, through amendments 176 and 177, is looking to bring forward the five-year review in clause 50 and require speedy progress, but the review that he suggests would take more than one month, while enough time must elapse if we are to collect sufficient data to make an informed judgment. On his amendment 178, however, I can assure him that we will look closely at the impact on different consumers when carrying out the five-year review, as we already do with
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our impact assessments on electricity market reform. Finally, Government amendment 66, which follows a helpful suggestion in Committee—again from the hon. Member for Brent North—will bring the emissions performance standard within the scope of the review.
I turn now to the counterparty arrangements for CFDs and investment contracts. I have tabled several amendments on this topic—again, many of them responding to very reasonable points made in Committee. Amendments 53 to 55 and 74 to 76 set out the circumstances in which we might need more than one counterparty, while amendments 56 and 77 extend the notice period before a body can withdraw its consent to act as counterparty. Amendments 57, 62, 63, 78, 82 and 83 make minor changes to avoid any confusion over the use of the terms “obligations” and “liabilities”, while amendments 58, 65, 85 and 86 create a statutory guarantee that the counterparty will exercise its functions to ensure CFD and investment contract liabilities are met and place a duty on the Government to provide the powers to do this.
John Robertson: Will the Minister give way?
Michael Fallon: I will just finish this section.
Amendments 60, 64, 80 and 84 make it clear that supplier debts can be pursued through the courts and that payments to generators will be pro rata in the unlikely scenario that the counterparty does not have sufficient funds immediately available, while amendments 59 and 79 ensure that suppliers only face costs that are related to the regime, including operational costs of the counterparty. Amendments 61, 68 and 81 are minor corrections and clarifications to ensure that the settlement of payments can work effectively, and amendments 88, 89 and 90 introduce a duty to transfer investment contracts to the CFD counterparty, thus ensuring they transfer quickly once the CFD regime is in place next year—that reflects points made by the hon. Member for Southampton, Test (Dr Whitehead) in Committee—while amendments 73 and 87 are minor changes to align the drafting of schedule 2 with part 2.
I am sorry to have kept the hon. Member for Glasgow North West (John Robertson) waiting.
John Robertson: I thank the Minister for being generous in taking interventions.
Who will scrutinise the counterparties’ liabilities? We saw how everyone thought that the banks were safe and had plenty of money and that things were good, but it did not turn out that way, and even the Treasury’s own predictions over the last three years have not been met properly. What guarantee can the Minister give, therefore, that the counterparties will have sufficient finances to meet their liabilities?
Michael Fallon: I am happy to give the hon. Gentleman further written assurances on that. He might be on rather weak ground in discussing the regulatory framework put in place for the banks, given that we have had to take immediate and fairly radical steps to improve it, but if I can give him any further reassurances on his main point, I certainly will.
The third main issue covered by this group of amendments is the funding and governance of the capacity market. I shall deal with the remaining Government
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amendments and new clauses, which relate to that market and are, I hope, relatively uncontroversial, before coming to the more important amendments tabled by the hon. Member for Southampton, Test. New clauses 8 to 10 and amendments 105 to 107 will enable us to set out detail of the capacity market in a combination of two places: in regulations, changes to which would be made and overseen by the Secretary of State; and in rules, which once made by the Secretary of State could be overseen by Ofgem.
The intention is to give Ofgem the responsibility for consulting on and implementing future changes to those elements in capacity market rules, in line with evolutions in the existing market structure. These changes enable that. However, Ministers would retain accountability for key aspects of the scheme, such as capacity volumes and cost control. Amendments 101 to 104 make clear our intentions for the capacity market settlement body, which has overall responsibility for managing payment flows—in short, that capacity payments will have to flow through the settlement body; that it can discharge certain technical obligations and functions through an agent; and that it can recover costs only in connection with the obligations placed on it as the settlement body.
Amendments 45 to 50, tabled by the hon. Member for Southampton, Test, would allow a second, alternative capacity mechanism, known as a strategic reserve, to be included in the Bill. As I understand it, a strategic reserve would hold a small amount of capacity outside the market, to be deployed only in limited circumstances. The Government have always acknowledged the potential benefits of a reserve as a short-term measure. If it is necessary to respond to a short-term security of supply challenge, Ofgem already has powers it could use. For instance, it could strengthen the options that the national grid has, to ensure sufficient capacity is in place before the capacity market is implemented. However, I would suggest to the hon. Gentleman that a capacity market is a better medium-term solution to address the current investment challenge and ensure continued security of supply, for two reasons.
First, if used as a longer-term intervention, a strategic reserve could undermine the market signals for capacity providers by reducing revenue certainty. That is because of the uncertainty about when the reserve might be deployed and the negative impact on the revenue of other capacity providers. There is a danger that investors may decide that future Governments will be tempted to use the reserve too frequently—a reasonable concern in a world of rising prices—which would increase the risk of not getting a sufficient return on their investment. The resultant increase in financing costs would flow through to the consumer, with the long-term risk that less capacity is built and the Government are forced to create a larger and larger reserve, at which point the competitive market disappears. By contrast, a capacity market is open to all providers of reliable capacity, with the only exceptions intended to be plant receiving support under CFDs. This provides the right, market-based signals for both existing and new capacity. Secondly, offering both capacity mechanisms in the Bill—the capacity market and the strategic reserve—would create regulatory uncertainty about the Government’s preferred approach and, again, act as a disincentive to investment.
Let me turn, fourthly, to nuclear power. The Government have made it clear that nuclear generation has an important
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part to play in decarbonising electricity generation. It is a source of reliable generation capacity and it is a vital part of our energy mix. CFDs are intended to provide support to all forms of low carbon generation; hence I could not support amendment 23, as it would exclude nuclear generation. I also have concerns about amendment 24, which seeks to limit the amount paid under a CFD to nuclear generation to no more than what can be paid to renewables generation. It would not make sense artificially to link the amount of support for one technology with support for another. Support should be set based on robust evidence and advice that demonstrates, for instance, that the level of support makes a project economically viable—and thus will attract investment—and that it delivers our policy objectives while minimising costs for consumers. More widely, renewables support rates will vary over time, as has happened with the renewables obligation, and a mechanism to link support levels in this way, as proposed in amendment 24, could be cumbersome and could restrict our discretion to set support levels that might otherwise provide value for money.
5.15 pm
Caroline Lucas (Brighton, Pavilion) (Green): Does the Minister agree, however, that the Government’s position on nuclear ought to be guided by the coalition agreement, which clearly stated that new nuclear should “receive no public subsidy”? Is he not acting rather like Humpty Dumpty in “Through the Looking Glass”, in that he is making words mean what he wants them to mean? Subsidy means giving extra money to that technology; it does not matter that he is also giving subsidies to renewables. He seems to be arguing that it is not a subsidy if it is being given to renewables and to nuclear, but it is still a subsidy. Will he not recognise that and stick to the line in his own coalition agreement?
Michael Fallon: Of course I stick to the line. On this side of the House we all stick to the terms of the coalition agreement, and it is important that we keep doing that. I do not see any reference in the Bill to the word “subsidy”. When the hon. Lady sees the terms of any contract that might be concluded with EDF for Hinkley, or indeed with Horizon Hitachi for the next two stations, she will see that the word “subsidy” is not involved.
Amendment 25 would prohibit the Government from underwriting, or providing in investment contracts, guarantees to cover nuclear construction costs. Let me reassure the House, if there is a concern about construction cost overruns, that such overruns for new nuclear will be borne by the developer. There are two scenarios, however, in which it might be reasonable for certain construction risks to be shared. They include cases involving less mature technologies such as carbon capture and storage, reflecting the high level of uncertainty around those construction costs, and those relating to certain events outside a developer’s control, such as specified change in law events. An example could involve a law that specifically discriminated against nuclear.
More widely, I can assure the House that we will only sign a contract in respect of Hinkley that is fair, affordable and represents clear value for money for consumers. Amendments 26 and 27 would delay the Government’s making CFD regulations relating to nuclear power or
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signing an investment contract until the National Audit Office had first carried out a value-for-money assessment of nuclear power or the relevant investment contract. It would not be right to hold up the delivery of a major Government programme that is vital for economic growth and jobs across the country until the NAO had undertaken a review. We have already put a significant amount of expert scrutiny into the decision-making process to ensure a robust evidence base, and will be consulting on the draft electricity market reform delivery plan to augment that.
More generally, the major CFD regulations will be consulted on and will be subject to affirmative parliamentary approval. Investment contracts are already subject to close scrutiny by external advisers to ascertain whether they represent value for money. Combined with my earlier commitments and amendments to the Bill, this will ensure transparency of investment contracts.
Joan Walley: Is there not a concern about the role of the National Audit Office in all this? There is no way of achieving transparency during the negotiation process, and unless we accept the amendments proposing a panel to oversee the process, there will be no way of finding out what is being agreed before we are presented with a fait accompli.
Michael Fallon: My first answer to the hon. Lady is that there is nothing to prevent the National Audit Office from looking into anything it wants to. The Government cannot control that, and nor can she. Secondly, I have already said that summaries of the advice will be published, and it will be perfectly possible for Committees of this House to look into these matters and satisfy themselves that the appropriate advice has been taken.
Joan Walley: Is not part of the problem the fact that the National Audit Office and the Comptroller and Auditor General do not have statutory powers to scrutinise public spending on behalf of Parliament before the negotiations have been completed?
Michael Fallon: I am not sure that is wholly right. I think that the NAO has, as I recall, already been looking at High Speed 2—before the contract for it has been placed.
Michael Fallon: I want to be fair to the hon. Member for Brighton, Pavilion (Caroline Lucas), too, but I give way again to the hon. Member for Stoke-on-Trent North (Joan Walley).
Joan Walley: I am most grateful, but the point is that while the Comptroller and Auditor General might consider doing a review once a negotiation has been struck, at that stage it is too late to understand what has been included. We thus have a situation in which the Minister should perhaps comment on the role of Parliament in scrutinising this issue.
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Michael Fallon: It is for Ministers to take these decisions and for Ministers to be accountable to Parliament for them. It is for Parliament to scrutinise the decision taken. I am sure the hon. Lady is not suggesting that Parliament itself should take this decision; in the end, it is for the Executive to take their decisions about investment and infrastructure and for those decisions to be fully accountable to, and scrutinised by, Parliament.
Caroline Lucas: I reiterate the point that the hon. Lady has just made because the National Audit Office cannot look at the issue at the key point where we need the information. My wider point is this. The Minister keeps saying that nuclear offers value for money, is fair and affordable and so forth, but how can that possibly be the case when this Government envisage locking taxpayers into a 35-year contract to pay around twice the current market price for power, with the money then going to line the coffers of the French nuclear power station operators?
Michael Fallon: I wonder how the hon. Lady seems to have more information about the final details of the contract than I do, as I would suggest to her that I am a little closer to it than she is. When the details are published, she will find that not everything that has appeared in the newspapers is wholly accurate.
Michael Fallon: I must be fair to the House and make some progress because I am only halfway through this group of amendments. If I am pressed to give way one more time, I will of course do so.
Martin Horwood: The Minister is very generous in giving way. I would like to ask him about one aspect, which was raised by Dr Paul Dorfman of the Warwick business school, and University College, London. They have speculated that the contract now being discussed with Electricité de France could be as long as for 40 years. In the spirit of parliamentary openness and scrutiny that the Minister has described, will he clarify whether that is an accurate guess?
Michael Fallon: My hon. Friend tempts me, but I am afraid that, much as I would like to do so, I am not able to speculate about the terms currently being negotiated with Electricité de France.
Finally on this group, amendments 28 and 29 seek to stop nuclear and fossil fuel generation from participating in the capacity market, which is designed to ensure the security of future electricity supplies. To ensure the most efficient mix of capacity and to avoid favouring specific technologies, the market needs to be technology neutral and support a range of generation sources, such as from fossil fuels, existing hydroelectric and nuclear plant and the demand-side response. I can confirm, however, that we do not intend to allow plant receiving a contract for difference, including new nuclear plant receiving a CFD, to participate in the capacity market. We do, of course, expect existing nuclear plant to play an important role.
Let me deal with some of the wider issues in this group of amendments, including bill impacts, biomass, liquidity and so forth. Amendments 32 and 33 specifically relate
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to biomass. I would like to thank my hon. Friend the Member for North Devon (Sir Nick Harvey) for raising this issue. His amendment 32 seeks to define biomass in the Bill. Let me make it clear to him that I see no problem with the definition he has drafted, but I suggest that this would be better left to secondary legislation, which would give us the flexibility to amend the definition over time to reflect changes in technologies or, indeed, in the evidence.
In respect of amendment 33, I would not want to limit the amount of support that an individual biomass generator could receive under a CFD, or to impose a condition that biomass generation greater than 15 megawatts could receive support only if it utilised combined heat and power or carbon capture and storage. That would risk excluding efficient forms of biomass generation or forcing all new generation to include combined heat or power, or carbon capture and storage equipment, which it might not be possible to utilise effectively, and I think that it would have the unintended consequence of increasing costs for consumers.
Barry Gardiner (Brent North) (Lab) rose—
Michael Fallon: I will give way, but I must soon make more progress.
Barry Gardiner: I am grateful to the Minister, who has been extremely generous in engaging in debate. Will he clarify one point? My understanding was that the definition that had been proposed was already incorporated in primary legislation, in an earlier Act of Parliament, and that the objection that he seems to have to it would therefore not apply.
Michael Fallon: I should be happy to check that. I suspect that the hon. Gentleman may be right, but I think that some of my objections would still apply. These things change over time, and I should prefer to have them in secondary legislation. However, if I have wrongly suggested that this is a novel approach, I will certainly get back to the hon. Gentleman.
On amendment 94, we need to be sure that independent generators have a fair chance of entering the market. I am sure that my hon. Friend the Member for Rochester and Strood (Mark Reckless), and other Members who have signed his amendment, would support that. Ofgem will shortly be releasing details of its proposed reforms to improve market liquidity, and I welcome that progress. However, it is crucial for the Government to be able to act if Ofgem is unable to deliver ambitious reforms allowing more independent generation in a timely fashion. That is why we need the backstop powers in clause 38.
Amendments 95 to 99, also tabled by the my hon. Friend the Member for Rochester and Strood, would remove the emissions performance standard from the Bill. I know that my hon. Friend is concerned about its impact on coal-fired generation, and suspect that he feels that the carbon price floor provides sufficient market signals to disincentivise such generation, but the Government's objective is to deliver a clear and unambiguous message to investors that coal-fired generation must significantly reduce its emissions to have a long-term role in our energy mix.
The commitment to decarbonisation is delivered through economic signals such as support for the carbon price, through planning policy—which states that new coal-fired
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power stations should be equipped with carbon capture and storage—and through the EPS, a coalition commitment that places a firm limit on the amount of carbon that can be emitted, regardless of the price of coal or carbon. That commitment to reducing emissions would be undermined by amendments 173 to 175, and I hope that my hon. Friend the Member for Daventry understands why I cannot accept them. In relation to amendment 174, I should point out that the formula in clause 42 was carefully designed to ensure that potential emissions from new coal plant would be at least halved.
Amendment 148, tabled by the hon. Member for Brent North, would apply the EPS to existing coal-fired plant that installed pollution abatement equipment to comply with the industrial emissions directive. I understand his fear that, if the relatively low price of coal continues, it may lead to levels of coal generation that will put our decarbonisation objectives at risk. However, our electricity market reform measures should mitigate the risk of carbon “lock-in” by driving investment in new low-carbon generation which will increasingly displace generation from fossil fuel.
Amendment 150 would reduce by 15 years the period in which the emissions limit for a new plant is “grandfathered”. Grandfathering until 2045 gives investors in new gas plant the regulatory certainty they need that the EPS will not stop them from making a return on their investment, thus assisting the provision of the new plants that we require in order to replace ageing capacity. Let me be clear: we need gas-fired generation in our future energy mix to balance increasing levels of intermittent and inflexible plant coming on to the system. Amendment 150 would deter such investment and thus reduce, not increase, the reliability of our electricity supplies.
5.30 pm
Lastly on the EPS, Opposition Members have tabled amendment 179, which seeks to exempt CCS projects from the EPS during their commissioning period. The House will recall that the draft Bill contained a similar exemption, but was removed following recommendations from the Select Committee on Energy and Climate Change.
Our view is that the best way to manage risks to CCS projects from the EPS is through each project’s funding contract. That provides greater flexibility to manage project risks in one place and on a case-by-case basis. Also, the EPS already provides a degree of flexibility for plant during the commissioning period.
David Mowat (Warrington South) (Con): The Minister has referred several times in the last few minutes to CCS technology. What is his core estimate of that being deployable on a commercial basis in the UK?
Michael Fallon: I am not able at the moment to give my hon. Friend a precise timetable. Last year, we had a competition, as he will recall, for CCS. We selected the two principal bids and we are continuing to negotiate, but as soon as I have more news on that, I will ensure that he is one of the first to hear.
I must thank the hon. Member for Brent North for amendment 149. He will see that the small error has already been corrected in the version of the Bill that was introduced to the House on 9 May.
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My hon. Friends the Members for Daventry and for Waveney (Peter Aldous) have tabled a number of amendments to clause 41 covering the certificate purchase scheme, which is designed to replace the renewables obligation for the last 10 years of its existence. First, let me reassure my hon. Friend the Member for Waveney that the provisions he seeks to remove through amendments 153, 154 and 157 to 159 simply replicate legislation that exists under the renewables obligation. Caps have been set before, such as for bioliquids; exemptions already exist for very small suppliers; and costs of administering the scheme are already recovered from the RO buy-out funds. The powers he wants to remove through amendment 159 would, for example, be needed to revoke any incorrectly issued certificates. These provisions therefore ensure the continued effective operation of the scheme.
On amendments 155 and 156, requiring the immediate recovery of shortfalls in the levy from suppliers would be unnecessarily prescriptive. That may not be necessary if, for instance, the shortfall is very small and can be made up in the next round of regular levy payments.
Amendments 160, 161, 167 and 168 would either remove our ability to change future support levels for the scheme, or add further validation requirements on the underpinning evidence for a change. Although the Government do not intend to make banding changes under the certificate purchase scheme, I would not want to remove our ability to do so. As we have seen, where there is compelling new evidence to change support levels, such as to protect consumers, it is important that the Government can act, and these provisions are important as they set out the controls on any such change.
On the underpinning evidence, we already take a rigorous approach to the assessment of costs and income in banding reviews under the renewables obligation. I can assure the House that we would do so again in any review of support levels under the certificate purchase scheme.
Let me reassure my hon. Friend the Member for Daventry that, in relation to amendment 169, consumer costs will always be an important consideration in banding reviews. New section 32V(4)(e) in clause 41 makes specific provision for that.
That brings me to the last but most important issue in this group: the costs and benefits of electricity market reform to consumers. A number of amendments have been tabled by my hon. Friends the Members for Daventry, for Waveney, for Gainsborough (Mr Leigh) and for Christchurch (Mr Chope), and we must thank the last two of them for providing such excellent chairmanship of the Bill Committee.
First and foremost, let me be clear that electricity market reform—EMR—is good for the consumer. Gas prices are rising and are projected to carry on rising. We need to move to a more diverse energy mix, which breaks our dependency on both gas and fossil fuel generation. The contract for difference provides protection for consumers by ensuring that generators pay back when the market price goes over the strike price, and the price certainty it brings will reduce the cost of financing new power stations, and thus reduce costs to the consumer. EMR also serves the public interest by reducing carbon emissions and ensuring everyone can benefit from reliable electricity supplies. These are important matters, which
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is why I would not want to accept amendment 162 and make them subordinate matters when the Secretary of State is exercising functions under part 2 of the Bill.
On amendment 151, I would not expect use of the liquidity powers in clause 38 to increase costs for consumers over the lifetime of any intervention. The purpose of these powers is to protect consumers by driving competition and reducing prices. A positive outcome for consumers must be proven before action is taken, and that would be shown through an impact assessment, which would be published when consulting on any proposed use of these powers. On amendment 152, contracts for difference can only be for the purpose of encouraging low-carbon generation, so that change is not necessary.
Both today and tomorrow, we need to work in the best interests of consumers and ensure that energy is cheaper as well as greener. I hope that all Members on both sides of the House can see that EMR represents the cheapest way of securing a diverse, low-carbon and reliable energy mix.
I want finally to turn to the amendments involving tariffs and to speak to the relatively minor Government amendments in that group before addressing the amendments tabled by the hon. Member for Angus. In line with the Prime Minister’s crucial commitment to ensure that people are on the cheapest tariff for their preferences, Government amendments 119 to 133 will align the powers in clause 121 more closely with Ofgem’s retail market review proposals. Government amendments 119, 120, 122 and 123 further clarify that those powers cannot be used for the purpose of imposing price controls by limiting the powers of the Secretary of State to make provisions under clause 121 only to the list set out in subsection (3).
In line with Ofgem’s retail market review proposals, Government amendments 125, 127, 128 and 131 will restrict the power to move customers from one tariff to another only to those customers on tariffs closed to new joiners. Government amendment 126 ensures that suppliers will have at least one core tariff slot that is not prescribed. Government amendment 130 clarifies that the power to prescribe that a supplier offers fixed or variable rate tariffs does not equate to setting the price or term for the tariff. Finally, Government amendments 121, 124, 129, 132 and 133 reword a number of the definitions to ensure that the powers can be exercised in the context of existing requirements placed on suppliers as a condition of their supply licence.
Amendments 21 and 22 were tabled by the hon. Member for Angus and address concerns he raised in Committee. Amendment 21 relates to the proposed Secretary of State power set out in clause 121 to move consumers off poor-value dead tariffs. His amendment would leave the only basis on which people can be moved off poor-value dead tariffs as an opt-out for consumers. Moving customers off such tariffs is a key part of meeting the Prime Minister’s commitment on energy bills. I would like to reassure hon. Members that in the event that Ofgem’s reforms are unduly delayed, we fully intend to make use of the opt-out approach rather than an opt-in. As a result of Ofgem’s review, however, it could become clear that there are certain circumstances in which some consumers could be actively disadvantaged by an opt-out approach, so we consider it prudent to retain the option to pursue an opt-in approach if necessary. Consumers could be disadvantaged
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should it, for example, transpire that as a result of market changes they would actually be better off staying on specific closed tariffs or that taking an opt-out option means they face contractual difficulties, such as a breach of contract.
Mr Weir: I understand what the Minister is saying, but as it stands clause 121 says that there can be a switch to a different supplier or different terms, “unless the customer objects”. The customer can always come back and say, “No, I don’t want to do that”; even though the company is saying, “This is a better tariff for you”, the customer still has the ability to do that. The difficulty with including subsection 3(e)(ii) is that, as the regulatory impact assessment said, very many customers never get round to switching and do not react when they are given offers or told a better deal is available. Leaving that provision in would allow companies simply to offer customers these things but not push them forward.
Michael Fallon: There may well be consumers who are not aware that they are being left on these tariffs, so we need to be careful about that, too. Ofgem could, however, deal with such matters, and I want to make it absolutely clear that the decision on whether to take an opt-out approach or an opt-in one will be made by the Secretary of State, or by Ofgem acting on his behalf, and not by energy suppliers.
Amendment 22 would add a new power for the Secretary of State in relation to customers with pre-payment meters, and there is a difficulty with it, too. The amendment is in two parts: paragraph (f)(i) specifies that these customers should receive the lowest tariff offered by the supplier, regardless of meter type; and sub-paragraph (ii) specifies that no more than 20% of each of their payments should go toward repaying existing debts.
Clearly, the aim of the amendment is to help out the most vulnerable customers, and I wholeheartedly support that. The Government are keen to see that consumers who use pre-payment meters are not disadvantaged, particularly the 20% of the fuel poor who currently pay for their gas or electricity in this way. Since 2010, there has been a major step forward in the treatment of consumers with pre-payment meters, with all the large energy suppliers choosing to equalise their pre-payment tariffs with standard credit prices.
The second part of the amendment relates to changing the way debt is repaid by customers on pre-payment meters. Customers in this situation currently repay a fixed amount at fixed intervals, for example, each week. The amount repaid is calculated for each consumer on the basis of their personal circumstances and ability to pay. The amendment proposes a limit of no more than 20% of the top-up amount, which in practice would turn most or all repayments from a fixed rate to a proportional one.
There are at least three reasons why we should not legislate in that way, the first of which is the cost to consumers of changing meters to accommodate such a provision. Secondly, let us consider the following: if a family paid a total of £10 a week, with 20% going towards repaying the debt, it would take the family seven years to clear the debt. This plan would also require the family to continue to pay £10 a week or £20 a week during the summer months, when most
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pre-payment meter customers use very little gas. If they reduce the total weekly payment in that period, the overall repayment period of the debt will, of course, increase again. Thirdly, there are existing obligations on suppliers under their licence to take into account a customer’s ability to repay when setting a repayment schedule. Suppliers are currently obliged to develop individualised repayment plans that take account of ability to pay, but existing pre-payment meters are not designed to allow for debt levels to be deducted on a proportional basis.
Mr Weir: I understand what the Minister is saying and I understand his objection, but if he looks at the excellent report on the issue from Citizens Advice he will see that it gives an example of someone who had £7 of every £10 put into the meter taken towards debt. We are trying to introduce a limit—although perhaps 20% is the wrong figure—so that that sort of thing does not happen.
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Michael Fallon: I will certainly look at that. I understand the purpose behind the hon. Gentleman’s amendment and I share it, but I hope that he will recognise that a percentage cap might not be the best answer. There might be other opportunities to return to the issue as the Bill progresses, and I hope that he understands the risk that setting a percentage limit could encourage suppliers to use that limit as a default position.
I do not think a legislative solution is appropriate, but we are investigating with suppliers what non-legislative action can be taken to improve the situation with prepayment meters. We have also recently announced funding for the big energy saving network, which is a co-ordinated network of voluntary organisations and community groups that will develop and deliver support for vulnerable consumers.
I am grateful to the hon. Gentleman for his continued interest in getting a better deal for consumers. I hope that he has found my explanation on the amendments reassuring and will, on that basis, agree for the moment to withdraw them. I apologise to you, Mr Deputy Speaker, and to the House for taking an inordinate amount of time to respond to the amendments, but the group contains a range of amendments from a large number of hon. Members and I wanted to do justice to each one of them.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): I welcome the Minister to his first parliamentary interaction with the Bill. His predecessor, the right hon. Member for South Holland and The Deepings (Mr Hayes), took the Bill through Committee and we know from our experience today that the Minister can speak—although perhaps in slightly less florid language—for at least as long as his predecessor could on such matters.
A range of issues are covered by this group of amendments, and I am conscious that many Members want to speak about their amendments. I shall do my best to be as brief as possible, but I want to mention a few points both in response to the Minister’s speech and in support of some of the amendments tabled by me and my right hon. and hon. Friends.
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I welcome Government amendment 66, which will put in place a five-year review of the emissions performance standard. That is very important. I am sure that my hon. Friend the Member for Brent North (Barry Gardiner) will try to catch your eye, Mr Deputy Speaker, to speak in support of his amendment 150. I hope that the Minister will take that seriously in the context of the length of the grandfathering period—gas investors suggest that their investment is usually over 30 years rather than 45—and give it a degree of consideration.
In relation to the EPS, let me say a few words about amendment 179 on carbon capture and storage. The provisions in chapter 8 on the EPS will have a significant impact on the future development of CCS. The Opposition have consistently and clearly set out our support for developing that technology, which we believe has a vital role to play in our future energy mix alongside other low-carbon technologies. We do not need to go over the same ground again, but I probably first raised with the Minister’s predecessor but one some of the issues about the £1 billion that was supposedly available for capital funding. We know what the Cabinet Office document said was available for this comprehensive spending review period, although I am conscious that the Minister’s Department—or one of his Departments, the Department of Energy and Climate Change—seems to have secured its negotiations with the Treasury on the CSR. I wonder whether the remainder of that £1 billion is part of the savings that have been offered up.
If we do not get the technology developed for CCS, we will face a significant gap in our ability properly to deal with the peaks in our generation requirements. That is why we tabled amendment 179. As the hon. Member for Warrington South (David Mowat) perhaps suggested in his intervention about carbon capture and storage, we are conscious that there have been bumps in the road in moving that technology towards commercial development; I think it is fair to put it in those terms. We are concerned, as are a number of industry bodies, that an unintended consequence of the Bill is that it makes that technology less likely to be developed.
The Minister was right to say that the exemption was in the draft Bill, but was taken out as a result of concerns, expressed by the Select Committee on Energy and Climate Change and others, that it could be a loophole allowing unabated coal generation. The way in which the amendment is framed—it relates to a specific commissioning period—helps to address that sensibly, and to ensure that CCS is given the best chance of developing and being part of the future-generation mix, as many of us wish it to be. I therefore intend to push amendment 179 to a Division.
There are a number of amendments relating to contracts for difference. I am sure that the hon. Member for Brighton, Pavilion (Caroline Lucas) and others will seek to speak to some of them. I wanted to say a word on new schedule 1 and new clause 5, which stand in the name of the hon. Member for Cheltenham (Martin Horwood) and a number of other Members from across the House, on establishing a panel of independent experts to offer advice and guidance to the Government before they enter into a CFD. Although the Minister was not on the Committee, I am sure that he is familiar with the tenor of our debates on the subject; we tabled a number of similar amendments in Committee, and
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argued strongly for an independent expert panel to offer transparency, expertise and, crucially, protection for consumers. That differs from the Government’s plan to set up a non-statutory panel, and would deal with the concerns that the non-statutory proposals do not go far enough.
I am sure that the Minister will be aware that in Committee we argued that for many people this is still a controversial issue. The best way to ensure confidence in the negotiations that are under way—I think I heard the Minister refer to “when”, rather than “if”, the contract is secured; I am not sure whether that was a Freudian slip—is to ensure transparency around the process. Having that panel is a sensible way of providing scrutiny and transparency. If those Members who tabled the amendment seek to push it to a Division, they will have the support of Labour Members.
On a related issue, amendments 8 and 9, which are in my name and the name of my right hon. Friend the Member for Don Valley (Caroline Flint) and my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger), push the Government to be more transparent about agreements with generators through investment contracts. It would be churlish of me not to recognise that the Government have moved on the issue since Committee, and have listened to what the Opposition said in Committee about what information could be restricted. I listened carefully to what the Minister said about the information that is not made available being described. However, I am unconvinced that that goes as far as it could or should. I take the point that it may be appropriate for certain information not to be put in the public domain, particularly when we are dealing with nuclear energy, but that should be the very limited exception, rather than the rule. That is why amendments 8 and 9 make it clear that the exception will be for “trade secrets”, rather than “confidential information”, as the Government could decide what was, or was not, confidential. That is important for transparency and confidence.
The Minister will be aware that the representative of EDF Energy who gave evidence at the start of Committee proceedings was very clear about the importance of transparency. It would be slightly odd if the Government sought to restrict that transparency. We will never have the confidence that we should have in nuclear as part of our generation mix if people are able to gainsay aspects of agreements between the Government and companies. The best way of ensuring that that does not happen is to make all the information available; people can then make their judgments. I am sure that that would not stop some Members from being against nuclear power, but it would give a number of others—and, more importantly, people more widely—confidence that nuclear should continue to be part of our generation mix.
David Mowat: I have listened carefully to what the hon. Gentleman said about the need for an expert panel, and all that that implies. Is it the position of the Opposition Front Benchers that the Government should not be able to enter into a binding contract with EDF, after negotiating with it in good faith, without that coming back to Parliament?
Tom Greatrex:
I understand, from what the Minister said, and what his predecessor said in Committee, that the agreed contract will come before Parliament, and
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I would expect that to happen, but an expert panel that included consumer representatives could help to bring a degree of rigour and transparency that will be important in ensuring that there is confidence if—or when, to use the Minister’s term—an agreement is reached.
David Mowat: Does the hon. Gentleman envisage the Government coming to an agreement with EDF that is subject to ratification by some panel? Would he expect EDF to negotiate on that basis?
Tom Greatrex: I expect that EDF would want the Government to be sure that the agreement that they were entering into was safe and sound, and conformed to the best possible degree of scrutiny. An expert panel could bring some of that scrutiny, rigour and analysis. That is, in the end, in the interests of not just the Government and EDF or any other company, but the whole energy sector. That is an important point that we pushed in Committee and will continue to push today.
Martin Horwood: I thank the hon. Gentleman for his support for my new schedule 1. In answer to the point just made, the schedule does not provide for a veto by Parliament on the contract for difference, but it does expect the Secretary of State to lay before Parliament written reasons why he disagreed with the advice of the expert panel, in the event of such a disagreement. It therefore provides greater assurance of scrutiny and transparency.
Tom Greatrex: I am grateful for that clarification. I hope that helps to address the point that the hon. Member for Warrington South sought to make; it also underlines the importance of the measure. It is possible and probable that the Government would come to a conclusion that members of the expert panel did not share, but as long as that was explained, I would not necessarily think that it was a problem. It may well be that the expert panel would come to a conclusion that the hon. Gentleman and others disagreed with and I agreed with, or vice versa. It is important that there is a degree of transparency and rigour in the process. That is why we will support new clause 5 and new schedule 1, if the hon. Member for Cheltenham divides the House on them.
The Minister touched on the capacity market and the amendments in the name of my hon. Friend the Member for Southampton, Test (Dr Whitehead) relating to the strategic reserve. The Minister seemed to use the same defence that we heard in Committee—that introducing a power to have a strategic reserve would send confusing signals. Indeed, his predecessor said:
“The new clause would allow us to have both a strategic reserve and a capacity mechanism. That might be the worst possible option, because it would send a confused signal to investors about the Government’s intentions.”––[Official Report, Energy Public Bill Committee, 24 January 2013; c. 329.]
The Government argued in Committee that it would be wrong to give the Secretary of State the power to introduce a new system or mechanism in future, as it would cause uncertainty. That is very different from the stance taken by the Government in the amendments that we will discuss tomorrow on 2030 decarbonisation, which give the Secretary of State a power to set a target if he so chooses, so the argument does not stand up to scrutiny. There are important points relating to a strategic
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reserve that I am sure my hon. Friend the Member for Southampton, Test will seek to make. I do not think that having that power in the Bill will necessarily have the impact that the Minister suggests.
A number of amendments relating to biomass have been tabled. It was the Minister’s predecessor who took through Parliament the statutory instrument dealing with the renewables obligation earlier this year. He made a number of commitments in relation to biomass, as I gently remind this Minister, in case they were missed in the comprehensive handover that no doubt took place earlier this year. His predecessor undertook to seek from those using biomass to generate power details about the sourcing of the biomass, and to make that information more widely available.
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At that stage, I believe, the correspondence had been sent out. I am not sure whether it has come back and whether it can be shared, but that would do this debate a service, as it has been characterised by conflicting evidence. It is difficult to make a coherent and comprehensive judgment on biomass and on some of the concerns expressed in the amendments before us without being able to reconcile the discrepancies in the evidence.
The Minister’s predecessor also suggested that he would form an expert group that he said would meet before the end of the month. That month was March. Again, I am not sure whether the expert group has yet met. I would be grateful if the Minister could provide more information about that. The issue has received attention in the recent past because of conflicting information and evidence, and if we want to be sure about the place of sustainable biomass within our generation mix, we need to ensure that the evidence on which those judgments are based is comprehensive and clear. The Government could usefully undertake that task.
The Minister’s predecessor also made a commitment to look at the difference between imported and indigenous biomass supply. Again, I seek further information about that from the Minister.
Dan Byles (North Warwickshire) (Con): The hon. Gentleman is probably aware that the Energy and Climate Change Committee recently had a one-off session on biomass. We concluded that this is almost certainly an issue that the Select Committee will revisit in more detail because, as he said, there is differing evidence that needs to be thoroughly teased out. Sadly, however, the results will come too late to inform this debate.
Tom Greatrex: I thank the hon. Gentleman for his intervention. I am pleased to hear that the Select Committee will be examining the matter further. I should have said that the Committee did the Bill a great service through its pre-legislative scrutiny. We will return to some of the issues on which he, as a member of the Committee, may have supported the conclusions but may not vote in line with them tomorrow. The Committee has done good work on the Bill overall and I am pleased to hear that it will do further work. It is important that we get greater clarity so that the debate is properly informed.
Finally, I shall touch on the clauses relating to tariffs, which have been grouped with the wider electricity market reform amendments. I need not remind the
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House that it was seven and a half months ago that the Prime Minister stood at the Dispatch Box and announced that the Government would force energy companies by law to put everybody on the cheapest tariff. For the avoidance of doubt, his exact words were:
“I can announce…that we will be legislating so that energy companies have to give the lowest tariff to their customers”—[Official Report, 17 October 2012; Vol. 551, c. 316.]
The Bill in its 200-odd pages contains no provision to put every customer automatically on the cheapest tariff. Indeed, what the Minister said in his remarks and what his ministerial colleague said on the radio at the weekend and in Committee was slightly different—that tariffs would be in line with customers’ preferences.
The intriguing source of Tory energy policy who has been busy entering the world of Twitter today talking about the impact of the measures in the Bill on consumer bills is using a figure which Ofgem suggested would be the case if every person were automatically put on the lowest tariff. If that means that the Minister is suggesting that that is the case, his amendments are deficient because they do not do what the Prime Minister said and what the Prime Minister and others have repeated in the Chamber 12 times since last October. I noticed that the Minister chose his words carefully and said “in line with”. If he is not doing as the Prime Minister said, I anticipate that the Prime Minister may seek to correct the record later in the week when we have the opportunity to ask him about that.
The Bill addresses some aspects of the energy market but there is a huge gap in it, as it does not deal properly with the retail market. We flagged up that gap in Committee and we have been clear and consistent in our stance. We want to see the Bill as the mechanism for ensuring that we get the right level of investment in our energy infrastructure. There are other issues that will be raised in another place, but the heart of the problem is how our energy is bought and sold. That is not addressed properly in the Bill. This sticking plaster attempt to implement what the Prime Minister said in October—he was particularly flustered that afternoon, as I remember it—is patently not achieved by the measures to which the Minister spoke today.
There are real reforms that could and should happen in relation to the retail market. At a time when the Bill seeks to change other aspects of the energy market, it seems odd that we are not dealing properly with the retail market, which would provide greater clarity and transparency going forward.
During the course of the Bill’s passage, we have not opposed for the sake of opposition. We will continue in that vein, as I am sure will others in another place. We have sought to be constructive in the amendments that we tabled to try to improve the framework offered by the Bill. There is a considerable amount of information that is not available to us to scrutinise. I heard the Minister say that information would be published at a later date in secondary legislation, but we are conducting our scrutiny in Committee and on Report without information that would have been appropriate.
The Minister’s predecessor undertook to publish some of that secondary legislation in draft, but that never quite happened. No doubt Members in another place will seek some of that information. Although the Bill sets out the framework for contracts for difference,
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some of the crucial detail about the operation and the capacity market is not available for us to scrutinise. To be able to make a sound evidence-based and comprehensive judgment of the content of the Bill, we need a degree of detail that is still missing.
Although I accept what the Minister said about the affirmative resolution procedure being used, he is obviously aware that without some of that information it is difficult to test some aspects of the Bill. I am sure other Members who speak in the next 53 minutes will make the same point. We are reliant on the Minister’s words. I have no doubt that he is sincere in his comments about the Bill to the House, but he is the third person to occupy his role in the past eight months, and those in the role have not always said precisely the same thing. The degree of confidence, clarity and certainty needed to transform the Government’s agenda and intentions for the Bill into reality requires a great deal more information to enable us to make that sound judgment. I hope the Minister will provide that information in another place to enable the Bill to address our shared concerns and to ensure that we get security of supply and a reduction in carbon emissions, and the most affordable way of doing those things.
Madam Deputy Speaker (Dawn Primarolo): Order. I remind the House that the debate must end at 7 o’clock. Quite a few Members wish to participate in the debate, so I ask each Member to make their contribution briefly so that we can facilitate as many contributions as possible.
Chris Heaton-Harris (Daventry) (Con): I will certainly obey your request, Madam Deputy Speaker, and skate through what I have to say. I should declare an interest at the very beginning, because I run a campaign outside the House. It is a not-for-profit company and I do not take a salary or any expenses, but I declare an interest, in the spirit of the time and in the hope that others pushing amendments may do exactly the same later.
I was pleased to hear the Minister address many of the concerns that I have raised in my amendments. I did not bang on about the thing that most would have expected me to bang on about in my amendments. I believe that the Minister agreed with one of them, and just wanted to check; I am slightly concerned that that might be the case. Alas, it was not the amendment that I really wanted him to agree with—amendment 169, which concerns the costs to consumers of the outcomes of the Bill.
The motivation of my amendments was simple: to include a reference to the consumer interest and force the Secretary of State and the Government to have regard to that, and to require much greater transparency about the contracts created and the costs imposed by the Energy Bill. We all know that the Bill came out of the Government’s electricity market reform process, which began in 2010 and had three elements. The first is the carbon price floor, which has been introduced by the Finance Act 2013 and sets out a path for a minimum carbon price in the UK from the fiscal year 2013-14 from £16 per tonne to £30 by 2020.
There is a new renewable and nuclear subsidy mechanism. The Government will replace the existing regime with a contract for difference mechanism. This new mechanism will very largely transfer the price risk from the developer
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to the consumer by guaranteeing an achieved power sale price for each power station covered. Unlike the renewables obligation, the new contract for difference mechanism will also provide subsidy support to the developer of new nuclear, about which I know other Members have concerns.
Another strand is that the Government will create a capacity market that will seek to ensure the retention of sufficient existing generation capacity and the building of new capacity. The design of the capacity market is still ongoing, so the exact nature of the market in the future is unclear, and we do not know when it is planned to hold the first capacity auction. I believe that it will potentially be in 2014 for delivery in 2018. Then there are the bits about emission performance standards to talk about.
Realistically, though, there is an overall problem with the Bill, which was highlighted by the Opposition’s general agreement. It is a kind of renationalisation of the power sector—very, very nearly. To deliver their policy goals the Government require utility companies and third-party investors to build assets that are fundamentally not economic, often in technologies that are far from robust or mature. The Government have taken upon themselves the responsibility of deciding which generation technologies are bad, such as coal and unabated gas, and which are good, such as hydro or nuclear or wind perhaps. They have also decided the pace of change, that coal should largely be removed from the power matrix by 2024, and that unabated gas should operate only at peak from 2027. They have decided which future technologies should or should not be developed and are pushing forward with a leap of faith on as yet completely unproven technologies, as we have heard before, including carbon capture and storage.
The Bill will take Government intervention up yet another level. Under the powers granted by the Bill, the Department of Energy and Climate Change will allocate contracts for difference to developers in those technologies and at those locations that DECC favours. It will set the strike price and so determine the revenue of the asset, what the consumer pays and the returns on investment. It is very much a centralising measure. I am not convinced that it gives the opportunities for new sources that bubble up, as we might perhaps say in this case.
Graham Stringer (Blackley and Broughton) (Lab): We might have an ideological difference if the Bill was actually nationalising the energy industry, but it is not; it is doing something far worse. It is guaranteeing profits for parts of the energy industry that have been chosen from a limited intellectual base. Does the hon. Gentleman agree that by picking so-called winners, which may be losers, the Bill is squeezing out money that could have been spent on research for better newer technologies?
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Chris Heaton-Harris:
I do agree. Let us look at what has just happened in America with the advent of shale gas and the development of non-conventional gas and oil exploration in the US. That has essentially destroyed the notion that the world has already hit peak oil or peak gas. If we compare projected gas prices—the Minister mentioned this—with what is happening in markets where unconventional gas is being developed quickly,
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we see that new developments could come forward if allowed in the future. I fear that we are picking winners on that basis. I know that all Members are concerned about greenhouse emissions and the like. The development of shale gas in the United States has reduced America’s greenhouse emissions. Therefore, there is an interesting benefit from doing these things.
To deliver the Government’s plans in the Bill will be hugely challenging, but they are even more challenging because there is a whole host of factors. If renewable technologies were easy to deploy at the utility scale, the Bill might be helpful, but they are not. If renewable technologies were economic to deploy, the Bill would be very helpful, but as of yet they are not. If nuclear power stations could be built quickly and economically, the Bill would help, but in the UK we struggle with building quickly and economically on that sort of scale. It may have been done overseas, such as in Finland, but, realistically, we cannot do that. If the public were willing to pay any price in their bills to fund this policy—this is my major concern, hence my amendment 169—the Bill might be helpful, but they are not willing to pay huge extra sums. These provisions are placing a huge extra regular contribution on bills, up to an estimated £600 each year by 2020 at the very least.
Mr Brian Binley (Northampton South) (Con): Was my hon. Friend also surprised at the lack of reference to the impact on business in this country over the next 20 years? The Chancellor wants growth, yet the Bill will impede the ability to get that growth. Will my hon. Friend say a word about that?
Chris Heaton-Harris: I dare not say a word about small businesses in the presence of my hon. Friend, the champion of small business in the House. When I used to run my own small business, the power bill was one of the biggest items that could not be avoided, and the Bill will increase that.
The Bill does not help with the core concerns of many in the House about fuel poverty. Reliable estimates of fuel poverty are difficult to come by because the Department has been hedging its bets on publishing any detail. The latest estimates are for 2010 when 3.5 million households in England and 4.75 million across the UK were thought to be in fuel poverty, based on the 2012 poverty statistics released by DECC. The latest dataset used by the House of Commons Library to estimate the impact of changes to prices is for 2009. This suggests that the increased cost of electricity due to the renewables obligation alone may have pushed 100,000 households into fuel poverty. We should be very aware what we are doing when we increase the cost to consumers of their energy. It powers everything from broadband to their heating, and many other things essential to the country’s development, and we should be very aware about how it works.
David Mowat: I accept the thrust of what my hon. Friend says on matters such as fuel poverty, but I rise to defend the Bill a little. Does he accept that we have to cut carbon? If so, does he accept that the way set out in the Bill is a path forward towards that?
Chris Heaton-Harris:
Yes, I accept that we need to be aware of our carbon emissions, and I actually think that being responsible for the environment and trying to
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deliver the best for it is a Conservative principle. The Bill has some good elements to it, but the centralisation that I mentioned and the increased costs to consumers, businesses and the like are outcomes that we should think more about. I will happily leave my contribution there so that other Members can speak.
Dr Alan Whitehead (Southampton, Test) (Lab): I rise to speak to my amendments 48 to 50, which, as we have heard from Minister, are concerned with the development of a capacity market intended to ensure that we have the range of capacity that we will require over the coming years and decades. Not to put too fine a point on it, it is intended to ensure that the lights stay on and that there is a decent margin between what people demand and what we supply.
A capacity market is a choice. It is not the only option available to secure the necessary capacity for the future. It seems to me that that choice needs to be based not just on whether the right capacity margin can be maintained. We should also ask at what cost it can be done, with what reliability and at what risk. I suggest that the choice of mechanism for maintaining capacity that is being made in the Bill fails on all those counts.
I have not invented that conclusion; the Department itself produced an impact assessment on the two choices that it had considered for securing capacity—a strategic reserve arrangement and a capacity market arrangement. Among other things, that choice is about ensuring that the amount of money that can be obtained through the sale of power into the market at times when capacity is tight stays within reasonable bounds. The impact assessment suggested that, in future, those reasonable bounds might get larger and larger. At the moment there is a maximum of about £1,000 per megawatt-hour, but it could go up as high as £10,000, in which case the consumer would be paying an enormous amount for their electricity under certain circumstances. The whole idea of keeping the costs of the capacity market under control would be completely overthrown.
The question then arises: which method best suits the need both to keep the right capacity and to keep it at a reasonable price and with reasonable reliability? Hon. Members will not be surprised that costs of the capacity market option over the period 2010 to 2030 have been assessed at two and a half times those of the strategic reserve option, and the effect on bills at 11 times higher. At first sight, that is not a good sign of the capacity market’s ability to provide a good deal for consumers.
According to the impact assessment, the reason why the Department eventually chose the capacity market idea was the entirely theoretical one that a reliability market
“limits the scope for generators to receive scarcity rents.”
However, the fact is that by introducing a capacity market and auction system in the way that we are, we will effectively provide guaranteed free money for a long period for people who are building conventional generation that provides capacity.