Backbench Business — Green Economy

Business of the House – in the House of Commons at 12:31 pm on 28th June 2012.

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[Relevant documents: The Twelfth Report from the Environmental Audit Committee, Session 2010-12, A Green Economy, HC 1025; and The Sixth Report of the Committee, Budget 2011 and Environmental Taxes, HC 878, and the Government Response, HC 1527.]

Photo of Laura Sandys Laura Sandys Conservative, South Thanet 1:22 pm, 28th June 2012

I beg to move,

That this House
urges the Government to promote the right fiscal and regulatory framework to accelerate green growth as an intrinsic part of the UK’s economic recovery strategy.

I want to thank the Backbench Business Committee for providing time for this important debate at this moment in the economic cycle, when we are considering the draft Energy Bill, which will reform the electricity market, and different issues relating to the renewables obligation and other fiscal measures. I also thank the Economic Secretary to the Treasury for agreeing to respond to the debate and so many colleagues on both sides of the House for signing the motion.

Few terms in today’s industrial dictionary are as loose and ill defined as the word “green.” People talk about “the green economy” and “green jobs.” The word—I mean no disrespect to Caroline Lucas—places a set of philosophical values around policies that, I believe, are not about debating sandal economies. I strongly believe that the measures the Government have put in place are aimed at increasing productivity, improving output, supporting greater competitiveness and building a resilient economy that is both lean and keen for the future.

In my constituency, I have seen at close hand the construction of a multi-billion pound wind farm. It is much more about heavy engineering than traditional green jobs. Those working at the cutting edge of new energy sources, vibration technology, surface engineering and friction reduction will deliver the so-called green revolution, but those individuals hold degrees in mechanical engineering, not sustainability. The green deal will implement energy efficiency measures in homes and offices throughout the country thanks to skills that are as wide ranging as construction innovation, research in plastics and synthetic materials and, of course, practical installation. From heavy engineering and the white coats in our university laboratories to those who fit cavity wall insulation, all these jobs and all these opportunities comprise part of that wide term, “the green economy.”

Today, the green economy is no sideshow; it represents a significant part of the UK economy, with more jobs than in information and communications technology, finance and insurance, and the motor trade. With low-carbon and environmental goods and services growing by 4.6% in 2009-10, it is a growth sector. However, we also need to talk about our industrial and energy policy in an international context. Why are South Korea, China and other Asian countries placing renewable energy and energy efficiency at the core of their industrial growth strategies? They are not overburdened with Green party candidates, and in some cases, such as China, they do not even need to secure votes. They are trying to build what is absolutely essential to this country: a strong, sustainable and resilient economy in which energy consumption and fossil fuel inputs are considered vulnerabilities, not assets.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I note in the papers that have been provided for the debate that the Foreign Secretary has apparently been strongly converted to green energy, but that some of his Cabinet colleagues have not. Will the hon. Lady make every effort to get more people on the Foreign Secretary’s side in these matters?

Photo of Laura Sandys Laura Sandys Conservative, South Thanet

I do not think that the Foreign Secretary has needed much persuasion or that there is any lack of will or determination in the Government. As I will continue to iterate, it is absolutely crucial that the policies we have put in place are sustained consistently into the future to attract the significant investment we need in the energy sector and the green economy.

If we look internationally, we will see that the so-called tiger economies are combining economic policies, subsidies, industrial focus and energy efficiency solutions to build their stronger economies. It is that co-ordinated model that I propose to the Minister today. Globally, there will be a race for resources, including energy, water and food. Energy consumption will grow by 33% over the next 20 years, with 50% of that growth coming from China and India. Even the Governor of the Bank of England has acknowledged that we must be cautious about our exposure to fossil fuels and that they could be considered a risk to financial security. Any country that is serious about future economic competitiveness, not least this one, will ensure that it limits its reliance on fluctuating and politicised energy inputs. Energy security, domestic production and low-input process re-engineering are not, in my view, things that it would be nice to have; they are a total necessity.

In many ways that creates a challenge for politicians. We need to come clean with the public and the private sector. We cannot con them that energy prices will come down today, tomorrow or even any time soon. The increase in global consumption is so marked that even the great shale gas discoveries in the US will not have a long-term impact on global costs. From the domestic perspective, Ofgem has calculated that domestic energy prices will rise by 60% by 2016.

It is the Government who will need to take an important role in the development of a long-term, secure and resilient energy supply. Frankly, there are some of us in the Energy and Climate Change Committee who believe that, whatever energy solution we adopt in the next few years, the Government will have to stump up a lot more money than they thought to keep the lights on, but that is a debate for another day. We need to deliver a strong and sustainable energy sector that delivers as much value as possible to the energy consumer and jobs and economic growth at the same time. To do that, we must look at energies in similar terms, whether tax incentives on fossil fuels or subsidies for the renewables sector.

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party

Does the hon. Lady agree that the £3 billion earmarked in the Budget to support the fossil fuel industry—oil and gas drilling—undermines precisely the green agenda she is setting out?

Photo of Laura Sandys Laura Sandys Conservative, South Thanet

It does not undermine that agenda. We need to understand where subsidies, incentives and tax reliefs are deployed throughout our energy sector. I look to a future with a mixed energy economy that utilises all the different energy resources, but we must be transparent about where those subsidies lie.

Oil and gas exploration, for example, has been hugely beneficial to this country, as no one can deny, and that is why we subsidise the sector. Oil taxation measures, oil allowances, petroleum revenue tax safeguards, the ring-fenced expenditure supplement, the field allowance and coal investment aid are all important parts of the energy industrial strategy. As John Browne, formerly of BP, has said:

“People forget the government supported the oil and gas supply chain in its early days: with generous tax incentives, training programmes, strategic infrastructure; and supportive regulation.”

The Government are still doing so today.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

Will my hon. Friend draw breath and think again? On this suggestion that we have been subsidising oil and gas, we have very high taxes on petroleum products and an extra tax on petroleum production called the petroleum revenue tax, so where does she get this “subsidy” from?

Photo of Laura Sandys Laura Sandys Conservative, South Thanet

The International Energy Agency states that the fossil fuel sector is currently subsidised by $480 billion.

Photo of Laura Sandys Laura Sandys Conservative, South Thanet

In all sorts of forms, from production right the way through to—

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

Rubbish!

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I think Mr...

Submitted by alec dauncey Continue reading

Photo of Laura Sandys Laura Sandys Conservative, South Thanet

Well, by 2020 the subsidy will amount to $660 billion.

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I think this figure is for the whole...

Submitted by alec dauncey Continue reading

Photo of Andrew George Andrew George Liberal Democrat, St Ives

My hon. Friend will be aware that the noble Lord Stern, who produced a seminal work just a few years ago warning of the consequences of ignoring the impact of climate change, emphasised the way in which past Governments have given, and the current Government still give, tax breaks and other subsidies and support to the fossil fuel industry—to the disadvantage of renewable energy.

Photo of Laura Sandys Laura Sandys Conservative, South Thanet

I thank the hon. Gentleman for his comment. I do not see the issue as a positive for one sector or another, but we must have transparency across all the energy sources that we as a country decide to—let us say—invest in or to support in any way.

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

Without wanting to get tied up in the argument about subsidy, whether it existed or the lack of it, I note the certain truth that there was significant state investment in the oil and gas sector in the 1960s and ’70s, which was repaid only when the gas and oil started flowing. An analogy could be drawn now with the green technology industry, where we hope that such development might happen, too.

Photo of Laura Sandys Laura Sandys Conservative, South Thanet

I thank my hon. Friend for his comments, and, exactly as he says, there was an emerging industry and significant Government support, which saw the opportunities that the sector could offer to our industrial policy and to energy security and resilience. On industrial policy, we also supported the car industry. In the ’80s we gave generous incentives to Nissan to attract it to the UK, and, when we look at our long-term, and now leading, role in the motor sector, we find that that has been a huge success.

So it is neither unusual nor wrong for government to incentivise energy investment or to support industrial development, and that is why I am pleased that this Government have put in place so many fiscal measures to do just that in relation to the new generation of energy sources and to investment in green technologies.

There are unfounded rumours that some in government have gone cool on the modern green agenda, but I know that not to be the case. I know that the Chancellor is committed to inward investment and to ensuring that companies such as Vestas reconsider their investment in north Kent.

I know that my hon. Friend who represents Sheerness—

Photo of Laura Sandys Laura Sandys Conservative, South Thanet

I know that my hon. Friend the Member Sittingbourne and Sheppey (Gordon Henderson), whose main port is Sheerness, is very keen to ensure that in the south-east we secure an important manufacturer of wind turbines.

I know that Treasury officials are totally committed, as they were to the oil and gas sector in the ’70s and ’80s, to attracting the new jobs and growth that are emerging from the fastest-growing business sector in the UK; and I am sure that all in government are focused on securing the £200 billion of funds to rebuild our energy sector in a highly competitive capital investment market, where policy certainty is fundamental to investment decision making.

All that the Government need to do to unlock those industrial opportunities is to sustain and reiterate their consistent and constant policies, with subsidies based only on proper evidence and with investment messages that resonate among the largest industrial companies in the world, such as Siemens and GE, and the large energy generators.

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party

I am grateful to the hon. Lady for giving way to me for a second time, but I cannot let pass what she has just said about the Government’s “consistent and constant” green energy policies, because they have been the exact opposite. Whether on solar or on wind, they have chopped and changed, and that is exactly why so many solar companies and wind companies are so furious—because they cannot plan for the future.

Photo of Laura Sandys Laura Sandys Conservative, South Thanet

I totally disagree. On solar power and feed-in tariffs, in particular, we inherited a totally unsustainable policy and system, which needed to be addressed, and unfortunately we have spent the past couple of years recalibrating in order to ensure that we have in place sustainable, consistent and long-term policies that will provide investment certainty to such companies.

The UK is a great place to invest, and it has a strong vision for a modern, green and forward-looking economy. On the impact of our fiscal measures and support, we have a choice: to build that modern economy and compete with the forward-looking, future-proofing countries, such as South Korea, China and Japan; or to hold on to an outdated energy model that will not cost us any less but will leave us and our businesses stranded in the past.

Several hon. Members:

rose —

Photo of Lindsay Hoyle Lindsay Hoyle Deputy Speaker and Chairman of Ways and Means, Chair, Panel of Chairs, Chairman of Ways and Means, Chair, Panel of Chairs

Order. I am going to have to introduce a time limit, but let us see how we go. If Members try not to use this much time, I shall start off the limit at eight minutes, but I may have to reduce it. How is that?

Photo of Joan Walley Joan Walley Chair, Environmental Audit Committee, Chair, Environmental Audit Committee 1:37 pm, 28th June 2012

I congratulate Laura Sandys, who serves with distinction on the Select Committee on Energy and Climate Change, on bringing the debate to the Commons this afternoon, and I note that the Economic Secretary to the Treasury, Miss Smith, is in her place, because if we really are going to make progress on this most important issue, we will do so only if the Treasury puts the whole issue at the core of its policy making.

It has always seemed to me perverse that we have a Green Book that is anything but green, so the time has come to ensure that the Treasury’s guidance on the national infrastructure programme, in particular, guarantees that every single policy is appraised and joined-up in taking further forward the agenda of securing more renewable energy and more energy efficiency.

I shall try very much to comply with the limit on speakers—

Photo of Lindsay Hoyle Lindsay Hoyle Deputy Speaker and Chairman of Ways and Means, Chair, Panel of Chairs, Chairman of Ways and Means, Chair, Panel of Chairs

Order. The limit is eight minutes, and we will not go beyond that, so if we can please keep to it that will be much more helpful. I do not want to have to use a big stick, as I want to get everybody in.

Photo of Joan Walley Joan Walley Chair, Environmental Audit Committee, Chair, Environmental Audit Committee

I, too, want everybody in the Chamber to get into the debate.

Let me bring to the attention of the House the two reports that the Environmental Audit Committee has produced, and which for the benefit of Members we have tagged on the Order Paper: the Committee’s twelfth report on “A Green Economy” and its sixth report on “Budget 2011 and Environmental Taxes”, which shows how we have examined the Treasury’s role in the matter.

We intended the two reports to be a starting point and an overarching basis on which the discussions that now need to take place throughout business, local government, the private sector and international development might be brought together, so that our policies—including what we do, and how we keep scrutinising what happens, in Parliament—can be tied to that agenda. We found that two years after making the commitment to increase the proportion of tax revenues accounted for by environmental taxes, the Government still have no strategy for achieving this commitment. In addition, they have not published their definition of an environmental tax. In our further follow-up inquiries, we will do what we can to obtain that definition and to scrutinise what is happening so that we get some real progress.

A further relevant aspect is the Rio+20 summit that took place last week. Its outcome was extremely disappointing given the lack of a highly ambitious outcome and follow-up action plan. However, all the different parties who were there, from business people, to legislators, to parliamentarians, to members of civil society were in absolute agreement that if the high-level leaders cannot come up with significant outcomes, everybody else has to raise their game. So it is with our Parliaments. I urge the Economic Secretary to demonstrate that she understands this issue by saying what she is doing through Treasury policy and in making sure in Cabinet meetings that there is a joined-up approach towards environmental taxes.

I want to raise issues relating to my own constituency, because we will not deal with this situation nationally or internationally unless we can deal with it locally as well. It is a matter of great concern to me that a large number of people in Stoke-on-Trent are living in fuel poverty. Indeed, of the 40,678 households in Stoke-on-Trent North, 10,120 are in fuel poverty, which is absolutely outrageous. It is a rate of 24.9%, which compares with the UK average of 18.6%—and even that is shocking. If ever there was a reason we should be getting support from the Treasury to address these environmental issues, it is that. We have a commitment to eliminate fuel poverty by 2016, and we will not achieve that unless we scale up everything that is done and look at how revenues can be reinvested so that whole communities see the importance of moving towards the renewables future that is so urgently needed.

I say this as someone who represents a constituency where the industrial revolution started because of our reliance on carbon.

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

Will the hon. Lady comment on the fact that the Labour Government spent almost £5 billion on trying to eradicate fuel poverty through various measures, with the consequence that fuel poverty went up in their 13 years in power?

Photo of Joan Walley Joan Walley Chair, Environmental Audit Committee, Chair, Environmental Audit Committee

I am not going to get involved in any kind of partisan debate. Unless we can bring in measures that deal with fuel poverty in the short term and the long term, and get people’s commitment to work on this agenda instead of making political capital at the expense of everybody else, we will not deal with the problem.

In Stoke-on-Trent, we want to work with the coal authority to extract geothermal heat, which we see as one part of the solution in the context of all the other things that need to be done, to provide the jobs that are required, to provide training for people in the skills that will be needed for the new investment in renewables, and to see what we can do to bring about district heating schemes for city centre developments. We want to use the water that is underneath our city—albeit in what is, to date, an innovative way—to do what other countries, such as the Netherlands, have done to get the investment that is needed. We cannot do that without fiscal changes and incentives, and ways of getting innovation and new technology on board very quickly.

On fuel poverty, yes, we have had investment, but we have seen that piecemeal investments do not deal with the whole issue. That is why the previous Government invented the CERT—carbon emissions reduction target—scheme. If we deal with whole communities, often in areas of Victorian housing where there are huge issues with energy efficiency, it is possible to get the investment that is needed in one fell swoop. That is the kind of scaling up that is now so urgently needed.

We have aspirations to decarbonise our city. We have an untapped renewable resource, but at the same time we recognise the need for investment across a wide range of different industries and sectors. If this debate helps to take that agenda further forward, and if our Select Committees can examine and scrutinise every single action that the Treasury is taking to make these aspirations a reality, given the urgency of the need for greater energy efficiency, it will have been worth while.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden 1:45 pm, 28th June 2012

I oppose the motion. I suspect that I will be the only person to do so. It is not because we cannot have green economy. We could—indeed, we once had a totally green economy. We relied on windmills to grind our flour, on watermills to saw our wood, on horsepower for transport, and on biomass—as burning wood is now called—for heat, but we abandoned those when we discovered that coal could fuel a steam engine, that oil could fuel the internal combustion engine, and that gas and nuclear could give us electricity. Since then, we have enjoyed huge increases in our material standard of living based very largely on comparatively cheap energy from fossil fuels.

The great Victorian economist, Jevons, pointed out nearly a century and a half ago why coal had ousted wind:

“The first great requisite of motive power is that it shall be wholly at our command, to be exerted when, and where, and in what degree we desire. The wind, for instance, as a direct motive power, is wholly inapplicable to a system of machine labour for during a calm season the whole business of the country would be thrown out of gear.”

Much the same can be said about the unreliability of solar and the discontinuity of tidal energy. My hon. Friends may want to return to a mediaeval economy that relies on unreliable, high-cost water, sunshine, wood and wind, but I do not. I am a conservative, not a reactionary. Of course, it may be that some time in the future new sources of energy will become available that are as reliable as, and cheaper than, fossil fuels—perhaps thorium reactors, nuclear fusion or cheaper battery storage, in conjunction with the intermittent renewables that we are developing at the moment. I will rejoice if those come about, but they are some way off.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Does the right hon. Gentleman accept that since the time of the quote he read out, we have had three further industrial revolutions, which makes his assumptions completely obsolete, and that we are in the middle of a further clean-tech and biotech industrial revolution that will make obsolete the previous assumptions on industrial revolutions? Has he taken that into account in his calculations?

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

I do not know which industrial revolutions the hon. Gentleman is referring to, but they certainly did not rely on our subsidising the use of more expensive energy to replace less expensive energy.

There are perfectly respectable, if not entirely convincing, arguments for saying that we have to replace cheap energy with expensive, less reliable energy to reduce carbon emissions, and that that is a price worth paying, to coin a phrase. However, the premise of this debate is that we can generate economic growth by introducing fiscal measures to subsidise and promote green energy. Let us be clear what that means: it means subsidising the replacement of comparatively cheap and reliable energy from fossil fuels with more expensive and intermittent energy from renewables.

Photo of Andrea Leadsom Andrea Leadsom Conservative, South Northamptonshire

Does my right hon. Friend agree that the debate should really be about whether we want to switch from higher-emitting to lower-emitting sources of energy, rather than having this complete confusion all the time about its being a question of carbon emissions or renewable energy? Renewable energy is very expensive, but there are plenty of sources of non-renewable energy that would be far less carbon-emitting.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

My hon. Friend is quite right. We could halve our emissions by switching to gas from coal, but that does not please the greens.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

I am sorry, but I have given way a couple of times.

To suggest that we can make ourselves richer by adopting more expensive energy is self-evidently ridiculous. Most of what has been cited as evidence of green growth involves creative accounting on a scale that would make Enron blush. First, there is the suggestion that a green sector has arisen, which allegedly employs 1 million people, produces goods and services worth £120 billion and, as the Deputy Prime Minister said the other day, contributes 8% to our GDP—although the House of Commons Library can find no source for that figure, other than the Deputy Prime Minister.

Those figures aroused my natural scepticism, so I tracked them down and found that they came from a Department for Business, Innovation and Skills report published earlier this year, entitled “Low Carbon Environmental Goods and Services (LCEGS)”. My scepticism was confirmed by the opening words, which explain:

“The definition of the LCEGS sector is the result of five year’s work”.

You bet it was! It carries on:

“The definition is broad”—

I can believe that—

“and includes activities that may appear under the overlapping headings of Enviro, Eco, Renewable, Sustainable, Clean Tech, Low Carbon or No Carbon (and any other we might have missed).”

That is not my comment, but theirs. It goes on:

“In the strictest sense it is not a ‘sector’ but a flexible construct or ‘umbrella’ term for capturing a range of activities spread across many existing sectors”.

What does the sector contain? A quarter of it or more has nothing to do with low-carbon activities at all, but relates to things such as sewage and water treatment, double glazing and controlling noise. Those are all excellent things, but they are not what we are talking about today and nothing to do with the low-carbon economy.

The biggest sector within the low-carbon sector looks promising: it is called “Alternative Fuel Vehicle” and employs 105,000 people, making it the biggest employment area in the low-carbon sector. I thought, “Terrific, we are employing 105,000 people making electric cars.” Sadly, however, we are not. I know one of the producers of electric vehicles and, alas, it is no longer producing them. It turns out that the name relates to mainstream and other vehicle fuels. We are not starting off some great manufacturing revolution through all this subsidy at all.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

I will, because I intervened on my hon. Friend, even though it will use up my time.

Photo of Laura Sandys Laura Sandys Conservative, South Thanet

The largest wind farm in the world is off the shore of my constituency, and 5,000 people are going through the port of Ramsgate on the construction side. The investment that has come in to the area has been significant—

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

That is fine, but my hon. Friend has read her speech. It is a question I was hoping for.

The growth of such sectors is either natural, in which case it is splendid, or it is the result of subsidies, in which case it is tosh. Subsidies can boost one sector at the expense rest of the economy, but we cannot make ourselves richer by providing subsidies. If a person moves a pound note from their left-hand pocket to their right-hand pocket, they are no richer. Subsidies can make us worse off, however. If we invest in offshore wind, which is twice as costly as conventional energy generation, we get half as much energy for a given sum of money. That makes us worse off, not better off.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

Only if the hon. Lady is going to prove that we make ourselves better off by producing half as much electricity for a given sum of money. She is not. If she gives up on that, I am glad.

The only way in which subsidies might conceivably generate an economic revolution is if we subsided the producers of goods and services that we could export;, but we are not allowed to do that under European rules. Instead, what we do is subsidise users, consumers and those who install generating capacity in this country. Unlike the Chinese and the Koreans, we are not allowed to subsidise those who manufacture wind farms or photovoltaic cells. We may want to, but we are not allowed to. The pretence that the subsidies that we are giving will promote infant industries is untrue.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

No, I have given way lots of times, including when it has reduced my own time.

Let us give up on the belief that we will create a new industry. All we are doing is subsidising jobs in other countries, whose manufactured goods we import. It is quite clear from a look at the detailed figures in this bogus sector that we are not creating an infant industry.

I will now give way to Andrew George, who wished to intervene, because I have a couple of minutes to go.

Photo of Andrew George Andrew George Liberal Democrat, St Ives

I thank the right hon. Gentleman for giving way. He must address the fact that the low-carbon goods and services market, including the renewables sector that he is talking about, is worth £3.2 trillion a year, employs 28 million people and is growing at a rate of 4%. Either we turn our back on that as a market for the UK or we engage with it, in which case we have to have production capital here.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

Exactly, but who is we? If we is the Government, the hon. Gentleman is proposing that the Government subsidise industries to go for that £3.2 trillion world industry. In fact, that is a bit of an exaggeration, but let us suppose that the figure is correct. The Government are not allowed to do what he wants because of European Union rules, which he supports. We cannot offer infant industries subsidies in this country, or indeed anywhere else in the European Union, although some of our partners may do so in concealed forms. We do not and cannot, so let us not pretend that we are doing so.

The subsidies that we deploy in this country go largely towards generating electricity by more expensive means than is necessary, which increases the cost base of our industry and makes it less competitive across the board. I hope that companies in this country will set up businesses in this sector, as in any other sector, to win exports across the world, but the Government are not allowed to support those companies, and let us not pretend that they are doing so when, in fact, they are subsidising imports.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test 1:56 pm, 28th June 2012

It is a pleasure to follow someone who can be defined as the Don Quixote of this debate, both figuratively and literally tilting at windmills.

The answer to the speech we have just heard is that the green economy is not just about underwriting one form of energy out at sea, but about putting the entire economy on a green footing in terms of resources, energy and demand, and including our homes and our vehicles. As the Government said a little while ago:

“A green economy is not a sub-set of the economy at large—our whole economy needs to be green. A green economy will maximise value and growth across the whole economy, while managing natural assets sustainably.”

That is what a green economy is about. Those are not my words, but the first paragraph of the Government document, “Enabling the Transition to a Green Economy”. There is precisely one paragraph in the document about what the fiscal incentives to move to that green economy might consist of, so this debate is timely. We must ask what fiscal incentives we should put in place to bring about those changes.

Our aim in the economic recovery should not be simply to return the UK economy to business as usual as it was before the crash; it should be consciously to use the opportunity provided by the need to reinvest and to re-engineer our economy to make decisive moves towards the green, sustainable, low-carbon economy that the first paragraph of that document suggests we should be aiming for. We need to be clear about what that entails in how we craft our fiscal policy.

The emergence of a green economy cannot be brought about just by changing the dials on a few economic levers; it is fundamentally asymmetric with what has gone before. Low-carbon sustainable energy, for example, does not have an investment or operational pattern that is anything like what we have been used to for the past 100 years. We cannot construct the next generation of low-carbon power plants and providers on the basis of what has gone before.

We can no longer rely on the assumption that we can generally predict what capacity will be needed and then work out how best to meet it. Future energy policy must be based on investing first in consciously reducing demand and then in decarbonising the remaining demand. In doing that, we have to move to a different paradigm of investment, because demand reduction is a process not an asset, and because low-carbon plants are capital intensive but mean on fuel. In other words, low-carbon plants take a lot of money to construct but, once constructed, use fuel that is either free or recovered from other processes. The model of low and basic construction costs and investment in sourcing, transporting and using fuel, and paying for it as we go, is no longer applicable.

We can no longer rely on the assumption that the purpose of investment in resourcing the economy lies in procuring material into the economy, using it and disposing of the consequences. A linear model of investment and expenditure no longer applies. We will need to move increasingly to a circular-resource economy, in which we do not throw things away—there will be nowhere to throw them. We still throw things away, however. Something like 520 million tonnes of material comes into our economy for domestic consumption, and 200 million tonnes leaves as waste. Only 20% of our material is sourced from secondary inputs.

The changes we need are about investing not just in the green economy, but in jobs. Contrary to what Mr Lilley said, they are real jobs for the future. Moving our resource base to the 70% EU27 recycling target would create something like half a million jobs in the UK by the early 2020s.

Photo of Diana R. Johnson Diana R. Johnson Shadow Minister (Home Affairs)

I am listening carefully to what my hon. Friend says about jobs. If Hull becomes a wind turbine manufacturing site, 700 jobs will be created directly and up to 10,000 jobs will be created in the supply chain. Those are real jobs for real people in my constituency.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

My hon. Friend is absolutely right: not only are the jobs real, but they are long-term, skilled jobs. Other countries are investing heavily in such jobs as that sixth-wave energy and industrial revolution takes off across the world.

My reference in an intervention to the several industrial revolutions since the horse and cart and steam relates to the fact that we are now beyond the information and technology revolution and moving into the clean-tech biotech revolution, which is taking off throughout the world. Who is the world leader in clean energy? We talk about its pollution and energy profligacy, but it is China—a country that is clearly engaged in a conspiracy of useless non-job creation in the green economy.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

I pointed out that the Chinese are allowed to subsidise their manufacturers of, for example, wind turbines, whereas we are not. Is the hon. Gentleman saying that we should subsidise such manufacturers, and how does he propose to alter the EU regulations to enable that?

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

As it happens, EU regulations enable the underwriting of investment in technology that will lead to a lower-carbon economy. The renewables obligation is regarded as state aid, but such investment can be underwritten precisely because it brings new technology to market, reduces its costs and increases its prevalence. That is why the Chinese invested £34 billion in clean energy in 2009, compared with £18 billion in the US. As Andrew George has said, the goods for low-carbon markets are expected to reach something like £4 trillion by 2015. Put simply, if we are not in that market, we will be sidelined not temporarily, but permanently.

Curiously, the recession gives our country an opportunity to be far more proactive than we might otherwise be. The cost of capital is low and liquidity is high because of the paradox of thrift: there is no danger that investment in green goods, services and plants will crowd out other forms of investment. Fiscally, we can go for it, but in view of the asymmetry, there must be clear and long-term signals.

What might we do? We could invest in decarbonising our homes, for climate change purposes and for demand reduction purposes. We should insulate homes to make them fuel poverty-proof—as we know, the green deal will only scratch the surface. We will get £4 billion per annum over the next 15 years from the EU emissions trading scheme, carbon trading and the carbon floor price. As a fiscal measure—without hypothecating what is in the tax pot—we could invest a large amount of that money in ensuring that our homes are energy-efficient.

We should invest in low-carbon energy provision in the way that I have outlined. If the state wills the ends of that provision, it must underwrite it. That need not mean putting money in the pot, but it does mean underwriting at least some of the risk. It is ridiculous, for example, that there is no state backing for the contracts for difference that will replace the renewables obligation under the Energy Act 2011, and that no demand-side measures, underwritten by feed-in tariffs, are being introduced under the Act. We can get long-term value by taking such fiscal action.

Fiscal policy need not involve underwriting money. Holding the ring on risk and bringing new forms of low-carbon power home is key. To get us to a position in which we have a substantial number of ultra-low carbon vehicles on the road, why not have a “feebate” system, whereby we use, as a fiscal measure, additional fees on high-carbon consuming vehicles to underwrite the new low-carbon vehicles that come on stream? We have a target of 1.7 million ultra-low-carbon vehicles on our roads by the early 2020s. That is the sort of measure we should undertake.

Above all, we should get real about the green investment bank. The bank will have £3 billion as a fund until 2016, or perhaps later, depending on whether the Chancellor decides that it is ready for investment as a whole, yet last year KfW, the German public green investment bank, invested £24 billion—more than a third of its £70 billion —on energy and climate change measures. We can do that if the Green investment bank is a bank, but it needs the ability to raise bonds and money at an early stage. That is the sort of fiscal underwriting we need for this green energy, resource and social revolution that we are going through. We need to get on with that urgently, and I urge the House to support the motion to assist with that process.

Photo of Gordon Henderson Gordon Henderson Conservative, Sittingbourne and Sheppey 2:06 pm, 28th June 2012

We will hear in the debate arguments for and against investment in renewable energy, although I can see only one person in the Chamber who is against such investment. Those on both sides of the argument would probably agree on two things: the first is that there is only a finite supply of fossil fuels, and the second is that Britain relies too heavily on foreign imports for the energy needed to power its homes and businesses.

Both factors are problems that need to be addressed if Britain is to have long-term energy security. Hon. Members have a choice: we can leave the problem for our children and grandchildren to solve in 40 or 50 years’ time, when it might be too late to find a solution, or we can get to grips with the problem now and ensure that future generations can switch on their lights.

The problems I mentioned are interlinked and can be solved only by finding replacements for the fossil fuels on which Britain has become too dependent. There are a number of options, including nuclear power, shale gas, clean coal technology, biomass energy, anaerobic digestion, ocean wave energy, tidal power and wind energy. The sensible long-term strategy would be not to major on any one of those alternatives, but to establish a national plan that draws in power from all of those sources to supplement the reserves of oil that will become increasingly scarce and expensive over the next few decades.

The advantage of establishing an alternative energy industry is that most of the components needed to generate power could be sourced in Britain. That is particularly true of the renewable energy sector. As an island, we have the advantage not only of a limitless flow of water, but also of access to all-year-round wind, particularly offshore, which leads me nicely to that part of the green economic sector on which I would like to concentrate.

Many oppose an expansion in Britain’s wind capacity. They either say that wind turbines will never produce enough electricity to make them viable, or object to the use of Government subsidies to encourage investment in wind energy, or both. I would have more sympathy for the first argument if wind turbine technology had stood still, but it has not. For instance, the new V164 offshore turbines, which are being developed by Vestas on the Isle of Wight, each generate 7 MW of electricity.

It was with deep regret that we learned one week ago that Vestas has decided not to renew its option for land at the port of Sheerness, which had been set aside as the site for a factory that would have produced the blades for the V164. That factory would have created 2,000 new jobs for my constituency, and many of them would have gone to people living in my constituency. Given that my constituency has a higher unemployment rate than the average south-east constituency—in Sheerness East, where the factory would have been built, it is more than 11%—the decision by Vestas has been another blow to the morale of my constituents.

In many ways, Vestas’ decision is surprising, because Sheerness is an ideal location for a wind turbine factory, which is why I will be working closely with Swale borough council, Kent county council and the Department for Business, Innovation and Skills to attract another manufacturer to the Isle of Sheppey. Full planning permission is in place, and we have the right infrastructure and a willing and ready work force; all we need is somebody willing to take Vestas’ place.

Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden

Will my hon. Friend confirm that the one thing that none of those organisations can do is offer a subsidy to anyone to come to his constituency to produce wind farm components? It might be desirable that they should—it would certainly be a better use of money than subsidising rich landowners to install wind farms—but it is not the case. Can he confirm that?

Photo of Gordon Henderson Gordon Henderson Conservative, Sittingbourne and Sheppey

I can confirm that none of those organisations can offer such a subsidy, but that is not to say that we cannot do something to attract an alternative.

Photo of Andrew George Andrew George Liberal Democrat, St Ives

The hon. Gentleman will surely acknowledge that one thing that the sector, particularly the production sector, wants more than anything else is the underbelly of a functioning sector—one where there is a market, even if only initially in the UK, and certainty. That is one thing that the Government can and need to provide.

Photo of Gordon Henderson Gordon Henderson Conservative, Sittingbourne and Sheppey

I agree, and I shall come to that in a moment. Vestas has not given any reason for its decision, so we can only speculate on why it decided to pull out of Sheerness. A few months ago, it announced that it was slowing down development of the V164 to take account of the current economic conditions and the needs of their potential customers, which is what the hon. Gentleman touches upon. As I said, though, I will return to that point later.

That slow-down has resulted in the slipping of the date for erecting the prototype VI64 from the end of 2012 to 2014. I can only assume that Vestas took the decision—quite sensibly from a commercial perspective—that it did not want to lay out more money in an option on land for which it had no need for the foreseeable future. What will happen in 2014 is anybody’s guess, and that is a big worry both for my constituents and those of my hon. Friend Mr Turner. It is still conceivable, I suppose, that

Vestas will come to Sheerness in 2014, but it will only proceed with its project if it can obtain firm orders for the VI64, and no potential customers will commit to those orders until they are clear about the Government’s commitment to offshore wind energy. Currently, however, the Government’s position is not clear, so I would like it to be made clear.

That brings me to the issue of subsidies, which has been raised already. As a Conservative, I am not naturally in favour of taxpayers’ money being used to help any business. If a product is good enough, it should be able to stand on its own two feet. I accept, however, that strategically Governments often use taxpayers’ money to invest in research and development in some industries, particularly where such developments are in the national interest—the defence industry is a case in point, of course. I believe passionately that securing energy supplies into the next century is in our national interest and that it will benefit Britain if taxpayers’ money is used to encourage the development of alternative sources of energy, whether nuclear power, shale gas or offshore wind. For that reason, I will gladly support the motion.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North 2:14 pm, 28th June 2012

I defer to the previous two speakers on their knowledge of energy matters, but I have some points I wish to make. I was interested in the suggestion from my near neighbour, Mr Lilley, who seems to be strongly in favour of getting rid of the EU’s restrictions on state aids. I completely agree. I am completely in favour of state aids, where appropriate, and we should not be constrained from applying them by the EU—but then my Eurosceptic views are, I think, fairly well known. My hon. Friend Dr Whitehead made a thorough, erudite speech that I will read in detail with interest later.

My concern is about energy conservation. Massive investment in energy conservation has everything to commend itself, while investment in nuclear generation has nothing to commend itself. With energy conservation, every home, office, public building and factory in the country can save enormous amounts of energy, so rather than generating energy, we need to conserve it. It is cheaper, too, particularly for the less-well-off living in constituencies such as mine, where some people still do not have roof insulation—aerial photographs at night show the infrared glow from those homes. These are poor people who cannot afford to invest, so it is something that the Government have to attend to.

Investment in energy efficiency would be enormously cheaper than focusing simply on generation. The Association for the Conservation of Energy has produced a report in the past few months demonstrating that such investment would be as much as £1 trillion cheaper over time than investment in generation and would create hundreds of thousands of jobs. Many of those jobs, in home insulation, would not be high skilled, so a lot of unemployed people, particularly young people, in my constituency who do not have high skills would be ideally suited to working in the sector. We desperately need these sorts of jobs at every level.

Energy conservation would be labour-intensive, rather than capital-intensive, which is what nuclear investment is about. I have been informed this week that officials in the Department of Energy and Climate Change are doing a deal that will be massively beneficial to EDF. All the other energy companies have dropped out of the nuclear programme in Britain, leaving EDF the monopoly supplier. It is effectively owned by the French Government—they own 85%—and our DECC officials are so obsessively pro-nuclear that they are going to strike a deal that will effectively subsidise EDF to the tune of £5 billion. That money will go to EDF, a French company, and will be used to benefit French taxpayers, French consumers and, no doubt, the French nuclear industry as well. It will not benefit us at all. That £5 billion could be spent in many other ways, particularly on energy conservation.

The right hon. Member for Hitchin and Harpenden is right that we need a base provision of core generation for peak times, but if we invest heavily in green energy of every kind in order to maximise energy provision in other ways, we could reduce that core requirement to its very lowest level. Germany has already done it. I understand that it has invested gigantic amounts in all sorts of alternative energy, such that, on warm summer weekend days, they can effectively shut down their power stations and tick over on the alternative energy provision.

Photo of Zac Goldsmith Zac Goldsmith Conservative, Richmond Park

The hon. Gentleman is absolutely right about energy efficiency and nuclear power. I echo everything he has said. Will he join me in urging the Government to put more emphasis on energy efficiency in the proposed electricity market reforms, the original intention of which was to introduce the concept of “negawatts”, which would put energy saved on a par with energy generated and therefore revolutionise the energy market and fundamentally change the dynamic?

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I thank the hon. Gentleman for his informed intervention. The problem is that the energy companies have been far too influential in DECC and have been able to bend the arms of even our Secretaries of State, because the central core of government decided years ago that it wanted to keep the companies and nuclear power on side. Those companies make money out of selling energy, not conservation or solar power at a local level; they do not make a profit out of that kind of energy provision. Indeed, we must have strong Government intervention to achieve that. In Germany, they have done it; with their feed-in tariffs being brought in years ago, the Germans are effectively decades ahead of us. In just a decade or two, half of their energy will be provided by alternative means. We are talking about enormous proportions of energy, and we have to go for that.

It has been said so many times, but we have wind on our shores and we are surrounded by sea and tides. We are aware of a positive move towards using the Severn barrage, that will produce enormous amounts of our energy, but there are other forms of generation, too, which could be flexible and provide us with base load, such as generation by burning organic waste, or anaerobic digestion. Unlike with wind and sun, we can turn that on and off. If we invested heavily in anaerobic digestion, so that all the organic waste was used to produce methane, which could be used either directly or to generate electricity, it would provide a massive contribution to the core base load of our electricity and energy provision. We have to go in this direction. We have to resist the power and controls of the energy companies and go for an alternative energy and green energy society.

I congratulate Laura Sandys on securing this important debate. If we do not move in this direction, we will be in serious economic trouble as well as environmental trouble.

Photo of Caroline Nokes Caroline Nokes Conservative, Romsey and Southampton North 2:21 pm, 28th June 2012

I add my congratulations to those of other colleagues to my hon. Friend Laura Sandyson securing today’s important debate. As a member of the Environmental Audit Committee, I am conscious—as our Chair, Joan Walley, who is no longer in her place, mentioned earlier—of the need to have a green thread running through every area of Government policy. That, of course, gives us the opportunity to have a very wide-ranging debate today. I am conscious, however, of the number of Members who wish to speak, so I shall try to keep my comments brief and restrict them to just two areas.

First, we have seen over the last few days the importance of fuel tax as a fiscal measure, and we are all well aware of the impact of high fuel prices on our constituents—not just on motorists, but on the consumers of goods transported by road, which in this country is, of course, absolutely everything. The carbon emissions from road transport make up a significant proportion—over one fifth—of the UK’s total CO2 emissions. Passenger cars, in particular, emitting in the region of 76 million tonnes of CO2 annually, contribute 13% of all CO2 emissions.

Clearly, this is an area where Government policy must be used constructively not only to encourage shifts in modes of transport, but to encourage road transport users to look for cleaner, greener alternatives. I am a big fan of differential rates of vehicle excise duty, as there is nothing that concentrates the mind of the user quite so much as choosing to drive a car that attracts a lower duty tariff. I urge Ministers to ensure that ultra-low levels of duty are retained for the cleanest and most efficient engines.

I do not wish to dwell today on passenger transport and the private car, so I shall move on to road haulage and the freight industry. This is an area of policy relating to green transport, which is a matter of concern to me, and I have asked a number of parliamentary questions on the subject. I particularly emphasise today the duty differential for used cooking oil biodiesel, which expired in March this year. I appreciate that biodiesel is currently little used in the passenger car sector, although it does have potential; it is far more significant in freight transport, which accounted for 26 million tonnes of CO2 emissions in 2010.

Without the support of the duty differential, many biodiesel users will inevitably switch back to fossil fuels, resulting in higher emissions and risking the loss of up to 3,000 jobs in the low-carbon economy. The double certificates allowed under the renewable transport fuel obligation look unlikely to be able to support this sector, particularly given that recent certificate values have fallen as low as 10p. While this industry is maintaining an ongoing dialogue with the Minister’s colleagues in the Department for Transport, looking to find an alternative solution, Treasury support and awareness is also vital.

The second area of policy I wish to highlight is house building. Kelvin Hopkins mentioned the efficiencies that can be made through better insulation. Better use of water should also be highlighted, as should better and more efficient boilers. Linden Homes, a house building company that operates in my constituency, has come up with an innovative way to help the Government to progress a zero carbon policy. Its proposal to create a “new homes sustainability bonus”, has the potential to contribute towards a zero carbon policy in a sustainable and affordable way, at a time when the industry faces significant challenges.

At present, all new homes constructed in the UK are required to meet stringent Government energy and water efficiency standards—and rightly so. This company’s idea, as part of the policy mix for national carbon reduction, is that developers could, for all new units built from 2013, contribute a new homes sustainability bonus paid into a central fund, which would then be used to find the most cost-effective ways to reduce carbon within the UK’s existing housing stock, which chronically falls behind new home standards and has significantly higher energy and water consumption. Only 40% of all homes currently have energy-efficient boilers.

Photo of Daniel Poulter Daniel Poulter Conservative, Central Suffolk and North Ipswich

My hon. Friend is making a very good point about existing housing stock, which is the majority of the stock in this country. Retrofitting and improving energy efficiency in those homes is good not only for business, but for consumers, particularly for those on fixed incomes such as the frail elderly and people in other vulnerable groups.

Photo of Caroline Nokes Caroline Nokes Conservative, Romsey and Southampton North

I thank my hon. Friend for that comment. He makes exactly the point I was moving on to.

Last year, the Environmental Audit Committee went to visit the Sustainable Building Centre in Leamington Spa, where we learned that if everyone in the UK with gas or oil central heating installed a high-efficiency condensing boiler, we would save more than 6.5 million tonnes of CO2 every year—and that is only one aspect.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

The hon. Lady makes a good point, but a 20% VAT charge is still made, when it could be only 5% VAT. That would be one simple subsidy to encourage people to invest in better and more efficient boilers.

Photo of Caroline Nokes Caroline Nokes Conservative, Romsey and Southampton North

I thank the hon. Gentleman for that, but my point is that if home developers were obliged to pay into a central fund, we could start to ensure that people in social housing and those on the lowest incomes do not merely think about cheaper energy-efficient measures, but have a grant to enable them to achieve that. The hon. Gentleman mentioned insulation earlier, but improvement is possible from double glazing, too.

Particularly at a time when my constituency and parts of the south-east are under water stress, we must start to look at finding ways better to use our water. We need to be more efficient through rain water harvesting, using grey water and taking simple measures to improve sanitaryware systems, so that the cistern from the lavatory uses less water. All these measures could be done very cheaply indeed.

According to the Energy Saving Trust, each person in the average UK home currently uses 150 litres of water a day. Level 6 of the code for sustainable homes seeks to reduce that usage to just 80 litres—but, significantly, that applies to new-build properties. As I have already said, however, they are a tiny proportion of our housing stock, and far greater savings—both in litres per day and cost to the consumer—can be achieved through working on older properties.

Independent research has indicated that by shifting the focus on to the existing housing stock of 25 million homes, rather than on the already energy-efficient new-build sector, great efficiencies and more value for money can be delivered for the nation as a whole. That scheme would mean that existing home owners would see reduced energy bills, social housing associations would benefit from reduced maintenance costs and local employment would receive a boost, thanks to the number of trades people needed to carry out the work. New home buyers would be spared additional costs, which would in turn help to ensure the viability of many development projects—a critical factor for the UK economy given the already chronic under-building due to economic constraints.

Photo of Robin Walker Robin Walker Conservative, Worcester

I congratulate my hon. Friend on her speech. She is making some important points about both water and heating, and about the work that can be generated. Does she agree that it is vital for the Government, when designing schemes, to work closely with the installers, who are key to people’s decisions about how to implement these policies in their homes?

Photo of Caroline Nokes Caroline Nokes Conservative, Romsey and Southampton North

My hon. Friend is right. The Government must work hand in hand with industry and the installers to ensure that we come up with schemes that not only look good on paper, but work in the real world.

Evidence suggests that if the hearts and minds of consumers are to be won over to energy efficiencies, there must be demonstrable cost savings for them. In response to a survey conducted in April this year, 41% of people said that they would be prepared to pay nothing more to make energy efficiency improvements in their homes. A scheme of this kind has the potential to provide grants for householders, enabling work to be done at no cost to them while also saving money, reducing emissions, and helping the Government to meet their targets. Surely that it is a win-win situation.

I have mentioned water efficiency. A company operating in my constituency, i2O, has developed the advanced pressure management solution, the world’s first system to monitor and control water pressure through a pipe network. It is an extremely successful design which has been deployed throughout the world, and is most widely deployed to regulate water flow and manage leakages. Last month South East Water awarded the company a £1.5 million contract to help to reduce its leakage problems. In view of last month’s drought conditions throughout the country, I am sure that such technology will be needed more and more, and I am pleased that South East Water wanted to install the system as soon as possible. I urge the Minister to support companies such as i2O which are employing innovative and sustainable ways of managing water levels and distribution.

Let me again congratulate my hon. Friend the Member for South Thanet on securing the debate. I look forward to hearing the Minister’s response.

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party 2:30 pm, 28th June 2012

I congratulate Laura Sandys on securing this important debate.

I am genuinely pleased to observe a fight-back from many Tory Back Benchers who are now trying to make the Government see the huge economic and employment benefits of a green economy, as well as the obvious environmental benefits. The scale of the challenge that they face was amply demonstrated by the speech of Mr Lilley, who sounded as though he himself was still living in the dark ages.

I do not know where the right hon. Gentleman has been for the past few decades, but when I last looked, Germany did not seem to be an economy that was struggling. Germany is doing incredibly well, and it is being built on an economy that is light years ahead of ours in terms of the use of the green economy. Let me remind the right hon. Gentleman that we ended the stone age not because we ran out of stones, but because we found a cleaner, more efficient way of behaving. In the same way, we will leave the fossil fuel economy behind because we now see cleaner, more efficient ways of behaving.

As for subsidies, there is a world of difference between subsidies that are time-bound until new technologies reach, in this instance, grid parity, and subsidies that have been going on for decades—as they have in the case of nuclear and fossil fuels—and are driving us ever closer to climate catastrophe.

Much of the debate has rightly focused on fiscal measures. Three years ago, the green fiscal commission revealed that a “polluter pays” tax shift would provide a significant boost for UK low-carbon jobs, as well as increasing competitiveness. It suggested that such a measure would reduce emissions by more than 30% by 2020, that it would create about 455,000 jobs, and that it would receive a great deal of public support.

It is important to bear in mind how widespread that support potentially is. Let me quote these words:

“I don’t underestimate how difficult it will be to rebuild public confidence that green taxes are genuine environmental policy… not just stealth taxes… I am… determined to rebuild this trust… As leading green… Professor Paul Ekins has rightly pointed out, this type of green tax switch might be termed a ‘win-win-win’ outcome… The time for action is now. Future generations will not forgive us if we fail.”

Those are all words with which I agree, but if a week in politics is a long time, four years is evidently an eternity. Those words were spoken by the present Chancellor to a Green Alliance conference back in 2008. I agree with all his words from 2008, but unfortunately they have not been matched by any real action since he has been in a position to put them into action.

I hope that today’s debate will enable us to remind the Chancellor of his words of four years ago, and help to convince him that he should throw his weight behind the UK’s aim of becoming a world leader in low-carbon industries. If he does not believe in the environmental reasons for such action, he certainly ought to believe in the economic and employment benefits. I also hope that we shall be able to persuade him to convince the Treasury that its flagship “green bank” ought to be given the power to borrow as soon as possible.

More broadly, I should like the Chancellor to consider measures such as “green quantitative easing”. I was interested to note that even the former Government chief scientist Sir David King has echoed my calls for green conditions to be attached to the billions of pounds that are currently being poured into our banks. I think that the money should be going directly into the economy rather than into private banks, but wherever it is going, the Government should at the very least ensure that green conditionality is involved, so that we can ensure that it goes into low-carbon infrastructure. Crucially, they should also recognise that the low-carbon economy is far more labour-intensive than the fossil fuel economy that it will replace, so it makes good employment sense to invest the funds in green rather than fossil fuel measures.

The one thing businesses are united in calling for is certainty. The CBI says about low-carbon investment:

“Businesses need, above all else, policy certainty, consistency and clarity over the long-term”,

yet that has been conspicuous by its absence under this Government—demonstrating a failure of leadership by them. The sad news about Vestas reversing its previous decision to invest in the wind turbine manufacturing plant at Sheerness is just the latest casualty of the Government’s failure to provide that most basic condition.

Photo of Nigel Adams Nigel Adams Conservative, Selby and Ainsty

Is the hon. Lady aware that in the last three days Vestas has also decided to close a manufacturing plant in China?

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party

It does not make me feel any better to know it is also closing plants in other parts of the world. It has clearly said one of the reasons why it did not go ahead in Sheerness was that it did not have enough orders for turbines on the order book. If that is a problem here in the UK, we should be addressing that, rather than worrying about what is happening in China.

One measure that would provide huge and tangible benefits both in my constituency and the rest of the UK is a massive investment in making the UK housing stock super-energy efficient. As others have said, that would not only be good in terms of getting our emissions down and creating lots of jobs; crucially, it would help tackle fuel poverty as well. This measure should be funded not through more levies on energy bills—as the Government plan, and which is inherently regressive—but from using funds such as the revenue from the carbon price floor and auctions of carbon emissions permits through the EU emissions trading scheme. That would have benefits in job creation, tackling high energy bills and achieving rapid emissions cuts. Some 118 Members have now signed the early-day motion on the Energy Bill Revolution campaign, which calls for precisely this step.

Members support that EDM because they know that, sadly, as it is currently designed, the green deal policy instrument is extraordinarily weak and the energy company obligation part of it—the bit that is supposed to be tackling fuel poverty—looks set to fail miserably both against the Government’s own objectives and in terms of doing what is needed to cut carbon emissions and end fuel poverty. The truth is that the final shape of that fuel poverty package could result in a 50% drop in the funding targeted at low-income and financially deprived households. There will be far less money in the ECO than there is in the measures that are being phased out—the carbon emissions reduction target, the community energy saving programme and Warm Front.

Photo of Daniel Poulter Daniel Poulter Conservative, Central Suffolk and North Ipswich

I think the hon. Lady is being disingenuous, to say the very least, in respect of this Government. It is because of the policies of this Government that we are seeing investment in increasing numbers of offshore wind farms, not only off the Kent coast, but, as I am sure my hon. Friend Peter Aldous will point out in his speech, off our coast in Suffolk. Will the hon. Lady at least accept that there have been many good advances in green energy—some of which are being delivered right now in Suffolk?

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party

That has probably happened in spite of Government policy, not because of Government policy. [Interruption.] I hear the muttering on the Government Benches, but what I say is true. The measures of investment figures show that under this Government investment in green technologies has decreased.

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party

I apologise, but I will not give way again, as I do not have much time left.

For many low-income households the green deal financial mechanism simply does not stack up. [Interruption.] The mechanism is based on loans with interest rates of between 6% and 7%. That creates the risk that these loans will be taken up by middle-class and well-off households, which might be able to afford to take them up without needing any support, rather than by less-affluent families with next-to-nothing in their pockets. Although there are limitations in respect of this market mechanism, if we are going to use it, we will at least need support to bring interest rates down to a more realistic level—as Germany has done through the development bank, KfW.

Renewable energy enjoys massive public support. That is true even of wind—although judging by the outcry from some Tory Back Benchers, we would be forgiven for assuming otherwise. In November, a YouGov survey found strong support for renewables, with 60% of people supporting wind power subsidies. The Prime Minister said in his half-speech at the clean energy ministerial meeting in April that he passionately believed that the rapid growth of renewable energy was vital to the UK’s future, but, sadly, his Government’s policies do not reflect those warm words. Instead, we hear rumours that he and his Chancellor are seeking backroom deals for a 25% cut in subsidies to onshore wind. Any reduction beyond the proposed 10% cut to wind subsidies would fly in the face of environmental and economic common sense, jeopardising the future of both onshore wind and investment in other renewables across the country, as well as the thousands of jobs they could bring.

The solar feed-in tariff fiasco provides another example of coalition Ministers creating harmful uncertainty. As one solar company in my constituency described it, the industry has had to endure a series of “unsettling knee-jerk changes” that have undermined not only investor confidence, but public confidence in the solar industry. Solar energy has huge potential in the UK and it is a tragedy that we are not supporting it more.

Marine energy also has massive potential. With the right support the UK industry could seize almost a quarter of the world’s potential market, according to the Carbon Trust. That would be worth an estimated £29 billion per annum to the UK economy by 2050 and would support more than 68,000 jobs. Sadly, that potential looks hugely unlikely to be realised, given that we have a Government Budget with a £3 billion tax break for more offshore oil and gas drilling—

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party

I will not give way, because I am running out of time. I am sorry. I was going to say that we also have a draft Energy Bill that threatens to usher in a new dash for gas.

Finally, in my last 40 seconds, I wish to pick up on the way in which “accelerate green growth” is being used in the motion, as we need to be a little clearer about that. Of course we need faster growth in some sectors of our economy, including in renewable energy and energy efficiency, but we must stop pretending that we can have infinite growth on a planet of finite resources. The current economic crisis gives us the opportunity to change direction and get on the path to a very different kind of economy, one that it is not measured solely by GDP. The problem with GDP is that it measures everything in cash terms; it does not measure what is growing, and it does not give us any sense of the quality of the economy and whether it is delivering true well-being.

Several hon. Members:

rose —

Photo of Nigel Adams Nigel Adams Conservative, Selby and Ainsty 2:41 pm, 28th June 2012

That is not the first time I have been mistaken for Nigel Evans, and I see that as a great compliment, so thank you, Madam Deputy Speaker.

I am pleased to be contributing to this debate on the green economy and the fiscal support it receives. Like many other hon. Members, I congratulate my hon. Friend Laura Sandys on securing it. It is particularly important in my constituency, because of the substantial investment being made in sustainable biomass and carbon capture. Drax and Eggborough power stations are based in my constituency, as is Kellingley colliery, the deepest coal mine in the UK. Drax currently produces more than

7% of the UK’s electricity, having generating capacity of just under 4,000 MW. It has been investing in research and development and in new facilities to co-fire with an increasing percentage of biomass. It has proven that its current plant can successfully operate with 12.5% co-firing, and there are plans to increase that to 20% and to build a new power station that would be fired with 100% biomass. Eggborough power station proposes to convert its 1,960 MW generating capacity to run entirely on biomass.

Those are the big wins we need if we are to secure our targets for reducing CO2 emissions and ensure that the green economy flourishes. Biomass results in 80 to 90% less net CO2 emission than coal, and these are the facilities we need to produce power when we need it and not just when the wind blows. They also currently provide secure employment for a large number of people.

We are talking about world-leading companies that have proven that their technology works and that have solved the supply and materials handling problems. However, they cannot provide a solution on financial viability without having a UK policy framework that supports it, which is why I am delighted that we have a Treasury Minister here with us today. Drax is already the UK’s largest producer of renewable energy, even without yet running its current renewable capacity to the full—the current renewables obligation framework does not make it financially attractive to do so. Drax is willing and able to go further, but the policy framework must support rather than hinder it.

Unlike onshore wind, the transition to biomass in my constituency enjoys considerable local support. The local labour force has the expertise to support the plant and sees it as a great new employment opportunity. Public support is important and these projects enjoy support rather than enduring local opposition. I am afraid that the same cannot be said of onshore wind farms, which are proposed in many numbers in my constituency. There is widespread knowledge about power generation and I am repeatedly reminded that more than 3,000 onshore turbines operating last year, which received nearly £400 million of subsidy, produced only 3.3% of the electricity consumed.

Such a level of subsidy for wind, which proudly claims to be the cheapest form of renewable energy, is not a particularly good use of the money that is being levied from the consumer, driving more of them into fuel poverty every year. Electricity that can be produced as and when required, at any time of the day or night, must be worth more than electricity produced only when the wind blows.

Electricity generated near to the industry and homes it supplies via a major node on the grid must be worth more than power from the wind generated in some remote location. Electricity generated competitively with a local labour force must be worth more than electricity that depends on imported turbines with low UK labour content. We should address those issues and I appeal to the Economic Secretary to the Treasury to allocate our financial resources accordingly.

Photo of Diana R. Johnson Diana R. Johnson Shadow Minister (Home Affairs) 2:46 pm, 28th June 2012

I, too, congratulate Laura Sandys on securing the debate. When the coalition came to power, it talked about rebalancing the economy, including moving from services to manufacturing, moving from London and the south-east to the regions and moving towards a more low-carbon economy. In my area of the world, the Humber region, the green economy is one way in which we can see growth brought back into the local economy.

I understand that three of the world’s largest offshore wind farms are around the UK and Hull is particularly well placed for the third round, as we have the Hornsea and Dogger Bank areas of the North sea. I want to talk about the benefits to my area of the green economy and about why it is important that the Government are clear in their approach.

At the moment, the Hull and Humber area is working up a proposal for a green port at east Hull. The proposal is for Siemens to come to the port and set up a wind turbine manufacturing site for turbines that could then be used out in the North sea. We are well placed because of the deep channels in the Humber estuary and the sailing time to the proposed Hornsea and Dogger Bank wind farm areas. At the moment, we are talking about a £250 million investment in Hull, with the further investment of £100 million through the supply chain that we hope will come to the city when Siemens arrives. I must say to Mr Lilley, who is no longer in his seat, that my understanding was that a financial package was available to support such investment in the city in recognition of how important the development was not just to my city but to the wider economic situation in the Humber and around the United Kingdom.

Photo of Laura Sandys Laura Sandys Conservative, South Thanet

I think the regional growth fund has given support to many of those companies as they open up their investment, to secure investment in Hull as well as in Sheerness. Perhaps the hon. Lady could provide clarification on that point.

Photo of Diana R. Johnson Diana R. Johnson Shadow Minister (Home Affairs)

I am grateful to the hon. Lady for her intervention. I will talk about the regional growth fund, but under the previous Government funding was made available for ports so that they could develop projects such as the wind turbine manufacturing that I mentioned. We need to recognise that not only the previous Government but, to give them some credit, this Government have taken steps to support the green economy through wind turbine manufacturing. I think it is a combination of the two things. I do not think we can deny that the previous Government did a lot around the green economy, with the very important legislation in the Climate Change Act 2008, which was the first of its kind in the world. I will come to the regional growth fund in a moment.

The North sea has been called the “Saudi Arabia of renewables”. There is huge potential for growth in the economy. Work on Green Port Hull is going exceptionally well and we are moving steadily, I hope, towards Siemens actually signing on the dotted line later this year. I pay tribute to the Associated British Ports manager, Matt Jukes, as well as Lord Haskins, who has been the chair of our local enterprise partnership, Councillor Steve Brady at Hull city council and Ian Kelly at the chamber of commerce. This has been an example of the public sector and the private sector working successfully together on the green economy. There are potentially 300 construction jobs on the Siemens site building the manufacturing factory. There will be 700 permanent jobs at Siemens and up to 10,000 in the supply chain working alongside different companies around the Hull and Humber area.

Let me put that into context. My constituency has 43.6 people chasing every job vacancy, so jobs are the key issue for my city and people who live in north Hull. At the moment, more than one in 10 young people in the city are not in education, employment or training, so it is important to do something fairly dramatic to ensure the regeneration of what was once a great city. Hull has the potential, with the opportunities offered by renewables, to become a world centre of excellence. We need to recognise the investment that is going not only into the green economy and the manufacturing side of turbines but into the wider economic benefits for areas such as mine. That is so important during a double-dip recession, and the green economy is growing at a rate of about 4%. I am sure that all parties would recognise that we need to do everything we can to support job creation and this particular industry.

I want to give the Government their due regarding the regional growth fund, through which £25 million was made available to work on the supply chain infrastructure that needs to be put in place to support the work that Siemens will, we hope, bring to the city. We also have enterprise zones on both banks of the Humber. I am waiting to see exactly how they are going to work, but the Government have given us the largest area of enterprise zone in the country. So, we hope that we are set, with a fair wind, to move forward, with Siemens coming to the city and with that renewables hub being developed.

Let me make two points about the Government’s approach. First, I am very concerned that any decisions the Government make on energy policy should be evidence-based. The hon. Member for South Thanet made this point in her opening remarks. We need clarity and transparency in policy and I am for ever asking the Government, in relation to all sorts of areas, where the evidence is that what they propose will work. It would be very helpful if the Minister, in his response, set out a commitment to provide reassurances about energy policy being evidence-based. The industry is looking for that and is keen to know why certain decisions are made. We also need to consider that, with investment now, the costs will come down in future. We know that the costs of the offshore wind industry will come down over time—the supply chain will ensure that—and that subsidy will reduce over time.

My second point is about the Government’s announcements, which need to be very clear and quick. The drip-drip of different possible announcements is very unhelpful. I also think that procrastination is a problem. Things need to be got on with. These mixed messages are a problem and I have to say that the Treasury seems to be causing the biggest problem. The Chancellor seems to have indicated in the past that he will not allow economic growth to be held back by green considerations, but clearly most of us in the Chamber today would say that green issues could drive the economy.

Finally, I understand that the consultation on the banding for renewables obligation certificates has taken us up to only 2017. Even with a fair wind and a relatively quick start, the green port in Hull will not begin until 2015, which will only give the industry two years of certainty about its returns. We have to look much more to the long term when we are asking industry to make huge investments.

I hope there is cross-party support for the motion. Labour introduced the Climate Change Act. We are committed to a green economy, and I very much hope that the Conservatives will fulfil their promise to be the greenest Government ever.

Photo of Peter Aldous Peter Aldous Conservative, Waveney 2:55 pm, 28th June 2012

I congratulate my hon. Friend Laura Sandys on securing the debate. Realising the full potential of the green economy is vital to securing economic recovery and creating new jobs.

The green economy is performing particularly well at present and it is important that the UK takes full advantage. Last year, the low carbon goods and services market grew by 4%, and investment in renewable energy around the world reached record levels. In 2011, there was an estimated £6.9 billion of investment in the UK renewables sector, with 21,000 jobs announced. Research and development work is ongoing, and renewable technology is becoming more competitive. The offshore wind cost reduction taskforce estimates that it should be possible to cut the cost of offshore wind by a third by the end of the decade.

It is important to take advantage of those opportunities so that as a country we are less vulnerable to rising global energy prices. We need to future-proof our economy against the vagaries of fluctuating fossil fuel prices. Such fluctuations restrict household expenditure and business investment decisions as well as pushing up inflation.

It is appropriate to commend the Government for the work they have done in the past two years. In many respects they have laid the foundations upon which a successful green economy can be built. They are tackling difficult challenges that do not have straightforward solutions. A good start has been made.

The fourth carbon budget, for the period 2023-27, has been set and the green deal starts this autumn. The Government have brought forward the green investment bank and have invested £3 billion as its initial capitalisation. It is good news that the Enterprise and Regulatory Reform Bill will enshrine in legislation the green investment bank’s objectives, embed its operational independence and provide Government with specific powers to finance it.

It is welcome that the Government are tackling electricity market reform as part of the draft Energy Bill, which is at present before the Environment and Climate Change Committee. I shall not comment on EMR in detail as we shall return to it in the autumn, but it is an extremely important subject where it is vital that the right decisions are made. In tackling EMR five guiding principles should be pursued: timeliness, simplicity, certainty, transparency and coherence.

I commend the Government for the work they have done locally in East Anglia. There is an enterprise zone aimed at the renewable energy sector in Lowestoft, in my constituency, and in Great Yarmouth, and centre for offshore renewable engineering designation for those two ports.

To realise the full potential of green growth, the Government need to address four challenges. First, there is a need for coherence from Government. Green investment is highly mobile and globally foot-loose. Investment will flow to the most attractive destinations. It is therefore important that the Government continue to send the right message: the UK is the best place to invest, with a stable fiscal regime and a sound pricing mechanism. That is how we shall achieve the necessary investment in new energy technologies.

It is also important to provide international investors with the confidence to invest in the UK. Investors need to have faith that all departments of Government are serious about the green economy. There should be a coherent and consistent framework and the right rhetoric must emanate from the Treasury.

Secondly, there is a need to provide 21st-century infrastructure. That means smart metering, a smart grid and in due course a European supergrid. Important work has already begun on rolling out superfast broadband, and it is important that that does not stall. There is also a need to continue with the work to achieve a 21st-century renaissance on our railways, and the Economic Secretary to the Treasury is playing an important role in that in East Anglia.

My third point relates to the green investment bank and its right to borrow. I have already commended the work that the Government are doing in setting up the GIB, which will operate from 2013-14, a year earlier than anticipated. It is envisaged that the bank will have the right to borrow from 2015-16. However, I must emphasise the vital importance of the GIB having powers to borrow, so that it can reach its full potential and provide certainty to investors. It must have that power so that it is not just a Government-run fund. The £3 billion of start-up funding should unlock £15 billion-worth of private sector investment, but that is a drop in the ocean compared with the £200 billion of investment needed to invest in energy infrastructure up to 2020.

It is important not to pursue the option of borrowing through the national loans fund to fulfil the GIB’s borrowing requirements. If that is done, there will be no independence at all. The GIB needs to be able to borrow independently from the capital markets. It is important to learn from the examples in Germany, where KfW leverages its equity by a multiplier of 28, and the Netherlands, where Bank Nederlandse Gemeenten achieves a multiplier of 59. My fourth point is that we need to provide people with the skills and training needed to take up the many exciting and diverse job opportunities in the green economy.

In many respects, that meeting of minds and hearts in the rose garden of No. 10 in May 2010 seems a distant memory, and perhaps another country. However, it is important to remember that one of the objectives in the coalition’s programme for government was the Prime Minister and Deputy Prime Minister’s shared vision of building a new economy from the rubble of the old, supporting sustainable growth and enterprise, balanced across all regions and industries, and promoting the green industries that are so important for our future.

I would like to promote “Leading the Way: Green Economy Pathfinder manifesto 2012-2015”, a document about which I suspect the Economic Secretary to the Treasury knows a great deal. It is a report produced by the New Anglia local enterprise partnership, covering Suffolk and Norfolk, setting out its route map for a transition to a green economy. It was launched earlier this month, and it will be presented to the Government in the next few weeks. I urge the Government to give full regard and consideration to its five objectives and 25 goals, which I will not go through because of the shortage of time.

In conclusion, the Government have made a good start, but a lot of work is still required to realise the full potential of the green economy, and there are many challenges that remain to be met. There is a need for more co-ordination across government, closer working with both business and local government, and a clear and simple regulatory framework to promote green investment. The UK remains an attractive place to invest, but we must do all we can to ensure that that reputation is not lost, but enhanced. I support the motion, and look forward to hearing the Minister’s response.

Photo of William Bain William Bain Shadow Minister (Scotland) 3:03 pm, 28th June 2012

I congratulate Laura Sandys on securing this timely and important debate, and the Backbench Business Committee on granting it.

The OECD has estimated that this year in the UK total economic demand will be only a tenth of that in Japan or the United States. The fiscal stance adopted by the Chancellor towards the economy as a whole, and particularly towards the green sector, is disappointing, given that our green economy accounts for 7% of gross domestic product and is the sixth largest in the world. It sustains 900,000 jobs and is growing at a rate of 4.7% a year, whereas, as the Office for National Statistics established this morning, the economy as a whole has shrunk by 0.2% since the comprehensive spending review in autumn 2010, although the Office for Budget Responsibility had predicted that in the six quarters following June 2010’s emergency Budget, the economy would grow at 3.7%. It seems that the green economy is one of few areas in which there is any growth at all.

China and South Korea are investing hugely in the low-carbon sector, which, it is estimated, will be worth $2.2 trillion by 2020. China’s share of the low-carbon economy is set to rise to 24% by that year. The Chancellor’s lack of foresight risks leaving the UK in the economic slow lane. It is extraordinary that it is not only the Governor of the Bank of England who now writes letters to the Chancellor about the state of the economy but, we have learned, the Secretary of State for Environment, Food and Rural Affairs, the Secretary of State for Energy and Climate Change and, perhaps most surprisingly, the Foreign Secretary. Perhaps there is only 24 hours to save the green economy, based on their concern that Government policy is simply not going far enough to generate growth in an innovative sector that, after the financial crash of 2008, provides an opportunity to rebalance a growth model that many people believe has failed.

This morning, Paul Krugman and Richard Leyard set out in the Financial Times how we have become mired in the slowest climb out of a slump since the

1870s, largely because of a lack of productive economic output. We face endemic long-term unemployment and mass underemployment, with 2 million people forced into part-time or temporary work because of not enough full-time jobs are being generated in the economy. Investment in the green sector is the key to ending that trend. Krugman and Leyard conclude in their powerful piece:

“Companies will only invest when they can foresee enough customers with enough income to spend. Austerity discourages investment.”

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I support everything that my hon. Friend is saying, but is he aware that in a survey recently reported by the CBI, 94% of employers wanted, above all, markets so that they could sell their goods? They were not concerned about regulation and all the other things that the Tories talk about.

Photo of William Bain William Bain Shadow Minister (Scotland)

For many months, my hon. Friend has identified the real problem—a jobs and demand crisis, which is what fiscal policy and investment in the green sector must address.

Lack of confidence means that private sector surpluses amounted to £99 billion last year, and £700 billion of private-sector assets are not in productive use in the economy. In the first three months of this year, global green investment fell to the lowest level for three years, according to Bloomberg New Energy Finance. It is clear that Governments have to act quickly if they are not to find themselves in a classic example of what Keynes called the paradox of thrift, in which the pressure to save overwhelms the need to invest and grow.

Although they are somewhat more reticent in their self-promotion, it is worth remembering that this is the Government who asserted that they were “the greenest Government ever”. Regrettably, this year’s Budget did little to redress the lack of green investment. The principal failure was the failure to improve the capital and borrowing powers of the green investment bank. As a concept, the bank is quite unique. It draws support from the CBI and the New Economics Foundation. Before the Budget, James Meadway, senior economist at the New Economics Foundation, called on the Chancellor to bolster proposals for the green investment bank with higher capitalisation and earlier borrowing powers.

Ernst and Young estimates that £4 billion to £6 billion of public capital is necessary over the course of this Parliament for the bank to be effective in tackling the investment barriers in offshore wind, carbon capture and storage, and associated infrastructure. Lord Stern, a leading climate change economist, notes that that is not state aid or subsidy, as the institution is needed because of market failures in finance, particularly those associated with risk and policy risk. However, the green investment bank will not have borrowing powers until April 2017, which casts huge doubt on its ability to raise the £200 billion estimated to be necessary to meet the UK’s CO2 reduction targets by 2020. While immediate borrowing powers are essential, so is timing. As the Environmental Audit Committee reported in March last year, investors may put off investment while there is uncertainty about how the bank will operate. A bank that is slow in building its balance sheet may not meet our emissions and renewable energy targets by 2020.

The London School of Economics recently issued a report showing the link between the effects of the current crisis of demand and the flailing prospects of the green economy in the UK. In its recent report on green investment and innovation, the LSE argues:

“Investment has slumped mainly because households, businesses, and banks are nervous about future demand and have responded by forgoing more risky investment in physical capital.”

That is the crisis that must be addressed now. The LSE also points out that the Government

“can still steer spending and investment through a mix of policies including pricing, regulation and institutional reform” that need not cost more money now.

Consensus on this issue comes from a surprising source—the Foreign Secretary, who said in his letter of 19 March to the Chancellor that

“we could get more mileage from this without additional commitment of expenditure or fiscal risk.”

Uncertain economic times need not mean an uncertain approach to the transition to a green economy.

Sir David King, as Caroline Lucas discussed in her speech, has argued that the quantitative easing programme could also be aimed at the green economy. In an article published in The Guardian this Tuesday, he wrote:

“This laissez-faire attitude that is gospel at the Treasury is not the right one at the moment. We do not have time to play about with this—we need to move quickly to get out of the financial crisis and the resource crisis”,

and he suggests that preference could be given to projects that promote environmentally responsible and sustainable development, modernising infrastructure and marking a shift away from the present high-carbon, resource-intensive economy.

In opposition, the Chancellor highlighted the need to

“bring to an end the stale argument that we have to choose between economic growth and the environment.”

In government he has so far, sadly, forsaken both, but this is the season for Treasury U-turns. The motion and this debate give him the opportunity to get serious and to generate real green growth and green jobs, so let us have the largest U-turn yet—a fully capitalised and properly borrowing Green investment bank and proper levels of investment in the green economy.

Photo of Therese Coffey Therese Coffey Conservative, Suffolk Coastal 3:12 pm, 28th June 2012

I congratulate my hon. Friend Laura Sandys who crafted such a genius motion, covering so many strands and industries and laying open the field for us to speak on a number of topics. I have been beaten by my hon. Friend Peter Aldous, however, who has already given a full and comprehensive speech on the merits of Suffolk, supported by my hon. Friend Dr Poulter.

I said in my maiden speech that I hoped our coast, the Suffolk coastal area combined with the coast around Lowestoft in the constituency of my hon. Friend the Member for Waveney and round into Yarmouth, would be known as the green coast, and I am delighted to say that our county councils, working with the local enterprise partnership, as has already been mentioned, are doing their bit to try and make sure that that vision becomes a reality. That was further enhanced when an enterprise zone was granted in a neighbour’s constituency and has been designated one of the centres for offshore renewable engineering.

I am delighted to say that the Suffolk-Norfolk rivalries are not quite as strong as they once were: we now reach across the border and our county councils, our LEP and, I understand, Essex county council work together to make sure that we have an energy skills strategy that reaches right across our area. That was evidenced by the decision to allow Norfolk university technical college to be based in Norwich, the city represented by my hon. Friend the Economic Secretary. That is a great opportunity and I am delighted to say that Suffolk and Norfolk are getting a grip on it.

With regard to the fiscal and regulatory framework, I was not surprised by the speech made by my right hon. Friend Mr Lilley, because I know that he holds strong views on these matters. I understand perfectly why he feels that energy costs are unnecessarily high: he blames the subsidy and thinks it is a problem for other industries. I take a very different view: that if we are to encourage self-reliance in energy, we have to invest in our energy infrastructure. It is not about subsidy; it is about an incentive to attract investors from around the world, and nowhere more so than at Sizewell C. I have seen the strong commitment of EDF and British Gas to continuing their planning application work not only at Hinkley Point, but at Sizewell C. Frankly, all the talk about subsidy is nonsense. It is an incentive to have green energy infrastructure on which we can all rely.

I hope that we in Suffolk Coastal will be vying with my hon. Friend and neighbour across the river with the coming online of the Greater Gabbard, Galloper, and East Anglia wind farms and so on, as many of those come onshore in my constituency. That does not mean pylons in my constituency, although sadly it does in one nearby. We are seeing for ourselves the future of green energy, and we are proud to be part of it.

I say to the Minister—she has heard me talk about this before—that it would be lovely if the contribution those communities are making to green growth was reflected in the allocations from the coastal communities fund. They deserve the lion’s share of that money. Frankly, I feel that we should get our share of the revenue that the Crown Estate secures from offshore wind farms and other such activities. [ Interruption. ] I am delighted that my hon. Friend the Member for South Thanet seemed to say, “Hear, hear” to that.

On other routes to market, I think it is telling that one aspect of green growth is trying to reduce the amount of energy we need for anything. I am delighted that the Government have put in place the money for rural broadband roll-out. I hope that the director general for competition in the European Commission does not put a spanner in the works by trying to prevent that money—our money—being used to ensure that we get broadband throughout the country. The other investment that my right hon. Friends in the Government are making, of course, is the investment in rail. I am sure that the Minister will not mind if I plug the future launch, which we hope will be very soon, of our prospectus for increased investment in rail, because we believe that it will generate a huge economic return for our region and the country.

I will mention briefly the contribution from my hon. Friend Nigel Adams. I have a lot of sympathy with his dedication to biomass. We have an anaerobic digestion plant at Adnams near Southwold and more are planned, but there is concern in East Anglia that biomass plants will be powered by straw that is sourced locally, because that would increase the price of straw for farmers elsewhere. With increasing welfare standards, which we all welcome, agricultural production will require more straw, which will start to become a scarce commodity. I have raised the issue with hon. Friends elsewhere—indeed, I am meeting the Minister to discuss the point—because we need to bear in mind the risk of distorting practices elsewhere through incentives on one side.

Finally, I will turn to the planning debate. There is no question but that I prefer offshore turbines to onshore ones, even though they are more expensive—the cost is coming down, as has been mentioned—especially as half my constituency is in an area of outstanding natural beauty. A very unpopular planning application was granted only the other day in Levington, which is in an AONB, and I was rather shocked and surprised that the four councillors outvoted three and the one who abstained. It was a great shame, because one of the things we need to do is get our communities behind the energy revolution and to share in it. Elsewhere in the constituency, communities have come together in wanting a turbine, so that they can use the proceeds from it. We need to develop an element of consensus on wind farms, because once they are in place, as my hon. Friend the Member for Waveney will know with the Kessingland turbines, there are still issues for residents that need to be solved.

I shall use part of my contribution to this debate to call on my local district councils and indeed councils throughout the country to take advantage of the recent Department for Communities and Local Government guidance on including a supplementary planning document specifically on renewable energy. Instead of councillors being beset by every single application and the Planning Inspectorate overturning decisions, I would like to see local councils develop their activities in a planned and structured way and be part of the process of making sure that the future is as green as the luscious fields that we have enjoyed since all this rain fell.

The future is green. One of our party’s slogans was “Vote Blue, Go Green” and I would like to think that under this coalition Government, we are doing more than ever to promote the green economy.

Photo of Martin Vickers Martin Vickers Conservative, Cleethorpes 3:20 pm, 28th June 2012

I, too, congratulate my hon. Friend Laura Sandys on securing this debate.

Energy policy and, in particular, the fiscal and regulatory framework that governs it is critical to my constituency. Diana Johnson outlined the advantages of the Humber estuary in terms of location and the development of the renewable sector, and its geographical situation is absolutely ideal for servicing offshore developments.

Developing renewable energy is more than an environmental solution to help slow climate change, however; it is about bringing jobs and investment and revitalising, rejuvenating and regenerating my constituency and other areas that have been hard hit by unemployment and by business closures.

Existing jobs in my constituency are heavily dependent on energy-intensive industry, including petrochemicals refining and steel production, but there is a limit to their ability to subsidise the development of the renewables sector, and the Government must be mindful of that. Part of the political process does, of course, involve balancing competing arguments.

To return to future jobs, however, the Government have recognised the area’s potential by establishing an enterprise zone, the very name of which—the Humber renewable energy super cluster enterprise zone—does not roll off the tongue but is an acknowledgment of the Government’s support for the growth of the sector in the area.

The zone includes the south Humber energy park, being developed by Able UK, which will not only, we hope, attract a major international company, but provide a massive opportunity for smaller and medium-sized businesses to become involved in the supply chain.

The establishment of the energy park project is going as well as can be expected, but the long drawn-out process has highlighted the need for greater clarity and speed on the part of the various Government agencies involved. I welcome the recent announcements indicating the Government’s determination to tackle those issues, and I urge them to ensure that the announcements are followed through and delivered speedily. If investors are to make sound judgments that favour the UK, we need to avoid delay and to speed up the development of infrastructure and jobs in areas such as my constituency, which so desperately needs them.

Potential investors have drawn my attention to several other factors, including the need for greater clarity on how the Treasury will value and ration contracts for difference—CFDs—for levy-control purposes, given that the amounts paid out under them will vary according to the wholesale price for power.

On CFDs, there are questions also about budgeting. From 2014 to 2017, there will be a choice between renewable obligations certificates and CFDs, but the available budget will have to cover both, so I stress again that clarity is needed on how this highly uncertain situation will be managed.

The industry is asking questions because it wants to see the expansion not purely of one sector, but of many, as indeed we all do. The knock-on effects of the green economy will be felt for generations, and I for one want to support the best opportunities that we can give them—but not necessarily at the expense of the current generation of jobseekers. That is what the green economy is really about, so saving the beauty of Britain and saving jobs for the British people must be our aim. This is an economic eco-system in which what happens in one area affects all the others. One aspect of that eco-system that the Government have got right is the interaction of stakeholders with local authorities, which has produced great successes in Humberside involving the recently established local enterprise partnership.

Recently I got together with my hon. Friends the Members for Cambridge (Dr Huppert) and for East Hampshire (Damian Hinds), and Green Alliance, to produce a pamphlet highlighting the importance of local leadership in the dash for green growth. The hon. Member for Kingston upon Hull North mentioned names that were familiar to me from the north bank Humberside area. I add my support and congratulations to political and business leaders in northern Lincolnshire, who have played a significant part in this. There has been cross-party, cross-river support for the various initiatives. As in the case of the Suffolk-Norfolk situation mentioned a few minutes ago, it is relatively unusual in Humberside to get support from both banks of the river, but thankfully, colleagues from both sides have come together. The local aspect of this could unlock business and industry from over-taxing, centralised policies. We urgently need to cut red tape and speed up the process.

Localism is powerful, and these opportunities are being ambitiously pursued with a focus on green business and investment. Investors are perceiving more risk than opportunity, and we need to ask why that is so. Perhaps there are too many complexities in the current set-up. Complexity equals risk, risk equals costs, and costs equal a lack of investment. We need to reduce the administrative quagmires and uncertainties and introduce a more locally based initiative that could speed up the process. The potential for job growth from the green economy is considerable, and I hope that we can move forward much more quickly to achieve that. I urge the Government to do more to end the uncertainty that the industry faces.

The other day, I attended an informative reception on biofuels—a huge growth area that has one plant coming online, but only one. We need to expand that sector as quickly as possible.

Ministers have worked hard to simplify the process by which the industry can develop. Despite the recent withdrawal of Vestas from its Sheerness project, there remains great potential to grow the industry, to the enormous benefit of my constituency and the country as a whole. I readily support the motion.

Photo of Andrew George Andrew George Liberal Democrat, St Ives 3:27 pm, 28th June 2012

I am pleased to have an opportunity to speak in this important debate. I warmly congratulate Laura Sandys on driving the initiative for the debate and on making a telling and significant opening speech in which she set it on the right course.

So far, speakers have not much reflected on why it is necessary for us to pursue a low-carbon future—apart, that is, from Mr Lilley, who is no longer in his place—and have accepted that policy as a given. As a responsible and significant country that wishes to lead the way internationally—for example, at the recent Rio+20 summit —we should be setting the standards in responding to the challenges facing the globe. The recent Stern report set out the significant impact that rapid climate change will have on people and their lifestyles around the globe, and on the world’s economy, including this country’s economy, if we fail properly to get on top of the problem.

I am glad that that is now seen as the relatively unarguable fact of the matter. Although there are some who advance the case—I will not say that it is a respectable case, but I respect the fact that they argue it—of the climate change deniers, who are the modern equivalent of the flat earth society, on a relatively un-peer reviewed and un-scientific basis, it is good that this Government, the previous Government and Members of this House generally take a reasonable approach to the challenges that we face.

The global market in low-carbon goods and services is currently worth £3.2 trillion and may be worth as much as £4 trillion by 2015. It employs 28 million people worldwide and, unlike many sectors, is growing at a rate of 4%, which is faster than the world’s GDP. The nub of the debate is that we can either ignore that growing global market in low-carbon goods and services and say that Britain wants no part of it, or say that we want not only to be part of it, but to be at the cutting edge. Britain should provide the necessary economic certainty for the players in that market to develop low-carbon technology in this country. We must give the right signals and encouragement to those industries. The underbelly of such certainty in Britain can provide the basis on which companies can test and develop those industries, and then become world leaders and develop an export market for the UK.

Fundamentally, that is what I believe lies behind what the Government are doing, and theirs is the right approach. They are putting the investment in and trying to read the messages in the market itself. I know that the Government have had some difficulty with solar photovoltaics, but the fact is that the cost of solar PV reduced by more than 50% in one year. It is difficult for any Government to have a system that can respond effectively to that and not create distortions in the market. We need to have the right incentives to encourage these industries, but the incentives must work in a manner that creates certainty for the long term. Despite the difficulty that was experienced last year, I am pleased that there is now a great deal more certainty and a formula in the feed-in tariffs system that will take the solar PV industry forward to a point where ultimately, in only a few years time, it will not need any fiscal stimulus to continue succeeding and to be one of the most significant players in our economy.

Photo of Robin Walker Robin Walker Conservative, Worcester

Worcester Bosch, a manufacturer of solar thermal energy, is based in my constituency. One of its concerns is that the enormous subsidies for solar PV under the unreformed feed-in tariffs system discouraged people from investing in solar thermal. Does my hon. Friend agree that having a more sensible and sustainable system will encourage the development of all technologies?

Photo of Andrew George Andrew George Liberal Democrat, St Ives

My hon. Friend makes the point very well. We must get the balance of the fiscal incentives right. Dr Whitehead made the point to the right hon. Member for Hitchin and Harpenden that the European rules do not rule out establishing incentives to develop and then roll out new technologies to promote the low-carbon economy.

West Cornwall and the Isles of Scilly in my constituency have for many years been at the cutting edge of many renewable technologies. We had the first wind farms at Delabole and Cold Northcott in the late ’80s. The geothermal project at Rosemanowes, near Penryn, has spawned a number of developments involving ground source heat pumps and deep geothermal, which I believe will be a significant driver of low-carbon technologies into the future. I am also pleased that the Government are investing in geothermal energy. More of Cornwall’s landscape is taken over with large solar PV than other parts of the country—Cornwall is famed for its sun, and it rarely rains. We want to harness that technology.

The first place in the UK to roll out commercial-scale wave technology is also in my area. That required significant Government investment—from the previous Government and the current one. We are at the critical point of ensuring that we plug companies into the system and that it works.

With all those sectors, Cornwall wishes to be seen as the green peninsula—the cutting edge or blueprint from which others can learn. The Eden project is an exemplar of rolling out such projects. It is not just the technologies that hope for opportunities, but companies. For example, Fugro Seacore, an offshore drilling company—I must declare an interest: my son works there—is helping to put in the footings for offshore wind. Such companies hope to have improved opportunities as a result of the fiscal measures that the Government are putting in place to promote low-carbon technology. I hope all hon. Members support this important motion.

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury) 3:36 pm, 28th June 2012

I thank the Backbench Business Committee for bringing this important matter to the House, and Laura Sandys for her opening speech. Other hon. Members have mentioned the drive she showed to ensure that we had the opportunity to discuss this matter.

We heard 14 subsequent speeches, covering a range of subjects—I shall mention some of them in my remarks. I welcome the Economic Secretary, who is here to listen. A succession of Ministers has been present during the debate, which is important in the context of joined-up government. I hope she finds the debate slightly less of a hot seat than she was subjected to previously. It is good that hon. Members have tried to shed more light than heat.

I am proud that one of the Labour Government’s legacies was the broad acceptance of the need to tackle climate change. They worked tirelessly to attract low-carbon investment and to strengthen the UK’s green economy. The Climate Change Act 2008 was a world first—it binds the UK Government by law to reduce carbon emissions by a third by 2020 and by 80% by 2015. My hon. Friends the Members for Southampton, Test (Dr Whitehead), my hon. Friend Diana Johnson and others were part of that process. We owe them a debt of gratitude for their work at that time, because it helped us to reduce the UK’s greenhouse gas emissions by more than 20%—to below 1990 levels—and to beat our Kyoto target.

The Labour Government doubled renewable energy generation. We tried to establish Britain as a world leader in offshore wind capacity, and moved towards the UK becoming a world leader in the prototype development of wave and tidal technology, as hon. Members have said. Clean coal and coal-fired power stations can sometimes be controversial, but the previous Government proposed that no new coal-fired power stations would be built without carbon capture and storage to cut emissions drastically.

When I spoke of the debate being generally consensual, I should have mentioned the slightly discordant note struck by Mr Lilley. I use the word “discordant” not to be critical. In characteristic style, he made his point and put the other side of the argument. It is important that such views are heard. When Labour left office, investment in alternative energy and clean technology had reached £7 billion, and we were generally thought to be moving things in the right direction compared to other economies in the world. Even amid the worst global economic slow-down since the 1930s, the low-carbon economy in the UK still grew by 4.5% in 2008-09 and by 4.3% in 2009-10.

Several contributions this afternoon have referred to the Chancellor and the Prime Minister’s position when in opposition. Indeed, prior to the 2010 election, both promised to continue the work under way and to prioritise the transition to a low-carbon economy. We have heard several quotes this afternoon, but let me recap the Chancellor’s position in 2009, when he said:

“We need to recognise the fierce urgency of now. We need to see the whole of the government pulling in the same direction to cut emissions and green our economy… Climate change cannot solely be the concern of the climate change Minister.”

That is an important message—and might be one of the few occasions I have agreed with the Chancellor. He also said:

“I want a Conservative Treasury to be in the lead of developing the low-carbon economy and financing a green recovery”.

He then gave the following commitment:

“If I become Chancellor, the Treasury will become a green ally, not a foe.”

Some of today’s questions have focused on how the Government plan to deliver on their promise to be the greenest Government ever and to build on the work already done.

Photo of Neil Carmichael Neil Carmichael Conservative, Stroud

I have just come from the Enterprise and Regulatory Reform Public Bill Committee, where we discussed the green investment bank, which is an important part of the Government’s strategy. Does she agree that it will be a powerful driver for improving our environment as part of the green economy?

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury)

I thank the hon. Gentleman for that information, and I am glad that the Committee is discussing the green investment bank. It has generally been welcomed this afternoon, although there is concern about whether it can deliver on its objectives and whether the Government are taking the right action to secure investment. Hon. Members have mentioned borrowing powers and other things that I will develop later, if I have time. However, although the green investment bank is important, it must have the right powers to succeed.

I have another concern that was reflected in contributions this afternoon. Are we really on the path to making this the greenest Government ever, or is the coalition, as has been suggested,

“on a path to becoming the most environmentally destructive government to hold power in this country since the modern environmental movement was born”?

Those are not my words—I mention them because it is important to consider different sides of the argument—but the words of leading environmentalists, including Greenpeace and the Royal Society for the Protection of Birds writing at the end of last year.

It is almost as if the Government, despite their earlier promises, no longer consider the transition to a low-carbon economy as their top priority. In the autumn statement, the Chancellor said that if we burden British businesses

“with endless social and environmental goals, however worthy in their own right, not only will we not achieve those goals, but the businesses will fail, jobs will be lost, and our country will be poorer.”—[Hansard, 29 November 2011; Vol. 536, c. 807.]

As hon. Members have argued powerfully, that is a particularly short-sighted way of looking at the world and completely ignores the opportunities to create an active industrial strategy within which the green economy can grow.

As other Members have argued, we have choice: we can either embrace and lead a new energy industrial revolution, or we can be left behind. We know that we are in difficult economic times, but all the measures we want to take on growing the economy will also help green growth, which is why Labour’s five-point plan sets out the immediate actions that we believe the Government should take to boost growth and create jobs, which would also help to strengthen the green economy. Even businesses have rejected the argument that the transition to a low-carbon economy is a burden; they believe it provides the UK with a huge opportunity for growth. The deputy director general of the CBI was very clear:

“Environmental regulation doesn’t have to be a burden for business. Framed correctly, environmental goals can help our economic goals—help start new companies and generate new jobs and enrich us all.”

We have heard the Foreign Secretary’s views quoted a number of times this afternoon. I suspect that he would be surprised to feature so often in a debate on the green economy. I shall not repeat quotes already referred to, other than to say that there are some powerful messages in them, as there are in the report published last month by the Environmental Audit Committee, which warned that green investment should play a key role in the UK’s economic recovery. We have also heard figures suggesting that the global market for environmental goods and services stands at around £3.2 trillion today, but will potentially be worth as much as £4 trillion by 2015. The figures on investment in clean energy have also been mentioned.

The green economy is growing worldwide, but the real danger is that if this Government do not continue the work started under the previous Government and do not see that climate change is important or that the green economy is a part of growing the wider economy, we risk being left behind.

Let me return briefly to the green investment bank. The Chancellor was very quick in the autumn statement to take credit for it as the Chancellor who funded the first ever green investment bank. It could, of course, leverage private investment and help drive economic growth, but the danger is that it risks falling into limbo. The Government now seem set to borrow £150 billion more than they planned to do a year ago, which poses issues, and the date by which we will have a proper functioning green investment bank with full borrowing powers has slipped back to 2016 at the earliest. Perhaps the Minister will provide some reassurance on that. The Government’s claim that the green investment bank is part of a strategy for growth and is to be centre stage will look pretty thin if it is not able to deliver any real investment in a meaningful time scale.

I have a couple of further points before I allow the Minister to sum up. The green deal has been referred to by several hon. Members this afternoon. That is important, but concerns have been raised about the fact that, despite the original claim that up to 100,000 jobs would be created in the insulation sector by 2015 and that 14 million homes would be reached by 2020 and 26 million by 2030, the consultation on the green deal, which was published in November 2011, came with some downgraded job forecasts, less funding for fuel-poor households, as we have heard, and no detail about the interest rates on which the green deal will rely.

Some Government Members have raised concerns—quite gently, I think—about what I and others described at the time as “shambolic” attacks on the feed-in tariffs for solar power. That risked thousands of jobs and left the public with legal bills running into tens of thousands of pounds.

Let me add my concern to those already raised about the plan by Vestas for the manufacture of wind turbines. It was originally hoped that it would create some 2,000 jobs, but it has been abandoned. Laura Sandys, a member of the Energy and Climate Change Committee, was quoted as saying at the time that Vestas’ decision would have been

“a commercial one but it also suggests a lack of confidence within the industry over the government’s commitment to the green economy and crucially to offshore wind.”

As I understand it, she went on to say, as other Members have said this afternoon, that the market needs certainty from the Government. That has been a running theme throughout our debate: in order to develop, create and ensure that new technology is made accessible and affordable as part of the delivery from tackling climate change and growing the economy, the market needs certainty and long-term planning. I strongly argue that it is necessary for the Government—across all Departments, including the Treasury—to stand up and take those responsibilities seriously.

Let me end my speech by telling the House what Labour believes we need to do. Some of it has already been set out by the shadow Secretary of State for Energy and Climate Change, my right hon. Friend Caroline Flint. She identified five key elements in an active industrial strategy. First, we need to unlock private investment by delivering on electricity market reform and ensuring that the Government act decisively. Secondly, we need to improve public procurement to support the green economy. We have heard about housing-related issues, and I think that we could do more in that regard.

Thirdly, we need a strategy for skills for a low-carbon economy. Over the past weeks, I have been meeting representatives of the automotive industry and the biofuels and combined heat and power sectors. All of them have said that there are possibilities for job creation, but that it will require investment, research and development and the right skills set, and that young people should be encouraged to take up those job opportunities.

Fourthly, we need to rebalance the economy, support growth in the regions and encourage manufacturing, and, as I have said, supporting green technologies will be a vital part of that. Further growth will require policy certainty and stability for investors, producers and users. Although talks are in progress in some of those sectors, I find it worrying—as, I am sure, do other Members—that the Government’s long-term commitment to combined heat and power and biodiesel, for instance, has not yet been made explicit. The industry must be persuaded that investment in those processes is worth its time, effort and money.

The final element in an active industrial strategy is something that we did not have the opportunity to discuss in great detail this afternoon, although a number of Members referred to it. We need to engage with the public and communities. Such engagement cannot be seen as a mere add-on, or something that we should do after everything else has been done. That goes for economic growth, but it also goes for our own behaviour. Household energy consumption is responsible for nearly a third of total carbon emissions. Of course we could do more in that respect, but we must also ensure that our communities are actively involved. Members have given some good examples today of how that can be done—for instance, through co-operative energy ventures or through communities’ buying, establishing and benefiting from their own turbines.

Today’s debate has given us an opportunity to explore ideas, to raise the concerns of industry—which have been mentioned throughout the debate—and to consider creatively how we can bring about the right economic conditions for sustainable growth and how the green economy itself can contribute to jobs and the wider economy. What we now want to hear from the Minister are practical ideas for fulfilling the commitments that the industry wants from the Government.

Photo of Chloe Smith Chloe Smith The Economic Secretary to the Treasury 3:52 pm, 28th June 2012

This has been an extremely interesting debate on the important issue of how to achieve a green economy in the United Kingdom. I am delighted to be back at the Dispatch Box discussing a subject of great importance in a civilised and reasonable way. Indeed, I shall be happy to take interventions, having already had such extensive experience of that practice during the week.

Let me echo the tributes that have been paid to my hon. Friend Laura Sandys. She did a fantastic job in setting out the terms of the debate. She spoke of jobs and opportunities, she spoke of transparency and evidence, she spoke of the long term, and she spoke of a role for the UK in being proudly and successfully resilient, innovative and productive. I think we can all identify with the sentiment and the passion with which she dealt with those issues.

Many Members mentioned the Environmental Audit Committee’s report on the green economy, which was published in May. I had the pleasure of giving evidence to the Committee during its inquiry. I commend its Chair, Joan Walley, for her work and for the speech she made this afternoon. Like my ministerial colleagues, some of whom were able to join us today, I read the report with interest. The Government are preparing a response, and will release it shortly.

As I said a moment ago, some of my ministerial colleagues were able to join us for a debate that, ultimately, dealt with much wider issues than the fiscal aspects of the green economy. It should be noted that, in many areas, the UK is leading the way globally. The Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend Richard Benyon—who was present in the Chamber until recently—is off to Panama this weekend to represent the UK. The work that he and others have been doing demonstrates that the UK takes the protection of our natural environment and the development of the green economy very seriously indeed.

I pay tribute to Members for their contributions to this debate, including the hon. Members for Southampton, Test (Dr Whitehead), for Brighton, Pavilion (Caroline Lucas), for Luton North (Kelvin Hopkins) and for Kingston upon Hull North (Diana Johnson), and my hon. Friends the Members for Sittingbourne and Sheppey (Gordon Henderson), for Romsey and Southampton North (Caroline Nokes), for Selby and Ainsty (Nigel Adams), for Cleethorpes (Martin Vickers), for St Ives (Andrew George) and for Waveney (Peter Aldous). I hope to be able to address their points, and those of other speakers, later in my remarks. Sadly, my right hon. Friend Mr Lilley has had to leave the Chamber, but I suspect even he would agree that this Government are focused on reducing the deficit, keeping our country safe in the global storm, and doing everything possible to help people in Britain deal with the rising cost of living.

We must consider the effects our comments this afternoon will have on households and businesses. The hon. Member for Brighton, Pavilion mentioned interest rates, and I assure her that our actions more broadly throughout the economy have helped keep them low for households and businesses. My hon. Friend the Member for Romsey and Southampton North talked about simple household measures that can help, and she and I share the same principles in this regard.

The Government have made it absolutely clear that we want a growing economy. That cuts to the heart of the issues we have been debating this afternoon. I make no apology to those that have heard me—and other members of the Government—say this before, as it bears repeating: green growth and a green economy are not separate from the economy at large. On the contrary, they are closely intertwined, as my right hon. Friend the Deputy Prime Minister made clear in his statement on the outcomes of the Rio+20 summit earlier this week. Our entire economy needs to be environmentally sustainable, enabling us to maximise growth while, importantly, managing our natural assets sustainably. That is plain common sense; it is about the efficient use of assets in the interests of the nation. It is both economically and environmentally the right thing to do.

We all know that that is the case from our experiences in our constituencies—I certainly do. I must pay tribute to my hon. Friends representing Suffolk constituencies who have spoken today about the thriving low-carbon sector in their seats—and mine—in East Anglia. As well as all the other sectors mentioned this afternoon, I might refer to the beer industry—which is a presence in the constituency of my hon. Friend Dr Coffey—as all of us might almost prefer to be enjoying its products on this warm afternoon than to be here in the Chamber.

The Government are using the broad range of tools at our disposal to help support the transition to a green economy. Those tools include regulation, financial incentives, voluntary commitments, public sector procurement and fiscal measures. As the motion highlights, we need to have the right regulatory and fiscal framework to achieve that, and we are putting such a framework in place.

From the outset, the coalition Government have committed to being the greenest ever and to increasing the proportion of revenue from environmental taxes. Some have said that Budget 2012 was not green enough. I disagree. We need to be realistic and acknowledge that not every Budget can be full of new green measures and proposals. After all, these are projects for the long term, as has been acknowledged in our debate. I might cite the examples of helping to protect households in the long term through taking action on energy bills, creating investment, supporting new infrastructure—I welcome the comments on that by my hon. Friend the Member for Waveney—and putting in place a stable fiscal and regulatory regime. Budget 2012 demonstrated the Government’s commitment to continuing with their plan to meet their environmental commitments while reducing unnecessary administrative burdens. Let us also be clear that, as well as incentivising behavioural change, the environment-related tax decisions in the Budget make an important contribution to reducing the record deficit left to us by the previous Government.

I shall now discuss how we can bring forward green growth and incentivise it. As I have said, our priority is to achieve strong, sustainable and balanced growth that is evenly shared across the country and between industries. May I set out a couple of areas of policy on which the Treasury and others are collectively leading that we think are in a position to help with green growth? The first of those is the carbon price floor. At Budget 2012, the Chancellor set the carbon price support rates for 2014-15 to meet the carbon price floor as it was set out at Budget 2011. This is a first-of-a-kind tax, and it will provide greater long-term certainty to the carbon price. It will give a secure future for billions of pounds of investment in low-carbon energy, which I am sure all hon. Members will welcome.

Support is also being provided to key industries—our energy-intensive industries—to ensure that they can adapt over time. Electricity market reform has recently been proposed in the draft legislation currently undergoing pre-legislative scrutiny, and that programme talks of needing more than £100 billion of investment to 2020 in electricity generation and networks.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

I am taking up the Minister’s invitation to intervene. Will she consider, even at this late hour, telling us about electricity market reform and how it affects the Treasury at the next meeting of the Select Committee on Energy and Climate Change, which I hope will be held next week? May I assure her that if she does take up our invitation, she will receive a warm welcome and some very straightforward and supportive questions during that discussion?

Photo of Chloe Smith Chloe Smith The Economic Secretary to the Treasury

I thank the hon. Gentleman for his good-natured reiteration of an offer to appear before the Committee. I have not appeared before it because it is scrutinising the draft legislation of another Department. I believe that my right hon. Friend the Secretary of State for Energy and Climate Change, who was also here this afternoon, explained to the Committee this week that he, of course, is representing the Government’s collective position. Although I welcome the hon. Gentleman’s faith in me, I regret that I do not feel that I could usefully add more than that which the Secretary of State has already provided to the Committee. May I also point out that electricity market reform, as my right hon. Friend will have set out, is an early and credible signal to investors that the Government are serious about encouraging investment in low-carbon electricity generation now?

I shall now deal with some of the points made in this debate. My hon. Friend the Member for Sittingbourne and Sheppey exhorted the Government to be clearer on wind energy. I say to him that the Government have been conducting a thorough review of the support provided by the renewables obligation and the Department of Energy and Climate Change will publish the results of it shortly. I know that he and others will take a deep interest in that.

Let me discuss other ways in which the Government have set out action, for example, in the area of accounting for our natural capital. The natural capital committee will help the Government to prioritise actions to support and improve the UK’s natural assets. I reassure the hon. Member for Stoke-on-Trent North that sustainability is considered when developing policy. Her Majesty’s Treasury’s Green Book already does that in guidance, clearly setting out how Departments can take into account natural capital and long-term sustainability issues.

May I further reassure the hon. Members for Southampton, Test and for Glasgow North East (Mr Bain) on the green investment bank? The important point is that the GIB pathfinder—UK Green Investments—is now open for business, with more than 20 individual projects under active consideration, including in renewable energy, waste management and energy-efficiency. All those are large markets with enormous growth potential. Calls have been made this afternoon for it to move forward more quickly and be able to borrow. I wish to reassure the House that it has been given £3 billion in its initial capitalisation and has the potential to borrow from April 2015 when debt is falling as a percentage of GDP—that is a crucial point.

Across the economy, we are focusing on creating the conditions for private sector investment and growth, including through innovation. As Members would expect, that includes supporting private sector investment and focusing on sustainability. I could point out fiscal steps that are in line with the motion, including a new above the line credit to support research and development activity in the UK and increases to the rate of enhanced deductions of SME research and development tax credit. Together with the green investment bank, those measures will play a crucial role in encouraging innovation in the green technology sector, which will have benefits for the wider economy, jobs and growth. Together with the green deal, the measures will help householders both directly and indirectly. I can reassure the hon. Member for Brighton, Pavilion that her calls for a whole-house approach in retrofitting are in line with what the green deal and the ECO aim to achieve. Those schemes also target funding at low-income households, which is very important for the battle against fuel poverty.

Regulation can play an important role in setting common standards and expectations. The Government recently announced that we will introduce mandatory reporting of greenhouse gases for all companies quoted on the London stock exchange. Again, that goes back to the theme of transparency. In this current economic climate, it is crucial to make it simpler for businesses and industry to meet their environmental responsibilities. We will continue to review and amend existing fiscal instruments and regulatory instruments to ensure they remain focused on achieving both economic and environmental objectives. An example of that is the review of the carbon reduction commitment scheme. Budget 2012 announced a consultation on proposals to reduce administrative burdens in that scheme and the Government are considering the responses to the consultation, which has just closed.

Let me return to the importance of this afternoon’s debate. It has been interesting and has demonstrated the importance of appropriate Government action across a breadth of sectors and using various tools. That action must encourage and drive forwards an environmentally sustainable and growing economy. It must pay attention to skills, and I was interested to hear the calls for attention to be paid to the high level of skills we can achieve in the British economy in a fully competitive sense. Once again, I welcome the passionate speeches from hon. Friends and hon. Members. I fully agree with those who have said growth and greenness are not mutually exclusive. We can have both. This Government want an economy that is growing, balanced and sustainable, which is good for businesses and for households. The actions that this Government are taking will help us get there and I thank the Backbench Business Committee and the House for raising the issue.

Photo of Laura Sandys Laura Sandys Conservative, South Thanet 4:07 pm, 28th June 2012

I want to thank everybody who has participated in the debate. It has been very wide ranging, as the Minister said, and I thank her in particular for her attention as she sat through the debate and heard all the different constituency and thematic issues that were expressed. I want to question only one thing that she said, as I do not think that anybody would presume that it is a question of either green growth or industrial growth and GDP. In my view, they are one and the same. Unless we think about the domestic production of energy to hedge off the international volatility of energy production, we will find domestic growth extremely difficult. Household bills will increase and businesses will start to be challenged.

We have covered every part of the green economy in the debate, and it is a part of the economy that is growing. In my constituency, the potential investment of £1 billion is about to be decided in boardrooms not just in the UK but around Europe. They are looking for investor confidence and I hope that this debate has contributed to that. I know that the Minister’s contribution has underpinned what this country requires to build on that growth: investor confidence, clear policies and a commitment to a green economy for the future. We need to take measures to deliver for UK jobs and our wider economy.

Question put and agreed to.

Resolved ,

That this House urges the Government to promote the right fiscal and regulatory framework to accelerate green growth as an intrinsic part of the UK’s economic recovery strategy.