Report (2nd Day)

Part of Energy Bill [HL] – in the House of Lords at 6:30 pm on 8th March 2011.

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Photo of Lord Lea of Crondall Lord Lea of Crondall Labour 6:30 pm, 8th March 2011

My Lords, the proposal in this amendment is, in some respects, complementary to the green industrial strategy. I think that the Government are doing rather well, in terms of the co-ordination within government, in getting their act together on a green industrial strategy, and this Bill bears witness to that. I know that a couple of weeks ago the Green Economy Council had its first meeting on the green industrial strategy. The council is chaired by Vince Cable and attended by Chris Huhne and Caroline Spelman, together with, I believe, junior Ministers from the Treasury and other departments. Apart from Ministers, there is very wide participation from members of industry, including the modern energy industries, and trade unions.

However, that is totally separate from where I think there is currently a gap in the narrative so far as concerns the general public, although it is in the same family of issues relating to carbon and so on. I refer to the tax subsidy side of the jigsaw puzzle. There is concern at the lack of an easily understandable narrative about how the tax and price side affects industry and how what one might call the fiscal energy accounts affect the consumer.

At the end of my speech I shall come back to the nature of the body that I am proposing to deal with this issue but, first, the question to be asked is: what sort of information flow on the taxation and price effect side is needed? I have set out briefly in the amendment the role of the Office for Budget Responsibility in providing verification of, and therefore greater credibility to, the picture presented by the Treasury. I also mention the role of the Office for National Statistics. It is a very important part of the governance of Britain but in some respects it has its own independent role, as must be the case in all countries. We all go round the world talking about the independence of audit and statistics as being central to a properly run modern mixed economy. Statistical bodies certainly have to be seen to be independent, and the ONS can, separately from the Treasury, produce independent studies-for example, on the income distribution aspect, which is measured in several ways, including through the composition of the retail prices index and the consumer prices index.

However, we need two sorts of information. One is what one might call a flow chart of the final incidence of all the taxes and subsidies faced directly by consumers today and indirectly through industrial sectors-transport being a notable example of that, given the weight of hydrocarbon fiscal imposts, and heating being another good example. Of course, that is information that can be presented at a point in time, but more significant in the dynamics of the hugely changing scenario over the next five to 10 years-and it is more or less a revolution in how the fiscal context of energy is governed-is the carbon floor. Over time, there will be a hugely important set of indirect subsidies relating to the carbon floor compared with if it were not there. Broadly speaking-you could have a very complicated debate on this-you can underpin a carbon price agreed nationally or internationally, or you can have a carbon tax, and we could debate that.

Another idea is the new entry tariff for electricity. That was announced by the Treasury and DECC in a Statement last December. You do not have to look into a crystal ball when you can read the book. A straightforward carbon tax-I shall use that as a proxy for all other hydrocarbon taxes-is highly regressive. We know that four times as much share of income is spent on carbon by the bottom decile compared with the top decile. That information is often fed to journalists. The person in the Rolls-Royce pays more but not as a percentage of his or her income. Unless people are deliberately setting out to mislead, it is not sensible to say that.

It is also not sensible for people to say on the BBC or anywhere else, unless they want to be mendacious, that people who no longer own cars because they cannot afford them are no longer part of the calculation under the heading of cars. Although that is the rule in the Office for National Statistics, there is a linking mechanism. If you are a youth looking for a job and you do not have a car, there is not much comfort in someone saying, "By the way, you haven't got a car so this is not a cost to you as measured in the retail prices index". People have to get their brains round that-this is the central theme of my speech and my amendment-so that they do not think they are being sold a pup. On home heating, currently the top decile of people pay 2 per cent of their income and the bottom decile pay no less than 16 per cent of their income.

I think the Treasury, DECC and others collect an amazingly interesting variety of statistics, some of which are hidden. Officials very kindly took me through some of the things available. I thought I knew roughly what was available but there were two or three things I had not heard of. That is not hiding one's light under a bushel; it is a failure to factor in or agree, a priori, the fact that statistics do not speak for themselves but they need some relevance to a narrative that is presented to people in Burton upon Trent. That does not happen at the moment. It is vital and it will be increasingly challenging to ensure that that happens in future. I put it to the Treasury-some of my best friends work in the Treasury-that they deliberately confuse the need for confidentiality and secrecy when it comes to the Budget. There is a question of how open they should be when it comes to simplifying information for popular consumption. You cannot get away from the fact that the Treasury is a highly political department because it and the Chancellor take a lot of heat from the public and the media on the big issues of the economy, taxation, employment and so on.

Against that background, I strongly welcome the creation of the Office for Budgetary Responsibility. I shall be corrected if I am wrong, but I think that the precursor to that was a statement by Gordon Brown or Alistair Darling before the election; they were present at the conception. I think it is now separate from the Treasury in terms of the building; it has its own Act of Parliament and I think it even has a telephone number. I spent months trying to ring it up and someone said, "Who do you want?". I said, "Who are you?", and he said, "I'm in the Treasury". I said, "I'm trying to get the Office for Budget Responsibility". There was a lot of shuffling around and then I heard, "Jonathan, are you the Office for Budget Responsibility?"-I am caricaturing it of course. That will be an increasingly important part of the national governance furniture.

The OBR fits the requirement in my amendment like a glove. It is a cross between the Treasury and the Institute for Fiscal Studies. In other words, you can ring it up, you can go and see the people, you can discuss things and you can say, "How does that add up?", and so on. That will be a bit of a culture shock for the Treasury, but I am sure it will get used to it and come to love the OBR.

I am underlining this so heavily because the analysis on this increasingly complex area-I echo a phrase from the noble Baroness, Lady Noakes, who I believe is on a skiing holiday at the moment, although I do not think that should be in Hansard-has to be at the unimpeachable end of the spectrum. It will be open to ordinary mortals as well as to Select Committees and so on to ask questions. Those questions will not be batted off, as questions to the Treasury often are, on the grounds that the Treasury high priesthood is not running public seminars in understanding statistics.

Another reason why transparency is highly important -comparing apples with apples-is that to gauge the subsidies per kilowatt hour of different forms of generating electricity, it is essential to make sense of the economics of each source and maybe that can be monitored and corroborated by the forum on carbon taxation, the body that I am suggesting in my amendment.

I draw attention to an interesting supplement in this week's New Statesman, where there are various examples of why it is very important that people are not conned into giving large amounts of money to different interests on different forms of energy without total clarity about what is coming in return. I quote from one of the authors:

"certainly with potentially very large amounts of money to be made-and lost-by different energy industries there will be some intense lobbying on all sides".

You can say that again.

Another aspect of the playing field-