Address in Reply to Her Majesty's Most Gracious Speech

Part of the debate – in the House of Lords at 5:57 pm on 22nd November 1999.

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Photo of Lord Ezra Lord Ezra Liberal Democrat 5:57 pm, 22nd November 1999

My Lords, I propose to direct my remarks to the commitment in the gracious Speech that the,

"Government will continue their leading role in protecting the global climate".

That statement was emphasised by the noble Lord, Lord Macdonald, in his opening remarks. A number of noble Lords have already dealt with various aspects of the environment. I intend to deal with energy and the environment, with particular reference to the objectives the Government have set for dealing with the problem of climate change.

The principal ways of achieving these objectives are by increasing energy efficiency, developing renewable resources--having regard to their environmental impact, as has been referred to by the noble Lord, Lord Monro of Langholm--and improving the use of fossil fuels by means of processes such as clean coal technology.

I have been involved in the energy sector for over 50 years and am still actively engaged therein in the promotion of combined heat and power. During that half century, there have only been two periods when energy saving was taken seriously. The first period was immediately after the war when coal, then the main source of energy, was in desperately short supply. When in 1947 I joined the marketing department of the newly formed National Coal Board, my task was not to sell coal but to ration it; not to persuade people to make more use of it but to make less use. That situation lasted for a few years until plentiful supplies of oil began to arrive, followed by gas from the North Sea and the development of nuclear energy.

The second time a real interest was taken in energy saving was during the oil crisis of the 1970s. Then, it was occasioned by the spiralling price of the product. Oil had taken over from coal in dominating the energy market. There seemed to be no end to the increases that would be introduced as a result of political action in the Middle East. However, that phase passed.

We then move to another phase when energy saving has become important; namely, the present. On this occasion the situation is entirely different. The motivation is the environmental issue, which does not have the immediacy of energy shortage or high prices. On the contrary, there is plenty of energy available and, on the whole, prices have been kept at a low level. There has been a recent increase in the price of oil, but oil is now much less dominant in the market-place.

So in order to achieve the Government's objectives against the background of a relaxed market situation, a great deal more intervention will be required than was previously the case. Whereas people were previously motivated by their own direct interests--namely, not being able to obtain energy or having to pay too much for it--those motives no longer exist. Therefore, I should like to examine the energy scene today in relation to the Government's climate change objectives.

First, let us take the domestic market, where the overriding issue is that of fuel poverty. My noble friend Lady Hamwee referred to the problem of poor housing. Fuel poverty and poor housing are inextricably linked. The latest English House Condition Survey indicated that there is fuel poverty in no fewer than 5 million homes in this country; in other words, insulation is inadequate, as are the heating installations. Not only does that have major social problems attached to it; it also leads to much waste of energy, with very little benefit for those who are unfortunate enough to live in such houses.

A tragic aspect of the problem is the mortality rate in the winter months compared with the rest of the year. The mortality rate in Britain rises in winter by between 15 and 30 per cent. That is double the rate in any other western European country. Indeed, in countries such as Denmark, where homes are insulated to a much higher standard than has ever been achieved here, there is no difference in the mortality rate between the seasons. So clearly, poor housing, poor heating and high winter mortality rates go together. That is an even more serious problem than only having to deal with climate change, important as that may be.

I have been associated with the work of the NEA for many years. It is an organisation committed to improving the insulation of the homes of people on low incomes, mainly the elderly. I therefore welcome the Government's recent publication of their new home energy efficiency scheme (HEES) which is intended to put much more money into improving heating conditions in the homes to which I have referred.

The trouble is, however, the magnitude of the problem. In spite of the big increase in resources that the Government will put into the scheme when it gets under way, it is proposed to tackle only some 300,000 homes per annum. That may sound a large number; but compared with the 5 million, it will take some 15 years to deal with the problem. The objective ought to be to end fuel poverty in this country and to deal with inadequate housing in a much shorter time. We should set ourselves a limit of five years. So although it is a step in the right direction, the scheme requires re-examination.

Another step in the right direction is the extension into the gas market of what is known as the energy efficiency standards of performance scheme, which has been applied very successfully in electricity. It involves a contribution of only £1 per annum per consumer of electricity. Aggregated, that provides a sum of £25 million, which has been used to introduce schemes for higher efficiency in the use of electricity. A National Audit Office inquiry into the scheme has indicated that the cost of saving electricity is half the price of producing electricity. Therefore, it is obvious that a scheme of that kind should be encouraged. I am delighted that it is being extended to the gas industry by the present Regulator. I have advocated that for many years. But the scale is far too small: £1 per annum per consumer. A good deal more needs to be set aside so that a larger sum could be used for these very desirable purposes. That is a further way in which the disadvantaged could be helped. So again, a step has been taken in the right direction that needs further development.

There is one other matter in regard to the domestic market that the Government should pursue; namely, the application of energy surveys to homes. If we do not know the relevant energy efficiency of a home, it is difficult to deal with the problem. The previous government developed a scheme for doing that; namely, the standard assessment procedure (SAP). It has already been laid down that all new house construction shall have an SAP of at least 60 out of 100. But the last energy survey of housing in this country indicated that the average SAP in Britain was not 60, 50 or even 40, but 35. Therefore, we need to know what the standards are in every home in the country.

There is a way of progressively introducing such an approach. When new mortgages are granted, the survey that has to be undertaken into the structure of the house could include the condition of the energy installation. Furthermore, the Government propose to introduce provision for a package of information to be provided by the seller of a property. That could also include information on energy efficiency.

I should like to deal briefly with the industrial market. The most important development has been the Government's plan to introduce the climate change levy. I am in favour of a levy on the usage of energy at a time when we are attempting to save it in order to improve the climate, both now and in the future. However, there were a number of serious shortcomings in the scheme. In his Pre-Budget Statement on 9th November, the Chancellor dealt with some of them, so the scheme now has fewer disadvantages than previously. But there is one weakness in the scheme. As now envisaged, it would raise £1 billion; however, only £150 million would be recycled into energy saving. The rest would go into the reduction of national insurance contributions by employers. That may be a worthy objective--no employer would not wish that to happen. However, I cannot see the relationship to energy saving. If the Government are to ring-fence the proceeds of the transport fuel escalator, they should do the same in the case of energy used for heating. If we could get that full £1 billion used in energy saving, we could move a long way towards achieving the Government's objectives on climate change, which are wholly desirable. The Government will shortly have, through the proposed utilities Bill, increased powers to take action in this area, which will be necessary in view of the market situation.

The major remaining difficulty is that the resources so far made available are not adequate. There are ways, largely through self-financing, of increasing resources. That extra expenditure should not be regarded as a cost. It will be of substantial benefit to both the present and future generations.