Energy Review

– in the House of Commons at 3:30 pm on 25th June 1998.

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Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills 3:30 pm, 25th June 1998

With permission, Madam Speaker, I wish to make a statement about the Government's review of energy sources for power generation and the preliminary conclusions on which I am now consulting.

The review was set up following the crisis in the coal industry last autumn, amid claims that the electricity market was rigged against coal. In response, the Government set up a wide-ranging review of electricity generation. The review has looked widely at the issues, with the assistance of independent consultants, about 150 outside representations, and meetings with some 40 parties. It has confirmed that there are, indeed, serious distortions in the electricity market. As a result, prices have been higher than they should have been. New gas stations have entered the market, benefiting from those high prices, displaced coal and failed to bring prices down for consumers. Without action to address those distortions, prices for consumers will continue to be higher than necessary, and diversity and security of supply will suffer.

Some have pressed the Government to go further and guarantee a specific share of the electricity market for UK deep-mined coal. The Government have given careful consideration to those and all other proposals. We do not, however, believe that to identify a defined share of the market, regardless of other considerations, would be the right course to take. Our aim is to put all fuels on a level playing field, and not to give priority to any one. We do not propose to subsidise any part of the UK coal industry. Coal producers themselves have asked for fairness, not favours.

I must therefore make it clear, against a background of speculation in the press, that there is no deal with the generators by which the Government have offered to introduce new policies in return for the generators buying British coal. Nor are the Government's policy conclusions in any way conditional on their doing so. That, and the fact that coal purchase decisions are a matter for them, has been made clear to the generators.

I have asked the advice of the Director General of Electricity Supply, and his views are set out in our consultation document. He has identified significant problems both in the electricity pool and in the market structure. Those, and the high prices arising in the market, have been among the factors encouraging the growth of gas in electricity generation at the expense of coal. He has advised me that action is needed to reform the trading arrangements so that all plant plays a full role in competition, and to address the market power of the major generators. He also sees new entry as important. We agree with him that reform of the market is needed.

The review has confirmed that the main objective of our energy policy should be secure, diverse and sustainable supplies of energy at competitive prices. That includes our concern to achieve environmental improvements. Taking account of the advice we have received from the DGES, we intend to achieve that objective by creating a competitive electricity market, founded on diverse fuel sources, providing secure supplies and, into the bargain, delivering significantly lower electricity prices to customers.

The Government are therefore making the following proposals to remedy the market distortions. We shall promote competition by reform of the wholesale electricity trading arrangements, and by pressing forward with competition in electricity supply. We shall seek practical opportunities for divestment of coal-fired plant by the major generators. We shall establish separate licensing of distribution and supply, and ensure fair trade in electricity with our European partners. We shall ensure that all generators are fairly remunerated for the services they provide to the grid. Taken together, those measures should remove the current distortions, which work against coal.

Market distortions disadvantage consumers, but they also have an impact on fuel use. That could put our energy policy at risk from both high prices and the loss of diversity and security that the squeezing out of coal and the consequent loss of coal-fired power stations would produce. Projections by our independent consultants, based on the current operation of the market, suggest that gas-fired generation could rise sharply, accounting for over 75 per cent. of our electricity within 20 years. In our view, a properly functioning market could well produce a different result.

There are also technical issues that arise from the growing use of gas on the grid. Our independent electrical engineering consultants report that the present arrangements have failed to resolve them. The DGES has said that better arrangements are needed. We propose to take that matter forward.

There is a wide reform agenda to pursue. That will take time; our aim is that, once it is achieved, the market will operate in a fully competitive way. However, the risk is that, before market reform is complete, fuel choices will be distorted, and diversity and security of supply will suffer. Therefore, during this period, we propose to apply a stricter energy policy to power station consents. In fact, significant market entry is still likely. Additional gas-fired power stations in various stages of development, equal to about 10 per cent. of system capacity and owned by competitors of the major generators, need no further authorisation.

Although the DGES has reservations about restrictions on consents, he recognises the Government's responsibility for energy policy, including diversity issues. In my view, it is of primary importance to avoid the pre-emptive destruction of our scope for diversity and security while reforms are yet to feed through.

The new consents policy will be in place only while our reform agenda is being addressed. I have asked the DGES to keep me informed of progress in dealing with the competition issues. I would expect the new consents policy to be relaxed when, on the basis of his advice, we conclude that our reforms have been undertaken and the distortions removed.

I turn now to the details of the proposed policy. We propose to approach new and pending applications for consent under section 36 of the Electricity Act 1989 on the basis that new natural gas-fired generation would normally be inconsistent with our energy policy concerns about diversity and security.

However, combined heat and power projects have environmental and other benefits that may outweigh those concerns. They will do so if the project is properly sized to meet on-site or nearby heat and electricity requirements and to deliver high efficiency, although each case will be examined on its merits. It will be especially important that the relevant heat and electricity uses are clearly identified.

Other applications likely to support our environmental objectives without compromising energy security or diversity should be consistent with the Government's energy policy aims. They are likely to include renewable energy projects, including energy from waste, in support of the Government's intention to launch a strong drive on renewables, proposals using clean coal technology and the fitting of flue gas desulphurisation equipment.

We shall take the same energy policy approach when considering existing and new notifications under section 14(1) of the Energy Act 1976 relating to the construction of gas-fired power stations. That will apply whether or not consent has been given under the Electricity Act. The consultation document gives further details of our proposals, including those on notifications under section 14(2) of the Energy Act 1976, dual-firing power stations and black start units.

Decisions on individual applications for consents under section 36 of the Electricity Act and notifications under section 14 of the Energy Act will take into account all the circumstances of the particular case. In particular, in applying the new policy to cases that are already before me, I would take care to weigh carefully the impact on the interests of the promoters against the wider public interest.

The policy that I am proposing today should lead to substantially lower electricity prices by promoting genuine competition and efficiency. It will also safeguard diversity and security while we, with the regulator, press on with making the market work. There have been suggestions that, in the absence of restrictions, real falls in wholesale electricity prices of at least 10 per cent. should be possible in the medium term. My hope and expectation are that prices will in fact fall under our proposed policy by even more than that. While the new consents policy is in place, I have asked the DGES to continue to monitor electricity prices and alert me to any further concerns he may have.

As I have said, coal purchase decisions are a matter for the generators. However, if UK coal—including Scottish and Welsh coal—can be competitive on price and other terms of supply, I see no reason why it cannot have a very positive future in the electricity generation market. Achieving that success is a matter for the management and work force of coal producers.

Decisions on any pit closures would also be a matter for coal producers. However, in the event of any closures taking place, the Government are firmly committed to taking early action to put effective regeneration programmes in place. Consideration will be given to establishing a regeneration fund to help affected communities.

My right hon. Friends are reviewing separately the planning policies for opencast coal developments in England, Scotland and Wales in the light of the pre-election 10-point plan, environmental and local concerns and relevant conclusions of this review. They expect to announce proposals following the final outcome of that review.

Safeguarding the environment is a priority for the Government. Sulphur dioxide emissions from the major electricity generators in England and Wales are already programmed to fall to 365 kilotonnes in 2005. That target, and significant interim reductions, must be achieved. We believe that coal-fired generators should take all reasonable steps to run their plant with flue gas desulphurisation more than their plant without it, and major coal-fired generators should be encouraged to have at least one FGD-equipped plant.

Against that background, the Environment Agency will be discussing with generators its proposals for revision of emission limits. We expect those discussions to encompass the implications of this announcement, such as for the likely lifetime and usage of coal-fired power stations and policy on flue gas desulphurisation.

On climate change, the Government remain committed to achieving our targets. Our policy remains consistent with a decline in carbon emissions from the electricity generating industry. We shall be consulting this summer on meeting our legally binding Kyoto target of a 12·5 per cent. cut in greenhouse gas emissions, and on how we can move beyond that towards our own aim of reducing carbon dioxide emissions by 20 per cent. by 2010.

The proposals that I have made today are open for consultation until Monday 20 July, and we intend to announce our conclusions shortly thereafter. Until then, I propose to defer decisions on power station consents and notifications. Where decisions are necessary and should not be deferred, I propose to apply the proposals announced today, subject to the circumstances of each particular case. A consultation document, with full details of our proposals, has been published today. Copies have been placed in the Vote Office.

Photo of John Redwood John Redwood Shadow Secretary of State for Trade and Industry

I thank the President of the Board of Trade for that statement. We learn that the Government have laboured for a whole year to bring forward an energy policy. Today, they have brought forward a few more soundbites and another round of consultation. We were promised an elephant of a policy, and we have been offered a mouse. Over the past year, they have given us hot air. Today, it is more soothing oil than solid coal or cleaner gas. [Interruption.] Labour Members should not leave the Chamber now, but stay and listen. They know that we have been given no substance or policy, and that it is the mining jobs in their constituencies which are at risk.

In opposition, Labour said that it would save mining jobs with a radical plan for coal. In government, it embarked on the opposite policy—licensing gas power stations; announcing tougher environmental targets; and failing to step up clean coal technology. The Government soon faced the predictable large-scale pit closures and lost mining jobs. So they panicked, and went out to consultation.

The Opposition welcome the pool price review. I suggested such a review months ago. Why has it taken so long to come to conclusions? When will the Government make some decisions about that vital matter? Will they find a way that is fair not only to coal but to gas? How many mining jobs will go regardless?

The Government's proposals are not so much a U-turn as a skid and a spin. How long will it be before clean coal technology is used at more coal power stations? What is the future of the gas industry—which was expanding fast and doing well before the moratorium was imposed? Why is there no statement on the future of the nuclear industry, particularly in the wake of the report by the Select Committee on Trade and Industry? We have heard a statement from the President which—by trying to face all ways at once—merely creates more confusion.

The Government's energy and environmental policies remain at loggerheads. The Prime Minister pledged the United Kingdom to tougher targets than the challenging ones that the previous Government had set and left in place. To hit them means burning less coal—a lot less coal—and turning to cleaner ways of generating power. Now the President wants us to believe that she will save some of the mining jobs that her own Government were threatening. That means that they will fail to hit their very own environmental targets.

It is no good the President replying that dirtier electricity will mean fewer cars on the road, because the Deputy Prime Minister is briefing to say that he will not be stopping us driving. Nor—I hope—will they force granny to turn down the central heating. Therefore, the Government must do something about power generation.

It has taken so long to produce such a sketchy policy because the Government have been at war over what to do. Those who wish to subsidise mining jobs have clearly been defeated. The Energy Minister has been sidelined once again. The Treasury has intervened liberally, and the President has been left with the unenviable task of playing across the line of the spin from No. 10 Downing street. Cricketers will know what happens next: the batsman gets caught out.

Ministers say different things to different audiences, to get through difficult days. They seem more interested in saving their own jobs than other people's.

Will the President today admit that, on this policy, the UK cannot hit its environmental targets, and that those targets will have to be changed? Will she promise to return to the House when she has made up her mind on all the issues that are so notably missing from the statement? The Government will have to understand that, by trying to be all things to all men, one ends up satisfying no one and closing a lot of pits.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

The right hon. Gentleman talked about saving mining jobs. In December 1980, a total of 230,000 people were employed in Britain's coal mines; today, there are 12,000. We do not need any lessons from him about what can happen to mining jobs.

The right hon. Gentleman also said that he suggested the review months ago. He spent his first few months as Opposition spokesman complaining that the Government were reviewing too many things, and attacking us for proposing to review any more.

The right hon. Gentleman asked about the time scale on clean coal and renewables. Contrary to what he said, the Government have already increased investment in renewables. I am sure that he will be gratified to learn that we already have an application to build a suitable station, which we shall, of course, be considering with great interest.

The right hon. Gentleman seemed to be torn between wanting to know the future of the coal industry and wanting to know the future of the gas industry. On the future of both industries, we shall unrig the market that the Conservative party left rigged, so that both industries can fairly compete against each other.

Why nothing about nuclear power? Nuclear power currently is not economic—as I think even the right hon. Gentleman will accept—and the Government have no plans to proceed down that route. He further asserts that the Government set tougher targets for the environment. He has alleged that that is behind the problems, and that those targets cannot be hit. He is wrong again; they can be hit.

Finally, I note the right hon. Member's observations about various of my right hon. and hon. Friends, who have played an extremely important, worthwhile and supportive role throughout Government, ironing out the implications of those policy issues for a variety of Departments. The right hon. Gentleman seems incapable of taking on board the fact that Government colleagues can co-operate in that way. No doubt, that says more about the record of the Conservative Government than this one.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

I thank the President for her statement. This is a complex issue, as my colleagues on the Select Committee on Trade and Industry and I found when we started looking into the energy industry. We recognised that it will involve not only Government policy but a degree of consensus throughout the various parts of the industry. Therefore, it is essential that the proposals should be put out for extended consultation. Does she also agree that the problem is not so much one of the existing owners of power stations not buying coal, but of getting people into ownership who are prepared to buy it? Therein lies the strength of the proposal for a divestment of ownership of some of the stations.

Secondly, does my right hon. Friend accept that many of us will welcome the flexible approach that she is prepared to take towards the moratorium? The blunt instrument that has been wielded for the past six months has not won any friends anywhere in the energy business. Those who want instant action today should not forget that coal is never bought in substantial amounts between June and September, and that there is time to get a proper deal to put the energy market on a proper footing so that the long-term security of miners' jobs can be guaranteed.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I am grateful to my hon. Friend for his remarks and for the important work of the Committee that he chairs. He is entirely right to say that it takes time to thrash out those issues. As he will have seen, we have allowed a further period of consultation so that people can take account of the Government's proposals. Of course, many people have already given us the benefit of their views during the review that has already been undertaken.

I am also grateful to my hon. Friend for what he said about divestment and the flexible approach to a stricter deferment policy on gas consents. The Government believe that all that offers a constructive way forward, and I appreciate his observations.

Photo of Andrew Stunell Andrew Stunell Shadow Spokesperson (Environment, Food and Rural Affairs), Liberal Democrat Spokesperson (Environment, Food and Rural Affairs)

May I thank the right hon. Lady for making the statement and for many of the things in it, although I must say something about those that, unfortunately, are not? We welcome the restraint on generation capacity and the removal of price distortion, although we will be interested to see precisely how that is to be achieved. Also, we welcome the reprieve for combined heat and power schemes, and the more flexible approach for the future. There were many sweet words in a rather long statement, but not too much action. For instance, there is still no clear overall energy policy for the nation or the Government. When can we expect that? There is no clear support for declining coalfield communities, which must clearly face substantial economic problems in the next five years as a result of the statement. No clear help is set out for renewables, there are no proposals on fuel efficiency or energy conservation, and what of the subsidiary issues, such as opencast mining? There were many unanswered questions in a long statement, and I hope that the right hon. Lady can provide some supplementary information now.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I am grateful to the hon. Gentleman for welcoming some issues, although slightly surprised that, having welcomed a number of proposals, he said that there was nothing in the statement—he managed to find at least three things. He suggested that there was no clear overall policy. I said repeatedly throughout the statement that Government policy is to obtain diverse, secure and sustainable energy supplies at competitive prices. That is very much our underlying approach.

The hon. Gentleman asked me to say more about the detail of coal communities support. I do not share the view that he seems to take about the extent to which such support is likely to be needed, but he will appreciate that, if a regeneration scheme in the coalfields is required, that would be a matter for my colleagues at the Department of the Environment, Transport and the Regions. It is not a matter to which I would be referring today.

The hon. Gentleman also asked me about proposals for, among other things, fuel efficiency. Again, those issues are addressed elsewhere, but we have issued proposals on such matters in, for example, our Green Paper on utility regulation. As I said, we are increasing support for renewables.

Photo of Mr Tony Benn Mr Tony Benn Labour, Chesterfield

In hoping that the President will disregard the totally hypocritical comments of the right hon. Member for Wokingham (Mr. Redwood), whose party consciously, deliberately and politically destroyed the coal industry throughout its period of government; and in thanking her for providing some alleviation to the short-term crisis afflicting the industry may I ask whether she recognises that any serious, long-term energy policy for Britain must take account of the fact that there is 1,000 years of coal under our territory, which is mined by some of the most highly skilled engineers in the world? It must also take account of the fact that nuclear power is much more expensive than coal, that opencast coal mining inflicts terrible environmental damage on mining areas—where people lose their jobs and their environment—and that up to 40,000 jobs in the mining manufacturing industry could be endangered if the domestic mining industry is allowed to collapse. Does she recognise that competitiveness, level playing fields and market forces are not the basis on which a nation can preserve its long-term policy, as the oil crisis of 1973 should have taught us all?

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I am grateful to my right hon. Friend for his recognition of the ludicrous attitude of the Conservative party. He talks about a serious, long-term policy, the coal reserves that may be available and his concern about the mining manufacturing industry, and I completely understand that those issues arise. However, I do not share his view that the serious, long-term and sustainable energy policy that we have outlined today will not leave a place for coal. We inherited a market in which coal had no future—that was, indeed, a measure of the Conservative party's hypocrisy—but, in these proposals, the Government are creating the space within which the coal industry has a chance to make its case.

Photo of Bill Cash Bill Cash Conservative, Stone

Does the President recall that a few Conservative Members, including me, voted against the pit closure programme, and that, shortly after the general election, I had an Adjournment debate which, some may reasonably say, stimulated discussion on this subject?

I congratulate the Government on their intentions as set out in the review, but I deeply regret the fact that no decisions have yet been taken. The right hon. Lady speaks about competition and a fair deal, but what specific action will the Government take to deal with the disgraceful distortion whereby, in the context of European coal, the German coal mining industry receives £5 billion a year in subsidy, but there is no equivalent redress for the British coal mining industry? I congratulate the Government on their intentions, but the review is very short on specifics.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I remember and respect the hon. Gentleman's stance on the previous Government's proposals, which resulted in so many pit closures. However, I say—with respect—that, if he had taken his opposition further and opposed some of the other actions of the Conservative Government, he might not have needed to oppose those closures. The previous Government's programme did nothing to redress the distortions in the marketplace on which we are taking action. Today's proposals, our review and the pressure we are applying over subsidies in the European Union—on which we share the view of the hon. Member for Stone (Mr. Cash), and on which my hon. Friend the Minister for Science, Energy and Industry has again been in touch with the Commission today—are issues on which the Government have taken a stance, unlike the Government whom the hon. Gentleman supported. We believe that our actions will create the fair market for coal that did not exist under the Conservative party.

Photo of Michael Clapham Michael Clapham Labour, Barnsley West and Penistone

Will my right hon. Friend take no notice of the comments by the right hon. Member for Wokingham (Mr. Redwood)? He is a classic case of Festinger's theory of cognitive dissonance, because he did one thing and says another. Can my right hon. Friend confirm that, during the period when the discussion document is out for consultation, she will apply the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981 to protect men in the industry?

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I am grateful to my hon. Friend for his remarks. I am not altogether sure I can even say cognitive dissonance without thinking hard. I recognise the importance of his point, but he will realise that TUPE conditions are a matter for the industry.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

I heard the Minister for Science, Energy and Industry announce the Government's policy on the radio this morning, and I have listened to the President expand on the details. However, I must confess that I am none the wiser about what the statement was all about. As I understand it, the President will restrict development of gas-fired power generation, albeit on a temporary basis, and will allow coal-fired generators to purchase as much coal as they like, wherever they like and at whatever price.

To compete, however, the generators will have to buy coal at world prices. There is an awful lot of coal in the far east at the moment, and to get British coal prices down to world price levels, we would need more opencast-mined coal that we could blend with deep-mined coal. Yet the President says that there will be a further restriction on opencast mining, which makes no sense under the logic of what she is proposing. She must explain more fully for the benefit of the miners in my constituency exactly what she is proposing to do.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

One thing is clear from what the hon. Gentleman has said: he has not understood the degree to which we inherited a market rigged by the incompetence of his party. Currently, gas and nuclear power have privileged access to the market. Coal was simply not able to compete fairly, and that is the source of the coal industry's difficulties. There are competition issues which the coal industry itself must address, but contracts have been signed for British coal in recent months, and it is clearly possible for UK coal to be competitive. That was not possible in a market that was deliberately rigged against the coal industry by the Conservative party.

Photo of Dennis Skinner Dennis Skinner Member, Labour Party National Executive Committee

Is the President aware that pit closures in areas of high unemployment would be a dangerous step, now that unemployment is possibly beginning to rise? Will she assure me that there will be no pit closures until proper conclusions have been reached from the holding review? Will she take into account necessary measures such as cutting imports, opencast mining and the French electricity link? If those actions cannot do the job, will she remember that our coalfield area is tiny, containing only 20 large pits at the most after the disastrous Tory years? There is, of course, one easy way to ensure the industry's stability, and that is to take it back into public ownership.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I know that that is, and always has been, my hon. Friend's view, but he knows that it is not the Government's policy. He asked about potential pit closures. His expertise on the subject is such that he knows that I cannot give that assurance. Apart from anything else, matters of geology can arise at any time. I cannot give the assurance that he seeks, but I can say that I do not anticipate that we will, in the aftermath of today's statement, see anything other than a coal industry that is able to find its competitive feet and to make its way fairly in the marketplace. He knows that that is what the industry has sought.

My hon. Friend asked for a statement on opencast mining. He knows that that is a matter for my colleagues in the Department of the Environment, Transport and the Regions. They will make a statement when the further review that I announced today is concluded in a few weeks. He also mentioned the French interconnector. I assure him that, just as we are continuing to press the issue of subsidies elsewhere in the European Union, we are considering how we can tackle this issue. We hope that the electricity liberalisation directive will offer an opportunity for coal-generated electricity when it is in place.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

I am sure that the right hon. Lady knows that her statement will have been received with disbelief by the environmental community. Can she explain who among the plethora of advisers and specialist consultants were her environmental consultants? How much extra CO2 will go into the atmosphere as a result of her policies? In what specific ways is she going to reduce CO2 elsewhere? How is she going to produce a 20 per cent. cut in CO2 when every Government policy has increased emissions, despite what they have said?

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

The Government are absolutely clear that what we are announcing today is consistent with the targets that we have set. The right hon. Gentleman himself has a contradiction to sort out. I understand that the right hon. Member for Wokingham (Mr. Redwood) has said that the reason why coal mining jobs are at risk is because we have tightened environmental targets more than the Conservatives would have done. I suggest that they come back when they have sorted out their difficulties.

Photo of Mr Joe Ashton Mr Joe Ashton Labour, Bassetlaw

Is my right hon. Friend aware that, at the two pits in my constituency, Welbeck and Harworth, the miners have made fantastic increases in productivity of up to 250 per cent. in the past few years, but still find their jobs in jeopardy? The harder they work, the more it seems that the EC imposes restrictions on their industry and favours cheap imports from north Africa and Russia. Why should the Germans be able to subsidise their coal and the French dump on us? Why should our miners always have to face supposedly fair competition that actually works against them? Can she not stop opencast mining, which destroys the environment? Can she set at rest the minds of miners now that the extra redundancy pay period has expired? If their jobs are going because of EC decisions, we should restore the redundancy pay that they were getting only a few years ago.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I respect my hon. Friend's long-standing expertise on this matter. We are continuing to press on subsidies, whether in Germany or elsewhere in the European Union, and on the French interconnector. A statement on opencast mining will be made later. He knows as well as anyone in the House that there are circumstances in which some opencast coal is needed to sweeten the use of deep-mined coal. It is not an altogether straightforward issue. I have taken on board his point about the miners in his constituency continuing to deliver higher productivity but still finding their jobs at risk. The simple reason, as he well understands, is that the market left by the Conservative party was deliberately rigged against them. It will not be in future.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West

The right hon. Lady says that she will conduct a price review. She knows that the problem is the structure of the pool and how it operates, and that gas is much more appropriate for interruptible supply than for base load, where it is largely used now. How will we deal with that problem? She also said that she wants diversity and security of supply, and that she will reduce emissions by 2010, by which time virtually all, if not all, of the Magnox stations will have closed. They do not produce any emissions at all. How does she intend to replace those stations if, as she has said today, she does not propose to take any initiatives on new nuclear stations?

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

The hon. Gentleman is entirely right about the structure of the pool. That has been the nature and source of the problem, although I do not recall his saying so when his party was in government, but never mind.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

He did. In that case, I take that back. I beg his pardon.

We are very well aware that the structure of the pool is the difficulty. That is the issue which we intend to tackle. One of the things that the hon. Gentleman will find when he has a chance to study the consultative document—I recognise that he cannot have done so yet—is that there are a number of issues surrounding the use of gas. He is right to say that it gives a more readily interruptible supply, but there are a number of issues related precisely to diversity and security of supply, and technical issues related to the way in which the market operates at present as a result of the operation of far more gas-powered stations, where there used to be a greater role for coal. The Government have received preliminary reports from consultants, and we shall continue to consider the issues.

Photo of Yvette Cooper Yvette Cooper Labour, Pontefract and Castleford

The 1,200 miners and 33,000 electricity customers in my constituency will have a strong interest in my right hon. Friend's statement today. I welcome her recognition that the Conservatives did not merely shut pits but outrageously rigged the market against the coal from the pits that were left. Will she give an assurance that the pool will be radically restructured? It lies at the heart of many of our problems with coal. What does my right hon. Friend believe would have happened to the coal industry if we had continued with the policy of the previous Government?

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

Of course I recognise the importance of the mining industry to my hon. Friend's constituency and the wider concerns of her constituents. She is right about the rigged market. I certainly assure her that it is very much the Government's intention that the pool review will produce proposals that allow for radical restructuring. She will probably recall that we announced the pool review as long ago as October, if my memory is correct. It is our intention that it should proceed.

My hon. Friend asked what would have happened to the coal industry had the Conservative party remained in power. There is no doubt about it. The right hon. Member for Wokingham (Mr. Redwood) has made the point that the Conservatives would have taken a different attitude to some of these issues, but none of us has any doubt that, had the policy that the Conservatives left in place continued to operate, the coal industry in Britain would have simply disappeared. I doubt whether more than one or two Conservative Members would have cared tuppence.

Photo of Margaret Ewing Margaret Ewing Scottish National Party, Moray

In welcoming the right hon. Lady's statement and recognising that there has to be considered examination of the consultation document, may I ask what overall assessment has been made of the impact on employment? Reports are circulating in the Scottish press that the proposals could cause the loss of several hundred jobs in the gas industry in Scotland and beyond. Does the right hon. Lady believe that she has produced a sustainable policy that will reduce dependency on the nuclear industry?

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I am grateful to the hon. Lady for her recognition. These are complex issues, and the impact on employment is not easy to assess. I am aware of some of the stories in the Scottish press. To be honest, we find it rather hard to understand the basis for them. It is not our expectation that those stories will prove to be soundly based. On the overall aspects of energy policy, it is the Government's intention to pursue diverse, secure and sustainable sources of electricity at competitive prices. Within that, there is a role for a variety of sources. That, we believe, could be one of the strengths of energy policy as a whole.

Photo of Kevin Barron Kevin Barron Labour, Rother Valley

May I tell my right hon. Friend how much I welcome her statement, which is the first bit of good news the deep-mined coal industry in this country has had for more than a decade? Does she agree that nobody on the Labour Benches argued that the coal industry ought to be subsidised? We said that it ought to have a fair chance—a level playing field in a market that had been rigged by the Conservatives when they were in office.

I am sure that many people in coal mining communities will thank my right hon. Friend and other members of the Government, who have been working for many months to give a bit of pride and honesty back to those communities. I am sure that they will deliver a sustainable deep-mined coal industry for many years to come, from which all the people of this country will benefit, not least electricity consumers, who will derive immediate benefit from the decisions that my right hon. Friend is taking.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I am grateful to my hon. Friend. The proposals in the review stem deliberately from our proposals for energy supply, but he is right to say that they will also have a beneficial effect in creating, for the first time in many years, a reasonable and fair market for coal. I am grateful for his recognition of that. As he reminded us, it is ironic that, because of their desperate efforts to rig the market against coal no matter what the cost, the Conservatives left us in a position where all customers—every family and every industrial consumer in this country—have been paying a higher price for electricity than they need to. That was the price of rigging the market against coal.

Photo of Eric Forth Eric Forth Conservative, Bromley and Chislehurst

What estimate has the Secretary of State made of the adverse environmental impact of her regime for coal-fired power stations? In giving that estimate, can she tell us how she proposes to meet the Kyoto targets, given the effect that coal-fired power stations will have; and in which areas other compensating reductions will take place?

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

The right hon. Gentleman cannot have been paying attention to recent statements by my right hon. Friend the Deputy Prime Minister. I assure him that we have looked carefully at the issue and that we are clear that there is nothing in my statement that will prevent the Government from reaching the targets we have set ourselves—which are, of course, rather firmer targets than those set by the Conservatives.

Photo of Paddy Tipping Paddy Tipping Labour, Sherwood

Will my right hon. Friend accept that her statement will be widely welcomed in coalfield communities, because it provides a framework that gives to coal fairness but no favours? Will not her announcements on the review of the pool and on tighter consent for gas stations give the opportunity for both coal producers and generators to come to new contract arrangements? Although that is a matter for them, is it not possible that a contract for, say, 25 million tonnes might be achievable? If that were achieved, there could be no question of any pit closures or job losses.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I know that my hon. Friend has campaigned long and hard on this issue, and that, with the Coalfield Communities Campaign, he has always argued for fairness rather than favours. He has recognised the impact of the proposals announced today.

My hon. Friend asked me whether there are specific tonnage implications in the statement, but he also said, correctly, that the contracts to be made between generators and coal producers are a matter for them, so he will understand why it is for them and not for us to come to that judgment. All I can say is that I am in no doubt at all that the proposals we have announced today and the way in which we are unrigging the market, which was biased against coal, give a real space for coal in this country, which has not been present for many years.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

Having represented a coal mining area in local government some years ago, I have long had a loyalty to the industry and those wonderful men who work in it. Having said that, and appreciating its long-term role in energy in this country—picking up the point made by the right hon. Member for Chesterfield (Mr. Benn), who said that there is 1,000 years of indigenous energy sourcing under our very earth—may I ask what specific measures the right hon. Lady has announced this afternoon to give the mining industry confidence that there will not be further coal mine closures and redundancies in an industry which I believe is of essential importance to this country? I was one of the few Conservative Members who voted against the decimation of the industry by the right hon. Member for Henley (Mr. Heseltine).

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I am grateful to the hon. Gentleman for his comments about the coal industry and those who work in it. I hope that I will not harm his career by saying that I recognise his loyalty not only to that industry but to British manufacturing.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

That may be true.

The hon. Gentleman asked whether we believe that today's statement will create confidence in the mining industry. 1 believe that it will. I remind him that, as several of my hon. Friends have pointed out, the industry has not asked for subsidy. It has asked for a fair, unrigged marketplace within which it can compete. That is what we are delivering in the statement. That, and the understanding that we shall remove the bias against the industry—against which it has fought, although, as the hon. Gentleman will be aware, many Conservative Members denied that it existed—is doing more to create confidence than anything else that we could do.

Photo of Caroline Flint Caroline Flint Labour, Don Valley

I very much welcome the statement, and I am sure that the miners at Rossington pit in my constituency will also welcome it. We now have a Government who say that there is a future for coal.

Will my right hon. Friend's Department promote the image of the new coal mines in this country? During the past year, there has been a portrayal of an old industry with old skills, and new industries such as gas have been promoted against that. The pit in my constituency has some of the finest technology and engineering skills in the world which are not only used to produce coal in this country, but are marketable abroad where they create jobs for British people. I hope that her Department will ensure that that image of coal is conveyed, rather than the images of the past.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

My hon. Friend is entirely right, and I welcome her words. As she says, coal is in many senses a new industry, as is mining support. There are technologies of the future for which there is a potential substantial market elsewhere in the world. We would have been unable to take advantage of that if we had followed the policies pursued by the Conservative party and allowed our own industry to disappear. I entirely accept my hon. Friend's point that the industry has a future in the United Kingdom and elsewhere, and I shall bear it in mind.

Photo of Michael Jack Michael Jack Conservative, Fylde

The President may be aware that, in my constituency, British Nuclear Fuels plc manufactures all the fuel for Britain's nuclear power stations and operates the Magnox stations that provide electricity at the lowest marginal cost. Her statement was silent on the effect of her proposals on the nuclear industry. Many of my constituents would like to know what estimate she has made or received about the impact of her proposals on the market for nuclear-generated electricity.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

Our proposals are for competition in the market that is fair between nuclear and other fuels, so there was no need for further comment on that. We inherited a market that was rigged against coal. Steps to advantage the nuclear industry have already been taken. This is not the first action that the Government have taken on the energy market; we have taken a series of actions since we came to power, and my statement does not change the basic position of the nuclear industry.

Photo of John Grogan John Grogan Labour, Selby

Following the comments of my hon. Friend the Member for Don Valley (Caroline Flint), does my right hon. Friend agree that coal is now a modern, flexible, high-tech industry with a highly skilled and highly productive labour force? In many ways, it is a new Labour dream and is well able to compete on the level playing field to which my right hon. Friend referred. Does she agree that there is not only an opportunity but a responsibility for RJB Mining and the electricity generators to make use of the breathing space that the Government have given them and to invest for the future, particularly in clean coal technology?

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

My hon. Friend is entirely correct, and I am grateful to him for his observations. He is right to say not only that the industry is modern, flexible, high-tech and able to compete, but that the market in this country has been given opportunities and a responsibility to seize them. In addition, given that coal will now have a level playing field in the UK, there are opportunities in overseas markets which, having a sound domestic basis, the industry will be in a better position to seize.

Photo of Tony Baldry Tony Baldry Conservative, Banbury

The President has said several times this afternoon that energy prices are higher than they need be. Will she be so kind as to place in the Library the evidence supporting that assertion, and give it to the Select Committee on Trade and Industry? It is slightly surprising, in that all the electricity consumer organisations, the CBI, the Select Committee and others are concerned that Government interference in the energy market will put up prices, to the detriment of consumers.

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I do not think that the hon. Gentleman has been following what has been going on. There is no dispute that energy prices are higher than they need be. The Director General of Electricity Supply and the major energy users agree with that. The hon. Gentleman will find some supporting material in the consultation document that I have already placed in the Library—but I can assure him that the assertion is not contested, even by those who have benefited from the fact that energy prices are indeed higher than they need be. They have just kept quiet, but they do not dispute the fact.

Some people may have assumed—perhaps even hoped—that the Government would interfere in a way that raised prices. I stress that the Government are interfering to unrig the market that the Conservatives left. That will lower prices, because the rigging was keeping prices up.

Photo of Mr Bill O'Brien Mr Bill O'Brien Labour, Normanton

I thank my right hon. Friend for her statement. As a miner who worked underground for 30 years, I welcome transparent and open statements from Ministers. We have heard it accepted that there has been a serious distortion in the energy market in favour of gas; I welcome the fact that we now have a Government who are being honest.

I consider that the regulator and the Environment Agency have played a part in the distortion of the energy market. Will my right hon. Friend ensure that that cannot happen again, to show that fairness and honesty in the energy market are the Government's intentions for the future?

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I am grateful to my hon. Friend, whose long experience in the industry I know of, for his observations and his welcome to the background of the Government's proposals. It is clearly not altogether understood—if it were, the hon. Member for Banbury (Mr. Baldry) would not have said what he did—that the review and the study done by the consultants have clearly exposed the fact that everything said by the coal industry and the coalfield communities down the years about how the market was unfairly and deliberately rigged against coal, resulting in higher prices for customers, was absolutely true.

The Director General of Electricity Supply has himself recognised that the way the market now operates has resulted in higher prices, and he is seized of the need to take action to redress that.

Photo of John Bercow John Bercow Conservative, Buckingham

Does the President accept industry estimates that about £3 billion of investment in new gas-fired power stations is at risk from an extended moratorium? If she does not accept those estimates, will she tell the House what hers are, and on what they are based?

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

There have been a lot of estimates based on a lot of rather wild rumours about what policy the Government might pursue. The Government are now putting these proposals in the public domain for consultation. No doubt people will have the chance to respond, and we will have the chance to assess their responses. We are determined that the coal industry should get a fair place in the market, and that consumers and the coal industry should both be fairly treated. That does require a deferment policy on consents, if justified.

As I have made clear—it will certainly be pursued over the weeks ahead—we shall look carefully, case by case, at any of these issues, should they need to be raised.

Photo of Joan Walley Joan Walley Labour, Stoke-on-Trent North

May I tell my right hon. Friend how much I welcome what she and her ministerial team have done in taking this important step toward a sustainable energy policy? However, there are major concerns from coalfields such as that in my constituency, where, because of what the previous Government did, it is already too late to safeguard coal mining. People are anxious that there should be no confusion between the concerns about a level playing field for deep-pit coal and those about opencast, and a licence should not be given to opencast. Will she meet anti-opencast campaigners, to ensure that concerns get fed into the review for the Department of the Environment, Transport and the Regions?

Photo of Margaret Beckett Margaret Beckett The Secretary of State for Business, Innovation and Skills

I thank my hon. Friend. I well recall the circumstances in her area and constituency—the implications for what were quite modern pits there, and the stance that she and her colleagues in the city took on the matter. I also thank her for her words about the ministerial team. One of the rewarding features of this whole consideration of policy has been the way in which Ministers within my departmental team and across Departments have worked so constructively and well together. I am deeply grateful to my hon. Friend the Paymaster General and to the Minister for the Regions, Regeneration and Planning, and others, for the way in which everyone has worked co-operatively together. My hon. Friend asked me a question about opencast mining. As I have said, there will be a subsequent statement about opencast in the light of the outcome of the further review. I am always willing to hold meetings or discussions where an issue is directly relevant to my own portfolio and concerns. The issue that she raises may be a matter for my colleagues, but no doubt that will become apparent in due course.