[Mr David Amess in the Chair] — Energy Supply

Part of the debate – in Westminster Hall at 3:07 pm on 6th September 2012.

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Photo of Barry Gardiner Barry Gardiner Labour, Brent North 3:07 pm, 6th September 2012

I am delighted to speak in this important debate, and I am particularly delighted to welcome the Minister to his position. His work within his previous skills portfolio was much respected, and I think that many of us hope that he will bring not only the dedication that he showed in that role, but his focus on developing green skills, into this new portfolio, where he is considering the UK’s energy supply. It is a difficult time to be taking on the brief, and I think that we all sympathise with him for taking over at this juncture, with so much on his ministerial plate. I assure him that the Committee—both sides of it, I think—will seek to co-operate with him to ensure that he gets his feet under the ministerial desk as quickly as possible and can take the brief forward.

I do not want to go over the ground that the Chairman of the Committee and Laura Sandys have already covered—I entirely agree with most of what they said, particularly the hon. Lady’s call for certainty in policy. She is absolutely right; that is one of the key things that will hold back—is already holding back—the investor community from pressing ahead with the sort of investments that we need, if we are to see the £200 billion investment come on stream and ensure that we have the continuity of a secure supply of energy over the next decade.

I want to focus on subsidy and the importance of getting subsidy right. Earlier this summer, there was a contretemps between the Treasury and the Department of Energy and Climate Change on the subsidy for onshore wind. The debate was not phrased in that way; it was phrased, “How much can we cut from that subsidy?” Should the subsidy be cut by 10%, which is the Department’s public position? Or should it be the far more severe cut of 25% proposed by the Treasury? Interestingly, the Department won the day in that public debate. In a straight fight between the Chancellor and the Secretary of State for Energy and Climate Change, most people in most circumstances would back the Chancellor, but in this case the Department won.

We need to consider the economic case for onshore wind. The new Minister has previously commented on onshore wind. We subsidise the technology, which operates intermittently. Wind does not blow all the time and cannot provide the base load of electricity supply. On a number of occasions, the Minister has remarked on the way in which the technology adversely affects communities in the countryside.

Long-term subsidies are not good. I think we can all agree with that. In my view, we should not subsidise any energy in the long term. Subsidies should never be a permanent feature of any market. Subsidies should be introduced only to address market failure and they should be withdrawn gradually as such market distortions are addressed. I hope even the Chancellor and the Treasury accept the economic rectitude of those remarks. Whether they can square that with this country’s ongoing fossil fuel subsidy is an entirely different matter.

Last year, the OECD estimated that, in 2010, UK subsidies for coal, gas and petrol amounted to £3.6 billion. Additionally, the Chancellor announced in his 2012 Budget further exploration and production subsidies of £65 million to develop the west of Shetland fields. The market failures addressed by those subsidies are unclear. On the contrary, fossil fuels appear to have an entrenched subsidy culture in which such taxpayer handouts are regarded as a right, rather than a means of addressing an otherwise unlevel playing field.

By contrast, the total subsidy paid to onshore wind amounted to less than £400 million in 2010-11, or £6 on the average household’s annual bill. That gives a better sense of the subsidy onshore wind currently enjoys against the £3.6 billion in consumption subsidies that fossil fuels enjoy before factoring in the cost of carbon emissions.