Clause 65 - Appointment of hydrogen levy administrator

Energy Bill [Lords] – in a Public Bill Committee at 10:00 am on 6 June 2023.

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Question proposed, That the clause stand part of the Bill.

Photo of James Gray James Gray Chair, Environmental Audit Sub-Committee on Polar Research, Chair, Environmental Audit Sub-Committee on Polar Research

With this it will be convenient to discuss the following:

Government amendments 12 and 59.

Amendment 117, clause 66, page 58, line 26, leave out from “regulations,” to end of line 27 and insert

“including but not limited to—”

This amendment seeks to define relevant market participants on a wider basis than purely gas suppliers, electricity suppliers and gas shippers.

Clause 66 stand part.

Government amendments 61 to 69.

Clauses 67 and 68 stand part.

Photo of Andrew Bowie Andrew Bowie Parliamentary Under Secretary of State (Department for Energy Security and Net Zero)

This group concerns clauses 65 to 68, regarding the hydrogen levy. Let me turn first to clause 66 and Government amendments 12 and 59.

Government amendment 12 will overturn the amendment to the levy provisions made on Report in the other place. The amendment would have ensured that the funding for the hydrogen production business model could be provided through the Consolidated Fund. However, the financial assistance power in part 2 already enables Exchequer funding of low-carbon hydrogen production. Indeed, I remind members of the Committee that the hydrogen production business model will initially be funded through the Exchequer.

The Lords amendment would also restrict where a hydrogen levy could be placed, thereby removing the option to levy gas and electricity suppliers and providing that a levy could be placed only on gas shippers. Investor confidence and developer confidence are critical to realising the potential benefits of the UK hydrogen economy, which could support more than 12,000 jobs and unlock up to £11 billion in private investment by 2030.

CCUS-enabled hydrogen projects are also expected to play a key role in the Government’s plans to deploy CCUS in four industrial clusters by 2030. Other countries are investing heavily in hydrogen and CCUS, and it is important that we do not miss this opportunity to deliver high-quality jobs and growth.

Government amendment 59 will expand the existing levy provisions to allow the Secretary of State to make regulations to establish a levy to fund hydrogen transport and hydrogen storage revenue support contracts, and associated costs, in addition to the hydrogen production business model.

The Government have not reached a decision on how the hydrogen transport and storage business models will be funded, but the powers in the Bill enable both Exchequer and levy funding options. That approach will ensure that there are robust, reliable options available to fund the business models. That will help to support investor and developer confidence in the future of the UK’s hydrogen infrastructure, encouraging private investment, which is critical to kick-starting and growing the hydrogen economy.

I shall now speak more generally to clause 66. I reassure the Committee that the Government will continue to prioritise the protection of consumers. We have paid almost half of the average household’s energy bill since the introduction of the energy price guarantee, as well as supporting businesses through the energy bill relief scheme and now the energy bills discount scheme. I also reassure members of the Committee that the Government are listening carefully to concerns raised across the House both here and, indeed, on Second Reading.

Government amendments 61 to 69 are all consequential on Government amendment 59. Clause 67 enables regulations to make provision for payments to be made back to levied market participants. For example, as the hydrogen economy matures, it is possible that the market price of hydrogen will exceed the agreed strike price. In that scenario, hydrogen producers receiving support through the hydrogen production business model would make payments to the hydrogen production counterparty. Using clause 67, the Secretary of State can make regulations that enable those payments to be passed through from the counterparty to the levied market participants. That can help provide for fair and efficient payment and reconciliation arrangements.

Clause 68 enables revenue support regulations to make provisions specifying the functions and duties of a hydrogen levy administrator. It also enables regulations to make provision for the Secretary of State to direct the levy administrator. That will help to ensure the effective operation of the levy by enabling regulations to set out functions of a levy administrator. The clause is critical to investor and developer confidence in the hydrogen levy.

Finally, clause 65 makes provision for the Secretary of State to make regulations appointing a person as a hydrogen levy administrator. I beg to move that Government amendments 12 and 59 be made and that clauses 65, 66, 67 and 68 stand part of the Bill.

Photo of James Gray James Gray Chair, Environmental Audit Sub-Committee on Polar Research, Chair, Environmental Audit Sub-Committee on Polar Research 10:15, 6 June 2023

Technically speaking, the Minister need only move that clause 65 stand part of the Bill. That is the first debate in the group.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Climate Change and Net Zero)

We have two concerns about this group. One relates to Government amendment 12, and the other to amendment 117, which we seek to advance. Amendment 117 simply seeks to widen the definition of relevant market participants beyond purely gas suppliers, electricity suppliers and gas shippers. There are other relevant market participants that might actually come under the definition, and we feel that the current wording in the Bill, which effectively says that only the market participants set out here can be included, is overly restrictive. We suggest in our amendment that the words should state that those participants—gas suppliers, electricity suppliers and gas shippers—should be included, but that the definition should not be limited to them. We have therefore added the words

“including but not limited to—” to the definition in the Bill. I would be grateful for the Minister’s response to the amendment, whether we move it formally or not. Some reassurance on the limitations perceived to be there at the moment would be helpful.

I will turn to the main issue in this part of the Bill. As the Minister states, Government amendment 12 seeks to overturn what passed in the other place, which is that their lordships felt that the idea of pursuing a hydrogen levy by means of a levy on customers, essentially, was not a good one. I would go rather further than that: I think it is an absolutely suicidal one.

Their lordships considered an amendment to the Bill at that point, which made it clear that there would be a limitation on who could be the levy payers as far as the hydrogen production levy is concerned, and that that limitation should be the Consolidated Fund or gas shippers. Arguably, gas shippers would have an effect on customers’ bills in the future, and the Consolidated Fund has an effect on taxation levels, but not on bills as such.

Where we had got to when the Bill came to this House is that a consolidated part of the Bill was actually a restriction on who could be levied as far as the hydrogen levy is concerned. I, for one, thought that was a very wise restriction to place in the Bill, and I know from their statements, particularly on Second Reading, that a number of members of this Committee also thought at the time that that was a pretty wise move.

That is why I am really disappointed this morning to see that the Government are seeking to overturn the restriction that was placed on levy raising in the other place. I am not the only person, of course, who is worried about this issue, as far as levy payers are concerned. I refer, for example, to the MailOnline on 4 June, which stated:

Grant Shapps is poised to ditch a plan to add around £120 to Brits’ energy bills to fund the transition to hydrogen.”

The article continued:

“The Net Zero Secretary is understood to be ‘not at all convinced’ that the levy should go ahead, after fierce criticism from Tories.”

Of course, it is MailOnline, so it does not say that there has been fierce criticism from the Labour party as well, but there you are. The article went on to say:

“The government has been accused of heaping more pain on struggling consumers with the proposals for a charge to fund the fledgling industry.”

Obviously, I have got to know the Minister quite well while we have been considering the Bill, and indeed beforehand, and we have a very good relationship. I, for one, would not like to see him being hung out to dry by his Secretary of State on this issue. Whether it is a wise thing for the Minister and his career to advance this amendment right at this minute is something that we will leave for others to judge.

However, the substantive point I want to make is this: just what will be the effect of a levy payment, in the way that this amendment suggests, on the development of hydrogen itself? The Government have quite rightly targeted 10 GW of hydrogen production by 2030 and they have put in place in the Bill arrangements for a system similar to that for offshore wind, with strike prices, reference prices and so on being involved in the process of levying whoever it is that will be levied.

Determining what the strike price is likely to be will be difficult. The Government have indicated—well, the then Department for Business, Energy and Industrial Strategy gave an indication in November 2022—that they would assume a strike price of about £100 per MWh for hydrogen production. Once that is established, it is important to look at what the difference is likely to be with the prevailing electricity price, since they are contracts for difference. With electricity prices as they are at the moment, the difference between the £100 strike price and the electricity price might be fairly small, but if we assume a more reasonable difference—what the selling price of hydrogen will be in the market at that point and based on gas as a comparator—we can come to something like £55 per MWh, which is the prevailing gas price and a premium on carbon pricing within gas. The difference between the £100 per MWh strike price and the likely reference price of £55 gives us a gap of £45, which would be the financial support for the 10 GW of hydrogen production by 2030 that would be fundable through a hydrogen levy. What that gap actually means is that some £53 billion over a 10-year period would be required.

That funding would not be flat because the hydrogen levy would be levied on a rising amount of production over the period. Initially the cost of the gap would be reasonably low, starting at about £700 million per annum between 2025 and 2030, but by 2030 it would be about £3.5 billion per year and then would continue through the period of 15-year contracts. The support that will be necessary—£3.5 billion per year by 2030—can then be translated into what it is likely to cost the bill payer per year as a proportion of that cost. If we divide the number of paid units by the amount per year by 2030, the cost on bills is likely to be in the region of £118 to £120 per year. That is a levy that dwarfs all previous levies.

The total amount of green levies, which are not being paid at the moment because the Government are covering them during the energy crisis—and not a much longer period, I suspect—is about £165 in total. So what is being proposed here this morning is a plan that will add two thirds to those levies over the period running up to 2030. Other levies are proposed in the Bill, and we have agreed to a number of others that are coming down the road—well, I say we agreed to them, but I unsuccessfully attempted to obstruct them. For example, the nuclear regulated asset base will come in as a levy, and there will be further levies under the Government’s—and, indeed, the Opposition’s—plan to quadruple offshore wind and, if we have our way, double onshore wind by 2030. If we continue trying to add levies for everything to customer bills, they will increase hugely by 2030, not because the prices of electricity or gas have gone up or because Mr Putin has invaded anywhere else, but because of conscious policy design and the way the Government set up the levy system.

I appreciate that trying to establish exactly what the costs will be is an art rather than a science, but I do not think that the putative cost of £120 more or less is likely to be that far out. The central point is that the fundamentally broken system of funding renewable and low-carbon energy by way of direct levies on customers will be further broken, further brought into disrepute and further of concern to customers in the future.

Hydrogen does not fit into exactly the same category as some other levies. One of my concerns about the nuclear RAB is that customers are being asked to pay for it before a nuclear plant is in production. That levy will be added to their bills before a single kilowatt of power has been produced by a new power station. Consequently, they may say to themselves, “We are taking on the risk of this. There should be ways of spreading the risk other than adding it to our bills.” For hydrogen, customers may say, “How is this coming to us? Is it coming to us in the same way as offshore wind?” Levying offshore wind will eventually lead to lower bills for customers, because of the maturity of the wind that the levy has enabled, so there is a sort of customer benefit at the end. At the moment, the extent to which hydrogen will be used for customers—certainly, domestic customers—is not clear. Indeed, the Government have deferred the decision about the role that hydrogen will play in domestic heating until 2026.

It is absolutely right that we move at least at the pace that the Government have set as their ambition for putting in place hydrogen, and particularly green hydrogen —10 GW by 2030—but there is much less clarity about what it will be used for. There are clear uses for hydrogen in decarbonising heavy industry, steel and various other heavy industrial products. Clearly, there are substantial uses for it in transport logistics and energy storage, but Members will see that all those uses do not bear on domestic customer arrangements in any clear way. Therefore, customers may well ask why they are paying £118 on their bills for something that is not going to impinge on those bills very much at all.

We will discuss the industrial turbocharger plans later on. I was reflecting that the Government now name everything “turbocharger”, “super” or “great” something or other. The turbocharger is essentially a plan for ensuring that industry is substantially exempted from the effects of various levies and those levies are more greatly placed on domestic customers. Later on, when we discuss the turbocharger, we will ask whether the Government intend to introduce the levy and, by the way, increase its severity by taking it off industrial users and concentrating it all on domestic users. If the Government do that, the £118 will be considerably increased for domestic customers. The Government currently appear to be getting cold feet about that and customers have not just got cold feet but are increasingly likely to revolt against it. As the Onward think-tank, which has done quite a lot of work on the matter, has suggested, there are other ways of funding a hydrogen levy to cover the sort of sums I have suggested but which do not entail putting that additional levy on customers. As the Bill stands, those other ways could be advanced, but not the question of a further customer levy.

I might kindly advise the Minister to think very carefully. Unfortunately, he cannot do that in the lunch break, because we may take a decision on the matter before then—unless I speak for even longer.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Climate Change and Net Zero)

I agree, Mr Gray. It is not a good idea, and I will bring my remarks to a close.

My kind advice is that the Minister should think very carefully before proceeding with the amendment. We have a good Bill overall, which has been strengthened by the decision made in the other place and it sits well with the Bill as it stands. Why can we not just leave it like that? Let us continue to discuss the Bill on the basis that we can all agree on that structure for the future. I fear the Minister may not take that advice. If he does not, we will certainly try and force a Division to make sure that that advice is well taken. The way to do that is simply to vote against the Government’s amendment.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Climate Change and Net Zero)

If the Minister does pursue this, that is what we would propose. I would just add, finally, that I think there is considerable support for that in this Committee. The right hon. Member for Elmet and Rothwell—

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Climate Change and Net Zero)

He said:

“We have to take the public with us on this—we cannot keep adding to people’s bills to try to make things work.”—[Official Report, 9 May 2023; Vol. 732, c. 276.]

That was well said, and I hope that that view will be reflected in the decisions taken by this Committee this morning.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

I thank the hon. Member for Southampton, Test for what was almost a warm-up act to introduce me to the stage. I agreed with every word: we do have to take the public with us, and a movement is building in the country against net zero and an increase in bills. There are many issues, as he has outlined.

I have good news and bad news for you, Mr Gray: I have quite a lot to say, but the hon. Member has covered a few of those things by setting out the financial implications, using some well-researched material that is available to the Committee, so I shall leave some of that aside.

One problem is that it is a little bit of lazy economics to come along with a new area of energy generation—renewable generation—and just say, “Well, we’ll add another tax to do it.” I hope to set out some alternative ways of doing it. There are some considerable potential uses of hydrogen, which I will come on to describe. If we take them in turn, they could suggest areas where the focus could be changed.

My hon. Friend the Minister is a dear friend of mine, and I will try to be gentle with him. He commented that the Bill will enable funding streams that are not yet decided. However, I say to him in all good heart that conversations in the background have opened with the comment, “Well, if we don’t do this, how are we going to pay for it?” That would suggest that decisions have already been made about the levy coming into place. I find that exceptionally disappointing, within the brief that the Minister has been given, because I do not want to see him hung out to dry.

Where I think the Minister has a very valid argument is in what he said about discussions taking place in the background. I have been led to believe that the Government are trying to work on alternatives for Report; I hope very much that that is true. The hon. Member for Southampton, Test quoted my comments on Second Reading; he will have noticed that my comments were not unique, as many colleagues on the Government Benches had similar concerns. I think that it is the view of the House, overall, that there are concerns about Government amendment 12. There is therefore an imperative on the Government to come along and find a way to make hydrogen work without a direct taxation on people’s bills.

Here is the reality. I have some figures and comments from the Library. Costs to consumers due to Government policy are known as policy costs. They consist of the renewables obligation paid on electricity bills to support large-scale renewables; the feed-in tariff paid on electricity bills to support small-scale renewables; contracts for difference paid on electricity to support low-carbon generation; the energy company obligation paid on both electricity and gas to support household energy efficiency; the warm home discount paid on both to provide a discount to vulnerable households; assistance for areas with high electricity distribution costs paid on electricity; and the green gas levy, which funds the green gas support scheme, paid on gas bills.

Based on the Q2 2023 price cap, the breakdown of annual costs annually is as follows: the renewables obligation is £80.26; the feed-in tariff is £18.70; the energy company obligation is £43.87; the warm home discount is £20.60; assistance for areas with high electricity distribution costs is £1.45; and the green gas levy is 45p. That shows that a significant number of green levies are already applied to people’s bills.

When we had the rapid increase in bills, the experience of everybody in this room and their constituents was probably quite unique. Like many politicians, I have spent decades knocking on people’s front doors, and we all know that there will be an argument about policy—it could be about when we did not put pensions up by the consumer prices index and in line with earnings, because of the anomaly during the pandemic around the decision we take every year. That can start a political debate on the doorstep: “It’s outrageous. You said you were going to do this, and you haven’t.” That is politics.

However, what happened in the early months of 2022 was something I had never seen before. Door after door, there was fear—absolute fear—from people about how they were going to pay for their energy. I was always supportive of the energy price cap, which was an important move that helped to alleviate things, but back in the first half of last year, there was much comment about how much levies were adding to energy bills to supplement green policies. Some said, “We must drop them,” but the Government made the comment, correctly, that contracts are in place and that that was not an easy thing to do. The idea that we could add another levy to energy bills is a mistake, and we will not take the public with us.

What we are doing on this Committee today, and what we are doing over the next few sittings—I am proud to be on this Committee, because this is a revolutionary Bill—has a lot of cross-party support, as Opposition Members have said, because we all recognise that this is such an important topic that will affect this country’s energy production, net zero targets, and how we move forward for decades. We should therefore be able, when the House is roughly speaking as one, to take the public with us, but every now and then little parts of the Bill can become exceptionally explosive—excuse the pun—in relation to bringing people with us.

Photo of Katherine Fletcher Katherine Fletcher Conservative, South Ribble 10:45, 6 June 2023

My right hon. Friend is making a powerful case around what many of us hear on the doorstep. Does he agree that being able to define exactly what any levy would be for is a really important part of explaining something when people are fearful of their energy bills? Some have concerns about the hydrogen levy: “What hydrogen is it? Is it green hydrogen produced by wind? Is it blue hydrogen produced from carbon fossil-fuel sources with associated carbon capture and storage?” Blue hydrogen still contains some contaminants. Does he believe that “hydrogen” has been defined enough to allow us to explain things to the general public?

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

My hon. Friend touches on an important point, drawing on comments made by the shadow Minister, the hon. Member for Southampton, Test. We are being asked to add a levy before we know how it will be used or what type of hydrogen it will generate. I do not think that people like signing open cheques without the way forward being defined.

I want to develop the argument for why hydrogen is an important step and to look at its applications in the automotive industry. The reason I say that is purely—

Photo of James Gray James Gray Chair, Environmental Audit Sub-Committee on Polar Research, Chair, Environmental Audit Sub-Committee on Polar Research

Order. I am reluctant to interrupt the right hon. Gentleman, whose speeches I always greatly enjoy, but he is now launching us into a Second Reading-type debate on the benefits of hydrogen. We are discussing a very specific series of amendments, so perhaps he will return to the group under discussion.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

I am grateful, Mr Gray. What I am seeking to do is set out alternatives that can be used instead of putting the hydrogen levy in place.

Photo of James Gray James Gray Chair, Environmental Audit Sub-Committee on Polar Research, Chair, Environmental Audit Sub-Committee on Polar Research

Order. We are discussing a Bill. It is possible to discuss the Bill itself or the amendments proposed to it; it is not possible to discuss things that are not in the Bill, even if the right hon. Gentleman thinks that they might be a good idea. Will he therefore please discuss either the Bill or the Government or other amendments in this group? He may not discuss things that are not in the Bill.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

I take your advice, Mr Gray. One tries to push one’s luck, but I take your comments on board.

To summarise the comments I was going to make, which can wait until subsequent stages, there are several alternatives within the energy market that can be used to achieve some of the things we are hoping to achieve with the blunt tool of yet another tax on energy. Hydrogen will play an important part in the energy progress that we make going forward. These things will need capital funding to help set them up, similar to many things that were done when the North sea was first exploited. Government subsidies and underwriting helped to get that under way.

These are important areas. We must not be blind to the fact that the public are losing faith in the climate agenda overall. There are many reasons why that may be happening. It may well be just algorithms on social media that draw certain people together, but we cannot be blind to the fact that there is a growing movement against net zero. There is a growing movement in this House to talk about having a referendum on whether we want to achieve net zero. Some colleagues are now pushing that forward.

We have to act carefully and diplomatically, and show people that there are huge advantages to be had from this technology and this energy going forward. The Government raise a lot of revenue off energy production, as the hon. Member for Southampton, Test and I have outlined. I therefore feel that Government amendment 12 would be a mistake. However, the Minister has indicated that work is taking place in the background, and I have had indications that amendments may be brought in on Report. If the amendment is pushed to a Division today, I shall not vote against it, but I shall abstain.

Photo of Olivia Blake Olivia Blake Labour, Sheffield, Hallam

It is a pleasure to follow the right hon. Member for Elmet and Rothwell. I know that this is not really a declaration of interest, but my mother, Baroness Blake, was actually the person who moved the amendment in the other place. It is interesting that mother and daughter are both working on this Bill in different ways.

Photo of Olivia Blake Olivia Blake Labour, Sheffield, Hallam

Possibly a record. Who knows?

I rise to defend the amendments made in the Lords and to speak against Government amendment 12, predominantly because of the aims of the Bill that the Secretary of State outlined when it was brought forward. Those aims were about security, but also about tackling fuel poverty. The facts about fuel poverty in the UK at the moment are very telling. I will cite the End Fuel Poverty Coalition’s numbers: 1,000 people died in 2022 as a result of living in cold, damp homes, unable to heat them because of costs. We also know that 7 million people in the UK last winter were living in fuel poverty. Taken together, those are staggering numbers, and it is important that they are at the forefront of our minds when we discuss the levy.

It is telling that there seem to be unified voices against the policy. The figure of £118 that the shadow Minister mentioned came from Onward, which is a Conservative think-tank. The discussion is also about who has the broadest shoulders to help with the changes that desperately need to be made to our energy system. I completely agree with the shadow Minister that the Bill gives the public all the risk and potentially none of the benefits.

There are 37 independently published reports that set out that they do not believe that the UK will move fully to hydrogen for home heating. Obviously there are massive benefits for steel—Sheffield is the city of steel—that could be unlocked through hydrogen, and there are many benefits for industry, but it seems wrong for Government amendment 12 to remove the protections given in the other place to the levy to prevent that cost from falling so dramatically on households. As the right hon. Member for Elmet and Rothwell set out, it is really important that we bring the public with us.

Government amendment 12 is almost a wrecking motion for net zero, because the opposition to this will be huge. I ask the Minister to think hard about whether the Government want to champion such a burden on households when it is not clear whether the benefit will ever fall on households. We do not yet know the questions about hydrogen, let alone the answers, or what the benefits to home heating will be, if that is the path we go down as a nation when there are many alternatives growing at speed, as we have discussed. I think the Government’s amendment is very challenging. I urge them to think again for the benefit of all those who struggle to pay their energy bills now and for those who may struggle in future if the levy comes in.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Climate Change and Net Zero)

I want to add to what has been said on both sides of the Committee Room today about how unwise it is for the Government to go down this path. I do not agree with what the right hon. Member for Elmet and Rothwell said about how we should not conflate public feeling about net zero with public concern about energy bills; the green transition and the move towards renewables will bring in cheaper energy and enhance our energy security, so I do not accept his arguments. However, if I were to argue that point with him, you would quite rightly say that I was broadening the debate beyond the parameters of the Bill, Mr Gray, so I will save my remarks for this afternoon’s Westminster Hall debate on the Government’s approach to net zero.

At the heart of the issue is what the shadow Minister, my hon. Friend the Member for Southampton, Test, said: consumers want to know how this will come to us. I share the concerns—my hon. Friend listed the other green levies in legislation, but the difference is that we can see a benefit from investment in such fields—but the hydrogen levy will mostly be to the benefit of energy-intensive, hard-to-decarbonise industries, and consumers will rightly feel that they are paying for something from which they will not receive the benefit.

We know that there is huge concern. The right hon. Member for Elmet and Rothwell said that there is fear in people’s eyes about how they will meet their energy bills. There is—I have seen that concern. In my public communications about how energy bills were predicted to rise, I was very worried about making constituents even more scared. It was a balance: I wanted to warn people about what is to come, but given the stress that they were under, I felt that it was important not to be alarmist. It is a difficult position to hold. As has been said, it could put about £118 on bills. Documents from the Department state that after 2030, the impact on consumer bills will ramp up even further:

“Once introduced, we expect its impacts will ramp up as we look to deliver our 2030 hydrogen ambitions to improve energy security.”

This is a deeply regressive move.

I do feel a bit of sympathy for the Minister, because he has to defend to the hilt something on which, given the reaction on Second Reading, he will end up having to U-turn. He will get all the flak, and his boss will get all the credit for having listened to people and changed his mind.

Somebody mentioned the think-tank Onward, which has contributed a piece to “ConservativeHome”. Onward has also said:

“The Government is walking into a trap with the hydrogen levy. It would be a mistake that risks stalling the development of a British hydrogen economy. It would also be unfair to ask households that won’t benefit from hydrogen directly to pay for it. The Government should think again. And the Treasury should get off the fence and back the role hydrogen can play in the economy.”

Clearly this is not an anti-hydrogen move. It is about ensuring that the people who will benefit bear the majority of the cost.

The shadow Minister, my hon. Friend the Member for Southampton, Test, has quoted a little of what the right hon. Member for Elmet and Rothwell said on Second Reading, but let me give the quote in more detail. The right hon. Member said that

“the cost we pass on to the public must be minimised. I hope the Minister”— that is, the Secretary of State

“will take note of the points about the hydrogen levy before Committee stage. It is misguided and it is in the wrong place. We have to take the public with us on this—we cannot keep adding to people’s bills to try to make things work. I hope the Minister will take that point away.”—[Official Report, 9 May 2023; Vol. 732, c. 276.]

The problem is that the Secretary of State has taken it away but not quite given it enough consideration at this stage, and the poor junior Minister present today is in an invidious position.

The former Business Secretary, Mr Rees-Mogg, said that he tried to block the levies when he was the Minister in charge of the Bill under the former Prime Minister. He said:

“Let’s not beat around the bush, these levies are taxes and tax is already too high…Energy is already expensive enough…The Government should try to help people get cheaper energy, not more expensive energy. There is no justification for further levies on bills.”

Mr Fysh argued that

“it is inherently inflationary to put lots of new taxes on things.”

Andrew Lewer said that

“just as it looks like bills will maybe start to come down—that will put them up again”.

Craig Mackinlay said that this was a

“socialist energy agenda…more reminiscent of the 1950s Soviet Union that we used to laugh at”.

Actually, I do not think that there is anything socialist about such a regressive move. I take the underlying point that we should not make such provisions, but I think it was slightly unfair to suggest that the move was coming from the left.

Finally, Lord Lilley, who sits on the Lords Environment and Climate Change Committee, argued:

“Hydrogen is a non-starter as a replacement for domestic gas” and that

“to make households pay for something they will never receive is a double insult. It’s absurd to make people pay for something that is never going to happen.”

I think he is what these days we would politely call a climate sceptic, rather than a climate change denier, so I would not endorse his broader approach, but those quotes sum up the position that the Minister is in. There is a lot of unhappiness on this issue. There is not support among the public or in the House, even among Government Members. I hope that he can give some indication that he will at least think about this, even if he cannot agree with us and is forced to vote in the wrong way today.

Photo of Andrew Bowie Andrew Bowie Parliamentary Under Secretary of State (Department for Energy Security and Net Zero) 11:00, 6 June 2023

I will start by speaking to amendment 117. I assure the hon. Member for Southampton, Test that the Government carefully considered the possible levy payers listed in the Bill when it was introduced in the other place. Levies on electricity and gas suppliers have been successfully used to support the deployment of low-carbon electricity and to increase the proportion of green gas in the gas grid. Those funding mechanisms are well understood by the private sector and can help to bolster investor confidence in the viability of funding for hydrogen.

Gas shippers were included as another possible option for the levy design, which allows for a greater range of options for a future levy design while appropriately narrowing the scope. The amendment in the other place was also intended to enable Exchequer funding of the hydrogen business model, but the powers in the Bill already provide for that arrangement. The hydrogen production business model will initially be Exchequer-funded. That aspect of the amendment would therefore introduce redundant provisions to the Bill.

Let me turn briefly to the thoughtful and serious comments made by the shadow Minister, the hon. Member for Southampton, Test, as well as my right hon. Friend the Member for Elmet and Rothwell and the hon. Members for Sheffield, Hallam and for Bristol East. I thank the hon. Member for Southampton, Test for bringing to the Committee’s attention the fact that the Government do care about and recognise the huge pressure that has been put on everyone in this country as a result of Vladimir Putin’s invasion of Ukraine, and the highly fluctuating gas markets and huge increase in energy bills that we have seen as a consequence. I thank him for reminding the Committee that this Government stepped up late last year to pay half of everybody’s energy bills—that is £1,500 per person. We consider very much the impact of any policy decision, any action taken by the Government and any action taken by forces outwith our control on people’s energy bills, particularly this year, when people across the country have been paying record amounts.

I recognise the experience that my right hon. Friend the Member for Elmet and Rothwell spoke so powerfully about; when knocking on people’s doors earlier last year, there was a genuine fear about the impact that the rise in energy bills would have on individual circumstances. That fear was not confined to those people who were sadly already worried—it was across the piece. We have got to pay close attention to that and bear it in mind when we reach any decision in Government that may affect those bills even further.

I say to all the Members who have expressed an opinion today, and to all those engaged in the debate outside this place, that the design of the hydrogen production levy is ongoing, and discussions as to what form that levy will take—or whether it will exist—continue. Those discussions will take into account all relevant considerations, including the affordability of energy bills, which I hope I have made clear the Government take incredibly seriously. We will continue to have discussions and consult on the future design of the said levy as we move forward.

Question put and agreed to.

Clause 65 accordingly ordered to stand part of the Bill.