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Treaty of Lisbon (No. 2) — (2nd Allotted Day)

Points of Order – in the House of Commons at 12:39 pm on 30th January 2008.

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Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons 12:39 pm, 30th January 2008

I inform the House that I have selected the amendment in the name of Mr. Hague.

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Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform 12:50 pm, 30th January 2008

I beg to move,

That this House
approves the Government's policy towards the Treaty of Lisbon in respect of provisions concerning energy.

It is a great pleasure to introduce this important debate about energy. That is, of course, its theme. The twin challenges of tackling climate change and energy security are perhaps two of the biggest challenges that this generation of European politicians and leaders must resolve. If we are to succeed in resolving them, we will need tough and effective action, at both a national and global level. In particular, if we are to respond to those challenges, they call for closer co-operation between members states of the European Union. That is why I strongly support ratifying the treaty of Lisbon. I want the United Kingdom to continue to play a leading role in shaping our response to both those significant energy challenges. It is the view of Labour Members and, I believe, of other hon. Members that we can best do that by passing the European Union (Amendment) Bill and by ratifying the treaty. The case for doing so is compelling.

The treaty enables the European Union to move on from years spent debating institutional reform to look out on the world, not in on ourselves, and to deal with the issues that matter to the people of Europe. The efficient and secure supply of energy will be critical to our economic performance in the coming decades. Building European Union institutions that are better able to function more efficiently, negotiate more effectively and respond more quickly to the needs of its citizens must be our collective aim. However, that chance will be squandered if Opposition Members are allowed to get their way. We cannot afford to spend the next decade looking inward or retreating to the margins of influence in the European Union, as some would like.

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Photo of Mark Harper Mark Harper Shadow Minister (Work and Pensions)

Given that the Secretary of State says that there is a compelling case, will he explain why the Government originally opposed the powers and wanted them removed from the treaty, and said that they were completely unnecessary because all the necessary powers were already in existing treaties?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I shall come on to that point. The important thing about the treaty of Lisbon—I hope that this reassures the hon. Gentleman—is that all the energy red lines are fully reflected in it. Let me set out the three most important ones. First, the treaty protects and secures our rights over our national oil and gas reserves. I would have thought that he supported that. Secondly, it will make sure that we can always act to ensure security of supply in emergencies. I would have thought that a Conservative Member of Parliament supported that. Finally, the new article will not impede progress in opening up EU energy markets. We hear a lot—rightly so—from Conservative Members about the importance of energy liberalisation. That is why the treaty of Lisbon is important and why we are right to introduce it in the way that we have.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

I am interested in what the Secretary of State says about the liberalisation of markets. Clearly, that is the important issue from the European Commission's point of view. How will the treaty encourage that given the Commission's proposals for unbundling ownership are being strongly resisted by France and Germany?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I shall come on to energy liberalisation. It is right to point out that the Commission's current proposals are being strongly resisted by a number of member states. The important lesson that I draw from all of this is that we would not have reached this point in what I hope will be a substantial transformation of the EU energy market if it were not for qualified majority voting. It has provided a strong stimulus for reform of this important sector of our European economy. As I said, it would not have been possible to have reached this stage if it had not been for qualified majority voting.

If we were to follow the advice of those on the Conservative Front Bench—I accept that not all Conservative Members feel the same way—we would be looking forward to a decade of introspection in the European Union, which would be damaging both to the EU and also, in particular, to the interests of the United Kingdom, which is my principal concern. I find it genuinely hard to understand the position that the Conservative party—officially, at least—is taking for two reasons. First, it wants to disown its role in relation to the Single European Act and the Maastricht treaty, both of which were in Britain's long-term economic and political interests and both of which rightly involved, in my view, extensions to majority voting in the Council. We would not have seen the opening up of markets in Europe without qualified majority voting.

However, if that were not bad enough, there is the second problem with the Conservative party's position, which is that it now wants to blight Britain's future in the new enlarged European Union by renegotiating the basis of Britain's membership. It is that deadly combination of disowning the past and blighting the future that shows how grotesquely out of touch those on the Opposition Front Bench have become. [Interruption.] I believe that howling at the moon, which is the best description that one can give of the Conservatives' policy on Europe, is no rational substitute for a sensible policy on Europe, but I am afraid that that is all we hear today from most Conservative Members.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

No. The hon. Gentleman has had his go.

An enlarged but more effective European Union, because of the treaty, can help to support our national and global energy priorities.

More than 50 years ago, the founders of the European Union recognised the critical importance of energy, then in the form of coal, to the economic and political security of Europe. Coal and steel were identified as the two raw materials crucial to power and industry in the Europe of the time. Today, against an increasingly competitive and politicised energy landscape, energy sources are even more critical to the continued economic success of European Union member states.

In recognition of that, the Lisbon treaty establishes a specific article—176—for energy policy, to give any energy measures passed at the EU level a specific legal base for the first time. Previously, the European Union could introduce directives on energy only by using other related articles, the most common of which were article 95, to do with the approximation of laws for the internal market, and article 175, dealing with the environment. Existing legislation passed under other articles include directives on the internal market in gas and electricity, under articles 47(2), 55 and 95, directives on the promotion of renewables and co-generation and on energy end-use efficiency and energy services, and the directive on the EU emissions trading scheme, all of which were made under article 175. Without a separate article, considerable time has undoubtedly been spent by the Commission, officials, national institutions and lawyers on looking inward at the bureaucracy of the EU rather than on discussing how we can deal with our energy challenges.

I believe strongly that there is therefore a need to turn the aspiration of open competitive markets that secure affordable energy supply while working towards a global low-carbon economy into increased and better-focused action at an EU level.

Supply disruptions to any one member state affect the European market as a whole and demonstrate that long-term bilateral contracts alone cannot wholly insulate countries from the impacts of supply tightness across the EU. The new separate article will make it easier for member states to discuss the issues in more depth and to work on delivering the energy solutions that we need. It will help to ensure that EU energy policies are clear, coherent and, we hope, mutually reinforcing.

The new article will aim to do four things: ensure the functioning of the energy market; ensure security of energy supply in the EU; promote energy efficiency and energy savings and the development of new and renewable forms of energy; and promote the interconnection of energy networks.

Photo of Gisela Stuart Gisela Stuart Labour, Birmingham, Edgbaston

Will the Secretary of State clear up some confusion? There seems to be an argument over the security of the energy supply, the stocks being held and the oil supplies, but it seems to me that the provision is perfectly reasonable. Can he tell me why it is coming under criticism?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I shall try to deal with that point, but I think that the criticism is coming from others, not from us. It is important to emphasise that it is clear that matters such as energy stockpiles are taken under QMV. That has been the position since the treaty of Nice. Perhaps this will answer my hon. Friend's point: the European Union will not have control of the UK's energy stockpiles. We will be required, rightly and sensibly, to maintain such supplies, but they will remain under UK control and nothing in the treaty affects that. I know that the Opposition Front-Bench spokesmen, at least, want to make such an argument, but those who have done so have not understood article 176 and its clear and express provisions.

We have also been able to ensure that the UK continues to have the right to determine the conditions for exploiting our natural energy resources, our choice between different energy sources and the general structure of our energy supply. Article 176 secures Britain's energy red lines in the way that I have described, safeguarding the British national interest in the process.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

Obviously, we are here in an effort to understand the detail of article 176 and its implications for the United Kingdom. Can the Secretary of State explain his interpretation of what would happen in the event of a conflict between the goal of energy security at an EU level and at a national level, given that the EU would be given legislative powers under the article?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

It is important to understand that this section of the treaty of Lisbon is essentially a consolidation exercise in relation to QMV rather than a significant extension of it. The importance of article 176 has to be properly understood by Conservative Members if they are to sustain their criticisms.

The treaty contains a proper recognition in the laws of the EU, for the first time, of the sovereignty of member states over their national resources. That will trump any other provision in the treaty and ensure that the powers on QMV have to be exercised against the background of the clear wording of article 176.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

The Secretary of State says that this is a consolidation exercise, but he knows that there are two new solidarity obligations—one in article 175 and one in amended article 100—to deal with periods of crisis. Given that the obligation could incur infraction proceedings by the Commission and, if judiciable, by the European Court of Justice, how does the Secretary of State think it might affect our freedom to supply oil, for example, to an non-EU member state in times of crisis—perhaps to another NATO member—rather than to other member states under the solidarity clause?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I think I understand the point that the right hon. Gentleman is trying to make. In this context, we are essentially talking about situations with which we have become all too familiar—those in relation to terrorism, and so on. I would have thought that there was a palpable case for co-ordinated action across the EU to deal with such issues. In relation to his point about social cohesion and solidarity, of course it was Maastricht that extended the activities of the Community in many areas, including in the field of energy. I am sure he will correct me if I am wrong, but I understand that he voted for the Maastricht treaty and supported it.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

The Secretary of State is missing the point. It is nothing to do with social solidarity; this is a specific, new obligation in the treaty to act in solidarity with other member states, both in normal market conditions and at times of crisis. Given that that the obligation is judiciable and can incur infraction proceedings, it is very serious and might—in my view, it will—affect our freedom of choice to supply energy to non-member states, that is, to our other military allies. We might need or decide to do so at the appropriate time. The Secretary of State did not answer that serious point, which has nothing to do with Maastricht as the obligations are new. Can he answer it now?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I do not want to prolong the exchange unnecessarily. As the right hon. Gentleman can see, I have rather a substantial speech to make.

Several hon. Members:

rose —

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

Let me make it clear that I shall not give way at this moment in time. I want to come back to the point made by Mr. Heathcoat-Amory.

The solidarity provisions to which the right hon. Gentleman referred have been designed to deal with national emergencies, including terrorism. With great respect to him, I would have hoped that he could find some common ground with us, on that point at least.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I shall give way to the Chairman of the Select Committee on Business, Enterprise and Regulatory Reform in a minute.

On the specific point about energy, it is important to bear in mind what the treaty says. It states:

"measures shall not affect a Member State's right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply".

Those are important guarantees to have in the treaty and the body of European law that were not there before. Given the perspective held by the right hon. Member for Wells, I would had thought he would be able to support them.

Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

My concern, too, is about paragraph 87 of the treaty—this new paragraph 1 of article 100—with its reference to a

"spirit of solidarity between Member States".

When I read that, I imagined that it referred to the problems with the supply of Russian gas to eastern Europe, for example, and the consequences for the British and western European markets. The Secretary of State is saying, almost by implication, that it is restricted to subjects such as terrorism. Will he be a little clearer about the range of circumstances in which he thinks the provision will apply?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I would prefer to make a little progress with my speech, but I shall ensure that the hon. Gentleman receives a proper answer as the debate proceeds.

Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

Article 122 of the consolidated texts, which is, I think, the article 100 that is being discussed, states in paragraph 2 that the Commission, having consulted people,

"may grant, under certain conditions, Union financial assistance to the Member State concerned."

Surely the article about emergency situations is to do with financial assistance from the EU, and not to do with diverting supplies from one country to another, or anything else.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

May I say how much I appreciate my hon. Friend's support? I am grateful to him for providing a clarification that we all regard as very helpful.

I do not believe that a fair-minded person could regard the provisions in the treaty as being of anything other than a positive benefit to the UK and the EU as a whole, unless opposition to this article is being used as a proxy by those who do not believe in tackling climate change or who want us to get out of the EU altogether. People will form their own opinion about that.

In the move to a separate article, the treaty confirms the role of QMV, and its retention is unequivocally in the UK's national interest. For years the UK has been working to achieve energy priorities, such as the liberalisation of Europe's energy market. We believe that the competitiveness of Europe's energy markets is fundamental to the economic performance of the EU over the next 50 years. Although progress and agreement have been possible without a vote, the potential for a decision to be taken under QMV has removed many of the incentives for an individual country with protectionist instincts to try to block progress against the wishes of the majority.

It seems certain to me that without QMV we would have made little or no progress in liberalising EU energy markets. In fact, it is arguable whether the Commission would even have proposed them in the first place. We would certainly have had no chance of securing the latest package of liberalisation measures, which those on the Opposition Front Bench have repeatedly called for us to support—the so-called third package of energy liberalisation, which is being negotiated. The UK strongly supports those proposals, which represent a real breakthrough in opening up Europe's energy markets. The aim is to prevent incumbent energy players from keeping others out of the market, and to promote competition. That would benefit energy consumers—individuals and businesses—in the UK. We are working with the Commission and our member state allies to make sure that that happens.

It will not be easy, as there is significant opposition to the proposals. Under a regime of voting by unanimity—which is what I suspect many Opposition Members would prefer—opponents of change could sit on their hands and resist any progress whatsoever, but with QMV we can make, and are making, real progress. We are unlocking decision making, breaking down time-consuming bureaucratic stalemates and helping to promote policies that we believe are in the interests of all the people of the EU.

I turn now to the important relationship between the EU and UK energy policy. Half a century ago, the European Coal and Steel Community brought European countries together in economic and political partnerships to build a lasting peace across the continent after the carnage of two world wars. Those early steps have borne considerable fruit. We have come closer together, and that is a good thing. Our continent is more prosperous and peaceful, and those are obviously positive developments. The threat of full-scale confrontation between European countries no longer exists.

In all those respects, the EU has played a positive role. I hope that hon. Members from all parties can agree on that at least, but we are undoubtedly still confronted by many difficult challenges, both at home and abroad. We are clear that every member state should be responsible for its own energy resources. That is not a Community competence, and nor should it be. It has been an important red line in the Lisbon treaty negotiations, and the treaty does not change that basic legal reality.

The Government have set out the objectives of our energy policy. We have focused on ensuring the secure provision of affordable and sustainable energy supplies for every UK citizen, as well as the successful transition of our country to a low-carbon economy. We are working with the energy companies and consumers to improve energy efficiency and increase our use of low-carbon energy sources so as to reduce our reliance on fossil fuels. However, fossil fuels will remain a major part of our energy mix for years to come. The best way to protect ourselves against potential supply difficulties caused by either natural disasters or resource nationalism is to develop as diverse a mix of energy sources, suppliers and trade routes as possible.

The UK is also undergoing a long-term transition from being a net energy exporter to being a net energy importer. Unlike many EU member states, we had years of being self-sufficient in oil and gas production but, however successfully we manage our remaining North sea oil and gas reserves, by 2020 imports are likely to account for well over half of our oil and gas requirements.

I believe that dealing effectively with those challenges means that we have to build a solid base of strong bilateral and multilateral relationships. Moreover, although our national measures to reduce greenhouse gas emissions can play an important part in tackling the problem, UK greenhouse gas emissions amount to only 2 per cent. of world emissions. Obviously, therefore, we need to work closely with other countries on a global level to make a significant difference. By acting with an enlarged and, thanks to the Lisbon treaty, more efficient EU, the UK will be able to help to deliver solutions for climate change and energy security at a European and international level.

Photo of Bob Spink Bob Spink Conservative, Castle Point

The Secretary of State is right to say that the UK generates only 2 per cent. of global carbon emissions, but does he accept that we have a duty to set an example to the international community when it comes to tackling the problem and setting up solutions to it? Can he guarantee that the treaty will not interfere in any way with the UK's drive to introduce new and greener sources of energy generation, such as nuclear? Will he give a cast-iron guarantee that the treaty will not result in any increase in our constituents' energy costs?

J

THERE IS NOTHING GREEN ABOUT NUCLEAR EXPLOITATION It would seem as though our slavourd capitalist regime of poluting industrias which seem to have more control in the World than the Goverments, people and laws, which in many cases of big international corporisations, work for them one way or another, needed an easy to grasp...

Submitted by Jona Hug Continue reading (and 4 more annotations)

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

The question of energy prices is complicated. I do not think that any Minister in any Government in Europe could claim to be able to hold down energy prices. That is not the world that we live in. We must tackle the problem of the fuel poor, and we are developing measures to that end, but there is nothing in the Lisbon treaty to impede progress on climate change or energy security—far from it, in fact. Moreover, the treaty builds the concept of sustainable development into the EU's legal architecture for the first time. Such policies should secure support from all sides of the House, not opposition.

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

My right hon. Friend said that by 2020 we are likely to import half of all the gas that we use. He will know that the new gas pipe from Norway is likely to make more gas available and that that could trigger a second dash for gas. We need the diverse energy mix that he has described, so will he be considering capping the amount of gas used for electricity generation? It already accounts for 40 per cent. of our gas usage, and by 2020 that proportion could be 60 per cent. or more.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I am grateful to my hon. Friend for those questions, but we are not going to cap any source of energy. That would be entirely the wrong thing to do, and completely incompatible with the fundamental features of our energy market. The question of carbon capture is especially pertinent in relation to the future of gas and coal, and all hon. Members should take some pride in the fact that the UK is the only member of the EU that is committed to a carbon capture and storage demonstration project on a commercial scale. I hope that other countries will make a similar commitment so that we can look at a range of technologies—including post-combustion, pre-combustion, oxy fuel, coal and gas—that could begin to make a significant difference.

Taking CCS out of the equation would cause a problem on a global scale when it comes to dealing with climate change. Estimates made by the International Energy Agency, the Stern review and others show that as much as a third of our total global carbon mitigation strategy will depend on CCS technology. So my answer to the question posed by my hon. Friend Mr. Clapham is that we should not set about the problem by capping energy sources but we should maximise the energy that we get from renewable sources, and the EU has proposals to that end.

In addition, I think that we should look at nuclear, and the Government have made our position clear on that. Finally, gas and coal will be part of our energy mix for some considerable time, and CCS will be an important way to make sure that those energy sources do not make matters worse. However, I do not believe that placing caps on individual energy sources is the right thing to do.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I have strongly supported the emphasis that my right hon. Friend has placed on energy sovereignty at a national level, and his recently expressed view that we should move as far as possible towards self-sufficiency in the longer term. However, Germany's installed solar power capacity is 350 times greater than Britain's, and it has 10 times more wind power capacity than we have. That provision is the result of intervention by the state rather than by the EU. Should we not do what Germany has done? Should not the Government take action now rather than rely on the EU?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

The German Government are playing an active and supporting role in relation to the new proposals from the European Commission, and they do not believe that Germany should not be engaged in shaping the new renewables directive. Indeed, the German Government have made significant progress on renewable energy in the past 10 or 15 years, and I pay great tribute to them for that.

I believe that the UK has made progress. We have doubled the amount of energy drawn from renewable sources in the past few years, and we are planning to treble it. We will have to do significantly more in the years up to 2020 if we are to meet the EU targets, but so far we have concentrated too much on the financial aspects of renewables promotion. We should not overlook some of the other problems with regulatory and planning consents that have got in the way of really moving ahead with renewable energy in this country.

For example, it is a matter of great regret to me that many local authorities around the country—run by the Conservatives, the Scottish National party and even my own party—have presented a brick wall to renewables schemes. There is no place for nimbyism when it comes to climate change, but there has been far too much of it.

Photo of Colin Burgon Colin Burgon Labour, Elmet

My right hon. Friend mentioned the nuclear power industry. I have grave reservations about the Government's proposals, which have been sold to the public on the assurance that the taxpayer will not underwrite any costs—such as clean-up costs—that are incurred. However, reports this week claim that EU directives and pressure from the European Commission mean that the British taxpayer will in fact have to underwrite the costs on any nuclear incident that might arise. Will he clarify the situation?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

Governments in the United Kingdom and around the world have entered into binding international agreements for dealing with any serious nuclear incident to ensure that public health is protected and decontamination takes place. It would be grossly irresponsible for the UK Government to pull out of such responsibilities, and we have no intention of doing so. Yes, it is a potential issue for all of us, but there is no question at all of a responsible Government running away from that kind of responsibility, and we have no intention of doing so.

On the costs of decommissioning and waste disposal, we have been very clear about where new lines must be drawn if new nuclear is to play a role in the UK energy mix. The only sort of energy generation that we subsidise in the UK is renewable. We are not proposing a subsidy for nuclear power, and we have made it clear that sufficient funds will have to be accrued over the lifetime operation of nuclear plants to cover the costs of long-term waste disposal and decommissioning the sites. Those costs should not fall to UK taxpayers. That is the view that we have reached.

Photo of Richard Ottaway Richard Ottaway Conservative, Croydon South

I do not know whether it has been put on the Secretary of State's desk yet, but is he aware of the report by Dieter Helm, professor of energy policy at New college, Oxford? He says:

"The Government's nuclear energy policy is fundamentally flawed because it relies on the 'fiction' that a new generation of reactors can be built without state support".

He goes on to say that the way out is to have auctions for long-term reductions in carbon emissions over 20 to 30 years. I ask the Secretary of State to have a hard look at that idea, because I think that there is something in it.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

Obviously we treat the comments of such a distinguished person with a great deal of respect and interest. I do not think that the professor made those comments during the consultation period; they came after it ended. I have been struck by how strong the power companies' interest has been in developing new nuclear proposals on the basis of the terms that we have set out. We are not mandating nuclear; we are not requiring power companies to construct, build and operate new nuclear power stations. We have established the ground rules for how that can be done in future, and it is up to the power companies to respond with proposals. Personally, I think that the professor's comments are not germane. It is likely that there will be significant interest in undertaking new nuclear projects that follow the lines that we have proposed, and energy companies have themselves strongly expressed that view to us.

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

I do not want us to get bogged down in a rehash of the energy statement. This country needs new nuclear power stations just to maintain the percentage of the power that is currently provided by nuclear. The key to this debate is that Europe as a whole is already 50 per cent. dependent on imported energy, 25 per cent. of which comes from Russia. Both of those percentages are rising. As a result, it is crucial that the treaty provision on solidarity is supported. I welcome what the treaty proposes, and I want to hear much more about what the Government will do to drive forward a more cohesive energy policy at the European Union level.

J

This Country seems to be unable to successfully clear up the radioactive contaminated beaches, wild life eateries and rivers that have been polluted from our Nuclear industries. Likewise, other than denying a link between Nuclear Energy and cancers like childhood Leukemia, the Government is unable to prevent such high clusters of cancers near Nuclear establishments. Neither is it able...

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Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I am grateful for the hon. Gentleman's support. He has taken a consistent view on all those matters, and I appreciate his remarks. Eventually—I know it looks as though it will be at some far distant point in the future—I shall come on to the points that he raised.

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

Richard Ottaway mentioned the interesting report from Professor Dieter Helm and Oxera. Will my right hon. Friend confirm that the report stresses that the United Kingdom has the most liberalised energy market in the European Union? That has given our consumers the benefits of a much greater choice of supplier and has lowered our prices. It also gives us lower prices than other parts of the European Union. That is the way forward for the EU, which is why all Opposition Members should support the Lisbon treaty's provisions on energy.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I agree strongly with my right hon. Friend, and I pay tribute to her work on energy policy. We hear a lot from Opposition Members about the costs of Europe for energy consumers in the UK—I have been reading a briefing that was made available to Conservative Members this morning. What is always missing from such debates is any mention of the significant benefits of EU membership when it comes to energy, and which my right hon. Friend highlighted. It is true that the report to which she referred highlights the fact that the UK has the most liberalised energy market in the EU. It also makes it clear that it is the most competitive energy market in the EU. That simply would not be the case if it had not been for the extension of QMV to such issues. I am perfectly prepared to acknowledge that that is an achievement of the Conservative Government, but the sad thing is that not many Conservative Members present want to acknowledge that. That is a sad reflection on the direction that Conservative politics has taken.

Photo of Claire Curtis-Thomas Claire Curtis-Thomas PPS (Rt Hon Baroness Scotland of Asthal QC, Attorney General), Law Officers' Department

My right hon. Friend will be aware that just over a year ago the Russians frustrated the supply of gas to continental Europe. That gave us all a significant shock and focused our minds on providing energy supplies in-country to meet our own needs. I therefore applaud the sentiment that he expressed: we need to strive towards ensuring that our country is energy-rich. I am also acutely aware that the provision of nuclear capacity will be constrained by suppliers and the availability in each country of people to manage those facilities. The UK currently does not have the capacity—

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. The hon. Lady is making a statement, not an intervention.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I am sure that that is true. The events to which my hon. Friend Mrs. Curtis-Thomas referred were a wake-up call for all of us. Mr. Taylor referred to some European Union member states being 25 per cent. dependent on Russian gas; some are 100 per cent. dependent on it. We in the European Union have to keep that firmly in mind, and consider what its long-term significance is.

I should try to make progress. On the proposals that the European Union has put on the table, I am sure that the House will be aware that the European Commission has published a package of ambitious climate and energy targets and measures for member states in a range of areas, including energy efficiency and new technologies. The UK played an important role in the development of those and other EU energy measures. As a result, we see the EU's overall energy package as a good starting point for the negotiations ahead.

We believe that if the EU has a more stable institutional framework, as a result of the Lisbon treaty, it will be able to focus, and deliver, even more on energy. First, we can ensure that there is a liberalised energy market across the EU that encourages competition and facilitates the flow of energy to where it is most needed. Secondly, we can promote greater market transparency, to help market players deal better with shocks, avoid shortages, and invest in and deliver the best cost-effective low-carbon solutions. Finally, we can develop an external energy policy that supports the EU in working with other countries to address the economic and political pressures that are having an impact on energy supply and demand, and to enable energy companies better to secure the energy that the European Union needs in future.

Photo of Albert Owen Albert Owen Labour, Ynys Môn

The Secretary of State made a strong case about the UK influencing the European Union. If we have a united European policy on energy, we can influence other countries—emerging economies such as India and China. Is that not good for citizens of the UK?

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Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I strongly agree.

It is one of the surprising ironies of political life that one occasionally finds oneself quoting people with whom one does not always agree. When preparing for this debate—and I did prepare for it—I came across the following comment, which touches on my hon. Friend's point:

"we can take pride in the distance travelled" in Europe,

"But we must also remember how far we still have to go. The Community is now launching itself on a course...which must make it possible for Europe to compete on equal terms with the United States and Japan....What we need are strengths which we can only find together. We must be stronger in new technologies. We must have the full benefit of a single large market."

That was said by Lady Thatcher in 1986, when she was Prime Minister. It would be an interesting test if we had a quick show of hands to see who on the Conservative Benches still agrees. I suspect that I know who would agree—there are a few decent Members there—but I suspect that a lot of Conservative Members have moved on.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I give way to the hon. Gentleman, because I suspect that he would be one of those who support what Mrs. Thatcher said.

Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

Lady Thatcher achieved the changes necessary to secure a competitive market in Europe using the existing powers. The Commission already has the powers to secure a proper price for carbon to underpin new nuclear and renewable energy. Those powers already exist. The things that we need to do can be done with existing powers. I cannot understand—although as a reasonable man, I am open to persuasion—why we need new powers to achieve objectives that we can already achieve.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I wish we had achieved all those objectives. It is not true to say that we have achieved them all. I made the point—it seems a long time ago—that I regard the provisions relating to energy in the Lisbon treaty as essentially consolidating. On that basis they should be supported, because they provide a simpler and clearer legal basis on which we can act.

The difficulty for the hon. Gentleman, for whom I have a great deal of respect, is that if he supports the provisions, and if he supports QMV applying intelligently in this context, he has a job of work to do to explain to people why he thinks it would benefit the European Union, even if the treaty had been ratified by the House, to go back and reopen it at some point in the future. I suspect that he does not believe that that would be in the UK's long-term national interest, so he needs to do a job of work on his hon. Friends on the Front Bench.

As I said earlier, the UK strongly supports a liberalised European energy market, one built on strong ownership unbundling, strong and effective independent regulation and greater transparency. The decline of our own gas resources and growing supply interconnection with continental Europe means that UK prices are increasingly linked to those in the rest of Europe. EU gas markets are not as transparent as ours, and that is putting upward pressure on prices as well. Our experience shows liberalisation to be the best and most effective way to deliver secure, affordable energy supplies, increased choice and improved services, better efficiency and greater investment.

As my right hon. Friend Ms Hewitt observed, independent research published today by Oxford Economic Research Associates again shows that the UK has the most competitive energy markets in the EU and the G7. That means that we ensure that no company can dominate energy production, generation or supply, that consumers can switch suppliers easily and quickly to get a better deal, and that third-party suppliers have equal and fair access to the market to help drive competition.

That should all help to keep our energy costs as low and as competitive as possible. As wholesale energy prices rise, having the most competitive market in the European Union is the best sort of protection for UK consumers against those pressures. That is evidenced by our lower prices over the past five years, despite the recent rises, compared with the EU 15.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

I am interested in what the Secretary of State is saying, and in theory he is correct. How, then, can he explain the fact that when one energy company puts up its prices, most of the rest follow at a respectful distance thereafter? Is that not grounds for at least investigating how energy companies are acting in our so-called liberalised market?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

The energy companies are subjected to the full rigour of existing legislation against unfair and anti-competitive practices. If there is evidence of any breach of our competition laws, we have the right mechanism to police it and to enforce those laws. The sad truth is that energy prices have been rising across the world, and it is inevitable that some of that will be reflected in prices here in the UK. As I say, if there is evidence of anti-competitive practices, we have the tools to address them.

The Commission has consistently credited the UK for the competitiveness of its energy market. The third package of energy liberalisation recently proposed is very much in line with the UK model, and could address many of the issues now inherent in EU markets. More transparent markets with clear, stable regulatory regimes would give market players the confidence that they need to invest, and would help reduce the costs of serving EU energy needs. Within the UK, liberalisation has led to sustained and substantial investment in new gas facilities: pipelines, LNG—liquefied natural gas—terminals and storage.

Independent research has indicated that full market opening in Europe could increase cross-border trade in electricity by 31 per cent. and reduce prices in the EU 15 by up to 13 per cent. Total savings in the EU could be of the order of tens of billions of euros. The lack of competition in EU energy markets is costing UK and EU consumers, and it is crucial that all member states press on until we have reached our goal of a true internal market in energy. Rejecting the Lisbon treaty would set back progress in this area.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

The whole House would agree that liberalising Europe's energy market is a good thing, but it can be done under existing powers. Will the Secretary of State tell the House why signing up to the Lisbon treaty will bring that about, if it is not coming about at present?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

The treaty provides a clearer legal basis for taking forward such work in the future. That is important, and we have important guarantees about our national reserves and strategic supplies, which I should have thought the hon. Gentleman supported. The sad truth is that we have not completed the job of energy liberalisation in the European Union, but the treaty of Lisbon will provide a clearer platform on which to take that work forward.

We all have choices in this debate. The hon. Gentleman is expressing his support for energy liberalisation, which I am glad to hear, but the position of those on the Conservative Front Bench—which, as I understand it, is not to ratify the Lisbon treaty but to renegotiate the treaty basis of the UK's membership of the European Union—would set back progress on energy liberalisation, not speed it up. That is the choice that he and others have to address.

As the House knows, last week the EU published its draft renewable energy directive, as part of a wider climate and energy package. The draft directive provides the framework for achieving the EU's agreed target of securing 20 per cent. of EU energy from renewable sources by 2020. It also proposes specific contributions from member states towards this goal. The Commission has proposed that 15 per cent. of all the UK's energy should come from renewable sources by 2020.

The directive also contains a target for 10 per cent. of all transport fuels to come from renewable sources by 2020. It is crucial that this biofuels target does not undermine global sustainability in any way. That is why we will continue to argue strongly for strict sustainability criteria to be applied to the biofuels that can be used to meet that target.

We see the proposals as a good starting point for discussion in the Council, and we believe that an EU working more effectively together can deliver the necessary action to match this ambition. We want all member states to be able to deliver their agreed targets in the most cost-effective way. We are committed to achieving whatever UK target is agreed following negotiations in the coming months, and we have made a strong start, with the announcement of a potential massive expansion of offshore wind, approval already given for the world's largest offshore wind farm, which will be located in the Thames estuary, consent granted for one of the world's largest biomass plants, which is to be built in Wales, and the launch of a feasibility study on harnessing the tidal estuary of the River Severn, the second largest project of its kind in the world.

There are many more important renewables projects in the planning system. The successful passage of the Planning Bill currently before the House will be vital to reduce delays in making the best projects happen. However, it is obvious that we will need to redouble our efforts to reach the 2020 target. This summer, we will launch a consultation on what more we should do to boost renewable energy to meet our share of the EU 2020 target. We look forward to a serious national debate about how we can best do that, to help feed into and shape the UK's renewable energy strategy, which I hope will be published in the spring next year.

Through the Energy Bill, we will put in place measures to strengthen the renewables obligation to triple renewable electricity from renewables obligation eligible sources by 2015, and in April the renewable transport fuel obligation will be introduced. As many hon. Members know, that will require suppliers to include 5 per cent. of renewables in their fuel mix by 2011.

By drawing a line under institutional reform in the EU for the foreseeable future—whereas it is the position of the Opposition parties to bring it back into the full glare of publicity—ratification of the Lisbon treaty will give us the time and energy to focus on issues such as those that I have outlined, which really matter to EU members and citizens. That is why the position being taken by those on the Opposition Front Bench is so damaging to the UK's long-term national interests.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

Is the Secretary of State making the case that the long list of renewables projects he has just told us about are dependent upon the provisions of the treaty? Presumably, planning for them began before 23 June, when the intergovernmental conference mandate was agreed.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

No. I know that my speech has been a long one, and perhaps the thread of it may not be as clear to the hon. Gentleman as I would like. That is not my argument. It is not a rational argument, because the proposals have been produced now and the treaty of Lisbon has yet to be ratified. However, my wider argument is twofold. The treaty provisions will be an improvement on how we currently deal with energy matters in the European Union, but my fundamental argument is that if we took the advice of the Conservative Front Bench, we would set back any realistic prospect of making progress on those areas and others. That is the fundamental choice for the House, and it is why those on the Conservative Benches with common sense are not supporting the views held on their Front Bench.

Strengthening the EU emissions trading scheme is another issue on which an outward-focused Europe can make a real and lasting difference. There is much for the UK to support—in particular, the Commission's move towards EU-wide central caps with a clear and long downward trajectory. That is a fantastic boost to our work to meet our emissions reduction targets in 2020 and beyond. The energy industry has made it clear to me and others that to invest with confidence in low-carbon energy production, they need the long-term certainty that a strengthened EU ETS can bring to the carbon market. That is one of the many reasons why the Commission's proposals on the ETS are so important.

The International Energy Agency estimates that carbon capture and storage has the potential to contribute up to 28 per cent. of global carbon dioxide mitigation by 2050, and will be crucial in moving towards a low-carbon economy. The EU's proposed framework for the regulation of carbon dioxide storage is a necessary step towards the commercial demonstration and future deployment of CCS across Europe. The framework will provide valuable support for our work on a domestic regime, on which the House had a useful debate on Tuesday night.

As many hon. Members will know, global demand for coal is due to increase by 73 per cent. by 2030, driven mostly by the energy requirements of China and India. The support of the European Union and members states' commitments to demonstrate CCS would add weight to the work of tackling emissions from developing countries. The Commission's plans for a network of EU demonstrations would include measures to share knowledge about those demonstrations with countries outside the EU, which will be of critical importance. I hope that the UK's project, for which we launched a competition in November last year, will form a full part of those activities.

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

I know that that competition is for post-combustion carbon capture, but I remind the Secretary of State that the merits of pre-combustion, pre-emission carbon capture are equally worth while. If this country is not going to have a project involving that, will he at least stimulate the European Union to spend some research funds on such a project?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I do not dismiss the importance of considering a variety of different carbon capture and storage technologies. In this country, we have to make a decision about the resources that we have available—that is, basically, to do one project here in the UK. Our clear legal advice was that to run an effective competition—and to have one, and one only—it was best to have a competition involving similar technologies that could properly be compared with one another.

I hope that there is scope for pre-combustion CCS demonstration projects to emerge from the European Union's commitment to organise 12 demonstration projects in the next few years. We have chosen post-combustion, for good and strong reasons. It is probably the technology that will have the greatest impact in China and India, and it is where we have to focus our support.

Finally, engagement with producer and transit countries, old and new, at European level, is crucial to UK and European energy security. Although pipelines that flow into central Europe from the east may currently have little impact on existing UK energy supplies, as our energy markets become more integrated, the work done to develop diversity of supply in one part of the EU will increasingly boost energy security across the whole European Union. An EU dedicated to addressing global challenges rather than debating internal reform can speak with a stronger voice and establish a more powerful collective position on energy issues at international level—for example, in the permanent partnership council with Russia.

Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

To draw those two threads together, is not the Opposition suggestion that we could do this anyway, without the treaty, an example of looking through the wrong end of the telescope? My understanding is—my right hon. Friend will correct me if I am wrong—that nothing in the Lisbon treaty would prevent the kind of initiatives mentioned by my right hon. Friend that the Government are already taking. Furthermore, there are elements to the treaty that, if the treaty is ratified across the EU, would enable this country and other member states to do even more—the sort of international co-operation to which my right hon. Friend has just referred.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I agree. This debate is about energy; the wider benefits to the UK of ratifying the Lisbon treaty are clear and compelling, and have been identified by the Prime Minister, the Foreign Secretary, the Minister for Europe and many other members of the Government. However, today we are considering energy. If there is cross-party support for the concept of energy liberalisation, the last thing we should do is to punt the Lisbon treaty into the long grass. That would simply make it harder for the United Kingdom and the European Union to make the progress that sensible and intelligent people want them to make.

Photo of Claire Curtis-Thomas Claire Curtis-Thomas PPS (Rt Hon Baroness Scotland of Asthal QC, Attorney General), Law Officers' Department

My right hon. Friend referred to projects being made available to China and India, as they are significant energy-consuming markets. Is there also an intention to share knowledge about new technologies for energy conservation and production with developing nations that currently have no energy profile at all, but which need energy to realise a decent standard of living for their citizens?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

Yes, there is. My right hon. Friend the Secretary of State for International Development is taking that work forward. The EU is taking forward a climate change partnership project with China. We have to make sure that all of us in the European Union make the maximum contribution to all the challenges, which essentially involve technology, but also include finance, the exchange of intellectual property rights, and technology transfer.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

In response to an earlier intervention, the Secretary of State promised to come back to an earlier point, but in taking so many interventions, he may have omitted to do so. Will he address the point in the Conservative amendment about the Government, having allegedly fought a separate energy article, now supporting it? Will he clarify his response on that specific point?

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

I did deal with that point— [Interruption.] Alan Duncan may not have liked my answer, but I definitely dealt with the point. To recap, I should say that we did have concerns about an energy article; there is no question about that. However, the concerns have been addressed. The importance of the Lisbon treaty in relation to energy is that there are important new energy red lines. First, we are able to protect and secure our rights over our national oil and gas reserves. Secondly, we can ensure that we can always act to ensure security of supply in emergencies. Furthermore, any new article will not impede progress in opening up EU energy markets and liberalisation. The concerns have been addressed; that is why I say to my hon. Friends, and to Members across the House, that they should support the ratification of the treaty.

To make real progress on all these issues, the UK has to play an active role in the European Union. The EU itself must be effective and efficient, focused on discussion and action beyond its own institutions on the issues that matter. Working together for the EU and each member state's national interest in relation to energy, the treaty of Lisbon will help us achieve that. It will enable the enlarged EU to work more efficiently, and the UK to negotiate more effectively about the future role and focus of a modern global Europe.

As I have set out, the Lisbon treaty meets the UK's red lines, protecting the UK in areas of vital national importance and helping us to focus on the big issues, including energy. It is what we said we wanted: an amending treaty, not a constitution. It is a good deal for Britain and for the whole of Europe, and I commend it to the House.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State 1:47 pm, 30th January 2008

I beg to move, to leave out from "House" to end and to add instead thereof:

"notes that the Government demanded the deletion of a new article on energy when it was first proposed as part of the EU Constitution;
further notes that the Government's explanation was that 'this provision is unnecessary as all aspects of energy policy are effectively covered elsewhere in the Treaty e.g. single market, environment';
believes that the Government's position then was right and remains valid;
and accordingly rejects the Government's current policy towards the Treaty of Lisbon in respect of provisions concerning energy."

Unlike the Secretary of State, I can start by saying, "Here's one I prepared earlier." However, once he got his script, I—and, I suspect, others in the House—sensed that his heart was not quite in what he was saying and that he had not really understood the implications of the treaty that he attempts to defend today.

The treaty represents failure—a massive failure of political will, a total failure of negotiating wit and a complete failure to keep the promises that the Government made to the British people in what, morally, was a binding manifesto commitment to submit the treaty to a referendum. The treaty is a duplicitous document, as has readily been admitted in the media by the author of the constitution, Mr. Valéry Giscard d'Estaing, the former Italian Prime Minister and the Belgian Foreign Minister. They have all claimed that the treaty is designed to be "illisible", "illeggibile" and whatever the Flemish is for deliberately unintelligible gobbledygook.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

I am grateful to my right hon. Friend for his astute clarification—double Dutch it indeed is.

Blinding us with techno-babble is a deliberate ploy to obfuscate the real intentions behind the treaty, which are exactly the same as those of the constitution: gathering power into the centre of Brussels, removing flexibility and ignoring the voice of its citizens, and assuming all the rights of power, but without any of its democratic responsibilities. This is neither the outward-looking, flexible European project that we wish to see, nor the project that we were promised.

Today it has fallen to us to examine the articles in the treaty that explicitly cover energy. In the spirit of the rest of the document, these sections are oblique, mysterious and evasive. Their very existence points to a murky process at the heart of Brussels which casts a shadow over the entire mechanism of decision making in the Commission, and, far more damaging, to the utter ineptitude represented by the Government's inability—in the phrase of one of my favourite Ministers, Lord Jones of Birmingham—to bang the drum for Britain.

The Government have said that we need these articles to drive forward the liberalisation of the European energy market. That is a bogus argument, for one critical reason that we have already touched on today: the European Commission already has the legal base on which to make progress on liberalisation, contained in the single-market provisions and in the 40 or 50 existing directives on energy.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

Rob Marris put his finger on it when he said that even if the hon. Gentleman were right, he would have to prove something more than that the EU can do these things already—namely that what is proposed is harmful. Can he tell us, in a nutshell, what is harmful about the change that is proposed?

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

That is a completely bogus somersault of an argument, which I do not accept. I shall come on to why what is in the treaty is, in my view, harmful, but it does not necessarily relate to the simple aspects of liberalisation.

Only last September, the Commission published the third tier of its liberalisation proposals. Let me confess openly that we agreed with what it said. There were two options on the table: they were, in fact, the EU's most aggressive proposals so far. If we require proof of their potential effectiveness, it is that they are vigorously opposed by the French and German Governments, neither of whom operate the liberal, free-flowing energy market that we operate in Britain.

The Government's claim that this will all help the progress of market liberalisation looks even more specious when we consider that one of the most fundamental clauses in the foundation treaty—that on competition, which calls for an internal market

"where competition is free and undistorted"

—has been deleted at the behest of Mr. Sarkozy. Far the most astonishing aspect of the whole process is the fact that our feeble ministerial negotiators have returned to the House waving a sheet of paper, flushed with triumph and boasting of a new era for Europe, but with one of the most crucial planks of competition policy axed by the French, thus leaving us vulnerable to the protectionist instincts of some of the EU's member states.

The Government's position would be comic if it were not so serious. The great paradox is that while they proclaim that these unnecessary articles on energy will drive liberalisation further, they have failed to prevent the removal of a clause that shores up one of the Union's greatest strengths since its inception: the dynamic and competitive internal market.

Let us turn to the treaty itself, and examine further exactly what it says about energy and what it might actually mean. As always with these labyrinthine manuscripts, the devil is in the detail. The House does not have a magnificent record when it comes to scrutiny of European legislation, and true to form the Government have not given us anything like enough time for informed debate, but we must make do with what we have.

The treaty establishes energy as a "shared competence". That is in the new articles 2A to 2E that the treaty of Lisbon inserts into the treaty of Rome. No such relationship currently exists between the Union and member states—there is merely a reference in the Rome treaty to "passing measures" on energy—so, for the sake of clarity, we should reiterate what we mean by "shared competence", lest there be any confusion about the extent to which this changes our relationship with Brussels in matters of energy.

Reference to areas under shared competence means that the EU and member states may both adopt legislation, but that member states have freedom to do so only to the extent that the EU has not. In practice, that means that in the eyes of the EU and its legal order it is European law, not the laws of individual member states, that will enjoy supremacy. The word "supremacy" itself may not be in the treaty, but the principle of superiority— [Interruption.] The Minister for Europe may well laugh. This is the deceit about which the whole country gets so angry: ministerial assurances, if that is what that chuckle meant, count for so little. In the end it is the words in the treaty that matter, not the scoffing of the Minister.

As I was saying, although the word "supremacy" may not be in the treaty, the principle of superiority shines through on every page of this document.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

Is my hon. Friend aware that he has the former Government on his side? They tabled an amendment in the Convention on the Future of Europe to delete the concept of shared competences, and they made exactly the points that my hon. Friend has been making. This Government are now trying to make the best of a bad job, but at the time—and it happened in my presence—the Government representative on the Convention moved an amendment to try to delete the concept. My hon. Friend is absolutely right in his objections, and at the time there was a cross-party alliance.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

I am grateful to my right hon. Friend. As a former Minister, he knows the argument inside out. What he and I are trying to say was confirmed in June last year by the legal service of the Council of Ministers, which stated its opinion that

"according to the Court"

—that is, the European Court of Justice

"this principle"

—of supremacy—

"is inherent to the specific nature of the European Community".

As was pointed out earlier by my hon. Friend Mr. Harper, what is so supremely unconvincing about the Government's position is that they themselves attempted to water down the boundary quite vigorously during the early stages of the negotiations. Mr. Hain, who as Minister for Europe was our main negotiator, lobbied to amend the treaty's definition of "shared competence" so that when the EU had acted—these were his proposed words—

"Member States shall respect the obligations imposed on them by the relevant Union measures".

That, in Euro-babble, means that it would have encroached less on our sovereignty. It was a very reasonable amendment which would not have precluded the action of individual member states, but the Government failed to amend the text. We are now lumbered with the deeply regrettable fact, as defined in the treaty, that member states cannot legislate if the EU has done so first, which jeopardises our ability to act independently on energy matters.

Undoubtedly the most unsettling part of the text is in article 100, which reads:

"Without prejudice to any other procedures provided for in the Treaties, the Council, on a proposal from the Commission, may decide, in a spirit of solidarity between Member States, upon the measures appropriate to the economic situation, in particular if severe difficulties arise in the supply of certain products, notably in the area of energy."

That is a pretty extraordinary part of the treaty, and I shall return to it in a little more detail later.

The final surprise is the insertion of an entirely new article on energy—article 176A, for those who are following this in their primers—which establishes an EU energy policy. It will allow the EU,

"In the context of the establishment and functioning of the internal market and with regard for the need to preserve and improve the environment", to pass laws in four key areas: ensuring the functioning of the market; ensuring security of supply; promoting energy efficiency, saving and renewables; and promoting the interconnection of energy networks. In that, the United Kingdom has no power of veto. The laws pass through co-decision, including qualified majority voting in the Council. Our Government have essentially written a blank cheque to Brussels, which could in certain circumstances oblige the United Kingdom, for example, to assist in the building of other member states' energy infrastructure, or even to supply them with energy during times of emergency.

Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

I suggest that the hon. Gentleman has only partly read out article 100, which becomes article 122 in the consolidated text. The bit he read out was paragraph 1. Paragraph 2, which deals with emergency stuff, reads:

"Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the Member State concerned. The President of the Council shall inform the European Parliament of the decision taken."

That is nothing to do with emergency supplies to other countries, desirable as that may be in some circumstances.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

The hon. Gentleman completely misunderstands the treaty, because that is a supplementary, additional provision, not something that qualifies what I have just asserted. It is not a question of either/or, but of an extra "and". The fact that the hon. Gentleman does not understand that shows the problems that we get into when this House scrutinises European legislation so poorly. We get ministerial guarantees, and a few years later judgments come at us down the track that we were told would never come our way. That is why people get so angry about the way in which European legislation—

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

Oh yes. I will happily give way to the right hon. Lady.

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

I am grateful to the hon. Gentleman. I have been following his argument with great care and looking again at the proposed new paragraph 1 in article 100. There is no requirement upon the Commission to come forward with proposals in the situation of energy supply interruption that he describes; nor is there any compulsion upon the Council of Ministers to decide to offer help in such a situation.

In any case, the central point that the hon. Gentleman has completely failed to mention is that only the Council of Ministers can make a decision under this article, and the Council of Ministers is comprised of the Governments of the member states, including the British Government, which has been extremely successful over the years in pressing policies in the interests of our country.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

This is why people get so angry with politicians in this country: they do not come clean about what can be done in the name of the EU and how such powers replace powers currently enjoyed by this country, and this House of Commons. That is why I object to what the right hon. Lady has just said.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

If we worked more closely with our European neighbours, we could cut the emissions from our present generation by 9 per cent. We have no mechanism to carry that out, either in normal circumstances or in an emergency. Surely we are talking about a perfectly sensible way of making decisions among ourselves. If every nation took the view that it will not do anything about energy unless it has total control over its own, we will not be able to meet our energy needs.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

I am all for the co-operation advocated by my right hon. Friend, but not for the transfer of power that allows us to be told to do things, which are unclearly worded in this treaty. The EU has an open-ended ability to tell us what to do in areas where that is not necessary. What does that mean? It could mean that the EU will tell us what to do about strategic storage; it could allow it to intervene on what might arise as a pattern of trading and supply—Government-to-Government contracts; it could give rise to the setting up of an EU regulator; it could allow the EU to tell us what we can and cannot do with our nuclear power stations; and it could even lead to a decision on whether we have the Severn barrage or not. Whether one is for greater institutional integration or against it, the provisions make one thing perfectly clear.

Photo of Kenneth Clarke Kenneth Clarke Chair, Tax Law Rewrite Bills (Joint Committee)

I find this debate very difficult. The Government are finding it difficult to explain what additional powers are given by this treaty, and with great respect, my hon. Friend is finding it very difficult to establish what is wrong with either the existing powers, or the powers as re-worded. He gives a list of things that might happen. Is he not aware that article 194—I am using the consolidated treaty—spells out that

"Such measures shall not affect a Member State's right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply"?

How on earth is that giving powers to Europe to veto the Severn barrage or to determine what sources of energy we use? It explicitly says that that is not the case.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

I beg to differ with my right hon. and learned Friend in this sense: the danger of such treaties is that one can start off thinking that benign powers are granted to the EU, but one finds that they normally morph into something completely different. We are seeking clarity in the belief that the powers that already exist are sufficient. As my right hon. Friend Mr. Gummer said, there are pressures in the EU already for liberalisation, and we agree about that. The current powers suffice, and that sufficiency means that we do not need what we fear may be coming in.

Several hon. Members:

rose —

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

I give way to my hon. Friend the Chairman of the Select Committee on Business, Enterprise and Regulatory Reform.

Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

This is one of the central issues. With respect to my right hon. and learned Friend Mr. Clarke, I think that he is wrong. This is a serious and worrying power. I hope that in unusual circumstances we would do what is right to protect the overall economy of Europe, but we know how to do that. We do not need it mandated to us by the European Union. That is what this power does. The article contains the words

"upon the measures appropriate to the economic situation".

That is quite a broad-ranging power. It is not restricted to terrorism, as the Secretary of State suggested. It is an unnecessary transfer of power, but we should retain national discretion over what we think is right in the appropriate circumstances.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

No doubt my hon. Friend's Committee will look into the matter further, but what he has said confirms the suspicions many in the House share.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

The debate so far has very much been about liberalisation, and as my hon. Friend has already said, such powers exist. However, what is new in article 176A is the power to decide by qualified majority voting measures to

"ensure security of energy supply in the Union", which is not necessarily about bullying Russia, but a redistributive mechanism in the European Union. We could be mandated, particularly taking into account the solidarity provision, to share—in other words, give—our energy supplies to other members of the EU, when countries outside the EU might have a better and clearer call on our resources because, for instance, they are a lot poorer. We could be giving energy to rich countries under the solidarity provision when we may wish to do something different. My hon. Friend is absolutely right about our powers being circumscribed under—

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

I am grateful to my right hon. Friend. In order to move on, I say once again that one has to ask why on earth, if everything is okay, the Government were so keen to remove those provisions in the course of their negotiations.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

No, I am going to move on now.

The Government have consistently claimed that the substantial difference between the ill-fated constitution and the Lisbon treaty rules out the requirement for a referendum. Luckily, both documents are readily available in the Vote Office, so it is possible to waste a few hours searching for any disparities. Alternatively, one could simply review the work of the European Scrutiny Committee, which simply states baldly that the two documents are "substantially equivalent". I was going to have some fun pointing out the equivalences in more detail, but in the area of energy, the real significance lies in what has been sneaked into the Lisbon treaty that was not in the constitution. What we see are not substantial revisions but additional provisions. Thus the only respect in which it is not the same is where it has been made much worse.

For example, in article 122 of the constitution that I have in front of me, we read:

"Without prejudice to any other provisions provided for in this Treaty, the Council, acting by a qualified majority on a proposal from the Commission, may decide upon the measures appropriate to the economic situation, in particular if severe difficulties arise in the supply of certain products".

In article 100, "acting by qualified majority" becomes

"in a spirit of solidarity".

Article 100 also adds the coda

"notably in the area of energy", by which the drafters almost certainly mean primarily in the area of energy.

Let us return to the phrase "spirit of solidarity", which also appears in new article 176A. Again, let us make the terms absolutely clear to the House. That provision mandates the Council to redistribute energy across the bloc during times of crisis. A gas dispute in Bavaria could ultimately lead to gas rationing in Birmingham. If there is an interruption in the supplies from the Gulf, the Commission can override our contracts. It can cut off our supplies from Milford Haven and send them to Ingolstadt, or divert our liquefied natural gas from the Isle of Grain to Novo Mesto. [Interruption.] The Minister may mock, but the point is not ridiculous because the words of the treaty are what matters.

Photo of Doug Henderson Doug Henderson Labour, Newcastle upon Tyne North

Does not the hon. Gentleman accept that the positive contribution of the European Union means that, if there is a shortage of gas or other form of energy in Birmingham, it might be helpful to have a little assistance from Bavaria? The point of the treaty is to create a climate in which it is easier for Europe to share its burdens and difficulties, which will thus improve the welfare of us all in Europe.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

Perhaps I am one of the few hon. Members who can say that I worked for many years in the energy markets. Our confidence should lie in properly working, liberal energy markets, not in intergovernmental decisions about changing the patters of supply. I therefore disagree with the hon. Gentleman—

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

The hon. Gentleman wishes to accuse me of casuistry and I am happy for him to attempt to do so.

Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

Of course, it is casuistry when the hon. Gentleman talks about, on the one hand, the normal functioning of energy markets—in which I am well aware that he worked for many years—and on the other, a potential crisis in the European Union. He should not compare apples with oranges; it is misleading.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

I do not accept that it is misleading. Energy markets are capable of far more than the hon. Gentleman appreciates.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

My hon. Friend, as an expert in energy, will recall that there was an energy crisis in Europe in 1972. Ted Heath, the then Prime Minister, summoned the chief executives and chairmen of Shell and BP and ordered them to divert supplies of oil from the rest of Europe to this country. They pointed out to him that, under the existing commercial law of this country, he could not so order, and that he would have to change the law. Such situations happen. Circumstances can arise in which a country would like to retain control of its resources but a higher authority might want to distribute them more widely. Surely the treaty gives power to the European Union to distribute those resources more widely when we might want to keep them to ourselves.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

My right hon. Friend makes a serious point. The UK could refuse to abide by the article and break what is described as the "spirit of solidarity". However, if the member state that requires assistance decides to take the matter to the European Court of Justice, which rules in its favour, the Council is obliged, under the article, to comply with the ruling. That would tie the UK in knots. Perhaps the UK wishes to abide by those rules, but it is unacceptable for the Government to bind the British people into such articles without first putting them to the public vote. To do otherwise is political cowardice and a breach of trust, given the Labour party's manifesto commitment.

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

The complexity of our debate shows the difficulty of putting the matter to a referendum. However, leaving that aside, does not my hon. Friend understand that the solidarity article makes huge sense for British national interest? By 2020, we will import more gas than we have indigenously. We already have an interconnector with France, which means—thank goodness—that we can tap into French, mainly nuclear-powered energy. Most of the pipelines do not start but end here. There is a vast need to ensure that no other member of the European Union holds us hostage. That is what solidarity is about and why the treaty is so beneficial.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

That is what the EU is trying to do at the moment, but, ultimately, the treaty gives more power to intervene on private contracts in a commercial setting. That could cause no end of upheaval in the efficient workings of the energy markets.

Photo of Mark Harper Mark Harper Shadow Minister (Work and Pensions)

My hon. Friend Mr. Taylor appeared to say that, if we did not adopt the article, there was a risk at some point in the future of our European partners withholding energy supplies from us and holding us to ransom. I find that incredible, given all the positive things that we say about our European partners and the spirit of solidarity in which we work with them.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

My hon. Friend is being ingenious and allows me to move on to the next part of my remarks.

The Government say that the treaty would better equip the EU to tackle the twin challenges of energy security and climate change. They claim that it will drive forward a liberalised European energy market, benefiting not only British consumers but British companies that wish to gain a foothold in the region. We agree with them about the necessity of freeing up Europe's energy market and the impact of driving down prices and empowering our companies, but we profoundly disagree that that cannot be achieved through current or proposed EU legislation.

It is ironic that the Government once presented the case for which I am now arguing. We are in an absurd situation, in which the Secretary of State has just eloquently defended a position against which his colleagues lobbied only a year or so ago. During the negotiations on the constitution, the former Minister for Europe desperately argued against including article 176A, stating that it was "unnecessary" because

"all aspects of energy policy are effectively covered elsewhere in the Treaty, e.g. single market, environment".

That is correct. However, he went on to register his "detailed concerns" on the text, which, he said,

"we consider may have the unintended effect of changing the boundaries of EU competence and the types of measure which will be subject to unanimity".

Those comments are significant. They are not light concerns about single words, the colour of the ink or the commissioners' handwriting. They are "detailed concerns" about the ethic of the article. Yet we are replaying that message to a Government who have suddenly developed a case of selective memory failure. If the then Minister for Europe was worried at the time, we are much more worried to find that the Government comprehensively failed to delete the article and now compound their failure in that duty by refusing to trust people's judgment in a referendum, which they promised.

We should have significant concerns about today's European market. France is dominated by EDF; Germany has been carved up by RWE, Eon, Vattenfall and ENBW, which own about three quarters of production and distribution capacities. Breaking the link between generators and grid operators would be an important component of the quest for liberalisation, giving European consumers more choice about their supplier and enabling our industrial leaders to grab a piece of the huge market. There are 20 million consumers in the UK who are supplied by French or German-owned companies, yet, across the channel, not a single French or German consumer is supplied by a UK-owned supplier.

We support the measures that the Commission unveiled in September. Those measures are already possible under existing powers—the amended treaty is unnecessary to achieve them. Liberalisation is by far the most effective tool for maintaining a secure supply throughout the EU because it delivers increased diversity of routes, companies, corporate strategies and risk profiles. Liberalisation sends a powerful message to EU suppliers that, in the long term, they will profit more from an open and transparent market than from relying on a national or regional champion. The latter is the stuff of old bloc politics and we are now in a different world.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

Does my hon. Friend believe that the removal of the phrase "free competition", which he mentioned earlier, from the treaty at the behest of the French Government will assist or not assist the quest for liberalisation?

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

My hon. Friend makes a point that I shall tackle shortly. Clearly, in our opinion, it would not assist the quest.

Here in the UK, despite liberalising some time ago, we still suffer from being Europe's last-resort gas bank. Continental suppliers buy gas from our market when they need it but they do not always sell it back to us when we need it. That partly accounts for why consumers felt the pinch in 2005 and 2006. Since 1 October, even though energy prices have risen by an average of 15 per cent., the interconnector pipe with Belgium has consistently exported more gas from us than it has imported. However, because of the total lack of transparency in our ability to scrutinise how, when and where gas flows around the region, UK suppliers have been hard pressed to respond.

The Government have pointed to article 176A in the treaty and to the provisions on the functioning of the energy market and promoting the interconnection of energy networks as providing two important spurs to action. However, as the Government made clear in the original negotiations—and as we have repeated here—existing treaties already give the Commission the powers that it requires.

For example, article 154 of the Maastricht treaty states that the European Community has the power

"to promote the interconnection and interoperability of national networks" and, what is more, to do so

"within the framework of a system of open and competitive markets".

Article 155 of the same treaty enables the Community to legislate to "ensure the interoperability" of networks, and there is no individual member state veto to slow the pace of market reform. Equally, the Commission has powers on the liberalisation of services, as provided for by article 49 of the Maastricht treaty, which states that

"restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended".

Energy is given specific precedence, as article 52 states that

"priority shall as a general rule be given to those services which directly affect production costs".

Finally, of course, the central foundation for action depends on the creation and maintenance of the internal market, under article 95 of Maastricht.

The treaty of Lisbon makes no change of substance to that. Instead, the one new thing in the latest treaty is the explicit provision allowing the Union to pass laws on security of energy supply. We should be in no doubt about the seriousness of such proposals. We may not like the way the current European market operates and we may wish to use any and all opportunities to push for greater honesty in European markets; but the one thing that the Union does not need is greater institutional and centralised powers to create that.

The existence of the provisions on energy, despite the Government's best attempts to erase them, casts a strange light on the debate that we had here last week on the Energy Bill. We said then that there was a somewhat dated feeling to the Government's renewables proposals, because we knew that the Commission would publish our targets for 2020 the very next day, as indeed it did. For renewables to achieve that 15 per cent. energy share in Britain's fuel mix, we felt that a more radical approach would be required from the Government. In a post-ratification world, the Energy Bill will not just look old-fashioned; it will be almost redundant. The treaty gives the EU a legal personality, empowering the Commission to contract on behalf of member states, which will enhance its power to conclude agreements on their behalf.

However, our greatest concern is that the Government have not thought through the new energy articles' effects, given the long-standing EU legal principle of implied competence. As the House will know, those powers were first acknowledged in the case of Commission v. Council, also known as ERTA, in 1971, in which the European Court of Justice held that

"each time the Community...adopts provisions laying down common rules, the Member States no longer have the right, acting individually or even collectively, to undertake obligations with third countries which affect those rules"

In other words, the ruling gives the power significantly to override bilateral arrangements. According to the court,

"when such common rules come into being, the Community alone is in a position to assume and carry out contractual obligations towards third countries affecting the whole sphere of application of the Community legal system".

In support of its findings, the court also invoked member states' obligation of loyal co-operation under the then article 5 EC—now article 10 EC—which allowed it to conclude that

"to the extent to which Community rules are promulgated for the attainment of the objectives of the Treaty, the Member States cannot, outside the framework of the Community institutions, assume obligations which might affect those rules or alter their scope".

It might be deemed unfair to have national contracts. We might have the sight, for instance, of the Commissioner for Trade visiting countries in central Asia to broker gas deals, putting the Union at odds with the fine threads of bilateral relationships that have been painstakingly woven through years of commercial and political contact. Ministers have failed to explain whether that energy article and the body of legislation that would undoubtedly flow from it would prevent the UK from concluding energy agreements with third countries, as we have already done with Norway.

The Secretary of State has argued as a passionate pro-European today and on other occasions, saying that we cannot hope to deal with the massive environmental challenges on our own, in isolation in Europe, and by "sniping from the sidelines", as he put it. Indeed, today he used the phrase "10 years of isolation", "separateness" or something like that—his exact words can be seen in the record. Just to be clear, there is nothing in what we have said that compromises our ability to work multilaterally to combat, for instance, climate change. Quite the contrary: Britain under the Conservatives will work constantly and closely with the Union to help ensure that we drive down our emissions across the region and to shore up our security of supply.

We are happy that the Union's emissions trading scheme has created a framework for a carbon price. The framework is currently not as effective as it could be, but at least the architecture is in place. We still think that an effective underpinning of the EU emissions trading scheme by a carbon tax may be the best way of stabilising the price of carbon, or at least underpinning it, thereby maintaining investor confidence in both nuclear and renewable over the long term. However, the treaty could throw our ability to act independently into difficulty, if under the disguise of "shared competence" the Commission assumed powers over energy taxation, using it as a bridge for greater authority over fiscal matters.

Before finishing, I should like to return to the deletion of that key phrase "undistorted competition", which my hon. Friend Mr. Clappison mentioned earlier.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

As I understand it, the hon. Gentleman's argument is based on a lot of ifs, buts and maybes. Perhaps it would help if I clarified one point to which he has mistakenly alluded a number of times in his speech. The measures under article 176A, to which Mr. Clarke has referred, that maintain full member state control over the exploitation of national energy resources would have primacy over any power under qualified majority voting to maintain the functioning of the market. The hon. Gentleman has not addressed that and has failed to acknowledge the status of article 176. In relation to his point about implied competence, I take it from what he has said that the future of any renegotiation of our membership of the European Union under a possible Conservative Government would depend upon those fundamentals being renegotiated as well. How does he think that will allow him to work more closely with the European Union on energy liberalisation in future?

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

The reference to "resources" refers to such things as oil and gas within the sovereign boundaries of a country. That is completely different from any reference to, and control of, supply.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

Let me again quote to the hon. Gentleman the article that the right hon. and learned Member for Rushcliffe cited:

"Such measures shall not affect a Member State's right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply".

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

But not necessarily a member state's control over those supplies, which is exactly what we are debating today. The history of European legislation in this country is that whereas the House and the country are assured that there are certain boundaries to such powers, those boundaries inevitably move and the powers creep forward. That is the concern with this treaty, as with so many others.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

I shall give way to my hon. Friend Mr. Cash first, which may give my right hon. and learned Friend the advantage of a counter-comment.

Photo of Bill Cash Bill Cash Conservative, Stone

I just thought it might be helpful to point out that the explanation just given by the Secretary of State—and, if I may say so, by my right hon. and learned Friend Mr. Clarke—does not fully explain what is going on. I do not have time to go through all this in an intervention, but the bottom line is that there are many provisions that are without prejudice to other provisions, and there about six in sequence that ultimately take us back to the approximation and harmonisation of laws in the internal market. In fact, it is quite clear that the Secretary of State is misunderstanding the position. I am sure that he will have an opportunity to explain later on.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

I am grateful to my hon. Friend, and, in the spirit of party solidarity, I shall now give way to my right hon. and learned Friend Mr. Clarke.

Photo of Kenneth Clarke Kenneth Clarke Chair, Tax Law Rewrite Bills (Joint Committee)

I thought that my hon. Friend was going to deal with the point raised by my hon. Friend Mr. Cash and explain what it meant. A moment ago, my hon. Friend Alan Duncan was trying to challenge the view being taken by the Minister—and, embarrassingly, also by me—on these energy clauses, by invoking a court ruling on the primacy of European law that predates British membership of the European Union, and which was the main subject matter of debate when we first joined the Union in 1972. Ever since then, people have attempted to make my blood run cold by suggesting how this ruling might be used in various bizarre circumstances. Surely it is not the policy of our party to reopen the basic principles of the primacy of Union law. Furthermore, as the ruling has not been used to stop our agreements with Norway or anyone else in almost 30 years, why on earth does my hon. Friend think that the majority of European Governments are now going to start to use the rules on primacy of European law in a way that would be hostile to our interests?

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

I would never want the blood of my right hon. and learned Friend to run cold. We enjoy his good cheer. To summarise my argument, I believe that powers that are unnecessary should not be included in legislation. Enough already exists to cope with any kind of energy co-operation that we need. The vagueness—and, consequently, the almost unlimited scope—of these powers gives us cause for concern. The basis for that concern is the experience of the past few decades, which has shown that powers that we were told would hardly ever be used—or only narrowly used—have ended up being broadly used and changing the nature of our powers compared with those of the EU.

That is the concern that underlies so much of what is in this treaty, and in those that have gone before it. I have not been in the House as long as my right hon. and learned Friend the Member for Rushcliffe, but even I can remember that, from the Maastricht treaty onwards, the track record has been that the promises made in this House do not turn out to be true in practice on the ground thereafter. That causes a lot of angst, political distress and disapproval of politics in general among the broader electorate.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

I will give way once more to the Secretary of State, then I will race to the finish.

Photo of John Hutton John Hutton Secretary of State, Department for Business, Enterprise & Regulatory Reform, Secretary of State for Business, Enterprise and Regulatory Reform

We all look forward to that. Can the hon. Gentleman give the House an example of how the current provisions on energy have been misused in the way that he has described?

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

The whole point about the current provisions is that we are actually rather happy with them. That is why we would prefer to stick with them and not muddy the waters by going into completely new territory—if I may mix my metaphors—by including them in the treaty.

I was about to address the issue raised by my hon. Friend the Member for Hertsmere on the deletion of the key phrase "undistorted competition". This is a critical point, and the Government's actions on this have been somewhat embarrassing. Throughout this whole process, there has been a palpable sense that the Government think that they have got away with it, that they have somehow fooled us, and that they have won.

The phrase that has been removed, following considerable pressure from Paris, is now covered in a separate protocol. But, to the trained eye, this is a bit of a fudge. Some of the seminal competition cases that have come before the European Court of Justice—and, indeed, some of the defining competition legislation—make direct reference to this clause, and some extremely distinguished European lawyers and academics have stated that this move will have a very damaging impact on EC competition law.

Mr. Sarkozy—now the great champion of our former Prime Minister's bid to become President of the EU—who was thought to be the architect behind the excision of the phrase, has admitted quite openly that he wants to tinker with anti-trust policy. Immediately after his election, he said:

"I believe in competition as a means and not an end in itself."

He also said:

"This may also give a different legal direction to the Commission, that competition is there to support the emergence of European champions, to carry out a true industrial policy".

France, which has every reason to oppose any measures to unbundle its tightly controlled power sector, can use this important concession to circumvent the Commission's powers to break up monopolies.

The Government say that they wish to be professionals in the centre of Europe, but this abject failure has exposed them as amateurs. They say that these new clauses in the treaty will improve the Commission's efforts to create greater competitiveness, but they have signally failed to retain a key structural phrase that will uphold exactly that aim. The Government might brag, but the brutal truth is that they have been outclassed, outgunned and outmanoeuvred. As a result, Britain has been ill-served by this Labour Government.

Several hon. Members:

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Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. Before I call the next hon. Member, may I observe, while not decrying spontaneity, that the convention of notifying us in advance of a willingness to take part in the debate has not been exhibited on all sides? It is helpful if such notification can be given, because, if a debate is oversubscribed, the Modernisation Committee encourages the Speaker to consider putting a time limit on speeches. So we are flying by the seat of our pants in this debate, and priority will be given to those who did notify us in advance.

Photo of Stuart Bell Stuart Bell Second Church Estates Commissioner 2:36 pm, 30th January 2008

I am grateful for the opportunity to appear for the first time in these debates on the European Union. They coincide with the 400th anniversary of the writing of the authorised version of the Bible under King James. Listening to some of the contributions and interventions, I have the feeling that if those authors in Jerusalem Chambers had been making similar points, they would probably still be sitting there, 400 years on.

It is always a pleasure to follow Alan Duncan, who has considerable experience of the energy markets, although it might be some time since he gave up working in them to enter politics. Perhaps the world has moved on since then. He spoke of the Government's position on this paper being oblique, mysterious and evasive. He also cited Mr. Valéry Giscard d'Estaing, and I must reveal my age by telling the House that I had lunch with Mr. Giscard d'Estaing at Chamallières on the day he became President of France in 1974. Listening to the various references to him over the past few months has given me indigestion, although that indigestion has been delayed for some 30 years. Most of the comments on Mr. Giscard d'Estaing from the Conservatives have been self-serving, and they consistently overlook the fact that he has said that, while the treaty was about 80 per cent. similar, the red lines organised and agreed to by the British Government make it a different treaty. I shall not be tempted to explore whether this is the same or a different treaty, because if I did, I, like the authors of the King James Bible, would still be here many years from now.

The hon. Member for Rutland and Melton made a number of points, which I am trying to assimilate. The one thing that strikes me when I listen to Conservative Members in this debate is that they give the impression that we must be a very small nation state with about 3 million citizens and have no say whatever on what happens in the European Union. Mr. Clarke, who is no longer in his place, made reference to that. In a speech in Quebec, Winston Churchill said of the Germans:

"What kind of people do they think we are?"

What kind of people do the Conservatives think we are when we are dealing with the European Union? We are not softies, and we are not here to be pushed over. We are here to play a significant role in the European Union. That is what this amending treaty is about and what we are about.

Photo of Bill Cash Bill Cash Conservative, Stone

The hon. Gentleman cited Sir Winston Churchill on these matters. Churchill also said that we should be "associated but not absorbed" in relation to the European Community.

Photo of Stuart Bell Stuart Bell Second Church Estates Commissioner

I do not think that Sir Winston Churchill was talking about the European Union in 1942, but he did say that the price of freedom was "eternal vigilance". I would commend such vigilance to the Conservative party in looking at this treaty, as vigilance has certainly been given another meaning in these debates.

The hon. Member for Rutland and Melton also talked about the sufficiency of the powers in existing treaties. He said that they were sufficient, but the fact is that it is rather like driving a car at 70 mph: if we take the foot off the accelerator, the car will slow down over a period of time. There are now 27 member states in the European Union, so it cannot be governed entirely on the basis of existing treaties. That has been looked into very carefully by many people, including many experts, which is why the amending treaty is before us now.

The hon. Gentleman amused the House—I am not sure whether he intended to—when he spoke about gas rationing from Bavaria to Birmingham. He also referred to gas from Milford Haven but, as he will know, it is supplied from Qatar. At the risk of extending this debate, can you imagine, Mr. Deputy Speaker, having to tell the Government of Qatar that instead of their vessels on the high seas going to Milford Haven, they should be diverted to Bavaria? [Interruption.] I am trying to be courteous, Mr. Deputy Speaker, in the face of some of the oddest and most ridiculous arguments I have ever heard put in the House. I will nevertheless try hard to stay courteous. The hon. Gentleman knows because of his experience in the Gulf that such a fanciful suggestion has absolutely no meaning at all.

Reference was also made from the Back Benches to the shortages in 1972. By my reckoning, that is some 35 or 36 years ago. Mr. Lilley needs to know that that was before we even joined the Europe Union. Mr. Taylor, who I am glad to see is still in his place, talked about solidarity. He rightly pointed out that solidarity is in the national interest. We have no interest whatever in not being "solidaire", if I may use the French word, with the European Union. What kind of country are we to be if we cannot be solidaire with our European partners in this interconnected world?

Photo of Alan Duncan Alan Duncan Shadow Secretary of State

In a way, the hon. Gentleman's attempt to point out the absurdity of diverting an LNG ship headed to Milford Haven from Qatar poses the other side of the question. What would or could be enforced by the EU in the spirit of solidarity to iron out difficulties of energy supplies other than intrusion in private contracts of that sort?

Photo of Stuart Bell Stuart Bell Second Church Estates Commissioner

Under no circumstances would the European Union, which believes in a liberal economy and free competition—I shall return to the hon. Gentleman's views on undistorted competition in a few minutes—wish to interfere with private contracts. This has been put to the hon. Gentleman before, but repetition has considerable merit when it comes to dealing with the Conservatives. Article 176A states:

"Such measures shall not affect a Member States's right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply".

If the Opposition concentrated on the serious matters posed by the treaty instead of trying to invent a whole series of fanciful forecasts of what might happen in the future, we would be able to have a better debate.

Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

I hold the hon. Gentleman in high regard, but as Chairman of a Select Committee I am obliged to rise above the party political hurly-burly and attempt to view these issues objectively. As far as I can see and with the best will in the world, what the hon. Gentleman has just said is wrong. The treaty really does give significant power to Europe. For example, when Russia cuts off gas supplies to east European countries, that is precisely to do with what my hon. Friend Alan Duncan suggested. I believe that we should leave it to the discretion of national Governments to decide what is appropriate in the circumstances, rather than hand over further competence and power to the centre.

Photo of Stuart Bell Stuart Bell Second Church Estates Commissioner

I am grateful to the hon. Gentleman and I noted his earlier intervention about Russia. I will deal with that and his point about giving powers away a little later. As we all know, we have never given powers away to Europe; rather, we have pooled our power. Back in 1972, Edward Heath talked about pooled sovereignty and we are still talking about pooled sovereignty today. We have never given a single power away to Europe.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

Does the hon. Gentleman agree with me that by pooling our powers, we in fact get greater powers than we would have had if we merely held them to ourselves? One of the ways we get things wrong is that we always invent ways in which we, Britain, might have to do this or that, without ever remembering that there are 26 other members who would, if we were in difficulty, have to be part of the overall pooling of powers and help.

Photo of Stuart Bell Stuart Bell Second Church Estates Commissioner

I am grateful to the right hon. Gentleman and I agree entirely with what he says.

The hon. Member for Rutland and Melton made much of the phrase "undistorted competition" and the fact that President Sarkozy had wished to modify it in the present treaty. He also made scathing—or passing—references to the protocol, quoting what President Sarkozy said. I am sure that the hon. Gentleman, with his wide reading, will have got round to studying the report of Jacques Attali on the state of the French economy, which calls for free competition and the opening up of the French economy, and which has been accepted by President Sarkozy. He will see a modified attitude towards competition within the European Union and beyond. It should also be noted that President Sarkozy was opposed to entry negotiations with Turkey on certain chapters, but when he became President, he quietly dropped that opposition.

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

My hon. Friend is making an extremely important point. On the issue of competition policy, is he aware that the excellent guide to the Lisbon treaty produced this week by the British Law Society confirms that the protocol leaves unchanged the legal treaty base in the EU for competition policy?

Photo of Stuart Bell Stuart Bell Second Church Estates Commissioner

I thank my right hon. Friend for that, but the Conservative belief seems to be never to let the facts get in the way of an argument. If the fact is not convenient, it is set aside. In an intervention, Mr. Cash, who unfortunately for me has left the debate—he and I go back a long way and I have a high regard for him—asked the hon. Member for Rutland and Melton what was going on. I have to tell him that we are going on with this treaty. Reference was also made to that indefinable future when we have a Conservative Government. At any such time as the hon. Gentleman wants to work on energy policy, he will work on it along the lines of this treaty as specified under article 176A. Conservative Members know that they will never seek to renegotiate it, but act within it. I know that, the hon. Gentleman knows that, the House knows that and I presume the country knows it, too.

The right hon. and learned Member for Rushcliffe talked in his intervention about the various contracts that we have already made, which the EU could not an did not interfere with. We have made contracts with Norway, Qatar and Algeria for the supply of gas. Contracts in Bulgaria were also mentioned, which, like the others, have been freely negotiated within the EU. I thus have great difficulty understanding the Conservative position. I suppose I can understand the need they feel to push for a referendum, but my view is that the Conservatives spend too much time watching "The West Wing" on television. They come back to character, trust and all the rest of it, but it does not play at all with the public. That is a matter for them, not for me.

The Secretary of State, in his speech and in the documents he gave us, talked about the lead that the United Kingdom has in the development of EU policy on energy. That was the fruit of the Hampton Court discussions under our presidency in 2005, which flowed through to the spring conference of 2007, and led to an energy package and energy policy for Europe approved by the Council on 8 and 9 March 2007. The principle of solidarity applies—a theme that I shall develop later.

Energy policy, security of energy and climate change are all interconnected. There is already a single market in gas and electricity, and once again the single market flows from the single European Act of 1986, entered into by the noble Lady Thatcher. A single market exists for gas and electricity. It exists for the benefit of consumers, with competitive prices and appropriate transport and storage infrastructures. A great deal has been made of the fact that the revised European constitution—as it is called by Open Europe; we call it an amending treaty—will hand new powers over energy policy to the EU: there would be a specific legal base for EU legislation on energy, and energy would for the first time be subject to majority voting.

As Opposition Members such as Mr. Hollobone said, the amending treaty extends qualified majority voting to new policy areas, and some of the new articles will be subject to QMV, reflecting existing practice for EU legislation in certain fields, including energy policy. The amending treaty will streamline and speed up decision making in a number of technical areas. The UK has always insisted on maintaining ultimate national control in the key areas of justice and home affairs, social security, tax, foreign policy and defence. The Lisbon treaty clarifies that position for the UK. Overall, the impact of QMV under the Lisbon treaty will be significantly less than, for example, under the Single European Act or the treaty of Maastricht.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

I negotiated for a long period in the EU, so will the hon. Gentleman accept from me that one is more likely to achieve one's national interest under the mechanism of QMV than by having a veto, because all the other countries know that if they steamroller a country in those circumstances, it can be done to them? The idea of consensus that that encourages greatly defends national interests, rather than damages them.

Photo of Stuart Bell Stuart Bell Second Church Estates Commissioner

I am grateful to the right hon. Gentleman for that point. He will also know that since the EU has been enlarged to 27 member states, QMV has worked well because they are all working together in a common European cause.

One of the difficulties I have with the Conservative position—which comes through repeatedly—is its wholly defensive approach towards the EU. It is extraordinary that the hon. Member for Stone, who has now returned to the Chamber, has somehow managed, either single-handedly or with the help of others, to persuade more Conservative party members to take the view that he took on Maastricht so many years ago. We will see whether that eventually plays in the country, but it is a great sadness for our great nation state that the great Opposition Conservative party, with values that go back more than 100 years, has taken a position very similar to that of the Labour party under Hugh Gaitskell in 1961.

Photo of Bill Cash Bill Cash Conservative, Stone

I am all in favour of co-operation in the EU, provided that it is proper co-operation. The problem is when it invades the primacy and supremacy of the laws that are passed in this House.

Photo of Stuart Bell Stuart Bell Second Church Estates Commissioner

I think I answered that point a few moments ago when the hon. Gentleman was briefly absent from the Chamber. We have not given any powers away to the EU. We have pooled our sovereignty and our competences, and we have done so in our national interests and in the interests of the EU as a concept and an ethos.

We have also discussed nuclear energy. The Secretary of State referred to that; Richard Ottaway intervened, and Mr. Taylor, my hon. Friend Mrs. Curtis-Thomas and my right hon. Friend Ms Hewitt all had a little nibble at the issue. France and Finland will expand their nuclear energy, and the Commission declared in its energy policy for Europe that more than half the member states use nuclear energy, and that nuclear energy provides some 30 per cent. of their electricity. Decisions in this area are left to member states, as this House learned when dealing with the Energy Bill. I should, however, make the obvious point, which has to be pointed out time and again, that nuclear power does not cause carbon emissions. Therefore, it is part of the environment-friendly programme of this Government and the EU.

The hon. Member for Rutland and Melton talked about France. Nuclear power in France produces 75 per cent. of its electricity, and nuclear power has made France the largest electricity exporter in the EU. The UK's nuclear energy debate is coming to an end with discussion on the Energy Bill but, as has been pointed out, new nuclear power stations will have a role to play in the UK's future energy mix, alongside other low-carbon sources. In the public interest, energy companies will be allowed the option of investing in new nuclear power stations, and we should take the steps necessary to facilitate that. As the Secretary of State said in response to an intervention, nuclear is not the whole answer, and the energy White Paper sets out the measures being taken to enable us to become more energy-efficient and increase the supply of energy from low-carbon sources. Nuclear energy can contribute positively to the energy mix.

Sadly, debate on energy has for a long time been neglected within the EU. That is why the Commission President Barroso declared on 20 November 2006 that energy had been a forgotten subject that was not on the Union agenda, but that now it is back on the agenda and is also at the heart of European integration. That should be understood against a background of energy demand growing within the global economy at the same time as energy sources are being depleted. World electricity demand is expected to double by 2030—overall global energy demand will grow by 53 per cent. between 2007 and 2030.

The Union has so far enjoyed energy sufficiency at competitive prices and supplies from a variety of sources. Like the United States, the Union is a net energy importer, with 50 per cent. coming from outside the Union, rising to 70 per cent. in the next 20 to 30 years, yet member states must compete with other nations in world markets to secure supplies. It must be said that member states are unlikely to run out of energy in the next 50 years, but that does not lessen the obligation to plan for the worst while hoping for the best, as former President John Fitzgerald Kennedy once said. We have to plan for conflict and for supply interruption—the hon. Member for Rutland and Melton touched on that. We must also plan for price variations; the Secretary of State commented on that, as did Bob Spink.

It is against that background that we can debate article 176A of the amending treaty. It addresses the framework of the internal market and acknowledges the need to secure energy supplies as well as to preserve and improve the environment. It states that the Union's aim is

"a spirit of solidarity between Member States" to

"ensure the functioning of the energy market", the promotion of "energy efficiency" and

"the interconnection of energy networks."

As the Government's document "Global Europe: full-employment Europe" acknowledged in referring to the spring European Council meeting of May 2007—also referred to by the Secretary of State—the Union leaders signed up to an ambitious package of climate change and energy proposals with the objective of putting the Union on the path to becoming the world's first competitive, energy-secure and low-carbon economy. The goal of the Union must be to create an energy policy that provides energy-supply security and efficiency, assists in the reduction of carbon emissions and other greenhouse gases and links in with the Lisbon agenda. It is necessary to provide a competitive framework for the new technologies in the eco-industry that will not only enable the consumer to reduce their carbon footprint, but do so at reasonable cost.

Notwithstanding all that is said by opponents of the amending treaty, the paradox is that the goals of energy security, environmental protection and the fulfilment of the Lisbon agenda can come about only through the action of member states. That is made clear in article 176A of the amending treaty, which was, again, referred to by the hon. Member for Rutland and Melton. There is no single market in energy . The market indeed lies with each member state. That was touched on by Mr. Curry when he referred on Second Reading to the gas contract that Bulgaria has entered into with Russia. My hon. Friend the Member for Crosby also referred to Russia in an intervention on the Secretary of State. I shall discuss Russia in a moment.

There are structural differences in the way in which member states fulfil their market requirements, and although the Union may lay down rules and regulations, the operation of them is a matter for each member state. It is true that the Commission has investigative powers within its competition competence, and that it has initiated legal proceedings in Germany against alleged infringements—I refer to the case of four electricity and generator suppliers. Any proposal to commit to further liberalisation of the gas and electricity markets of the Union could be led only by the Union, and member states would have to follow. The challenge for the Union is to urge member states along in the interests of the broader Union and in their own interests. That is the purpose of article 176A; it aims to provide a framework to those ends.

The Union must meet its own increasing energy demand and match that with its intended constraints to safeguard the environment. Such measures include: reducing carbon and other greenhouse gas emissions; developing hybrid cars to consume more biofuel; developing renewable energy; and, of course, resolving the debate on nuclear power. To return again to the comments made by the right hon. Member for Skipton and Ripon, much is often made about security of supplies when it comes to Russia. I believe that was also touched on by the hon. Members for Rutland and Melton and for Mid-Worcestershire (Peter Luff). The question is whether too much dependence is involved in dealing with suppliers from Russia. Is the Union's dependence on Russia to the detriment of the Union?

The Union's policy towards Russia is one not of dependence, but of interdependence. José Manuel Barroso has declared that interdependency is for the mutual benefit of both Russia and the Union, and that it requires transparency, the rule of law, reciprocity, non-discrimination and a level playing field in terms of market opening, market access and competition. In other words, interdependence means that the Union relies on Russia for a major part of its energy supply, and Russia sees foreign currency receipts from that and its trade with the European Union contributing some 40 per cent. of the Russian budget.

However, interdependence goes beyond energy supply. The Union is Russia's major trading partner—bilateral trade reached €96.55 billion in 2004. More than 60 per cent. of Russian export revenue comes from energy—most from exports to the Union. That is true interdependence. The Union has therefore every interest in deepening its relations with Russia and maintaining its access to oil and gas through long-term contracts, facilitating security of supply, which is so paramount to the Union's industrial efforts. I have cited Winston Churchill once, and I am happy to do so again. He said that dreams are good, but facts are better. The fact is that Russia has 27 per cent. of the world's known gas reserves, in addition to its oil reserves.

Of course, the Union imports from the Organisation of Petroleum Exporting Countries and has established a formal dialogue to improve communication about prices, supplies and investment. In 2003, some 23 per cent. of the Union's gas came from Russia, whereas Algeria provided 30 per cent. and Norway 25 per cent. That was also mentioned by the hon. Member for Rutland and Melton and my hon. Friend Mr. Clapham. Algeria is a reliable and traditional supplier that enjoys a strategic energy partnership with the Union. I am glad that delegates from the Algerian Parliament will visit the UK Parliament, through the auspices of the Inter-Parliamentary Union, at the end of February.

The Government's policy and the amending treaty link energy policy and trade policy. The Union's aim is to integrate Algeria fully in the Union's internal market, and thus double its gas supplies to the Union. The Union has also signed an agreement with Ukraine to co-operate not only on nuclear safety, but on the integration of electricity and gas markets. The Union seeks to improve environmental standards in Ukraine's coal sector, and agreements have been signed with Azerbaijan and Kazakhstan. The Foreign Secretary's Bruges speech on 15 November followed in the august footsteps of the noble Baroness Thatcher. He called for an "environmental Union" and for the Union to be a "model power" in the 21st century. He also wanted it to be a low-carbon power.

There should be some unity across the Floor of the House on the following at least: an energy policy linked to a reduction in carbon emissions; a 20 or 30 per cent. reduction from a base year of 1990, with a longer-term goal of reducing emissions to less than 50 per cent. of 1990 levels by 2050; and all that being linked to sustainable development and poverty reduction, doing one's best for the environment and marrying that with energy security.

The Union spoke with one voice at the Bali conference in December in its search for a replacement for the Kyoto protocol. It gave world leadership to achieve these reductions in greenhouse gases. The Prime Minister added to that when he reported back from the European Council meeting in December. He said:

"Europe must also step up funding, including funding through the World Bank, to help the developing world to shift to lower carbon growth and adapt to climate change."—[ Hansard, 17 December 2007; Vol. 469, c. 597.]

On Second Reading, the right hon. Member for Skipton and Ripon quoted from Milton's "Paradise Lost". The European Union is not a paradise lost, but nor is it a paradise found. Whatever the views of right hon. and hon. Members of this House, the Union is here to stay. Europe has had centuries of fluctuating history, with its plagues, pestilence and wars, but now it has peace, prosperity and unity in diversity. The Union has chosen the path of civilisation, progress and prosperity, seeking to apply that to all its citizens. The hon. Member for Stone does not seem to think it a wise principle to follow civilisation, progress and prosperity. Perhaps he will give me an alternative.

Photo of Bill Cash Bill Cash Conservative, Stone

It used to be the red flag, but now it is the European Union flag that the hon. Gentleman is waving.

Photo of Stuart Bell Stuart Bell Second Church Estates Commissioner

I must tell the hon. Gentleman that the Union flag has more stars than the red flag had.

Let us return to civilisation, progress and prosperity. The Union has sought to apply that notion to all its citizens, rich and poor and healthy and sick, including the weakest and most deprived. It seeks a liberal economy that does not conflict with, but is compatible with, a social model. I believe that those words come from the preamble, which is often derided across the Floor of the House, including by those on my own Back Benches.

The quotation cited by the right hon. Member for Skipton and Ripon brought to mind a quote from Henry David Thoreau, which I first heard from the lips of George Kennan during his 1957 Reith lectures—I said that I would be giving my age away during this contribution. He said that

"there is no ill which may not be dissipated, like the dark, if you let in a stronger light upon it, but if the light you use is but a narrow and paltry taper most objects shall cast a shadow wider than themselves."

It is to be hoped that the Government, in choosing these debates, such as this one on energy, by subject matter, will cast a stronger and better light on the operation of the Union, which is there for the benefit of all our citizens, now and in the future.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs 3:09 pm, 30th January 2008

It is a pleasure to follow the poetry and prose of the Second Church Estates Commissioner, Sir Stuart Bell. He cited Churchill twice, as well as Thoreau and various other people of whom I had not heard. In the midst of that, the hon. Gentleman put his finger on a fundamental point: if we go back to the founding of the single market—I understand that the Conservative party still approves of that—we see that it implies the pooling of sovereignty. We cannot have a single market with common rules across national borders without such pooling. That must apply equally to the market for energy, but whenever the logic of being pro-single market is applied in a particular case, Conservative hackles rise and they cry, "National sovereignty!"

It is surely impossible to have things both ways, although Conservative Members may try to do so. If we support the principle of the single market, including a single market in energy, we must accept some pooling of sovereignty. Simply to say that we do not like a treaty because it involves some qualified majority voting on the structure within which the single energy market will operate is inconsistent. If we will the end, we have to will the means.

Photo of Mark Harper Mark Harper Shadow Minister (Work and Pensions)

Will the hon. Gentleman address the question that the Secretary of State did not deal with satisfactorily? We already have the powers necessary for a liberalised energy market. Indeed, the Government extolled the virtues of the liberalisation introduced by that great woman, Baroness Thatcher, in the Single European Act. What will this treaty enable us to do in liberalising the energy market that we cannot do already?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

I am happy to address that point. When I intervened on Alan Duncan, who is no longer in his place, I put the same question to him the other way round. I asked him what Conservative Members were afraid of in the powers in the Bill, as it consolidates and clarifies existing powers.

Mention was made earlier of gobbledegook and double Dutch, but as European legislation and provisions go, article 176A is admirably clear. One could show it to the average person in the street, and they would understand immediately what it was talking about. It includes the aims to

"ensure the functioning of the energy market...ensure security of energy supply...promote energy efficiency ... and ... promote ... interconnection".

Those are all clear and laudable aims, and putting them explicitly is better than having them brought in through the back door as environmental or economic provisions. The Secretary of State rightly pointed out that in the past, some of those energy goals have been achieved using other provisions—not as a pretext but as a route to them. Surely it is better to be explicit about energy policy and its goals, and that is what the treaty does. I cannot see what the Conservatives are afraid of in clarifying the goals and adding the caveats. I have not heard a convincing explanation.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

Does not that point illustrate the futility of much of this debate? Although the provisions that the hon. Gentleman mentions will be put on the face of the treaty, the real argument is about liberalisation, which will be bogged down because many nations support their national champions and will not support a full unbundling of powers.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

The treaty states explicitly that its role is to

"ensure the functioning of the energy market".

I accept that that is qualified by the provision that it shall do so

"in a spirit of solidarity between Member States".

However, it explicitly states that the Union should work on that aim, and I suggest that that will facilitate liberalisation, not stand in its way.

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

I strongly endorse the points that the hon. Gentleman makes. Beyond simply clarifying the existing powers that the Commission and other EU institutions will have, the treaty also explicitly, and for the first time, protects the sovereignty of member states in respect of exploiting their own energy resources. That is the critical point that Conservative Members completely refuse to recognise. The treaty is an improvement on existing powers, as well as a clarification of them.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

I am grateful to the right hon. Lady for her intervention. My instincts, in all matters European, are to look for subsidiarity. I seek reassurance that the national interest is being protected, and in this case that is made unusually explicit in the article. It states, as she points out, that the measures included

"shall not affect a Member State's right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply".

Those are precisely the assurances that someone concerned about possible erosion of national sovereignty would want—and here they are. The hon. Member for Rutland and Melton got extraordinarily worked up over something that appears to say everything that we would want it to say, because of his generally vitriolic attitude to the European Union rather than because of the specifics of what we are discussing.

Photo of Bill Cash Bill Cash Conservative, Stone

The hon. Gentleman was right to concentrate, in his very first words, on the internal market. However, if he has studied the interaction of all the different provisions in the energy framework, he will appreciate the fact that we will end up with several potential choices within a co-ordinated legal system dominated by shared competencies that will preclude member states from being able to pursue their own energy policies. That is where the problem lies.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

It is clear that the issue of energy, and the related issue of climate change, must be addressed at the Europe-wide level. It is not sufficient for any member state—or any nation state, in fact—to go it alone on such matters. I hesitate to say this to the hon. Gentleman, but there is a bigger picture. Our energy policy has two goals, both of which are explicitly mentioned in article 176—security of supply and combating climate change. The very first sentence of the article says that the energy policy will operate in

"the context of the establishment and functioning of the internal market and with regard for the need to preserve and improve the environment".

Those two priorities are stated explicitly, and the advantage of that is that we can pursue our national policies in delivering them, and the European Union will also work together to deliver them.

Issues such as emissions trading have to be agreed at a national level. We cannot address them effectively on our own. Energy policy is a classic example of something that the European Union should be doing. In many ways, the pressures that we face on security of supply and the environment make a more compelling case for European partnership and integration here than in many other areas concerning which people get exercised about the European Union.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

The hon. Gentleman makes the same case as was made yesterday by Chris Huhne, on the subject of home affairs. It needs no great prescience to suggest that the same case will be made in forthcoming debates about foreign and security policy, the environment and climate change. Is there any area in which the Liberal Democrats do not want further integration and concession of authority?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

There is a hierarchy of issues. Even the hon. Gentleman will accept that some policies are best determined by local government, some by national Governments and some by pan-European bodies— horses for courses. I have no problem with saying that energy policy requires a co-operative element, which is why the European Union has an important role to play.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

To paraphrase the hon. Gentleman's answer, there are no areas in which the Liberal Democrats would not concede more power to the centre.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

The record will show that that is an absurd comment, given what I said.

Article 176 also states that Union policy will

"promote the interconnection of energy networks".

That point has not been addressed much, and I hope that the Minister will say more about what is envisaged. It is an important issue for those of us who want to see more renewable energy. The example that springs to mind is our interconnector with France, which is locked into a high nuclear proportion in its energy supply, so it generates more electricity than it needs in the summer and has to export the excess using its interconnections. Such mechanisms create flexibility in the Europe-wide energy market.

Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

Given the Liberals' position of saying no to new nuclear in Britain, is the hon. Gentleman nevertheless happy to receive French nuclear-generated electricity?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

As the Minister knows, we operate in a Europe-wide energy market and we import nuclear electricity from France. Clearly, the long-term goal is a zero-carbon self-sufficient economy. That is the direction in which we need to head, but nobody is suggesting that we should turn off the taps tomorrow, or that we will become self-sufficient in that sort of timescale.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Foreign Affairs), Liberal Democrat Spokesperson (Foreign Affairs)

Does my hon. Friend not agree with me that if the French taxpayer wants to subsidise electricity that the British consumer can buy in an open market, that is a very good deal for the British consumer? French taxpayers have to subsidise nuclear energy generation in France to a huge extent. We are benefiting from France's having to export it at a market price.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

My hon. Friend has just given us the definition of the spirit of solidarity that we all want to see.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

Do we now understand that the Liberal objection to nuclear power would be entirely removed if it were proved to be cheaper and more cost-effective than any other system, irrespective of anything else?

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. I do not want us to stray too far down that route.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

For the record, Madam Deputy Speaker, I will say simply that we have a range of objections, of which cost is only one.

Returning to the treaty provisions on energy, it seems to me that there are several reasons why we should not be suspicious of greater EU involvement in energy policy, but should welcome it. First, the case for working together on climate change is more pressing than ever, given the worsening situation, and if we are to ensure that the costs of tackling climate change are fairly shared. That will not happen if individual states act in isolation; a co-ordinated effort is needed. That is why I welcome the Europe-wide measures on renewables that were announced last week. The Conservative spokesman did not make clear whether he supports Europe-wide action of that sort. That sort of measure can be very effective but it needs partnership, and the provision in the treaty will facilitate that partnership, rather than make it more difficult or require the work to be done through other provisions in other treaties. Let us be explicit and state clearly what is being provided for.

The second reason why countries need to work together on energy policy is that we face many of the same problems at the same time. The hon. Member for Middlesbrough mentioned dependence on Russian gas, and I think that coal will be of increasing importance. The United Kingdom will not face that problem alone; many other European nations will face it as well. We may well have common answers to those problems, which might be facilitated by the treaty. We have a common need to boost renewables, which in some cases may be done better by working together than by working in isolation. We have a common interest—the Secretary of State mentioned this—in developing carbon capture and storage technology, and there is a Europe-wide initiative on that. In my view that work is far too slow, both nationally and internationally, but it will certainly not be any quicker if we all adopt the Conservative "You in your small corner, and I in mine" approach to energy policy.

I admit that we were slightly surprised when energy was chosen as the topic for a day's debate—not because energy is not incredibly important, but because many of the provisions that we have discussed are consolidating provisions, and because one might have assumed that the Conservatives, who apparently favour free markets and a single European energy market, would be entirely in favour of the treaty's provisions in this respect.

Let me say a word or two about the other article being discussed—article 100, which relates to exceptional circumstances where there is a problem with energy supply. The point has been well made in the debate that it is one of two paragraphs set in the context of an economic policy section, and that the second paragraph to which it is being added is about EU fiscal support for countries struggling with their energy supply. That seems to be a measure that we should welcome and encourage, not fear. The hon. Member for Rutland and Melton was scaremongering in the extreme, offering all sorts of horror stories and saying that this or that could happen, but he provided no substance or evidence for that view, so it is hard to see what the problem is.

This seems to us one of the more straightforward parts of the treaty. When I realised that I was to have the joy of a day spent debating the Lisbon treaty Bill, I dreaded the prospect of the provisions that I would have to deal with being fiendishly complex—but I was astonished to read how plain and straightforward they were. The policy objectives of tackling climate change—

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

I am just about to conclude. The policy objectives of tackling climate change and securing energy supply seem to us entirely laudable. They are objectives on which the national interest and the European interest are in harmony, not in conflict, so rather than be hostile to them, we should embrace them.

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West 3:24 pm, 30th January 2008

It is a pleasure to follow Steve Webb and my hon. Friend Sir Stuart Bell and to have this opportunity to contribute to the debate on an issue that is of real and growing importance to all our constituents. Despite the fact that the United Kingdom, thanks to our own liberalised energy market, has for many years been enjoying, on average, lower energy prices than those across the rest of the EU, in recent months all of us will have heard complaints from our constituents about the severe prices rises facing consumers following the wholesale price rises across the globe. At the same time, we have seen for many years the rightly increasing concern among the British public about the impact of climate change, and therefore the need to change—indeed, to reduce—our energy use.

I intend to develop a point made by my right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform in his opening speech: that the need for more action in Europe on energy issues is one reason—for me, one of many reasons—to welcome the Lisbon treaty and the Bill. Some years ago, when I was Secretary of State for Trade and Industry, I presented to the House this Government's first energy White Paper. We confronted the decline in Britain's North sea oil resources; we examined the policy implications of Britain ceasing to be self-sufficient—or largely so—in energy supplies and becoming a net importer of energy; for the first time we put climate change and carbon emission reductions at the heart of our energy policy; and we argued that in future, energy policy had to be central both to our relations and actions within the EU and, more broadly, to our foreign policy.

Photo of Mark Harper Mark Harper Shadow Minister (Work and Pensions)

If, as we argue, the powers to liberalise energy markets are already available in the EU and what is missing is the resolve to liberalise, what in the treaty will change that lack of resolve and ensure that energy markets across Europe are liberalised in practice?

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

The hon. Gentleman has had several goes at making that point. I shall return to it later in my speech, but the brief answer is that I have no doubt that, because the treaty clarifies powers or provisions that existed in earlier treaties in different sections and puts them together in a single energy power, the Commission, the European Parliament and the Council of Ministers will all feel a renewed commitment and energy in relation to energy issues.

Secondly, as I said when I intervened on the hon. Member for Northavon, the new provision to protect the energy sovereignty of member states in the context of issues that appropriately should be national competences is an improvement on earlier provisions. I would therefore have expected Mr. Harper to welcome it.

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

On the subject of competition, does the right hon. Lady agree that the key element is to reinforce the power of the Commission? The answer to my hon. Friend Mr. Harper is effectively that bringing that clearly into the body of the treaty reinforces the Commission's power. The one thing that I am sure my colleagues are keen on is having a stronger and more effective Commission, without which there will be no liberalisation within the European Union.

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

The hon. Gentleman is right, but I am afraid that there is a paradox—a real contradiction—at the heart of the position taken by those on the Conservative Front Bench, and by so many of his right hon. and hon. Friends. The ends that they want to secure, including the liberalisation of Europe's energy markets, require a stronger Commission, as well as, in many cases, an increase in qualified majority voting within the Council of Ministers—but that is precisely what they object to. That paradox gives rise to the rhetoric that we heard, especially yesterday, about those people in Brussels imposing things on us, as if Europe were an occupying power rather than a club of which we are a leading member.

The changes in the world of energy that we highlighted in the energy White Paper five years ago are taking place even faster than we anticipated—most notably, of course, the extraordinary growth in China, India and other emerging economies. It is not only the United Kingdom that is ceasing to be self-sufficient in energy supplies. The European Union as a whole, the United States, China itself, Japan and soon India—in other words, all the world's major economic centres—are, or shortly will be, net importers of energy.

I can develop that argument further: 50 per cent. of the world's daily supplies of oil are internationally traded. In just 10 years' time, 70 per cent. of the globe's oil requirements will be internationally traded. Of that 70 per cent., three quarters will come from west Africa, Russia and the middle east. The position with gas is similar. There are many, many more importers and fewer exporters, and many—perhaps most—of those exporters are hardly what one would call stable democracies.

In this world of intensifying competition—a world eloquently described by my hon. Friend the Member for Middlesbrough as this interdependent world—the challenges that we face in Britain are challenges that we face in common with our fellow members of the European Union. They are, notably, challenges involving how we secure our energy supplies and how we deal with and reduce CO2 emissions. Equally, much of the action that we need to take in response to those challenges, we can take only in common with our fellow members of the European Union.

The problem—this is the point made by Mr. Taylor—is not that we have too much Europe, but that we have too little. [Interruption.] Let me develop the point. There is agreement on both sides of the House, even from Alan Duncan, that Europe's energy market is not a proper market; it is certainly not a single market—I think that I am quoting him pretty accurately on that. Instead, it is a highly fragmented market physically, but also economically and politically.

The hon. Member for Northavon said that an essential part of our strategy across Europe to secure energy supplies in future lies in having far more interconnections. It is essential in this world of intense and intensifying competition for energy that we have as many providers of energy as possible, and that we have as many pipelines, sources and supply lines as possible. That means more interconnections and more terminals—more storage capacity—for liquefied natural gas. That in turn requires a pretty substantial amount of private sector investment, and that of course requires far more effective liberalisation of Europe's energy markets.

The hon. Member for Rutland and Melton himself made the point that Europe's energy market is economically fragmented. He welcomed, as I hope we all do, the Commission's proposals to liberalise the market, in particular to unbundle distribution and production of energy.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

How is that market to be liberalised when some of the main players in the EU, particularly France and Germany, have a totally different attitude to the idea and to the question of energy security? They see their security as built on their national champions, such as EDF and RWE. Liberalisation will happen only if those bodies are broken up and unbundled. As far as I understand it, not only France and Germany but Austria, Bulgaria, Cyprus, Greece, Latvia, Luxembourg, Slovakia and Malta oppose the proposals for unbundling. Even with qualified majority voting, how does that process have any chance of success?

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

The hon. Gentleman makes an important point. We will secure our goal of energy liberalisation as we have secured so many other goals in Europe—by making and winning the argument, and by ensuring that the Commission comes forward with proposals that make full use of the powers conferred on it by the original treaty, including the competition power, and those that are so helpfully clarified in the Lisbon treaty.

Of course, the Commission's most recently published proposals stem directly from a broad strategic review of energy requirements and policy across the EU that was initiated by the Government when the UK held the presidency three years ago. Of course those proposals are not yet agreed, and of course we will argue about them. However, we have a better chance of winning those arguments not only because we are right—as I believe, and as I am sure that Mr. Weir and most other hon. Members believe, too—but because we will have a clearer legal base. That is set out clearly in article 176A, which is article 194 in the consolidated text.

The new provision, which protects subsidiarity for those issues that properly belong to member states, is another welcome aspect of the treaty. The new, helpful energy title ensures that in developing proposals for consideration by the Council and by Parliament, the Commission will concentrate on the four goals in paragraph 1 of article 194 and will not seek to intrude, as one or two of its earlier proposals would have done, on a member state's right to determine the conditions for exploiting its choice between different energy sources and the general structure of its energy supply. In other words, I believe that on energy the treaty will give us more of the right kind of Europe and less of the wrong kind of Europe.

One of the several reasons why the treaty is known in France as la Britannique may well be that we have won so many of the arguments: we have won all those that really matter.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

The right hon. Lady seems to be placing great emphasis on the role of the EU in guaranteeing the security of energy for the countries of Europe. How does she explain the EU's plans for renewables, which do not include plans for nuclear energy? Even worse, they take no account of the back-up needed when the wind is not blowing. That would require Britain to have some 33 GW of capacity constantly available from conventional power stations. How does the right hon. Lady justify her argument? Surely it is nonsense—and European policy, in the main, is nonsense.

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

I am afraid that the hon. Gentleman and I will never agree on that matter. I strongly support the European Commission's proposal and welcome the fact that our Government have endorsed it. The proposals set a stretching target for Europe to increase its renewable energy supplies. Indeed, our renewable obligations in Britain, which I extended when I was Secretary of State, have helped to secure a massive increase in investment—

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

That significant investment was not only in wind farms, but, as we have seen with the Severn barrage, in tidal power.

Photo of Bill Cash Bill Cash Conservative, Stone

Is the right hon. lady implying that she is responsible for the ridiculous idea that we could get 15 per cent. of our energy requirements from renewables?

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

I have no doubt that we can achieve a substantial increase in that regard, especially through the use of wind power. The UK is blessed with wind resources, and we also have some of the world's leading technology companies—something that I should have thought the hon. Gentleman welcomes.

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

The reality is that rising demand for energy, increased competition for supplies and climate change mean that all countries, including Britain, will have to find the right energy mix. We need much greater energy efficiency, and we lag behind many of our European partners in that respect. We will also need to make use of renewables, cleaner coal, oil and gas, and nuclear energy—although the latter is not for all countries, and some member states do not wish to go down that route. Different countries will use all those energy sources in different combinations, as the new treaty makes clear.

Photo of Claire Curtis-Thomas Claire Curtis-Thomas PPS (Rt Hon Baroness Scotland of Asthal QC, Attorney General), Law Officers' Department

My right hon. Friend may have heard the sedentary intervention to the effect that renewables will be subsidised, but does she agree that subsidies will be needed if we are to develop the technologies necessary for tackling climate change and carbon dioxide production?

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

I completely agree: that was the logic behind the introduction of the renewables obligation and its subsequent extension. Most renewables technologies are still too little developed to be able to stand on their own two feet in commercial terms, but the renewables obligation has pulled in the necessary investment much faster than would otherwise have been the case. That investment will help us to meet our carbon reduction targets, and to achieve the security of supply that hon. Members of all parties are worried about.

Photo of Stuart Bell Stuart Bell Second Church Estates Commissioner

Before my right hon. Friend leaves the point, does she agree that the European Council of 8 and 9 March last year made it clear that decisions about the choice of energy mix, the sovereignty of primary energy sources and the use of nuclear energy are matters for individual member states?

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

My hon. Friend is absolutely right, and I am grateful to him for that clarification. He spoke earlier about Europe's dependence on Russia for so much of its energy supplies, and about Russia's dependence on earnings from its oil and gas exports. I should like to develop the points that he made a little further.

Despite Russia's economic dependence on oil and gas exports, it is failing to make the investments that it needs if it is going to meet its own growing demand for energy as well as the demand among the countries to which it exports. In addition—and Ukraine is the most notable example of this tendency—it has succumbed to the temptation of using its oil exports for blatantly political purposes. As long as the EU remains fragmented about energy policy, both politically and economically, the danger exists that Russia will be able to pick off individual member states. Europe must therefore speak with one voice on the common interests that all its member states have—certainly in respect of energy policy, but about many other matters as well.

We know that Russia is increasingly closed to EU investment in its energy infrastructure. Russia desperately needs that investment for its own domestic purposes, but it is denying it to its consumers and businesses. At the same time, Gazprom, one of the largest energy companies in the world, is increasing its investments in the European Union. It has investments in at least 20 European Union member states—it may well be more by now—including investments in some distribution networks. Not surprisingly, given how Gazprom is run and its close and rather murky relationship with President Putin, there are worries among our European Union partners about its growing influence within Europe's energy markets.

It is a reflection of the strength of existing provisions, which the treaty will re-enact and clarify, that the concerns about Gazprom's growing influence have already been referred to the European Commission's redoubtable Competition Commissioner, Neelie Kroes. I understand that President Putin complained at a meeting with Chancellor Merkel last year about Neelie Kroes's proposed investigation of whether Gazprom's growing role could impede the liberalisation of European energy markets, and that Chancellor Merkel replied that Gazprom should consider it an honour to be treated like Microsoft. It is a reflection that we might all enjoy of how important it is to have a strong Commission with strong pro-competition powers and a Council of Ministers that uses qualified majority voting in appropriate cases.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

Many of us have concerns about Gazprom's strength and reach in European markets. Would the right hon. Lady go so far as to say that either the Commission or national authorities should be able to prevent Gazprom from investing in EU countries, to the extent of buying significant national energy suppliers?

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

No, I would not. Indeed, I am pretty certain that such a move would be unlawful under European Union rules, which rightly prohibit discrimination against investors on the basis of nationality. My own strong view, which is reinforced by my years at the Department of Trade and Industry, is that Britain is a shining example of an economy that has benefited from being open to foreign investment. I welcome my right hon. Friend the Prime Minister's recent statement on sovereign wealth funds.

The right way to respond to the perfectly legitimate concerns about how Gazprom might, presumably at President Putin's behest, abuse its investments is to ensure that Gazprom, like every other investor and company, abides by European Union single market rules. The treaty—I do hope that I can persuade the hon. Gentleman of this—will not simply repeat the original treaty's pro-competition stance; it will clarify the legal basis for European Union action in relation to energy in a way that is wholly helpful to the cause of energy market liberalisation, which he and I both support. It will also clarify the subsidiarity of member states, on which I should think he and I also agree.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

We do have a degree of common ground on that point, if on nothing else relating to the treaty. However, would not article 176A give the EU legislative powers in relation to maintaining the functioning of the energy market and the security of energy supply that would enable it to legislate to prevent Gazprom from taking such a position in the market?

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

My understanding is that any action by the Commission against Gazprom would have to be taken within the framework of laws prohibiting discrimination on the grounds of the nationality of the investor. We might be getting into rather technical legal issues, on which I am certainly not an expert, but I am glad that I have made at least a little bit of progress with the hon. Gentleman on that point.

Before turning to my final point, I make a point that was made in an excellent bulletin from the Centre for European Reform on the matter. As it says, if Europeans are worried about Gazprom's role, they need to back the Commission's efforts to speed up liberalisation of their own gas market. To put it a little more crudely than the Centre for European Reform did, what is sauce for the goose is sauce for the gander. The very powers that enable the Commissioner to examine whether Gazprom might abuse its investment are also powers which, with the support of the Council of Ministers, will enable the Commission to rule out market abuses by Gaz de France, E.ON-Ruhrgas and some of the other monopoly or near-monopoly providers in parts of the European Union.

Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Jack Straw, Lord Chancellor), Ministry of Justice

I agree with my right hon. Friend that the treaty will be effective in co-ordinating European energy policy and ensuring more secure sources of energy for the Union. Is it not the case that the way in which the Russian Government are using Gazprom as a tool, and the fact that they are making bilateral agreements in 20 countries of the European Union, rather than negotiating with the EU as a whole, mean that they have far more leverage than we would want them to have? Although I agree that there should be more sources of energy in Europe to guarantee the security of supply, do not those 20 agreements with EU member states put us in a difficult position?

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

My hon. Friend makes an important point. There will always be a large number of bilateral and sometimes multilateral agreements within not just Europe's market, but the global energy market. That is the nature of the contracts and relationships between different companies and different countries, but the response to the concerns that my hon. Friend and many others have expressed about Gazprom, which I share, is that the Commission itself, using its treaty powers, will be able to investigate whether Gazprom is abusing its market position in an anti-competitive way.

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

More than that, there is the energy charter treaty which the Russians signed up to in 1994. They accepted the legal obligations of that treaty prior to ratification. They have not ratified, but they are obliged to respect it. This regulates reciprocity of investment. The key argument that we have at present with Gazprom is that we allow it to invest in the European Union, but President Putin has steadfastly tried to renationalise the assets within Russia so that private western companies are effectively losing assets or not getting fair value for those assets.

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

The hon. Gentleman is right. The Russian Government's action in relation to Sakhalin II is a good example of exactly that. The right response is not tit for tat—I do not think he was implying that—or to lock Gazprom out of European energy markets, even if that were legally permissible, which it is not. It would be wrong in principle, as well as unlawful in practice and damaging to the interests of our own consumers.

We will need to go on making that argument with Russia, and we need to do so with a single voice so that individual member states, perhaps thinking that they are acting in their short-term interests, do not seek to do different deals with Russia. We need Europe to speak with one voice to Russia and to try to persuade President Putin that by blocking off western investment in his energy infrastructure he is doing enormous damage to the interests of his own consumers and his own businesses, whose demand for energy is rising rapidly and needs to rise even more rapidly if the Russian economy is to grow.

Within the next decade or so, there is a real prospect of Russia, hitherto one of the major global suppliers of gas in particular, not having enough to meet its domestic demands, never mind the demands of those of us in the European Union.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

Is the right hon. Lady saying that European Union countries should not, as individual national Governments and countries, enter into bilateral agreements with Russia? If she is, I should say that that would be an extremely dangerous precedent, which could be introduced in many other areas of our economy and would undoubtedly lead to a federal state of the European Union. Surely that is the logical conclusion of her argument. Furthermore, will she also tell the House how many other energy—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The hon. Gentleman is aware that interventions should be brief. Many hon. Members are waiting patiently to contribute to this debate.

Photo of Patricia Hewitt Patricia Hewitt Labour, Leicester West

The hon. Gentleman is certainly misunderstanding me—whether deliberately or not, I do not know. I thought that I had made the point clearly in response to an intervention. Of course there will continue to be a whole range of bilateral—or even multilateral—agreements between companies and countries. However, Europe needs to speak with one voice on Russia's policy intentions.

Let me conclude on a more general point, which comes back to a point made by the hon. Member for Northavon. Since its inception, European Union member states have been able to choose to pool sovereignty and work together with others in the interests of each of us. In this interesting debate it has been extraordinary to hear the hon. Member for Rutland and Melton and many other Conservatives, although not all, on one hand claiming to support energy liberalisation across the European Union, and having no serious argument against the Lisbon treaty's energy provisions—as Mr. Clarke made clear—yet on the other being absolutely determined to oppose the treaty and vote against the Bill.

Furthermore, if and when the treaty is ratified by this Parliament and those of every other member state across the European Union, those Conservatives threaten to reject and denounce the treaty and throw into jeopardy the whole legal basis of the European Union's operation—and thus disrupt all the efforts, which they claim to support, towards energy liberalisation. That would be disastrous for our constituents' interests, for Britain and for the European Union as a whole. That fundamental contradiction in the official position of the Conservative party, which has undoubtedly allowed its anti-European prejudices to triumph over its supposed commitment to the interests of the British people, will lead the House to reject its position and, I believe, will lead the British people to reject it as well.

Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee 3:58 pm, 30th January 2008

I regard this as having been a rather unsatisfactory debate. I managed largely to avoid the debates on the Maastricht treaty, although sadly I was once called by the Whips to make a filibustering speech lamenting the then Opposition's wasting of time during the debates—there was a certain irony to that, although I managed to discharge my duty with reasonable decorum.

I find it unsatisfactory that we should be having a Second Reading debate on energy policy that lasts for four and a half hours, followed by a Committee stage that lasts for one and a half hours. My understanding is that things would normally be the other way round: normally a Committee stage lasts three or more times as long as Second Reading. We have it the wrong way round. It is a shame that it has taken more than three hours for the first Opposition Back Bencher—and I am not only a Back Bencher, but the Chairman of a Select Committee—to make their first contribution.

Having said that, I am delighted to follow Ms Hewitt. I did not agree with everything that she said—particularly her concluding remarks—but it is good to see a former Secretary of State for Trade and Industry using her skill and expertise and coming back to participate in debates. The right hon. Lady set a model for other former Cabinet Ministers in joining us in that way and showing herself to be a true parliamentarian, and I thank her for that.

There is another unsatisfactory aspect of the debate. We waited more than a year for a debate on energy policy, and then, rather like London buses, two came along together. We had an energy debate last week, we are having another this week, and the Minister of State and I are to have a third opportunity to catch the bus tomorrow, when the Minister will attend a sitting of my Committee to discuss energy prices and generating capacity. I am sure that many of these issues will be dealt with again in detail and in a very congenial forum, and a fine job I am sure the Minister will do of it.

So far in today's debate there has genuinely been little disagreement about the objectives that we all share. It has been very much a debate about mechanisms, which has made it slightly frustrating in many ways. I must tell the Secretary of State and the Minister that I am concerned about the provisions in the treaty, although not for the reasons identified by the right hon. Member for Leicester, West and certainly not for the reasons offered by the Secretary of State in his opening remarks. He suggested that the treaty was some kind of proxy for opposition to the European Union itself, and some kind of cover for a wish to withdraw from it.

I believe that the Government were once opposed to these provisions. They had sound, well-argued reasons for opposing precisely the provisions that they now ask us to endorse. It is a shame that they lost the negotiations on the issue, because their negotiating position was the right one for the country, but sadly they abandoned it, which is why we are in the position in which we find ourselves today.

As for my own position, it is simply this: ever-closer union must have its limits. There are some matters that all Members, however Europhile they may be, do not believe should be transferred to the competence at the centre. The limit must come somewhere. The question is where we should draw the line, and my contention is that in the case of energy policy the line pre-Lisbon was drawn in about the right place. I believe that the treaty pushes it a bit too far.

Why does this matter so much? All Select Committee Chairmen think that their subjects are the most important to the country, and I genuinely believe that energy policy is one of the two most important issues that the country faces. The other, for my money, is probably skills, in which we have some competence in another Department. Those are the two key issues involving United Kingdom competitiveness, and hence the United Kingdom's future ability to pay its way in the world and our long-term security.

Mercifully, skills are not in any sense a European Union competence, and I think that that is the answer that Steve Webb should have given when he was challenged on the point earlier. Skills are an example of the competences that we believe should remain firmly in this country. [Interruption.] Perhaps there was no specific suggestion to the contrary, but it is a good example nevertheless, and I hope that the hon. Gentleman would have endorsed that view in any event.

We are debating the interrelatedness of energy policy and the European Union. What is also common ground between us is that there is no way in which British energy policy can be separated from European energy policy. It cannot be, and it should not be. In fact, when I write to constituents who urge withdrawal from the European Union, I cite energy policy as a reason for not doing so. Our ability to influence the European market in gas and, in particular, electricity depends on our membership of the European Union, and it is therefore absolutely in our interests to engage in energy policy. There can be no debate about that; the debate must be about how we are to engage in that policy.

The question I want to ask is "Do we need any new powers and competences at all?" A thought at the back of my mind suggests that we might, and I wish that we were debating it now. I think it was my colleague on the Select Committee, Mr. Weir, who made the point about French and German national champions, and listed other countries with a chauvinistic approach to energy policy. It is certainly true that the conduct of British energy policy is shaped very heavily by the aggressive chauvinism of, particularly, the French and the Germans. There is no doubt that the European Commission, in its magnificent battles with the national champions in the rest of Europe, is encountering a great deal of resistance to the liberalisation of the European markets that is so much in Britain's interests. It is possible that we need new powers to deal with that, but I do not think we do.

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Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

Is not the crux of the new powers in the treaty the interlinking of the issues of energy security and liberalisation, given the attitudes of, for example, the French and German Governments, who exert huge influence on their own energy companies?

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Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

The hon. Gentleman is absolutely right. The question that the House must seriously address is whether we need to pool new aspects of our sovereignty—to use the less controversial phrase of some of my hon. Friends—to achieve those objectives. I believe that existing powers are sufficient to deal with them, and we should be content to rely on them, rather than seek new ones.

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Photo of Bill Cash Bill Cash Conservative, Stone

I was interested in the exchange my hon. Friend had about the French and German position. Is he aware that, this week, France and Germany will seek to prevent a forced break-up of their power companies when they unveil a joint initiative, as reported in the Financial Times? It is precisely that problem that we are up against. It is not just a problem for the European Commission, but for the global marketplace.

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Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

I was aware of that because my hon. Friend had drawn it to my attention earlier on. That development does not surprise me at all, and it is important that it is put on the record. I view with some trepidation what the development will actually entail when it is announced by those Governments.

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Photo of Jim Cunningham Jim Cunningham PPS (Mr Mike O'Brien, Minister of State), Department for Work and Pensions

Does the hon. Gentleman agree that it is important that countries in Europe stand together as far as possible, even given the current difficulties? The Russians have certainly used energy as a weapon; they did so in Ukraine not too long ago.

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Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

I do not remember whether the hon. Gentleman was here before the speech of Ms Hewitt. She discussed at some length towards the end of her remarks—in my view, her analysis was absolutely right—the real challenges relating to Russia. It is not attracting sufficient investment in its own industry to guarantee the supply in its own marketplace, never mind its ability to export; that is the real fear about Russia. My worry about Gazprom is not so much its power, but whether it will actually have the power to sell when the time comes. I am slightly less concerned about that, although it is a big and complex subject that we do not have time to debate now.

I am grateful to Open Europe for its extremely good briefing on this debate, which points out that this is the first time energy will be subject to majority voting in the European Union, and that is a big change. I am not against pooling sovereignty, but the question is whether we need more powers to achieve the objectives we share. I do not believe that we do. The briefing emphasises:

"The Government said that these new powers were 'unnecessary' and that it had 'detailed concerns' about them."

But they swallowed their concerns and gave way on every point. I have seen a document that suggests what their original negotiating position was; I heartily endorse that position, and I am sorry that they gave up on it. I do not believe that the treaty does anything helpful by way of consolidation, clarification or addition to add to the powers that we already enjoy to break up energy monopolies on the continent, which are so important with regard to our own security of supply and price. The necessary provisions are already there.

I share with Open Europe the concern that the new energy powers will let the EU pass legislation on energy that has nothing whatsoever to do with the operation of the internal market. I cannot authenticate its figures, but Open Europe states:

"For example, in 2002 the Commission proposed a huge increase in statutory oil reserves. The UK vetoed this at the time, but under the Lisbon treaty the UK could not block it. If the Commission were to reintroduce the proposal in future it could cost the UK up to £6 billion to implement, with ongoing costs of £600 million per year."

The briefing points out the impact that that would have on energy prices at a time when we are deeply concerned about fuel poverty in this country. Those are real issues, but the Government have not yet satisfied me as to whether they will have an adverse impact on our constituents.

Let us consider the three articles that concern us—I am using the consolidated text. Article 4 defines for the first time, other than in case law, the shared competences of the European Union. The helpful Library note on shared competence says:

"In these areas Member States will have competence to adopt legislation to the extent that the Union has not exercised its competence. This has been interpreted by critics to mean, in effect, a back door to EU exclusive competence, giving the Union a right of first refusal with regard to competence, while Member States would only be able to do what the Union decided not to do."

Given my view about the centrality of energy policy to this country's competitiveness and security, it worries me that the Government have yet to produce good arguments for that formalisation of the sharing of competence, with its consequent effect on this House's ability to legislate on energy policy.

The second article, which we have already debated at some length and I have dealt with in response to an intervention, is article 122 in the consolidated text. It deals with

"the measures appropriate to the economic situation, in particular if severe difficulties arise in the supply of certain products".

I have still not heard a convincing explanation of the sort of circumstances in which that power could and would be used. It is a freestanding provision, which does not relate to the second part of the article, which refers to difficulties

"caused by natural disasters or exceptional occurrences beyond its control", which is a broad definition. The Secretary of State suggested terrorism as an example, but I hope that, in those circumstances, the countries of Europe would naturally wish to do what was right and best for Europe, because that would also be in their self-interest. I do not understand the necessity for including a new power in the treaty. When I cannot understand the reason for doing something, I prefer not to do it. If there is a compelling reason for doing something, I will consider it. However, I am worried that we are adding powers for which there is no compelling need.

Article 192 in the consolidated treaty provides that the Council can act unanimously on

"measures significantly affecting a Member State's choice between different energy sources and the general structure of its energy supply."

That is helpful. The substantive article that we are debating—194 in the consolidated treaty—includes a subsidiarity provision, which states:

"Such measures shall not affect a Member State's right to determine the conditions for exploiting its energy resources,"— the North sea in our case—

"its choice between different energy sources and the general structure of its energy supply".

That is a good, useful subsidiarity point, which I welcome.

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Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

How would my hon. Friend respond to the EU's scientific experts, who said of biofuels, which could cost up to £50 billion by 2020, that the policy outweighs the benefits to the individual countries that comprise the EU?

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Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

I would love to get into a lengthy debate about biofuels with my hon. Friend because he makes a powerful point. I shall deal with renewables briefly towards the end of my remarks but I share his concern. We all assumed that biofuels were an unequivocally good thing, which brought unqualified benefits to our farmers and the environment, and we now realise that the matter is more complex than we first imagined. I am glad that we are having second thoughts about the subject to ensure that any biofuels that are used genuinely contribute to environmental sustainability and do not have an environmentally negative impact.

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Photo of Bill Cash Bill Cash Conservative, Stone

My hon. Friend fulfils the important function of chairing the Select Committee on Business, Enterprise and Regulatory Reform. When we consider the duties, options and the extent of remaining choices, I hope he noted that the paragraph of article 194 that he cited ends with the important words,

"without prejudice to Article 192(2)(c)."

That takes us back into a labyrinth of other matters. As Chairman of the Select Committee, my hon. Friend may wish to consider in due course the legal basis for the article, and I am sure that the European Scrutiny Committee will be glad to help him.

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Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

We could have great fun with that. I could almost share my hon. Friend's addiction to the nuances and niceties of the matter. He is right that the article states,

"without prejudice to Article 192(2)(c)."

However, article 192 provides that the Council will act unanimously, but

"without prejudice to Article 114."

I shall not turn back to article 114 to discover to which article it is without prejudice. Heaven knows where that would lead us. [Interruption.] My hon. Friend is right that the paper trail would lead us back to the beginning and I understand his concern.

Article 194 has four substantial provisions. One is to ensure the functioning of the energy market. We do not need such a provision because it is already implicit everywhere else. The right hon. Member for Leicester, West said that the article usefully consolidated matters, but I need to be persuaded.

The article refers to ensuring the security of the energy supply in the EU. I believe that the British Government, not the EU, have a central role to play in that. To be fair to them, they have done many of the right things. For example, the Planning Bill is a flawed but well meaning attempt to ensure that we have generating capacity. The Government have been working closely with the Government of Qatar and other places to ensure that we can import LNG. They have done much on gas storage, albeit sometimes belatedly. Security of energy supply is for national Governments to tackle and I am nervous about action at EU level.

The article covers promoting energy efficiency and energy saving, and developing new and renewable forms of energy. We are all in favour of that but, again, I am worried that the EU's power may be channelled in an unhelpful direction towards specific technologies.

I would like to see member states experimenting with different technologies. For instance, I have a hobby horse about hybrid cars, which I think are bad for the environment. Because of the total carbon footprint of the cars and the recycling costs, I think that clean diesel is better for the environment than hybrid technology. Toyota has made a great play of promoting itself as an environmental company because it uses hybrid technology. There is also a reduced congestion charge for hybrid technology, which I resent because I am not sure that it is the right technology. The state, in the shape of the Mayor of London, is taking a view on a particular technology, which is not helpful.

I worry that the energy provisions in the treaty could lead Europe to specify technologies in an unhelpful way. That is why I have some doubts, as the Minister knows—doubts, not objections—about the banding of renewable obligation certificates, because I worry that we will again be choosing technologies. However, that is a separate debate.

The only thing that is genuinely helpful is sub-paragraph (d), which says that policy will aim to

"promote the interconnection of energy networks," which I can see is hugely important for the functioning of energy markets. I also suspect that that provision actually adds to the existing body of legislation, so I have some sympathy for that part of new article 194.

The reason for my overall concern is that energy policy means different things to different people. When we talk about energy policy—we have seen that there is a consensus in all parts of the House—what we mean is often liberalisation of the European market, energy efficiency and renewables. However, when people talk about energy policy in eastern Europe, one word comes to mind: Russia. They have a different obsession, and understandably so—I am not making a criticism. The interests of eastern and western Europe diverge on energy policy, as do this country's interests vis-à-vis the continent. Again, I am nervous about pooling too much sovereignty, in case that is against our interests.

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Photo of John Horam John Horam Conservative, Orpington

My hon. Friend has mentioned Russia, which is pertinent. Is he aware that Italy and the Italian company Eni are getting together with the Russians in joint schemes, such as the southern stream pipeline, which would totally bypass western Europe and give Russia direct entry into southern Europe? That is an example of where we should be concerned not necessarily about what the British Government are doing, but about what other countries are doing.

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Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

I understand my hon. Friend's point. We could discuss pipelines, which are a very political subject, at great length. However, I have not thought through the implications of the development that he described, but it is helpful that he has made that point.

For me, there are two central things that Europe must prioritise. One is liberalisation, on which the Commission is working hard; the other is the carbon price, which is a very important mechanism. We are starting the phase 3 negotiations, and we shall see where they lead. However, my hon. Friend Richard Ottaway drew attention earlier to Dieter Helm's concerns about the long-term carbon price. Although the Commission's heart is in the right place—phase 2 is better than phase 1, and I am sure that phase 3 will be better than phase 2—I am still worried that the time scales for the mechanism for setting the carbon price are not long enough.

Investors are not sure—this concern has been expressed to me by potential investors in nuclear power, for example—that they can project 30, 40 or 50 years ahead, based on what the mechanism for setting the price will be. They do not know the price—they can take a view on that—but they need certainty about the mechanism. They know how oil prices are determined—it is called supply and demand, and they can take a view on that, too—but they do not know how the politics of setting carbon prices will work out. I am concerned that that remains the most important challenge for Europe, because we need a European price. We should therefore not divert attention from that crucial issue.

Very briefly—I have spoken for too long already and many other hon. Members want to speak—I should like to discuss renewables and the draft renewable energy directive. There are lots of targets floating around, which can get quite confusing. The UK has a target of 10 per cent. of electricity generation from renewables by 2010 and an aspiration of 20 per cent. by 2020. The EU has a target for the generation of 20 per cent. of all energy from renewable sources by 2020, from which we now know that the UK's target is likely to be 15 per cent.

That 15 per cent. target is much more challenging than the UK's existing aspiration, because it will translate into a higher figure for electricity generation, which comprises only 18.5 per cent. of the energy market, and because we do not have the policy levers to pull to produce the solar gains in other areas. The target will translate into a big demand for renewable electricity generation. When we have the Minister for Energy before the Select Committee on Business, Enterprise and Regulatory Reform tomorrow—here is a clue to one line of questioning—we will be pushing him a little on what he thinks that target will mean in practice for renewable electricity generation as a percentage of total generation, because I just do not think that we can achieve it. That target—that expectation, aspiration or whatever one likes to call it—is unrealistically high and I do not think that we can meet it.

There is some speculation that the then Prime Minister Tony Blair did not understand the difference between energy and electricity when he negotiated the figure. I understand that, because although we have energy reviews all the time, they are actually always electricity reviews. But there is a real problem here. The European Union is about to impose on us a target that I do not believe we can meet.

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Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

The hon. Gentleman talked about the carbon trading initiative in the European Union. My understanding is that, within that, there is also a mechanism for trading renewable energy through certificates of origin. So, what might happen is that the countries that are closer to meeting their targets on renewables will end up selling certificates of origin to those that are not meeting theirs, to boost their amounts.

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Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

The hon. Gentleman is absolutely right. That is the way in which the mechanism would work, and I imagine that that would mean additional costs for UK energy consumers. I worry about that, but I am sure that that is exactly what will happen.

Interestingly, the race for renewable technology can have a downside. I am told—the Minister might wish to correct me—that Holland has the highest level of onshore wind generation in the European Union. The result of that, however, is that it needs so much back-up hydrocarbon technology for when the wind does not blow that it also has the highest per capita carbon dioxide levels in the EU.

These are difficult issues for us to resolve. Unless there are compelling reasons in the British interest not to do so, I believe that these matters should be resolved by this House and our Ministers. We have a good Energy Minister at present, and I would rather that he dealt with these matters. I do not want us to let these powers go or to pool them unnecessarily.

I have severe reservations about the way in which this market will work. We have a lot to do to ensure that our own market will work effectively. There is news, apparently, that EDF might be about to buy Scottish Power—it is a bit of an outside chance, but it could happen—which would reduce from six to five the number of suppliers in our market and raise big questions about the competitiveness of the UK energy market.

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Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

Ah! The hon. Member for Angus might have some news on this matter.

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Photo of Peter Luff Peter Luff Chair, Business, Enterprise and Regulatory Reform Committee

That is absolutely right. EDF is actually buying Iberdrola. It is a long and complicated chain of events involving a number of European energy companies but, basically, it looks as though there could be further consolidation of ownership in the British market. There are big issues facing competition in this market as well. I still think that the balance of power is about right as it stands, and I am not persuaded by the Government's case for the energy provisions in the Lisbon treaty.

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Photo of Claire Curtis-Thomas Claire Curtis-Thomas PPS (Rt Hon Baroness Scotland of Asthal QC, Attorney General), Law Officers' Department 4:21 pm, 30th January 2008

It is a pleasure to follow Peter Luff. I might not agree with some of the sentiments that he expressed, but he always speaks eloquently on this issue—no doubt as a result of his chairing the Business, Enterprise and Regulatory Reform Committee.

I have listened closely for the past four or five hours to the arguments from Opposition Front-Bench Members and other hon. Members who have tried to justify our rejecting article 192 in the consolidated texts of the EU treaties as amended by the treaty of Lisbon. I believe that the amended treaty merely recognises a need to reflect a developed understanding between existing and new member states, and reaffirms existing agreements. It also takes the opportunity to assert an unequivocal position on the promotion of energy efficiency and energy saving, and on the development of new and renewable forms of energy. It is this element of the reaffirmed energy policy that I wish to discuss today.

First, I want to refer to the recent announcement by my hon. Friend the Minister for Energy. As his White Paper on nuclear power and the Lisbon treaty unequivocally state, human-caused climate change is in large part due to huge emissions of carbon dioxide. As a result, we have a moral as well as an expanding economic duty to begin converting our industries, homes and means of transportation to more environmentally friendly technologies. The House of Commons has a duty and a responsibility to debate the merits of nuclear, wind and coal power in Britain. It might be politically risky or inopportune to suggest higher energy costs in the short term, but we must consider that a down-payment on a much brighter future. That has certainly been the case for some of our renewable resources.

We owe it to our children, and to their children, to blaze a trail to greater environmental and ecological well-being, but also to keep Britain competitive and current in the European and world economies. New technology undoubtedly offers a great market opportunity for British-based companies. Making a change to nuclear power, as the Government have proposed, will undoubtedly incur short-run costs.

The recent White Paper estimated that assessing designs and location strategies, licensing new plants and establishing an application process will not take place until 2013, well before the construction of new nuclear plants can begin. During that time, spending on these plants will be condemned and lambasted by Opposition parties, rendering the nuclear plan a significant political liability. However, it is essential that we follow this path, but we must never under any circumstances underestimate or undervalue our desire and our need to develop other technologies.

The Stern review of 2006 concluded that up to 1 per cent. of the world's gross domestic product should be invested each year to mitigate the worst effects of global climate change by restricting the release of greenhouse gases. The catastrophic result of saying that we will take care of it later is not simply that exotic plants and animals will die; according to Stern, global GDP will eventually suffer the immense consequences of climate change as a result of severe weather, including hurricanes, wind and flooding. Stern concluded that if we begin acting to reduce greenhouse gas emissions by increasing renewable energy sources, further capping the emissions of coal plants and increasing the usage of nuclear power, we will save money later in the century. Making sacrifices now will create a much better situation in future. I believe that the UK must take a lead so it can guide its allies in America, India, China and the developing nations on these policies.

I turn now to the challenge that faces us all in relation to the promotion of energy efficiency, energy saving and the development of new and renewable forms of energy. So many of my constituents—

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Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

On a point of order, Madam Deputy Speaker. As I understand it, this is essentially a Committee stage, so is Mrs. Curtis-Thomas in order in giving us a general dissertation on Chinese energy policy, which has absolutely nothing to do with the treaty, let alone the detailed provisions of the Bill?

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker

We are not yet in Committee. I am occupying the Chair here rather than at the Committee Table, so I am afraid that the right hon. Gentleman has misunderstood the position. I believe that the hon. Lady was going rather wide of the debate, but I repeat that the House is not yet in Committee.

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Photo of Mark Harper Mark Harper Shadow Minister (Work and Pensions)

Further to that point of order, Madam Deputy Speaker. Surely it is the case that the motion before us relates to approving the Government's policy on the treaty of Lisbon in respect of energy provisions. It is not a debate on Britain's energy policy in the wider sense, but on the treaty provisions that relate to energy.

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker

The hon. Gentleman is absolutely right in his remarks. Perhaps the hon. Lady will address her remarks in that light.

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Photo of Claire Curtis-Thomas Claire Curtis-Thomas PPS (Rt Hon Baroness Scotland of Asthal QC, Attorney General), Law Officers' Department

I am dealing now with the promotion of energy efficiency, which is covered in article 197C. Some of my constituents would expect the treaty to consolidate energy security and trading markets, but that is not the main subject that focuses their minds. They want to know how we are going to use this treaty to tackle climate change, and I believe that that desire is strongest among the youngest members of our society. Schoolchildren in my constituency and members of my own family are greatly focused on that aspect of this treaty. We often talk about how Parliament can engage young people and it is clear that this is a very relevant platform for them—one that I wish to express on their behalf.

It is this generation of young people who will without doubt have to confront the serious consequences of climate change. It is not just the young people of Europe whose lives will be affected in an unprecedented way as a result of energy utilisation. The children of developing nations such as Sierra Leone, for example—many of whom live without any energy, light or heat for cooking or manufacturing—are likely to bear the consequences of excess energy utilisation today.

I know that the development of new and renewable forms of energy provision in the treaty will do more than just drive new technologies within the EU—in respect of which we will inevitably take a lead—as the significant investment will greatly assist developing nations that have very little access to energy sources within their countries now. We need to share with them our knowledge as well as the products of this new element in the treaty. It seems so utterly unfair that we constrain the energy utilisation of emerging countries because we have become only too well aware of the impact of unconstrained use in our own. We have to do all we can not just to find ways to generate the energy, but to be far more creative in respect of conserving the energy we have already produced. That will require technological innovations and significant public information and educational programmes, which I hope will flow from the new treaty.

Young people must be made aware of the importance of combating climate change. Although many of my local schools have taken their own initiatives on that, climate change is not covered in the primary or secondary curricula, except for a very small intervention in geography subjects.

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. I must remind the hon. Lady that that is a subject for debate on day 8, rather than today.

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Photo of Claire Curtis-Thomas Claire Curtis-Thomas PPS (Rt Hon Baroness Scotland of Asthal QC, Attorney General), Law Officers' Department

In conclusion, I want to emphasise that although young people have a major role to play in combating climate change now and in the future, Members of Parliament also have a duty to do that. Under the energy element, we are invited to introduce a number of new instruments in order to be in compliance with the treaty. Those instruments should lead to the extension of current initiatives in the UK, including those on controlling carbon emissions around town, such as through charging exercises and the low-emission programme that the Mayor has just introduced. It is important that this element has been included in the treaty. I welcome it and the support the House will give to the treaty today.

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Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton 4:31 pm, 30th January 2008

I shall be brief, as I know that other Opposition Members wish to contribute, and in the interests of having a balanced debate, I shall try to give them sufficient time to do so.

I support the insertion of the energy element in the new treaty, as I have long argued that energy was insufficiently covered in existing arrangements, and having a more common EU energy policy is becoming an issue of increasing UK national importance.

Many contributions to the debate reflect the self-confidence that has come from decades of energy self-sufficiency in this country, but the reality is that we are now rapidly getting into a state of energy insecurity. It is interesting that a consultancy firm, Inenco, says that the number of nuclear and coal plants coming out of service over the next few years make shortages likely. It believes that demand will overtake supply some time between 2012 and 2015, creating a serious generation gap. As I hope there will be a Conservative Government at that time, we should deal with this matter quickly.

Although I support the desire to have new nuclear power stations, they will not by themselves fill the gap because they will not be ready in time. It is right that the Government are encouraging them by providing regulatory and support frameworks for investment in nuclear power stations, and I am delighted that my hon. Friend Alan Duncan has supported the Government in that. However, we face a problem, which is shared by most other EU countries, although the extent of the problem differs: there is within the EU an increasing dependence on imported energy. Rather than have a "beggar my neighbour" attitude—that is, by and large, the attitude of Members who wish there to be no more pooling of sovereignty or community engagement—we should have a constructive approach.

That is increasingly important in the context of the world energy situation and of the way in which some of our energy is increasingly supplied. The African position is worrying for the EU as a whole. It is true that Algeria is one of the largest suppliers of its own energy to Europe, but let us consider the situation across the African continent. There is now very strong Chinese investment in, for example, energy in Angola, and the recent Gazprom negotiations in Nigeria cause serious concern about the future of the Nigerian energy supply. Uncertainties are arising, and they need to be discussed at European level.

The increasing dependence on Russia, which has been mentioned by several hon. Members, should give a pause for concern. About 25 per cent. of our energy comes from Russia, but that figure will rise to 40 per cent. by 2030, according to the Commission's figures. It is difficult to know exactly what will happen. Interestingly, Russia is the second biggest producer and exporter of oil—after Saudi Arabia. It accounts for about 12 per cent. of global production, although it has only 6 per cent. of global oil reserves, so there are a few questions marks over its continuing prosperity. There is no doubt that Russia's ability to generate huge capital reserves because its energy is being sold at elevated prices means it will dictate much of what will happen over the next few years. Given all those circumstances, we need to deal with energy coherently at the European Union level.

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Photo of Adam Holloway Adam Holloway Conservative, Gravesham

Does my hon. Friend agree that the treaty could have an effect on concerns about energy security, particularly in eastern European countries, and could therefore be used in such a way that the UK loses control of its own energy stocks in an emergency?

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Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

I disagree with my hon. Friend. The treaty may make it more likely that we do not lose that control.

The situation is cause for concern because Russia is picking off individual members of the former Soviet Union and doing some alarmingly worrying deals. The Baltic states are very susceptible to that influence. A different deal with Bulgaria has just been done, and it too is of concern. It involves both Gazprom and the approval of a particular pipeline that has been mentioned earlier. We should not be unaware that the Russians are determined to ensure that there is a single source supplier of energy—gas and oil—to Europe, and that the way the pipeline has been negotiated means that for a period of years, until we find some way of bypassing it, there could be a single source. That would mean that Russia would be able to pick off members of the European Union.

I think everyone in this House agrees that the European Union cannot allow any one of its members to be influenced by an external country. That is one of the solidarity issues that we have agreed ever since we joined the European Union. As energy is now a security issue, the danger is that some of the former Soviet Union countries that are now part of the European Union could be very vulnerable to the Soviet tactics of the Russian Government. I do not wish to name a particular country, because to do so might draw too much attention to it, but one can use one's imagination as to which countries I am discussing. We therefore need to get our act together, and the main principles of the treaty and the changes in article 176A are crucial.

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Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

I shall, of course, give way to my long-term friend.

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Photo of Bill Cash Bill Cash Conservative, Stone

Does my hon. Friend have any thoughts on the interaction between Russia and Germany, and, of course, Mr. Schroeder and Gazprom?

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Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

A lot of very worrying negotiations are going on, particularly as they affect Lithuania and Poland. They are therefore European Union matters in which we have an interest. That was one of the most helpful interventions my hon. Friend has ever made, because it confirmed my point that these are European Union matters rather than national matters. He is, of course, an expert on the treaty, but he does not always understand what he has said. Article 176A is crucial. Paragraph 1(a) states that the Union should aim to

"ensure the functioning of the energy market".

All four sub-paragraphs require the Commission to have strong powers, and if this treaty enforces the powers of the Commission, that is a very good thing.

My hon. Friend raised the problems of the French and German desire to discourage unbundling. I shall quote the Financial Times from Monday, in which the energy Commissioner stated:

"Our main priority is that customers can choose and have an active role in the market. That will bring prices down. If you do not like your supplier you should be able to change."

Bravo. A good Conservative like me believes strongly in an effective and powerful Commission, reinforced by the European Court of Justice, and including energy policy.

Article 176 expresses the desire to

"ensure security of energy supply in the Union".

That is touched on in the points that I have just made.

In an earlier intervention in the speech by Ms Hewitt I commented on the energy charter treaty that the Russians have signed and which has recently received much attention. I hope that the Minister will have another look at that treaty, because it raises considerable concerns about energy supply and the role of the Russians, especially Gazprom. They have signed the treaty, and that requires reciprocal arrangements, including investment and other characteristics of the energy market. As the treaty is in existence, we should hold the Russians to account and perhaps ask whether it would be right for them to be given easy entrance into the World Trade Organisation before starting to honour the treaties that they have signed. I draw the Minister's attention to early-day motion 798, in my name.

If we are to achieve the aim of ensuring the security of energy supply in the European Union, we have to take collective action. Article 176 also states that Union policy will

"promote energy efficiency and energy saving and the development of new and renewable forms of energy".

We have had those discussions and I do not need to say more about that. It is clear that each nation will have a variety of choices in how it achieves that, and that is enshrined in the treaty as a national interest.

We have to ensure that we meet our environmental objectives, and also diversify into reliable energy sources. I am all in favour of renewable energy, but I am not entirely certain that it will provide reliability of supply. I hope that the Minister will be challenged on that in the Select Committee, which is admirably led by my hon. Friend Peter Luff.

The article also says that EU energy policy will

"promote the interconnection of energy networks".

That is an important issue for the EU, because if there were a problem, the Union would have to intervene. Pipelines will be a cause of increasing concern. The threat to pipelines and supply touches on another useful clarification in the treaty, about the common foreign and security policy. That is not only an external issue—for example, but not uniquely, with Russia—but a domestic or even, one might say, a European homeland security issue. In a recent Government announcement, this country has already made it clear that companies will have to pay for the military to secure the gas outlets within the United Kingdom. That does not surprise me. Indeed, we will have to go further, and there will be more obligations.

Security of gas and oil supply through pipelines in the European Union is a British national interest. If a pipeline somewhere else is blown up, it is a problem for us if it is part of our supply. Who protects Norway? We forget that the Russians are also encroaching on the Arctic circle, and any threat to Norwegian supply would be a grave problem for us.

This debate, which is narrowly focused on energy, indicates just how important it is for this country to start to think positively about the role of the European Union. We cannot influence such matters on our own. We cannot afford breast-beating declarations that Britain is best, or that we must look after our national interest, as if that were a zero-sum game that excluded everybody else. We are in this together, and we are in a much more insecure world. We start increasingly from the position of a lack of control over sufficient energy supplies for ourselves. We are becoming a net importer, which increases the insecurity.

I hope that the Minister will pick up some of those points and talk positively about the benefits of the Lisbon treaty. If he is not positive about them, no wonder the public at large are confused. The treaty is a good thing for the United Kingdom. Let us cut through the cant and understand that if we play the game properly, we can have disproportionate influence. Many other countries in the EU are looking to us for that leadership.

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Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs) 4:45 pm, 30th January 2008

It is fitting that energy forms part of our debate, given that the whole concept of the EU grew out of the European Coal and Steel Community, but energy is one of the less satisfactory areas of the European project and, to be frank, I do not think that the proposals in the treaty will do a great deal to improve the situation. European policy swirls around the concept of liberalising energy markets and the belief that such liberalisation will lead to a better deal for consumers, but, given the recent experience of UK consumers and the swingeing energy price rises that we have suffered in our so-called liberalised market, it is at least questionable whether we are getting any real benefit from it.

It is often argued that one of the reasons for that is the non-liberalised nature of the European market and its interaction with the UK market, especially through the gas interconnector. The Independent put it well when, on 8 January, it reported:

"For their short-term supplies, companies on the Continent come to the liberalised UK market where the wholesale price is significantly less than the oil-indexed gas sold on the European market. Their short-term supplies met, the European groups then hoard their stored supplies, crimping demand and driving the price up further still."

In other words, the actions of the major European suppliers mean that prices in the UK rise. We have heard today about moves to centralise further the European companies' hold on various markets.

The purposes of the new energy provision, article 194, are to

"ensure the functioning of the energy market...ensure security of energy supply in the Union...promote energy efficiency and energy saving and the development of new and renewable forms of energy" and

"promote the interconnection of energy networks."

None of us would have any great problem with any of that, and we certainly do not intend to oppose this part of the treaty—it is all very much motherhood and apple pie stuff. My difficulty is that although it all looks great on paper, what is actually happening in the EU seems to me to be somewhat different.

The Commission has been trying for some years to liberalise the markets, and in September last year it produced its third liberalisation package. The proposals consist of four documents that would amend the existing gas and electricity legislation, and a fifth that would establish a new agency for co-operation among energy regulators. The Commission's aim is clearly to remove barriers to creating a fully functioning internal energy market, which it believes will ensure open and fair competition and effective regulation, leading to lower prices for European consumers in a single European electricity grid, which it wants to have in place by January 2009. I have already expressed scepticism about whether the liberalised market truly leads to lower prices, but the real fly in the ointment of the proposal is that the Commission wants to achieve a liberalised market using the mechanism of unbundling ownership—in effect, breaking up the vertically integrated energy companies that operate on the continent and having separate ownership of generation and transmission networks.

That is all very well in theory, but as I pointed out earlier in an intervention, several of the large European states—France and Germany in particular—are dead set against that approach, because their idea of energy security is based on the concept of having national champions in the energy market through promotion of big vertically integrated energy companies with a large element of state ownership, or at least state influence. Electricité de France—EDF—is a classic example. There is a conflict in article 194 between the idea of security of supply and the idea of liberalisation of markets, because there is no definition of how we are to achieve security of supply, and there is a fundamental difference between the UK Government's approach and the approach favoured by France and Germany, for example. In passing, it is worth nothing that the UK Government see new nuclear power stations as important for future energy security, yet the company most likely to invest in them is one in which the major shareholder is the French Government.

It is also highly unlikely that France and Germany will agree to ownership unbundling that reduces their Governments' influence over the internal energy markets. That is doomed to failure. When I put that to the Secretary of State, he said that qualified majority voting was the key, but at the end of July last year, not only France and Germany, but Austria, Bulgaria, Cyprus, Greece, Latvia, Luxembourg and Slovakia sent a joint letter to the Commission arguing that ownership unbundling should be only one of a few options. Cyprus and Malta have also expressed additional fears about that. Even with qualified majority voting, we will be unlikely to get agreement on unbundling in that way.

As is the case with all things European, it is likely that a compromise will eventually be reached. Hopefully, it will be along the lines of what is known as the Scottish solution, which operates by separating transmission operators while leaving the integrated companies. However, being European, who knows what will come out of all this? I am interested to hear what the UK Government's position on the energy market will be if the full unbundling option does not proceed. Are we in for many years of arguing about that before we come up with a compromise?

The provisions of the treaty will not change things, because we could do much of what is proposed by using existing legislation. We might be putting those provisions on the face of the treaty, but it will not make a great deal of difference.

I want to raise a specific point on article 194 and its relation to article 100. Much has been said about that, and the circumstances in which help would be given to other nations. I find many of the arguments somewhat bizarre. A great deal of concern has been raised about the position of Gazprom in the European market. It is active not only in the eastern part of the European Union, but also in the western part, where it has tried to buy up transmission capacity. Indeed, at one time it was looking at Centrica.

As Mr. Taylor hinted, the article gives confidence to members of the EU in the east that the west will come to their aid if Russia, or Gazprom, tries to cut off their gas supplies. Members of the Select Committee on Business, Enterprise and Regulatory Reform—or on Trade and Industry, as it used to be called—who visited some of the eastern European countries during our investigation found clearly that that is, rightly, a serious concern for them. They see the EU as their anchor in democracy against Russia, but they are worried about the gas situation. The article is sensible because it gives them confidence that they will not be left out in the cold—no pun intended—if Gazprom does that.

We had a brief diversion into biofuels. I remember speaking to a representative of a major oil company about the future of biofuels, and that person talked about second-generation biofuels—those that come not from palm oil or corn but from wood and wood offcuts. The representative said that they would be made in areas with large forests. Guess where that is going to be in Europe? Eastern Europe and Russia. So there is a potential problem with biofuels, too, if we do not get this right.

No debate on energy would be complete, as I am sure the Minister will be delighted to hear, without a reference to our old friend transmission charges—something that I have discussed with him on the odd occasion. I have mentioned the discriminatory nature of transmission charges in the UK before, particularly with reference to renewable generators in Scotland. However, the subject also has a European dimension. If the Commission is serious about creating a European grid, the question of transmission charges throughout Europe will have to be addressed.

Under the Commission's proposals, national regulators are given an obligation when fixing or approving tariffs to ensure that network operators are given incentives to foster market integration. Scottish and Southern Energy, among others, has pointed out that one of the key obstacles to effective market integration is the discontinuity in generator tariffs at national borders.

The guidelines limit the maximum average generator charge, but that still leaves scope for massive discontinuities at national borders due to extreme locational tariffs in some member states. That is an important consideration in the UK, as the guidelines say that the average UK tariff should be €2.4 per megawatt-hour. The UK complies with that average, but that disguises a vast range of locational charging arrangements set by the national grid and approved by the regulator—in our case, by Ofgem.

The European guidelines allow differentials, but state that a differential of €20 per kilowatt-hour would be an extreme example of locational pricing and a significant barrier to European trade. However, in the UK the difference between northern Scotland and southern England is more than €40 per kilowatt-hour—twice the extreme example cited by the European Union. If the treaty goes through, as I am sure it will, and the new electricity measures come into being, I look forward to the European Commission taking an interest in that extreme example of discriminatory pricing and overturning the UK Government's refusal to do anything about it.

That subject is linked, too, to the new European decision on renewable energy generation. In an intervention, I mentioned the interesting fact that although the EU is now setting renewable generation targets for each member nation, there is a proposal for other countries to trade certificates of origin. That could lead to a great deal of trading of renewable energy. That could be a huge benefit, particularly in Scotland, because of the potential for renewable generation. I look forward with interest to seeing how it will be implemented in the UK.

I realise that time is running out, and so I shall bring my speech to a close. It seems to me that much of the debate about European energy before the treaty was presented to us was about who should set energy policy—Brussels or London. In our view, both are wrong. Scottish energy policy should be controlled from Edinburgh.

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Photo of Mark Harper Mark Harper Shadow Minister (Work and Pensions) 4:58 pm, 30th January 2008

I shall of necessity be brief and raise just one or two points. The first is directly relevant to article 176A(d) of the treaty, and concerns the promotion of the interconnection of energy networks. One point that will be keenly felt by my constituents concerns the pipeline from Milford Haven to the national gas grid. One of my concerns is that we should ensure that local people's influence on the way in which those energy networks are put together should not be downgraded. The Minister for Energy will know that his boss, the Secretary of State, recently turned down an above-ground installation on that pipeline following an inspector's report. That was an important battle which was keenly fought by my constituents. They would not want to feel that their ability to influence the way in which those networks were put together was damaged by the treaty and its provisions.

My hon. Friend Peter Luff, Chairman of the Business, Enterprise and Regulatory Reform Committee, pointed out that the Government's negotiating position initially was that they did not want these provisions. They felt that they were unnecessary and argued against them. Now, they are arguing in favour of them. I do not necessarily agree with all the points made by my hon. Friend Mr. Taylor, but he did a better job of arguing in favour of the treaty than the Secretary of State.

I have two questions for the Minister who will wind up the debate. First, reference was made to the clearer legal basis for liberalising markets, but how will the treaty deliver that? My second question will be of interest to all our constituents: what assessment have the Government made of the treaty's effect on energy prices here in the UK, as well as in other parts of the EU? The UK already has the most liberalised energy market, so it is not clear how liberalising markets elsewhere will help our constituents. It would be very helpful if the Minister responded to that.

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Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform) 5:00 pm, 30th January 2008

This afternoon's debate has been frustrating in many ways, as has been made clear in various contributions. In part, that is the result of its structure: we have spent four and a half hours talking about general energy policy, and will have only one and a half hours to discuss the specific amendments that have been tabled. In other words, the debate has been too general and too little concerned with scrutinising the detail of the treaty.

My hon. Friend Peter Luff, the Chairman of Business, Enterprise and Regulatory Reform Committee, said that energy debates are like buses—nothing comes along for ages, then there are three in three weeks. A couple of weeks ago, the Secretary of State surprised us by telling us that he used to be a bus driver. His speech today might be compared to how buses behave: first there was no speech at all, and then two came along at once. In fact, he did rather better without the text than with it. There was a real sense that his heart was not in his speech, and it was certainly clear that it was lacking in content. He could have covered much more ground than he did.

At the outset, I shall set out those areas where we agree with European energy policy. Various significant aspects of energy policy demand international co-operation—tackling carbon emissions, for example, or agreeing the right level for a carbon tax and moving towards liberalised markets—but we believe, as my hon. Friend said, that the Government and the EU already have enough powers to take action in those areas.

Some interesting contributions were made to the debate. I was pleased that the former Secretary of State, Ms Hewitt, spoke from the Back Benches. She rightly talked about the energy gap, but that gap would be smaller now if she had taken more action and indulged in less consultation when she was in charge of the Department. We had three White Papers and two energy reviews when we should have been seeing action. The consequence is that there is panic building of gas storage facilities, and the Government are having to review the targets that they set. The original goal of 10 per cent. of energy coming from renewables by 2010 has been cut to 8 per cent., and the target of 20 per cent. by 2020 has also been reduced, perhaps to as little as 12 per cent.

The right hon. Lady also said that we do not have too much Europe, but too little. For me, that was the quote of the debate, and perhaps it could be the slogan for the referendum campaign, if we ever get one. It is a remark that goes to the heart of the matter, so it is no wonder that she is not keen on having a referendum.

The right hon. Lady also said that we need more pipelines, storage facilities and LNG, and she is right. However, she also claimed that the liberalisation provided by the treaty would be needed if we are to get them, and in that she is fundamentally wrong. This country has perhaps a dozen days of gas storage, whereas illiberal countries such as France, Germany and Italy have 95, 80 and 80 days, respectively. In fact, it is the countries with illiberal energy policies that have the highest proportions of gas storage facilities.

The right hon. Lady made her most irresponsible comments when she tried to promote the treaty by spreading scare stories. Of course we must be wary of massively powerful, state-backed corporations, but it is simply not correct to say, as she did, that Russia will pick off EU countries one at a time. That is not going to happen.

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Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

No. I hope that the right hon. Lady will understand, but she had half an hour and I have only 10 minutes. She also tried to create a stir about Russia's investment in other countries, yet Gazprom's investment in the UK, for example, amounts to a trading arm. It buys and sells, and in that way it helps the market to work. It was therefore irresponsible of her to create confusion in the way that she did.

The Liberal Democrat spokesman, Steve Webb, also made an interesting speech, from which two things were clear. The first was that he could not think of one area in which his party would not be willing to cede more sovereignty to the EU—

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Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

The hon. Gentleman says that there are too many to choose from, but he could not come up with one during the debate. The second problem that he had was with clarifying his party's nuclear policy. The Liberal Democrats say, "No nuclear power here, but yes, please, we'll import as much as we can through the interconnector from France." It is a fundamentally hypocritical position. They do not want nuclear power here but are happy to use cheap French nuclear power and leave the French to deal with decommissioning and waste disposal.

The key issue in this debate is whether it is right to give the European Union greater powers to determine energy flows in times of crisis. It is a question not of interpretation of the treaty but of a fundamental and genuine difference of opinion. The change suggested is to allow the Council of Ministers the power to divert energy supplies from one country to another if it deemed it necessary in a time of crisis, and because the issue would be decided under QMV the country concerned would not be able to resist the change. It is quite legitimate for some to argue that that is the right thing to do, but overwhelmingly we Opposition Members fundamentally disagree, and that alone is a ground for a referendum.

I ask Government Members not to misinterpret us. We are not saying that the United Kingdom Government should not help other countries that are facing an energy crisis—we have a great history as a generous nation that carries out its international responsibilities well—but it should be up to our Government and other sovereign Governments acting independently to decide whether it is right to give other countries that help. We should not be forced to do so. When my hon. Friend the Chairman of the Select Committee asked the Secretary of State to clarify the circumstances in which that might happen, the Secretary of State could not do so. He basically said, "Somebody will give you an answer on that later." So much for line-by-line scrutiny. It is simply not happening in this debate.

Ours is not a selfish little England position; we believe that it is right for every country to have the relevant powers. That works both ways. Two years ago, when this country was short of gas—and just after the Minister for Energy said that we were awash with gas—we discovered that France was not, as we had hoped, exporting gas through the interconnector, as it is legally obliged to keep a certain amount of gas in storage for its own domestic use. Under the treaty, France could be obliged to overrule its national laws and export gas even if it does not wish to do so. It would be interesting to see that issue at the heart of a French referendum.

The treaty's approach will penalise countries that have invested in long-term energy security. We in this country are belatedly making the investment needed to improve our gas security—we are investing in new pipelines, liquefied natural gas facilities and better gas storage facilities—but it would be quite wrong for our gas supplies to be diverted to support another country that had not taken such responsible measures unless our Government had the absolute right to decide whether to allow it.

During this debate, there has been much discussion about what will happen and could happen. Whenever the Minister for Europe has been in the Chamber, he has scoffed from the Front Bench every time the word "could" has been used, but it is quite right that we in this House should look at what could happen under the treaty. The reason many people in this country are so disillusioned with the European Union is that they are constantly told that each treaty and new measure means one thing, but they then discover a little while down the line that it means a whole lot of other things that they were never told about. It is therefore quite right for our debate to focus on the powers that the treaty could confer. We have no legal definition of a crisis or of solidarity. The British people need to know that under the treaty, our economic security could be put at risk to solve an energy problem elsewhere in the European Union.

The other big issue in this debate is liberalisation. I agree with Mr. Weir that the further measures proposed in the treaty are not necessary to take forward the liberalisation of European energy markets. The Secretary of State has not given us any evidence that the European Union does not currently have the power to move forwards with liberalisation. After years of no progress, we are now seeing at least some progress on the uncompetitive practices in use elsewhere in Europe. It seems bizarre that we should need a new treaty just when the European Union is beginning to show that it has real teeth.

The treaty moves us in the wrong direction. It will remove the reference to undistorted competition, just because that suits France. It is to the shame of our Ministers that we have given in to demands arising purely from the narrow, nationalistic interest of one other country involved.

So let us be clear: we want energy security; we want to cut carbon and we want a realistic price on carbon; we want a growth in renewables; and we want more done on fuel poverty. As we move through the Energy Bill, we will be taking the lead on those issues, and I hope that the Government will respond to the amendment that we tabled.

The Secretary of State said in his opening speech that we are out of touch. It is strange that he says so, when we are pushing for exactly the same changes as Ministers previously called for. Let us put the matter to the test. Let us see whether we or the Government are out of touch. Let us put it to a referendum.

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Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

I really enjoyed the debate, and it is a pity that it must end so soon. From time to time I felt that I had stumbled into the Eurosceptic Tory class of '93, '94 and '95. I hope that the divided class will have more frequent reunions.

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Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

The arguments were the same as the Government used.

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Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

One of the "illegitimates" is trying to heckle me, I think. [Interruption.] Mr. Lilley understands the reference.

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Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I shall not ask the Minister to withdraw that remark, but we should bear in mind that expressions that might just be allowable in parliamentary language are not allowable as a matter of taste.

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Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

Of course I withdraw the remark. It was a reference to the history of humour in the House, but obviously it did not go down well in all quarters.

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Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

I am grateful to the Minister for giving way. I had not even heard his reference to my parentage and I am not the least bit concerned about it. I just remarked that when he thought he was hearing Eurosceptic arguments, he was hearing the arguments that his own Government have been putting forward during the negotiations on the treaty.

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Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

I have apologised and I shall be careful about quoting former Prime Ministers in the future.

We had good speeches from my hon. Friend Sir Stuart Bell, the former Secretary of State, my right hon. Friend Ms Hewitt, the Chairman of the Select Committee, Peter Luff, my hon. Friend Mrs. Curtis-Thomas, Mr. Taylor, and Mr. Weir, and a kind of Eurosceptic vignette, if I may use that term in the House, from Mr. Harper.

The hon. Member for Esher and Walton challenged me to speak positively about the Lisbon treaty. I do speak and think positively about it, and I do so in general terms. I sometimes think we miss the wood for the trees in such debates. My parents' generation witnessed all the horrors of a divided Europe in the second world war. My grandparents' generation witnessed all the horrors and the mass murders on both sides of the first world war. I am pleased to be part of a generation that is discussing, albeit occasionally dryly, important matters such as climate change and energy, and how we can make a contribution in Britain and in Europe. I am very positive about the new Europe and Britain's role in it, and about the Lisbon treaty.

Let us remind ourselves of the energy mix across the EU. Oil accounts for some 38 per cent. of energy supplies, gas 24 per cent., coal and other solid fuels some 18 per cent., nuclear 14 per cent., and renewables 6 per cent. and rising. Within that overall picture, the mix varies considerably by country. We have heard about France, where perhaps 80 per cent. of electricity comes from nuclear, whereas in Austria none comes from nuclear. Most of Cyprus's energy comes from oil, most of Poland's from coal. That is why the member state has to take charge of the energy mix in its own national community.

We have heard about the increasing importance of imports. In 2004 approximately 50 per cent. of EU energy was imported, but by 2030 the figure could be as high as 65 per cent. That signifies one of the challenges. We have an increasing reliance on imports in a world where energy prices are likely to remain relatively high and where fossil fuel reserves are concentrated in relatively few regions of the world, including the middle east and Russia.

There is the urgent need to tackle climate change; EU countries share that objective not only with each other, but with the rest of the world. For those reasons, during the UK presidency of the Council of the European Union in 2005, we put forward a plan to create a common EU energy policy, including the establishment of a common European power grid, co-operation on gas storage, exchange of information about security of supply and a strengthening of climate change policies. I shall quote another Prime Minister, this time within the bounds of propriety. The then Prime Minister, Tony Blair, said at the time:

"It is important that energy policy is something that we work on together as a European Union".

He was right. The House is well aware of our recent decision on nuclear power, our commitment to a major expansion of offshore wind power and the passage of Bills on energy planning and climate change. However, whatever action we take at home, it is surely obvious that we can achieve the most, in this interdependent and highly competitive world, when we act together with our international partners.

Let us not pretend that it will all be easy. It would be naive to expect major players in the Organisation of Petroleum Exporting Countries or Russia to come to the negotiating table wearing kid gloves. The EU must be ready to speak, and speak strongly, with one voice on energy policy. That is not only in Europe's interest, but in Britain's best interest. We need the enlarged EU of 27 countries to be able to work effectively and efficiently to draw a line under debates about institutional reform and move on to dealing with the great issues of the day, including energy. The treaty of Lisbon will make that possible, and we should welcome it.

I move on to the issue of oil stocks, which involve an important obligation. We are obliged to hold stocks of oil in case of severe disruption of oil supplies. That mirrors our international obligations under the International Energy Agency, of which the US, Canada, Japan and Australia are also members. The Nice treaty changed the voting on any directive concluded under that article from unanimous to qualified majority voting. It is important to emphasise that the Lisbon treaty makes no change to that.

On the obligations to release stocks in case of severe disruption to supply, I should say that the last time that that was required was during hurricane Katrina, when the UK rightly led, under our chairmanship of the IEA governing board, in helping our friends in the United States. That was done under consensus. A number of fearful hares have run on this, so I emphasise that we have never taken action through the EU on that issue. On both times when it has been necessary, action was taken through the IEA.

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Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

The hon. Gentleman says, "Fine!" Unanimity—more than even QMV—has broken out on this occasion.

We have heard a little about article 176A of the Lisbon treaty today. It provides for the EU to help manage the functioning of integrated European energy markets and ensure security of supply. However, it does not seek to move control of any nation's energy resources to the European Union. The hon. Gentleman asked what was new about the treaty. I shall quote a passage that is new—and clear, important and reassuring:

"Such measures shall not affect a Member State's right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply".

That is new and clear.

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Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

The hon. Gentleman says, "So what?", but he should understand the words that he says he has read—they make it crystal clear that there is no threat to our national integrity.

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Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

With respect, I cannot; time is of the essence.

We face critical issues and we certainly need to look forward and not go back. There are critical issues about the liberalisation of our energy markets, in respect of which the UK has led the charge, and about radical moves to a low-carbon economy, the development of renewables, progress towards clean coal, and carbon capture and storage. We are looking forward; unfortunately, many Conservative Members, although not all, are rapidly pushing the rewind button of European history. What Labour seeks to build is a modern Europe fit for the 21st century. The Conservatives, sadly, are building a squalid coalition against the treaty with, among others, the Dutch Party for the Animals. Unfortunately we have to leave them there for the time being while we, the British people and the British Government, get on with the job of confirming the treaty. It is good for Britain, and it is good for Europe.

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Question put, That the amendment be made:—

The House divided: Ayes 170, Noes 369.

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Division number 62 Lisbon Treaty — Disapproves of the government's policy towards the Lisbon Treaty in relation to energy — rejected

Aye: 170 MPs

No: 369 MPs