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Davey on Jobs and Growth in a Low-carbon Economy

March 9, 2012 10:39 AM

• [Mar 05] Edward Davey : I AM grateful to Caroline Flint for securing the debate, as it gives me the opportunity to come to the House for the first time as Secretary of State for Energy and Climate Change. I thank her for her welcome at the start of her remarks. I look forward to our debates, and I hope that despite some of the remarks at the end of her speech, we can have a constructive dialogue that shows the country and the world that there is significant consensus in the UK about the urgent need to tackle climate change. In that way, we can both attract the investment that is needed and continue to lead the international debate that it is crucial to keep winning.

I wish to take my first parliamentary opportunity to reaffirm the coalition's commitment to being the greenest Government ever. My predecessor had a fantastic record of delivering policies that will protect the environment and consumers while making our energy infrastructure competitive.

Much of what the right hon. Lady said about our record was simply unrecognisable and unrelated to the facts. I was also disappointed to see no mention of consumers or bill payers in the Opposition's motion. Under the previous Government, the link between energy and climate change and end users was often overlooked, and the link between the economy and our efforts to tackle climate change was not nearly strong enough. The coalition, on the other hand, has been successful in recognising that within our economic priority to foster growth, create jobs and make Britain competitive, we must pay heed to our obligation to tackle climate change while at the same time empowering and supporting consumers.

I want to make it absolutely clear that the energy bills of consumers and businesses will be a priority in my thinking. At the Department for Business, Innovation and Skills, I was the Minister responsible for consumer affairs, and I am worried about the impact of high bills on consumers. In a consumer empowerment strategy that I published last April, I talked about empowering consumers through collective purchase and collective switching. One would have thought that the Labour party would have been concerned about those matters in its 13 years in government, but it was not. I say to the right hon. Lady that in our work, including since I have taken office, we are pushing collective purchasing and collective switching, which will empower consumers, make energy markets more competitive and get a better deal for consumers.

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Caroline Flint (Don Valley, Labour): Is it not the case that the Opposition have held two debates about energy prices? One was during the energy summit, and unfortunately the Secretary of State's predecessor did not take the opportunity to talk about collective switching. The Labour party supports collective switching, but also reforming the energy market to make the energy generators put their energy into a pool and open it up to being sold in a transparent way. Will he support us on that?

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• Edward Davey : I am very grateful when the Labour party raises the matter of energy bills, because my constituents are concerned about their bills. The problem is that the Labour party did not do anything about the matter when it was in government. We are pushing collective switching, which Labour had 13 years to do. Some countries in continental Europe have been experimenting with the idea, but I am afraid her party did nothing.

599

Charlie Elphicke (Dover, Conservative): I congratulate my right hon. Friend on his newish appointment. My constituents are concerned about the many renewable and carbon commitments that the previous Government put on the backs of the poor through energy bills, particularly those such as the renewable heat incentive, carbon capture and storage commitments and feed-in tariffs. How are this Government looking after the least well-off, whom the previous Government were busy plunging into fuel poverty?

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• Edward Davey : My hon. Friend will know that the costs of the renewable heat incentive and CCS were put on to consumer bills under the previous Government. We have removed those levies, and those schemes are now paid for through taxation. That is a classic example of how we have helped consumers.

599

Joan Ruddock (Lewisham, Deptford, Labour): I congratulate the Secretary of State on his new position. He refers to the desire to be the greenest Government ever, and we really must hold him to that. Why, then, does he think a leading environmentalist, whom his party courted before the election, said at the end of last year that the coalition was "on a path to becoming the most environmentally destructive government to hold power in this country since the modern environmental movement was born"?

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• Edward Davey : I certainly do not recognise that description of this Government. It has been commented in one or two places in the press that the one thing to which I have been most committed throughout my political life is environmentalism-my first political activity was in the environmental movement. I can therefore tell the right hon. Lady of my complete commitment to that agenda.

The motion contains some good points. Cross-party support, for example, for the Climate Change Act 2008 makes the UK an attractive place to do clean-energy business-the right hon. Member for Don Valley was gracious enough to admit that the coalition parties supported the Act, which is important. A consensus on many such issues, whether energy infrastructure investment or climate change, is extremely important, because they are about investors investing over decades. If we are to hit our 2050 target, we need to give those investors and the wider economy a lot of confidence.

600

Huw Irranca-Davies (Ogmore, Labour): I welcome the Secretary of State to his post, in which he has the opportunity to set a new course for the Government. May I suggest constructively that, first, he needs to give certainty to green investors, big and small? The Government have shaken that certainty-he should not listen to his officials. Secondly, he needs to avoid carbon leakage from existing energy-intensive users, whose confidence his predecessor managed to shake. If he can deal with those two things, which have gone deeply downhill in the past two years, he will do this country, green jobs and the green economy a service, in both steel and wind.

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Lindsay Hoyle (Deputy Speaker; Chorley, Labour): Order. There seems to be a lot of wind in these long interventions from both sides. Can we have shorter interventions? I should say to Front Benchers, and let Back Benchers know, that it looks like we will have to introduce a limit of six minutes because of the amount of time that has been taken.

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• Edward Davey : Thank you very much, Mr Deputy Speaker.

I know Huw Irranca-Davies takes a real interest in such issues and has a good track record in speaking up for them, but I do not recognise his points. My right hon. Friend Chris Huhne played a fantastic leadership role as Secretary of State for Energy and Climate Change. He set the Government's ambitions at a far higher level than any previous Government. It is my job to deliver on those, which I intend to do.

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Simon Hughes (Bermondsey and Old Southwark, Liberal Democrat): I welcome very warmly my right hon. Friend to his new post. Will he confirm that, consistent with his past, present and vision for the future, green campaigning groups and the devolved Administrations will always be welcome to discuss with him their ambition, so that we can be a uniting coalition for a green country, to which he has always aspired?

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• Edward Davey : I certainly can give my right hon. Friend that commitment. I have already met many non-governmental organisations and have spoken to the devolved Administrations. It was my pleasure and privilege

to work on this agenda with him over a number years. He showed fantastic leadership when this was not a popular issue. He did more than almost any other hon. Member to put this issue on to the political agenda, and I pay complete tribute to him.

600

John Redwood (Wokingham, Conservative): Does the Secretary of State agree that if Britain's energy is a lot dearer than that of her competitors, we will drive a lot of industry to a lot of other countries? There will be as much CO2 in the world, but we will be short of jobs.

601

• Edward Davey : We need to look carefully at our energy-intensive industries, which is probably what is behind my right hon. Friend's question. However, there is a danger in the debate that some of the economic analysis is too static. As the world moves to its climate change targets, industries across the world must be more energy-efficient. Industries in countries such as ours that can steal a march and become first movers will prosper by becoming more energy-efficient. Some of the market signals that are needed are rightly happening, but I accept that we need packages for energy-intensive industries.

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Geraint Davies (Swansea West, Labour): rose -

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Eilidh Whiteford (Banff and Buchan, Scottish National Party): rose -

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• Edward Davey : I shall make progress and take interventions later.

Since coming to office, the Government have already seen significant new investment in clean energy. Our policies have stimulated new growth, supported new jobs and delivered new capacity. The UK is becoming more attractive to investors. Billions of pounds are being poured into our low-carbon economy, and more and more clean energy is coming on stream. The average annual growth in our low-carbon and environmental goods and services sector is estimated at more than 5% right through to the end of this Parliament, and low-carbon goods and services account for 8.2% of the UK's GDP-a higher proportion than in Germany.

Since last April, companies have announced plans for £3.8 billion of investment in the UK renewable energy industry, and £600 million has been invested in onshore wind alone. A recent report by Ernst and Young showed that the UK is now the fifth most attractive place to invest in renewable energy-up from sixth last year-and we remain the most attractive place in the world for investment in offshore wind. The Minister of State, Department of Energy and Climate Change, my hon. Friend Charles Hendry was telling me that 95% of offshore wind installations occurred off our shores last year.

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Caroline Flint (Don Valley, Labour): On the Ernst and Young report, is it not the case that the attractiveness of investment in the UK has only returned to the position it was in November 2010? Is not the truth that, since the right hon. Gentleman became a member of the Government, we have gone from third to 13th place worldwide in terms of actual investment in renewables in the UK?

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• Edward Davey : I think that the right hon. Lady is quoting from the Pew report, but those data were provisional. According to the new data recorded by Bloomberg,

investment is twice as much. I am afraid that she needs to do her homework before she comes to the House.

Unlike the right hon. Lady, we have made good progress on the green investment bank. The recruitment of the bank's chair and senior independent director is under way. [Hon. Members: "Where's the progress?"] The right hon. Lady and Luciana Berger need to calm down. If they do, they will hear that 32 bids were submitted to host the bank, which suggests an awful lot of interest and attraction. Those bids have come from right across the country. It is because of such interest that we have allowed extra time to ensure that we make the right decision on the location of the bank. Right hon. and hon. Members seeking to have the bank in their constituency ought to give credit to the Government for taking their representations seriously.

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Julian Smith (Skipton and Ripon, Conservative): Will the Secretary of State confirm that the Leeds city region has made an excellent bid for the green investment bank? It is, I hope, one of the best bids that he has seen.

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• Edward Davey : When I used to attend Business, Innovation and Skills questions, as a Minister in that Department, I noted that there were more questions on the location of the bank than on any other subject. I thought I might not get so many in my new position, but I see that I am already getting them. I refer my hon. Friend to my right hon. Friend the Secretary of State for Business, Innovation and Skills.

Subject to state aid approval, the bank will be operational by the end of the year. But from next month, we will pave the way for the establishment of the bank with a programme of direct coalition investment in green infrastructure: we have made £100 million available to invest in smaller waste infrastructure projects on a fully commercial basis; a further £100 million has been made available for investment in the non-domestic energy efficiency sector; and the coalition is ready to co-invest in offshore wind projects. The bank is on course to begin investing its £3 billion of initial capital by the end of the year.

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Alan Whitehead (Southampton, Test, Labour): Has the Secretary of State read the small print from the Chancellor on the future of the green investment fund? He has said that it will not be a bank until the target for debt to be falling as a percentage of GDP has been met -2015 at the earliest but probably now 2017. It is not a bank, and, on that formula, will not be so for a very long time. Will he ask the Chancellor to change that formula so that the green investment fund can become a green investment bank, which he suggests it already is?

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• Edward Davey : My right hon. Friend the Chancellor would not have had to make that statement had Labour left the economy in a decent state. The fact is that we are having to clear up Labour's deficit. Nevertheless, at the same time, we have established the green investment bank-something that it was unable to do even in the good times. That we are doing it in the difficult times shows our commitment to the environment.

That investment is already yielding real benefits. According to one survey, four out of five wind and marine energy companies are planning to hire more

staff by this time next year. Many of those companies are small or medium-sized businesses, while many operate in areas that have otherwise struggled to attract investment. All are helping to rebalance and rebuild our economy, and hasten the low-carbon transition. For example, Evance Wind Turbines in Loughborough has doubled the size of its UK manufacturing facility and has expanded its work force by 25%. Sales have grown by over 200% since last January. Samsung announced plans last month for a new wind turbine plant in Fife-a £100 million investment that is expected to create more than 500 new jobs. Let us also consider Rolls-Royce, whose £400 million nuclear deal with Areva will support hundreds of highly skilled jobs, including in Rotherham. Even closer to the constituency of the right hon. Member for Don Valley, is the Don valley power project at Stainforth. It is one of the most advanced carbon capture and storage projects in Europe, and is looking to break ground in 2013, employing 2,000 people at the peak of construction and creating 200 jobs for normal operation. Those companies and many, many more are building the clean-energy infrastructure that will power Britain's future, not just in generations to come, and not in some far off world, but in the weeks and months ahead. Some 4 GW of renewable electricity is expected to come online in the coming year-a doubling of capacity since May 2011. That is a real achievement.

A common thread running through some of the Opposition's rhetoric concerns stability for investors. I would like to address that, because there is a difference between the parties on this issue, and it is plain for all to see. Let us take nuclear power. I am the first to admit that pushing ahead with new nuclear was not an easy decision for my party, but we have taken it, and we will do it. Let us contrast that with how Labour dithered over new nuclear, so that for the best part of a decade not a single new nuclear plant was authorised. It was the coalition that took forward the national policy statement on new nuclear, paving the way for the first new power station since 1995. However, I was grateful for what the right hon. Member for Don Valley said about nuclear power. Her strong support from the Opposition Front Bench for our new nuclear programme is welcome. It is important that we take politics out of such decisions, so I am grateful that we are making some progress.

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David Mowat (Warrington South, Conservative): Will my right hon. Friend give way?

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• Edward Davey : In a second.

On renewables, Labour missed chance after chance, allowing other countries to steal a march, so that when we came to office, the UK was near the bottom of the European renewable energy table-as some of my hon. Friends have said-despite our strong natural resources. We were ahead of Luxemburg-

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David Mowat (Warrington South, Conservative): And Malta.

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• Edward Davey : My hon. Friend is right. However, we were behind Bulgaria, Romania and the Czech Republic. We were at the bottom of the European league. This coalition Government are going to rocket us up that league. We want to ensure that our incredible offshore wind potential is realised. It was Labour that failed to do its job properly in government. If Labour had not done so, we

would already have more manufacturing, more design and more added value here in Britain. Instead, we have seen manufacturers in Europe and Asia seize much of the supply chain value. In contrast, since we came to power, our policies to support manufacturing at ports and set up the offshore wind developers forum are already beginning to yield results. Foreign companies such as Siemens are now looking to invest in UK turbine manufacturing, and British companies such as David Brown are exporting technology to developers such as Samsung.

Investors and businesses want policy stability, but Labour could not deliver in government. Let us take the feed-in tariffs scheme-which Labour voted against in the last Parliament. Given an opportunity to encourage sustainable clean-energy industries here in this country, Labour dropped the ball. It should not have been necessary to review FITs, but they were not properly designed in the first place. The seeds of instability had already been planted by Labour Members. Labour's scheme had no flexibility to change tariffs in response to the rapidly changing technology costs. As a result, 80% of the costs of FITs in 2015 will go towards paying for just 20% of the generation capacity, which was installed under Labour's scheme. Under our new, improved scheme, we expect to get three times as much electricity generation for less than one third of the cost. When it comes to solar power, Labour is the party of the few, and the coalition is the Government of the many. There will be many more installations, and many more households will benefit. There will also be much more carbon dioxide taken out of the system.

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Joan Ruddock (Lewisham, Deptford, Labour): On that point, the Secretary of State's predecessor has said that there is a need for a community energy tariff in relation to the FITs. I have spoken in the House about the tremendous damage done to the social housing sector by the Government's cuts. I note, however, that there is now no reference to a community energy tariff in the consultation. Will the Secretary of State say something today specifically about what he intends to do about that?

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• Edward Davey : Under the scheme that the previous Government devised, there was no such system. The new scheme that we are consulting on contains proposals for a community guarantee for tariffs on which we want to hear people's views. I hope that the right hon. Lady will engage with that consultation, because I think that that is a very positive proposal.

Following on from what I said about collective switching, I would now like to say a little more about what the coalition is doing to help, protect and empower consumers. We want to help people to heat their homes at a lower cost by improving the energy efficiency of their homes. That is why we are pioneering the green deal. We are creating a brand new market framework, designed to be driven by consumers and businesses, which will secure billions of pounds of private sector investment in Britain's building stock. We are working with the finance industry to ensure that there is a sufficient supply of low-cost finance from day one.

The right hon. Member for Don Valley criticises a lack of progress, but we are designing an entirely new means of financing the re-fitting of Britain's housing stock. We are the first country ever to do so, and we

want to get it absolutely right. We have held in-depth discussions with a wide range of banks and other financial institutions, and established a round-table forum of key investment banks and investors. My right hon. Friend the Business Secretary has stated that the green deal is a priority for the Green investment bank. We are also in discussions with the European Investment Bank to see how it can support the green deal. I believe that we have an ambitious agenda that will help consumers up and down the country as it is rolled out.

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David Hanson (Delyn, Labour): Why is it, then, that representatives of local businesses came to my constituency office last Friday to tell me that there was gross uncertainty over the future of the green deal? They told me that they could not make plans because an interest rate had not been set, and that they were worried about losing businesses and the impact on jobs. In fact, one firm, which employs 55 people, did not expect to still be in business on 31 December. Why is that the case, if everything is so wonderful, as the Secretary of State maintains?

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• Edward Davey : I would have thought that the right hon. Gentleman would know that the scheme is not going to be launched until the fourth quarter of this year, and that we will be making announcements in the run-up to the launch. I hope that he explained to his businesses that they will need to look for the Government's announcements, and that they should feel positive about a scheme that is going to happen under this Government and that did not happen under the previous one.

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David Hanson (Delyn, Labour): Will the Secretary of State start, then, simply by saying on what date he will set the interest rate for the green deal, so that businesses can plan for the future? This involves long-term investment decisions for them, as well as for consumers.

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• Edward Davey : The problem with some of the Opposition's criticism is that they do not seem to realise that this will be a market-based system, and that the Government will not set the interest rate. The right hon. Gentleman needs to understand that green finance companies such as those I have just been talking about will set the interest rate.

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Luciana Berger (Liverpool, Wavertree, Labour): The Secretary of State has said that the Government will not intervene in that way. Is he aware of the German example, in which the German Government have taken the lead and subsidised the interest rate down to 2.65% for a similar green deal scheme? The uptake for that scheme is 100,000 homes a year. This Government's ambition is for our scheme to be massively larger than the German one, and we want to see that ambition realised, but how does the Secretary of State expect to achieve that when the interest rate has not yet been set? There are indications that it will be set at 6% or above, but polling shows that that would result in only 7% of the British public being interested in the scheme.

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• Edward Davey : I am afraid that the hon. Lady is slightly confused. The German scheme is a personal loan scheme. Our green deal scheme is attached to utility bills; it

could not be more different. The structures that she is talking about would therefore not work in the scheme that we are introducing.

The Labour Government were, frankly, equivocal about the capacity and suitability of our energy infrastructure. The coalition is therefore having to work doubly hard to compensate for the missed years. Our reform, set out in our White Paper last year, will secure our energy supplies, guarantee returns for investors and safeguard consumers from volatile internationally-set fuel prices. Critically, it will deliver energy infrastructure that will ensure Britain can evolve into a competitive low-carbon economy. We are introducing a mechanism to ensure that there is sufficient capacity, too.

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David Mowat (Warrington South, Conservative): I have been listening carefully to the Secretary of State's remarks. He tends to use the terms "low carbon" and "renewables" interchangeably; they are, of course, not the same thing. The Climate Change Act 2008 asked us to reduce carbon, not necessarily to build renewables. In any event, will he confirm that all low-carbon sources of energy, including carbon capture and storage and nuclear, will be eligible for Green investment bank funding?

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• Edward Davey : I am delighted to confirm that. I am sorry if my hon. Friend thinks I am interpreting low carbon as renewables, which is not our position. When we look at electricity market reform and talk about low-carbon technology, we are indeed talking about new nuclear and carbon capture and storage as well. I hope I have reassured my hon. Friend on that point.

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Eilidh Whiteford (Banff and Buchan, Scottish National Party): May I welcome the Secretary of State to his new post? I am glad that carbon capture and storage has been mentioned, as I have a constituency interest in gas carbon, capture and storage at Peterhead, which provides a classic example of an opportunity missed in recent years. Will the Secretary of State take the opportunity today to set out a clear timetable for that technology? Personally, I believe that gas is a really flexible technology that will help balance the intermittency, so when can we expect an announcement?

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• Edward Davey : As the hon. Lady will know, we intend to announce our competition for CCS soon. I cannot give her the date today, but we are clear that we will make it soon and in time to dovetail as best as possible with the European money that will also be available for some of these pilots.

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Ian Lavery (Wansbeck, Labour): rose -

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• Edward Davey : I will give way, but then I want to make some progress.

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Ian Lavery (Wansbeck, Labour): Will the Secretary of State confirm which of the four carbon capture and storage projects will be gas, which will be coal and when they will be delivered?

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• Edward Davey : I have to explain to the hon. Gentleman that there will be a competition. People will put in projects of all different types; then the competition will be judged. It would be completely wrong for me to say that we will favour one technology or another. There is going to be a competition, and it will be carried out with proper process.

A skilled and flexible work force is not only critical in delivering a cost-effective, low-carbon transition; it is also a key part of this Government's offer to young people. The Department for Business, Innovation and Skills has set out a vision for radical reform of the further education and skills system to deliver skills for sustainable growth. Apprenticeships are at the heart of this strategy-arming employers and individuals with the support, funding and information they need to make the right choices. The skills strategy for England covers the whole of the economy, including green skills and sustainable development. It is a demand-led model to help deliver the skills training that businesses and individuals need.

The Government have put in place institutions to support this approach, such as the growth investment fund and national skills academies, and we have set up specific initiatives to ensure that we have in place the skills to meet our green objectives. These include a national skills academy for environmental technologies to develop standards, deliver training and upskilling for tradesmen and women and technicians to install and maintain low-carbon systems; funding for a renewables training network, led by RenewableUK, to tackle the shortage of skilled workers in green energy industries; a talent bank for the gas, power, waste management and water industries led by the energy and utility skills sector council; the creation of up to 1,000 green deal apprenticeships, subject to business take-up; a new "skills for a green economy" group of sector skills councils and others to help businesses understand and address green skills needs; and work to raise awareness of the green economy through the TUC-led unionlearn initiative. Taken together, they show how we are creating a strong and flexible platform to meet the skills needs for the green economy transition.

The coalition remains absolutely committed to the low-carbon transition. We will secure clean energy supplies at the lowest cost to consumers, making our homes and businesses more efficient and our electricity greener. Since taking office, we have put in place new policies to secure growth in clean energy investment, jobs and capacity. These policies are already bringing real benefits up and down the country. I have to say that I do not recognise the characterisation of this Government's record that we heard from the right hon. Member for Don Valley. I do, however, agree with the Opposition's contention that the low-carbon transition has the potential to be a major source of jobs and growth for the United Kingdom. I encourage Opposition Members to stop talking down our industries and our opportunities and instead to focus their energies on making the case for the low-carbon transition, in this place and in their constituencies. I believe that the sector has a hugely positive future, and that it is central to our growth strategy.

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