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Those who subscribe to small-scale localised developments ignore the economic reality that in order to keep the transport system—and the chemical plants and the 24/7 industrial complexes which this

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country still has—going, we need a baseload-generation capability. If we are to have that, and have it in a manner that enables us to reduce carbon emissions, then the nuclear option has to be exercised. It will not happen immediately. We need approval and licensing of the reactors. That is in many respects the first fence and, at the moment, it looks like we are falling at it.

Despite the talk about the doubling or quadrupling of the salary of the chairman of the Nuclear Decommissioning Authority, we have the spectacle of the Nuclear Installations Inspectorate in a prolonged battle with the Treasury because the Treasury will not recognise that there is a special case to be made for nuclear installations inspectors, a group of men and women who are very highly qualified and highly skilled and who at the moment are in very short supply. The Minister could help us if he would tell us where we are in this wrangle between the Treasury’s obtuseness and obduracy and a not unreasonable demand by the installations inspectorate. We need their services in cleaning up the nuclear power stations and in decommissioning them. These people are necessary at every step along the road and their employment is essential. We are not going to get these people into employment if we are not able to offer them salaries commensurate with the significance of their task and the importance of what is going on.

Before we build nuclear power stations and before we have windmills we have to take account of the fact that the gracious Speech contained a reference to “affordable” power. Since 2004, we have seen some 2 million households going back into fuel poverty; that is, more than 10 per cent of their weekly income is accounted for by their fuel bills. We have seen the Government cajoling the energy companies, which have made offers and proposals. However, I find it very difficult to see energy utilities cast in the role of philanthropists. Their limited philanthropy does nothing but confuse consumers in dire straits. The Government have recognised that there should be social tariffs; that is, special provision should be made for consumers with financial difficulties by means of price discounts, fixed price bills, price freezes and the like. The Government have said that if the companies are prepared to introduce such measures, they will not legislate. However, the competitive position is a shambles. We have a variety of schemes, not all of which are identical, and not all of which genuinely help the fuel poor. It would be helpful if the Minister could tell us whether the Energy Bill that we shall probably see in the New Year will cover the social tariffs that companies will be required to provide for the poorest and most vulnerable sections of our communities. If they are to be provided for, there should be guidelines of a character that the public and the companies can follow. At the moment these vulnerable people are not being given a fair crack of the whip.

Overall, this area of the Government’s policy is exciting and developing and will be the subject of a lot of debate here. With one or two obvious qualifications, I shall be more than happy to offer my support and participation. I hope that by the new year we will see an Energy Bill and a White Paper

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which together will point forward to a future in which nuclear power—in which, as I say, I have an interest—will be a contributory factor. No one is asking for a French option of 80 per cent in 60 stations across the country but we recognise that our over-dependence on gas and the difficulties with coal—even allowing for storage of carbon—mean that these options are not in themselves sufficient. The nuclear option can give us national independence from the vagaries of the international system, but it will not come for at least another 10 years and in the intervening period a lot of old and cold people will die unnecessarily because they cannot keep themselves warm. Therefore, I ask the Minister to deal with that as a matter of piority in the forthcoming Bill.

7.43 pm

Lord Kirkwood of Kirkhope: My Lords, it is a great pleasure to follow my colleague the noble Lord, Lord O’Neill, who is a well established expert in the whole field of energy. It was a pleasure to listen to his powerful contribution. I strongly agree with what he said about social tariffs. He knows more about that than anyone else. Fuel poverty is a real scourge across the nation. I wish to concentrate my remarks on poverty.

Climate change and energy are the biggest issues facing us over the next 10 years. Much has been done in that regard in the Stern report and the Comprehensive Spending Review report on implementing Stern. The Bali conference in December 2007 will also be important in that regard. I just wish that people made more use of their powerful positions in government to try to change domestic attitudes to saving energy. If we save energy, some of the problems to which the noble Lord, Lord O’Neill, rightly alluded will become much easier to manage.

I feel sorry for the noble Lord, Lord McKenzie, who will sum up a debate comprising the diverse topics of consumer affairs, industry, energy and economic affairs. I shall make his life slightly easier—it is a genuine attempt to do so—as I shall talk about poverty and he knows about that. But before I do so I make a point in parenthesis about the role of Parliament and the important sentence in the Queen’s Speech about trying to get more engagement with and transparency in Parliament. There is far too much legislation and not enough pre- or post-legislative scrutiny. Through the Procedure Committee, the Whips or somebody, I hope that the House will seize the invitation in the Queen’s Speech to give effect to the aspiration of achieving a better role for Parliament.

I give an example, which is only one of dozens that I could think of. We have a carryover Bill dealing with the replacement for the Child Support Agency at the same time as we have a children Bill. It makes absolutely no sense to me that these two things should be separate as they both deal with crucial elements in children’s development, yet we have two separate bits of legislation. The Bill dealing with the replacement for the Child Support Agency simply lifts the template that was devised in the 1991 legislation.

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Circumstances have changed considerably in all sorts of ways since then. Let us see what we can make of the offer from the Executive to try to get a bit closer to it and work with it so that the legislative process is more efficient and receives even better scrutiny, although my experience of the three years that I have been in your Lordships' House is that the scrutiny here is of a much higher grade than in the other place. Let us continue that and see whether we can make the processes more transparent and more understandable to people outside.

I was slightly irked by the sentence in the Queen’s Speech about everyone being given,

“the chance to reach their full potential”.

If everyone was given the chance to realise their full potential, the country would really be in trouble. As the late Lady Seear used to say, it is an impossible goal to attain. For the lowest deciles of the income distribution, the aspiration to get anywhere near realising their full potential is impossible these days.

I wish to make a simple point in my remaining allotted time; namely, we have had a wide-ranging and interesting debate. I agree with much that has been said about skills, opportunities and the CABs. All these things have to be considered in the round and in the mix and they will all help. But what worries me more than anything else is that over the past 10 years there has been a benign set of economic circumstances. I think that the noble Lord, Lord MacGregor, referred to this, and there are people in this place who know more about economics than me. I think that it is generally accepted to be true that we are just emerging from a period where there was a real chance of making a difference to some of these things. I acknowledge that the Government have tried to do all sorts of things with active labour markets, with which we all agree, and I do not deny for a moment that there have been improvements in child and pensioner poverty in particular during that period, but for all that we still have 8 million families suffering from financial exclusion. The noble Lord, Lord O’Neill, said a moment ago that 2 million are in fuel poverty. Fifty per cent of households have no savings and no pension provision. A third of households—nearly 50 per cent in some more challenged locations such as sink estates—have no household contents insurance. My noble friend Lord Oakeshott referred to £1.3 trillion-worth of debt. That is not something that you would have expected to be the end result of 10 years of relative economic stability and growth.

I do not want to sound too doom-laden but my worry is that things could get worse. Noble Lords on all sides of the House have suggested that that might happen in the next five to 10 years. If that is the case, what will happen to some of these challenged households? I looked again at the figures for households below average income, published in May. I acknowledge that some of these figures have shown a downward trend. The figures relate to 2005-06, so some of the Government’s plans have still to feed through, but we are still talking about 10.4 million people below 60 per cent median net disposable household income on a before housing costs basis and

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some 12 million on an after housing costs basis. There are similar types of figures. These are numbers of people; they are not percentages. These are 2.8 million or 3.8 million children, depending on whether it is on a before or after housing costs basis. The working age group of people who are below 60 per cent has gone up over that period, and there are between 1.8 million and 2.2 million pensioners, depending on whether the test is before or after housing costs. Big numbers of households are challenged. There is poverty still abroad in our country; it is not fashionable to talk about it, but it is there and it hurts. It could be getting worse, because the raw material price increases in fuel and foodstuffs that we have begun to notice coming through the pipeline will fall with heavy incidence on the poor more than they will on anyone else. The Government must take some account of that.

We are waiting on an uprating statement which is coming within the next few weeks. We have the retail prices index increase of 3.9 per cent for full benefits and 2.3 per cent for Rossi index means-tested benefits. I urge the Government to use all the leverage that they can—because there is discretion in some of the operating rules—to recognise that those challenges are still being faced by some households throughout the United Kingdom. It will not be made any easier by the departmental spending envelope, because the Comprehensive Spending Review tells us that the DWP is going to have to generate annual net cash-releasing savings of £1.225 billion over the next three years to 2010-11. That is an annual 5 per cent average increase each year over that period of the Comprehensive Spending Review. There have been some improvements as a direct result of the efficiency of putting more professional staff who do a very good job into front-line positions dealing with some of these issues, but if the department is being asked to survive against that kind of background of savings, it is being asked to do too much with resources that are not adequate for the task in hand.

We are moving away in a worrying sense from a rights-based welfare system. The welfare system is too complex; but I get boring about that. I have new friends and allies on this, because the Select Committee in the other place in its seventh report said that the benefits simplification programme has,

“a lack of vision and drive”.

It does not believe that the Benefit Simplification Unit can do the necessary job. It has called for a high-level welfare commission to look at the oversight of simplification in the round. I agree with all that.

The National Audit Office this morning published a report looking at sustainable employment, and it rightly alluded to the fact that a 13-week sustainability period in jobs is nothing like adequate. David Freud talked about a three-year sustainability period before a job could in any sense realistically be described as sustainable. That is a real challenge that must be addressed in terms of how the Welfare to Work programme is to be rolled out in future. My plea to the Minister is: of course there are lots of success strories that the Government can point to over the past 10 years, but if that is all we can do in terms of the numbers of people who are still in

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poverty, we have to work even harder over the next three-year period. If we do not do that properly, things will get worse before they get better.

7.54 pm

Lord Berkeley: My Lords, there was much welcome reference to reducing emissions and the need for clean, secure and affordable energy supplies in the gracious Speech. I will concentrate my remarks on using less energy both for saving emissions and because of price. Two previous speakers, my noble friend Lord O’Neill and the noble Lord, Lord Kirkwood, mentioned domestic energy and fuel poverty.

There is much too little emphasis on the need for using things like proper insulation. In the document produced by the Government last week, Towards a Sustainable Transport System,much more than transport is covered. It is a response to the Eddington report and the Stern report. They only plan a 12 per cent reduction in emissions from the residential sector in 25 years. That is not really very much; a lot more could be done. I welcome the construction of another quarter of a million homes every year, and we understand that by 2016 many of them will have zero emissions. I wonder how that will be done. The Home Builders Federation, which seems to be in charge of all the feasibility studies, does not have a very good record in improving building regulations, insulation and so on. There have been seven separate occasions in the past 20 years when it has resisted having better insulation. Its director has gone on record as saying:

“What is the point in trying to keep the heat inside the building, if the world is heating up outside?”.

That is a bit of a Neanderthal approach.

I hope that the Government will be able to do better than that. I hope that they will take into account the evidence produced by the Building Research Establishment that even the very poor standards that we have for our houses at the moment are not actually implemented. In fact, it is the exception rather than the rule that buildings comply with even minimum standards. The goal of having zero emissions by 2016 remains. The Government have said that energy standards for all new homes are to be tightened in 2010 up to the code level 3 for sustainable buildings, and then higher in 2013.

It is extraordinary that Ministers are apparently blocking any council wanting new private homes to reach those levels. By ministerial edict, they are not allowed to do so. Apparently that is because our old friends in the Home Builders Federation say that placing such extra burdens on them would reduce the number of new homes that will be built. Given that homes last so very long, it looks as though we will be shivering in our homes for many decades to come. That is not a very good idea. I hope that my noble friend can tell me that I am completely wrong on this and that we are all going to have lovely warm homes in any house that is built now or in the future.

I will now consider transport sector energy use and carbon reduction. Again, in the report in response to the Eddington review, the transport sector does even worse than the residential sector. The Government

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are planning only an 8 per cent reduction in emissions to 2030. The report does not give many ideas for saving carbon emissions, especially from cars, trucks and air. I will paint a scenario about this on passengers and freight. I declare an interest as chairman of the Rail Freight Group. There will be a growth in demand for the next 25 years. Government forecasts that we have used in the industry suggest that rail freight will more than double by 2030, with container traffic doubling four times. Road freight will probably do much the same. Rail passenger numbers will double if the trend goes on; it is extremely good at the moment. Car use will probably double as well.

I do not know what will happen in the future of air travel. The Government look forward to making air travel more efficient in emissions, but they do not even suggest that instead of some short-haul flights people should be encouraged to go by rail. Since Mr Eddington used to run British Airways, maybe that is not so surprising. Putting that aside, there are some good ideas here. The real issue will be the price of oil. We have followed the price of oil, which today is about $100 a barrel. The Treasury currently uses in its forward estimates a figure of $40 to $50. I was told that it has a scenario in which the price drops to $10 in 2010. I am not sure of the logic of that, but it is a good curve. What I have never seen and what should be in this long-term planning document in response to Mr Eddington is what would happen if the oil price was $150 or $200 in five or 10 years’ time—and rising. Would demand increase? Would China, India and other such places ensure that the price continued to go up? It is a trend that is happening at the moment. Gas prices will follow oil and I suspect that coal prices will do much the same. In 10 or 20 years’ time, maybe less, we might expect petrol to be £4 a litre—four times the present price. I do not think that that is unreasonable.

In the next 25 years the trend must be towards more energy-efficient transport and a much greater use of electricity. I do not know whether my noble friend Lord O’Neill’s ideas of having much more nuclear power will be the way forward, but there will certainly be a need for more electricity and less oil and gas. He is quite right about the planning issues. We need better planning for the railways, as well as for nuclear and ports and so on. What would be the consequence of this price rise? Many fewer passengers on more expensive flights and possibly electric cars but less use of them, while demand for trains and buses might quadruple rather than double. That is an idea. Regarding freight, we have not yet invented electric lorries. There may be more shipping for places near the coast, but possibly four times more rail freight. There may be much more electrification of railways, but the consequence will be four times more traffic than at present.

I may be wrong, but that is surely a scenario that the Government should begin to examine with some urgency. It affects the quality of our lives, the location of schools and hospitals relating to our workplaces, our homes and commuting. I suggest that there would be no more driving around the M25 from Reading to

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Chelmsford to commute, which someone I know does every day. Our planning laws will need revision. This will affect our economy also, one way or another. I hope that my noble friend can give me some assurance in his response that the Government will start looking at this scenario of oil prices of $150 to $200 a barrel, rather than $50 or even $10, if my figures are right. I look forward to his response.

8.03 pm

Viscount Eccles: My Lords, in following the speech of the noble Lord, Lord Berkeley, I cannot resist drawing attention to the contrast between what he said and what the noble Lord, Lord Jones, said at the beginning of this debate. Perhaps I may offer some comfort to the noble Lord, Lord Berkeley. I can assure him that I live in a house built in 1656 that is extremely well insulated. The walls are very thick and there is six inches of vermiculite between the joists in the roof, which does a grand job in keeping out the cold.

The Government have made much of their economic record. I want to talk about the principal driver, which is perhaps the City of London. Oxford economists have carried out a study that shows that the 12 per cent of the population living in London produces 19 per cent of the gross value-added of the country. Of that 19 per cent, some 13 per cent is due to financial services and to the business services that accompany them—legal, accounting and consultancy. That contribution has risen by a half since 1997, from around 8.5 per cent of GVA to 13 per cent today. That is an amazing and successful performance. It is due to world markets, to the position of London, to confidence in the regulatory system, the depth of London’s capital markets and to the professionalism of those who work there.

That inevitably brings me back to the subject raised by the noble Lord, Lord Oakeshott, and others—Northern Rock. What is the true importance of the credit crunch and the position of Northern Rock in relation to the performance of London? Before going into that, I should say that I live in the north-east. To comfort the noble Lord, Lord Berkeley, I catch the train from Darlington every week when the House is sitting and return at the end of the week. My wife, who sometimes sits on these Benches, has been happy to be a depositor with Northern Rock until recently. I have benefited as a trustee of a leading north-eastern charity from the munificence of the Northern Rock Foundation, which has been a fantastic supporter of charitable causes in the north-east of England.

I must plead a gap in knowledge. When I was the chief executive of the Commonwealth Development Corporation, I was much involved in mortgage finance. We managed mortgage finance companies; we did not call them building societies. We had 100 per cent of the equity in some companies and other equity percentages in other companies from places as far apart as Hong Kong, Kuala Lumpur, St Lucia, Dominica, Nairobi and Kingston in Jamaica. So we were reasonably abreast of the idea that sometimes housing finance could be risky. But I have to say that

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if you were prudent, there was nothing more certain to a housing finance company than a brewery. If you invested in the third world, a brewery was the only investment on which you were pretty certain to make a reasonable return. We did not understand mortgage finance. We lent only four times proven income and we lent 90 per cent of a cautiously valued property on a repayment mortgage. We did not understand all the things that have happened subsequently.

The Northern Rock story is, unfortunately, very different. The only business it had, the single-stream business, was in housing finance and related lending. When it became a bank, it became very aggressive, with a strong marketing and sales policy and an extremely aggressive financing policy. I have to say that I simply cannot comprehend how one could think that it was right to depend to that extent on wholesale money markets. What surprises me is why the regulatory system failed to deter Northern Rock from what it was doing. It has been going on not for one or two years, but for several years. Yet the regulatory system, which is supposed to deal with these matters, completely failed to persuade it.

At the beginning of this year, Northern Rock had an 8 per cent market share, which was very good. It heard the warnings, but it did not heed them. Perhaps the warnings were not forceful enough. The Governor of the Bank of England, with whom I have a lot of sympathy, has said, “Perhaps I did not say what I was saying clearly enough”. But it was heard by everyone else and it was in the newspapers. But Northern Rock decided to go ahead and proceeded to build its market share towards 10 per cent by taking 20 per cent of all new business. That will not have endeared it to the other people operating in the same market. Thereby lies something that has not yet come out, although I think that it will: the bank was the new kid on the block and it was doing things that others operating in the market knew to be unduly risky.

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