Thursday 6 September 2012
[Mr David Amess in the Chair]
[Relevant documents: Eighth Report from the Energy and Climate Change Committee, Session 2010-12, HC 1065, and the Government Response, HC 1813.]
Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Hayes.)
It is a great pleasure, as always, to serve under your charming and skilful chairmanship, Mr Amess.
I draw attention to my entry in the Register of Members’ Financial Interests. In view of a lot of traffic on Twitter and on the blogs, I would like, if colleagues will forgive me, to clarify precisely what my interests are. I have two financial interests in the renewable energy field. The first is AFC Energy plc, a UK-listed company that I have chaired for five and a half years. It is developing a fuel cell to convert hydrogen into electricity for applications in static situations—in other words, not on vehicles. That company does not receive any Government help. Its business model does not assume that it will ever be eligible for renewables obligation certificates or feed-in tariffs. Its aim is to compete on equal terms with other forms of generation. I do not believe that, since I have been its Chairman, the Energy and Climate Change Committee has ever discussed the subject of fuel cells.
The second financial interest is TMO Renewables, another UK-based company, which is developing a second-generation biofuel. That company does not receive Government help. It does not plan to market its product anywhere in the European Union, so it is not affected by any UK or EU policy. The company is not seeking any subsidy from taxpayers or consumers. It is promoting its technology in the BRICs—notably in China and Brazil, and also to some extent in India. I would also mention that when the Minister for Universities and Science recently visited that company, it was not at my invitation. I was not informed of the invitation in advance; it was made by the staff. I deliberately did not attend that visit, although it resulted in an invitation for the company to take part in a Government-led trade mission shortly afterwards. I also have a non-financial interest in the Renewable Energy Association as that organisation’s first ever president, which is an unpaid post. When I took it on, I made it clear that I could not act as an advocate for the association or for any of its members. Finally, I have a financial interest in Group Eurotunnel SA, which is considering a joint venture that would involve the construction of an interconnector to take electricity to and from France.
I apologise for the length of that declaration, but so many untrue—and sometimes, I think, deliberately false—statements have been made about my interests in the past few weeks that I wanted to make the record absolutely clear.
I simply want to say that during all the time I have served on the Committee, it has always been aware of the Chairman’s interests, and at no time have any of us felt that those interests have in any way impeded or compromised the work of the Committee. He has been absolutely scrupulous in declaring those interests and making clear his position. I deprecate the journalism that has sought to besmirch the work of the Committee, which I believe is what journalists have tried to do, by suggesting that there has been any compromise. I welcome the fact that the Chairman has made such a statement.
I, too, am grateful for that entirely unsolicited intervention from my colleague.
I also point out that I have been a strong and consistent advocate of greater investment in renewable energy for almost two decades—ever since I first took an interest in climate change when I was rather unexpectedly given ministerial responsibility for it in 1993. I believe that Britain needs investment in many forms of low-carbon technology, which of course includes nuclear power, and the suggestion that my views on the subject could possibly have been influenced by interests that I did not acquire until 2006 is simply absurd.
I warmly welcome the new Minister to his post. He comes in at a very challenging time in his Department’s history. We, as a Committee, look forward to working closely with him. We worked very closely with his predecessor, my hon. Friend the Member for Wealden (Charles Hendry). I would like to take this opportunity to pay public tribute to him as an exceptionally conscientious, straightforward, knowledgeable and trustworthy Minister. He will be much missed—certainly by me, and I think by the whole Committee—and his knowledge of the issues, at a time when rather complex legislation is going through the House, is something that I hope my hon. Friend the new Minister will also soon acquire. I wish him well in his task.
I also thank my colleagues on the Committee for their work in producing not just the report that we are debating, but an extraordinary number of reports over the past 12 months. I also pay tribute to our very hard-working staff.
It is almost a year since the publication of the report that we are debating, and the concerns that we expressed then are almost exactly the same as those that we would express now. Britain is, of course, very dependent on imported fossil fuels for its energy, and anxieties about the level of generating capacity remain. The concerns about the fact that much of our existing capacity, in the form of the old coal and nuclear plants, will retire very soon, and about the need for that to be replaced, are as acute today—if not more acute—as they were last year. Absolutely enormous investment is needed in new capacity, storage facilities and so on. In the past year, there has still been progress, albeit insufficient, on energy efficiency, and on carbon capture and storage.
Britain remains a big net importer of energy—the figure was 29% last year. We are very lucky to have Norway on our doorstep, which is a friendly and reliable supplier of gas, but it is still desirable that we try to minimise our dependence on imports. In my view, that supports the argument for exploiting our shale gas reserves, for which we look to the Department of Energy and Climate Change for early approval, as has been recommended by the Committee. We will soon return to that subject, and I hope that we get the go-ahead soon.
Norway is a friendly supplier of gas, but even that fact cannot insulate us from future gas price spikes. Those who advocate relying mainly on gas to generate our electricity must recognise not only that, without the so far unproven economic availability of carbon capture and storage, gas cannot possibly get us to the 50 grams per kWh emissions target set by the Committee on Climate Change for 2030, but that there is also a real danger, as the Asian economies continue to grow, that global demand for gas will drive prices up, meaning that Britain’s economy will become less competitive if gas is our principal source of electricity generation.
I am sure that the hon. Gentleman recalls the “World Energy Outlook” report and our interview with its head, Fatih Birol that drew particular attention to the fact that as Russian gas from western Siberia is gradually going offstream, the eastern Siberian gas fields will then come onstream. The likelihood is that there will be a decrease in the gas from Russia that comes into Europe and that, as the countries of Asia—China and India—see a rise in their need for gas, the eastern Siberian stream will increasingly be pulled down there. The position of Russia will therefore put Europe in a very different situation vis-à-vis gas.
The hon. Gentleman—in terms of the Committee’s work, he is probably my hon. Friend—is absolutely right about that point. The situation will get much more serious from Europe’s point of view in relation to its reliance on imports from Russia. I commend the work of the International Energy Agency, and especially of Fatih Birol, who has a particularly mature and perceptive view of long-term energy trends. The IEA’s work gives us a lot of warnings.
Despite all that, in what I hope will be a diversified mix of energy sources—gas, nuclear, low-carbon and renewables—gas will remain important in the next 15 years. We cannot do without it, so I hope that the Government’s gas strategy will include a further expansion of gas storage capacity, which is currently only a fraction of that routinely maintained by Germany, Italy, France and the United States.
Our report also recommended that the Government should set up an independent central agency to manage Britain’s strategic oil stocks, so we look forward to progress on that. We distinguished, although not everyone does, between independence and security. Independence of energy supplies is not attainable for Britain in the foreseeable future but, in any event, security is more important. Security means much more than just reliable sources and supplies of energy, although that is a pre-requisite, as it makes storage and interconnection important factors, too. It means having adequate generating capacity and a mix of generation that delivers value for money to consumers and protects consumers in the event of a much higher carbon price, which may well emerge—indeed, it is likely—in the 2020s and 2030s.
I note en passant, and with approval, the continued spread of emissions trading as a policy instrument. It has been adopted in a growing number of countries, although that trend that was not apparent three years ago. We now see it in countries in Asia, in Australia and in parts of America, and pilots are taking place inside China, as we reported recently. That points to the use of emissions trading and the possibility of a rising carbon price in 15 or 20 years.
I have just been reflecting on that point about security and diversity going hand in hand. Does my hon. Friend think that France, which is relatively undiversified—it has 70% to 80% nuclear—has inherently less secure energy than us?
That is an interesting point. France is exposed to the risk of something that derails nuclear technology. Last year’s Japanese accident, which was actually an industrial rather than a nuclear accident, effectively led to the closure of nuclear power in Germany. France has rightly taken a more robust attitude. The factors that led to the Japanese accident would not apply for the most part to French nuclear power stations. None the less, a great reliance on a single technology inherently puts a country in an exposed position, although that is perhaps less the case for nuclear power, given that the supply of uranium is probably reliable for the foreseeable future. Interestingly, France is also quite a big investor in wind power which, again, is not something that depends on imports. I would not say that France is excessively exposed, but would be in the event that something went wrong with its nuclear power stations. It is also struggling to renew its nuclear power stations, and cost overruns and time delays have affected EDF quite badly. None the less, I remain a strong supporter of investment in new nuclear power.
I thank my hon. Friend for allowing me to intervene as I may not have a chance to deal with this issue in my summation. He made two interesting points, which I should like to test a little further. The first is about the relationship between gas and competitiveness. After reading the work that his Committee has done on low-carbon growth links with China and listening to his general comments on China, may I ask him to say something about the changing character of demand, especially from the emerging economies, and the effect that it may have on the world price of gas and our competitiveness? I have another point, but I have gone on long enough. I do not want to test your indulgence, Mr Amess, beyond reasonable limits.
I am always encouraged when a Minister intervenes on my remarks. It suggests that he is listening, not that I expect anything else from the present Minister, and that we are debating something that is of some consequence. It is an interesting question. We are likely to see from China and the other Asian tigers huge demand for imported energy. China has a lot of coal and it may have some more gas that we do not yet know about, but the likelihood is that it will become an importer. Countries such as Korea are already huge importers of fossil fuels. I suspect that the world price of gas will tend to be driven up by the growth in these economies. There will be some interesting consequences. America, which may well be self-sufficient in gas for the time being, will thereby have a competitive advantage because if it wants, it can keep down its gas prices, although if I were a gas producer in America I would wonder about exporting it to a jurisdiction where the price was higher. It would be prudent for Britain to assume that, even if the price of gas remains decoupled from that of oil, we may see a significantly higher gas price by 2030, and that if we were too dependent on gas we might find that we were paying more for our energy than if we had a more diversified mix. A lot will depend on how much investment takes place in nuclear power in some of these countries, because at the moment that seems to be an open question.
I hesitate in trying my hon. Friend’s patience further. I was going to mention this earlier. There is no such thing as a world price of gas. There is a European price of gas and a Henry hub price of gas in the United States of America. Currently, the gas price in the US is one quarter of the price here—that is a game changer. Although the demand in China will be high, the US price may represent a constraint on price even in Europe because, if the US lets it happen, liquefied natural gas can be imported into Europe at a cost that is less than the differential between US gas prices and our gas prices now.
I agree with my hon. Friend: clearly, there is an opportunity for the very low price in the United States to influence prices here. If the US is allowed to do that—and it is converting some of its terminals to export rather than import LNG—the differential is too attractive not to pursue it. However, I doubt whether that by itself would be sufficient to offset the upward pressure from the much faster-growing and larger economies in the east.
Security also depends on a much greater investment in energy efficiency. As we all know, Britain now needs a huge investment in generating capacity. There is no guarantee that that will be forthcoming unless we have clarity and general stability of policy. I urge the Minister to ensure that there is no slippage in the discussions—not just those about the energy Bill but the negotiations on strike prices for contracts for difference—that are under way. The nuclear industry in particular requires as much clarity as possible as it has enormous capital needs and long delays before any return is achieved. I am sure the Minister will find that matter pretty high up his briefing pack.
I hear what my hon. Friend says about certainty being a pre-requisite for getting the kind of investment necessary over the term about which we are speaking. The Committee has spoken about that before: its report on the emissions trading system talks about a strong and stable carbon price signal being another component that is needed to achieve certainty and predictability, which are the pre-requisites of investment. Will he explain that to me? After all, I am on a sharp learning curve.
I am sure that the Committee is encouraged by the fact that the Minister keeps quoting from our reports. He could not have a better textbook from which to embark on his learning curve. The signal that we would like to see of a strong and stable carbon price is one that has been conspicuously absent from the EU emissions trading system, for a variety of reasons. First, the cap was originally set much too high in phase one, and phase two was scuppered by the recession. It will probably be the latter part of this decade, at the earliest, before we see that strong, stable carbon price emerging, but we will see it eventually. I would be surprised if, by the 2020s, we do not see a stable carbon price. Moreover, if more countries, including some large ones, adopt emissions trading as one of their instruments to address climate change, I suspect that the prospects for that strong and stable carbon price will be greatly increased.
I am listening with great interest to my hon. Friend. My question is about energy storage, to which he has referred a few times. Are the members of the Energy and Climate Change Committee, and indeed the Minister, thinking about energy storage and the technologies involved, including, for example, liquid air? If so, are they considering studying the effect of energy storage on investment and how the impact of energy storage might be calibrated?
I am hoping that the Minister can enlighten us about that, if not this afternoon then before long. One thing that we as a Committee recognise is that the present system—the market—is not giving enough incentive to companies to invest in energy storage. That is why no investment is taking place. There are a variety of ways in which that could be remedied. However, at the moment the ball is probably in the Department’s court on energy storage, and we look forward to hearing what it has to say in due course.
I will try to make some progress, because I am conscious that my colleagues need to speak in this debate. I will just reiterate the point that I was making before the Minister last intervened. Uncertainty or last-minute unplanned policy changes on which consultation has not taken place—I am happy to point out that such changes might not necessarily come from the Minister’s Department but from the Treasury, as we saw in Budget 2011, which contained changes to the tax regime for oil and gas that had not been consulted upon—are simply killers for investment.
Our Committee’s report urged that there should be diversity in energy supplies. Of course, the size of the role that gas can play in that regard will depend significantly on progress being made on carbon capture and storage. If that facility becomes available, there is a much bigger opportunity for gas. Therefore, we should focus our efforts on CCS as much—possibly more so now—on gas as on oil. Alongside that, however, we also need nuclear. Many of us regard it as a clean and safe technology. We have some anxieties about the progress on new nuclear power stations. EDF appears to be on the brink of making the decision in that regard, but it is not quite over the line yet. The future of the Horizon consortium is still unclear. I say to the Minister that if the only way to get nuclear power stations built in Britain soon is to accept investment from abroad, even from China, with the right safeguards, that is perfectly acceptable. The aim is to get these things under way.
Even if that alternative—investment from abroad—fails, I wonder whether the time is approaching when we should consider another model, in which the Government take the construction risk for nuclear power stations and use their own balance sheet and excellent credit rating, which I pay tribute to the Chancellor of the Exchequer for achieving, to finance the construction stage of a nuclear power station. Then, when it is completed, the power station can be handed over for operation; we can sell it to one of the nuclear power companies. I am just anxious that we may reach next year and find that no one will build under the present policy. I hope that it will not come to that.
Let me turn briefly to renewables. I am encouraged by the price falls that we have seen in technologies such as solar power. I am also encouraged by the further innovation taking place in a range of technologies, including some waste-to-energy technologies, and by the British leadership in non-wind marine technology, such as tidal power and wave power; the Committee has also reported on that technology.
However, I urge the Department to take an evidence-based approach, which the Committee itself has adopted. We must do what we can to protect consumers by rigorously insisting on value for money from renewables. I would love to think that we could get huge amounts of base load power from tidal power, but in practice it is much too expensive at the moment for it to be a big factor.
We must face the facts, however uncomfortable they are to the population. Whenever I mention the subject of onshore wind turbines, I am assailed by hundreds, possibly even thousands, of e-mails, some of which are quite irrational or even offensively pornographic, but never mind. I will not read them out to Members here in Westminster Hall; it would involve using some unparliamentary language. Nevertheless, we cannot avoid the arithmetical fact that at present it is cheaper to generate electricity from an onshore wind turbine than from an offshore wind turbine—or from tidal power or wave power—and it is likely to be so for some years to come. I cannot wish that fact away.
However, I do not suggest that we should impose wind power from wind turbines on any community that does not want them. Any community is perfectly entitled to say that on visual or noise grounds the turbines are too intrusive to be accepted; that view is fine. None the less, we cannot alter the fact that if we ruled out onshore wind turbines completely, the absolutely certain consequence would be to raise the price of electricity for consumers.
Just as we need clarity and stability about policy on generating capacity, we need clarity and stability in the transition process from renewables obligation certificates to feed-in tariffs. We also need clarity about the levy control framework and about what would happen in the event that there is a clash between meeting the requirements of the Treasury, in terms of the framework, and meeting the requirements of the Government as a whole, in meeting the carbon budgets to which they are committed. All of those issues will have to be answered when the House considers the energy Bill in the next few months. We look forward to being given some clues about the Minister’s attitude towards these issues.
I was going to say a bit more about energy efficiency, but I hope that everybody takes it as read that for our Committee that is the first and foremost priority. It is the one area where the needs of security, affordability and reduced emissions all come together; greater energy efficiency achieves all those objectives.
I am keen that the Minister should have plenty of time to give us the first clue about his thinking on these issues, so I will conclude my remarks now and just say that I hope my colleagues will deal with the other parts of the report that I did not have time to deal with myself.
It is a great privilege to follow my hon. Friend the Member for South Suffolk (Mr Yeo), the Chairman of our Select Committee. As he rightly said, we have been involved in producing a wide range of reports. Subjects such as energy can be quite dry, but every 10 or 15 years, they become the most exciting portfolio across all Government Departments.
I welcome the new Minister to his post, which he takes at a time when energy is perhaps one of the most important and interesting issues that the country faces, with energy security absolutely at the heart of that. I look forward to his first appointment with the Committee, which I am sure will be in the near future.
I also follow my hon. Friend the Member for South Suffolk in recognising the extraordinary work and success of the Minister’s predecessor, my hon. Friend the Member for Wealden (Charles Hendry), who was an exemplary Minister with a reputation both here and abroad. I am sure that the new Minister realises that his post is, in many ways, a sales job. It is about knocking on doors around the world to try to ensure that we find the investment we need, which is close to £200 billion. I am sure that fellow members of the Committee will join me in hoping that my hon. Friend the Member for Wealden has an interesting future beyond the portfolio that he has left.
Energy security involves two competing issues, in that we face a significant increase in energy consumption but, at the same time, a decline in UK production. I do not want to make too much of a political point, but that situation did not arise only yesterday—we have faced it for the past 15 or 20 years, so it has been straightforward to predict. It is unfortunate that we are now racing to try to achieve some policy certainty and reinvestment in the energy sector when it has been quite obvious that we have been facing this problem for many years.
Globally, some would say that the last century was dominated by the politics of ideas. This century will be about the politics of resources. That is what makes the energy security debate so important, because it is about much more than the energy sector. It is also about our future industrial growth, our competitiveness and keeping the lights on, and in a much less benign environment than before. There is demand for energy, food and water from domestic audiences, whether they are in the UK, China, Russia, or even countries where democracy is not necessarily the watchword. For the UK and all these other countries, access to resources will be absolutely crucial and will determine their economic success.
No one is proposing energy independence, but I have a personal experience that illustrates why I am particularly sensitive to the issue of energy security. I worked in the energy sector for about 15 to 20 years. Before I came to this place, I worked for the Georgian Government in the Caucasus, advising them on the Baku-Jehan pipeline. The second time I was in Tbilisi, I came out of my hotel room and saw a man who was not much further away from me than my hon. Friend the Member for South Suffolk is now. Somebody then went up to that man and shot him in the head. That was related to a large energy deal that was being proposed by a Russian company. The Georgian businessman had turned down the deal, and instead of a shareholder meeting, a P45 or any form of renegotiation, there was a murder in the main street of Tbilisi. That might sound unusual to people in Whitehall, but it is not necessarily unusual in parts of the world where energy is politics.
In addition, when I was sitting having a nice meal in Georgia, the lights went out for 20 minutes. It was apparently a message from the President of Russia to the President of Georgia—“Please will you give me a ring?” He gives him a ring, and 20 minutes later the lights go on. The Georgians then turn around to each other and say, “So, we have lost a bit more of our sovereignty.”
Those examples might seem extreme, but this is where politics and resources come together. Although we might not be exposed to the politicisation of energy, the international market will be, and we must clearly understand that the world of benign energy trading might become a bit more difficult.
Unlike for many countries, it will be not the insecurity of supply that we have to address, but the cost of the supply. The cost of volatility in our energy sector will greatly affect the desirability for inward investment into this country. In India, the electricity went down for three or four days, and that was a massive blow to the country’s attractiveness as an investment market. We might not have the actual lights out, but we will have a problem when it comes to cost, and the cost to our industrial base is crucial. As a result, we should be looking for consistency and predictability to the same extent as considering the lowest cost at which we can deliver energy.
What does a secure energy environment look like? I agree with the Chairman of our Committee that it looks like a truly mixed energy economy, because that will deliver us the greatest resilience. We need to consider increased domestic production, because international volatility will be one of the most destructive economic factors for British business. Our domestic production will, of course, include nuclear—I am a great proponent of nuclear, but we need to get the investment profile and environment right—wind, gas with carbon capture and storage, and coal.
I had an interesting experience with my right hon. Friend the Member for North Somerset (Dr Fox), who has never been known to be a great proponent of Europe. He said in a Chatham House speech before the election—perhaps in 2008 or 2009—that European Union member states should become a co-ordinated and active consumer of energy when it comes to Russia and certain parts of central Asia. I therefore agree with my hon. Friend the Member for Stroud (Neil Carmichael).
To return to the question of a mixed energy economy, new technologies must also play a part in the resilient energy mix, but anyone who thinks that any of the energy generation sources are pain-free is misguided. Planning applications for shale gas, which I have had in my area, make onshore wind farms look like a walk in the park. The cost of nuclear, including de-risking, will be a lot more than the Government think. In many ways, that reiterates what the Committee Chairman said about considering taking on responsibility for build costs.
The wind sector needs to become much more efficient and to understand how to better engage communities. We must recognise that no energy solution comes without some pain. We must not necessarily look to pick winners and losers, but consider how the mixed energy economy needs to be addressed. We all need to appreciate that opportunities are not simple and straightforward.
The Minister faces an interesting in-tray. Energy security will be achieved through a range of Government policies, although sometimes the policies are so complex that they might create competing behaviours. There are capacity mechanisms, increasing market liquidity, which is crucial, storage policies, which were mentioned by my hon. Friend the Member for Stroud, distributed energy incentives, which have not had sufficient profile and enough focus placed on them by the Department, and smart technologies. A range of interactive measures can help to reduce wastage, increase productivity and hedge costs. If energy security means anything, we must ensure that we closely consider demand reduction. Our Committee was a bit concerned and rather disappointed that the Department did not include in the draft Bill a significant set of policies on demand reduction. That can be a very exciting win for the UK when it comes to competitiveness and to building a resilient and modern economic base.
In conclusion, I want to highlight a significant problem with the country’s energy security. This reflects something that the Committee Chair said, and I hope that the Minister will be able to resolve it. The issue is policy certainty. Companies are much less worried—strangely enough—about what incentives there are, or about exactly what they feel they will get out of choosing one energy source or another. However, we currently have rhetoric and we have reality. We have a fast track on the low-carbon economy with one measure, and the brakes appear to be put on with another. We have an opportunity to build a really strong economy around our need for energy investment, but we sometimes confuse the investment community about our intentions. Certainty and clarity of direction will offer the Minister the greatest opportunity for success when he travels the world’s energy company boardrooms, selling the UK as one of the most predictable and reliable investment locations in the world.
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 the hon. Member for South Thanet (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 political 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.
I hesitate to speak for the OECD, but my understanding is that the £65 million is composed of production subsidies, VAT subsidies and other things. I am sure information on the figures is available from the OECD, because they are the OECD’s figures, not mine.
I am sorry, but I do not understand that answer, because £3.6 billion is a very large amount of money. The hon. Gentleman makes a powerful point if that figure is a true reflection of the situation, and it is reasonable to ask how the money is being transferred at that rate to the energy companies and, presumably, their shareholders, because that had previously passed me by.
Members of Parliament are not noted for admitting ignorance, but I am happy to do so. I cannot give the hon. Gentleman a detailed breakdown, but that figure has been given by the OECD. As I said in response to his previous intervention, my understanding is that the subsidy is accounted for in VAT subsidies and in other production subsidies, such as the ones I mentioned. I cannot go further than that. I do not claim to be the economist or accountant who worked out the figures published by the OECD, to which I refer him.
The real market failure is that the environmental, economic and social costs of greenhouse gas emissions are not properly factored into our fossil fuel price. The Government recognise that and have tried to attribute a price to carbon emissions through the EU emissions trading scheme. Unfortunately, the carbon price has neither been stable enough, as the Chairman of the Select Committee mentioned earlier, nor high enough to redress that market failure, even for the 40% of UK carbon emissions covered by the ETS. Fossil fuels are operating in a market tilted distinctly in their favour. Those who support renewables such as onshore wind that do not produce polluting carbon emissions are perhaps entitled to claim that there is clear justification for that level—albeit a very low level, as I have shown—of subsidy.
Bringing new technologies to market can be difficult, and many technologies have died in the valley that lies between demonstrator a prototype and full commercial development. If the UK is to develop world-leading renewable technologies, such as those mentioned by the Chairman of the Select Committee, particularly marine technologies, we need further subsidies to enable renewables to make that transition from prototype to full commercial scale. The renewables obligation subsidy introduced by the previous Government was designed to do that to some extent and supported new wind generation as the technology successively improved and economies of scale reduced production costs. It is worth noting that it is onshore wind’s positive trajectory in reducing costs that led the Department to argue that the subsidy could be reduced by 10% in the first place. As the technologies become cheaper, it is right to scale down the subsidies. That trajectory has led some in the industry to project that onshore wind will be cost competitive with gas by 2020, which brings another element to our discussion. Indeed, the hon. Member for Warrington South (David Mowat) highlighted that differential and the possibility of seeing cheaper gas in the UK because of shale gas in the United States.
Clear social and environmental costs are associated with shale gas in the United States, and the Committee flagged them up in its report on the potential for shale gas in the UK. However, at every point we should aim to factor the cost of pollution into the true cost of the fuels that we use. That is really how we should evaluate the cost. We do not, for example, factor into the cost of fossil fuels the cost to the health service of people with bronchial or asthmatic conditions caused by carbon emissions from diesel and petrol engines. If we want to get a far better handle on our energy needs and supply, and the security of that supply, let us compare the true costs of the separate parts of our energy mix, and not simply look at the market cost.
I want to go off slightly on a tangent and mention, in response to the shale gas debate, one other aspect that I think it important to draw to the attention of the House. As shale gas provides the USA with increasingly low-cost fossil fuel, there will be a substantial shift in American foreign policy, which has been fixated on the middle east—for good reason. Its fossil fuel supply has substantially depended on stability in the middle east providing continuity of supply. The discovery and exploitation of shale gas in the United States significantly changes that perspective, and when we look to the future of European and UK energy we need to factor that in too. The drivers that caused the US to be so involved with middle east countries will shift. We need to recognise that, as much as we recognise the shift happening in the gas fields in Siberia, and the rise in demand from India and China.
There is one further thing I want to comment on: the fourth pillar of the Government’s proposals on electricity market reform—the emissions performance standard, the carbon floor price and the way in which they interact. Is not it strange that the emissions performance standard was set at 450 grams per kWh? Whom did the Department think it was fooling by setting that figure? It is clear that it was set because it excludes dirty coal without carbon capture and storage, but it has a beneficial effect on investment in nuclear, boosting the price.
In the past year and a half, the Committee has spent a lot of time talking to the investment community, which has been generous with its time and views and has made clear the way in which the risks associated with different technologies and energies manifest themselves. There are planning, construction, operational and price risks and, particularly with the nuclear industry, a decommissioning risk. The key matters on which the investment community focused in discussions with the Committee were construction risk and the period during which capital is exposed in the construction of new nuclear, as opposed to new gas, technology, and the different lengths of time needed to get production in place and price coming through. The investment community made clear to the Committee its belief that without Government subsidy—not covert subsidy by way of price subsidy through the EPS but real subsidy in relation to those risks and the extra cost of capital—there will not be the level of nuclear infrastructure development that the Government have said they want.
I come back to where I began on the question of subsidy: without a much more transparent understanding of the subsidies going to fossil fuels, and the lack of accounting for their cost in damage to health and the environment, and pollution; without factoring those things in; without a clear understanding of the subsidies necessary as technologies develop, and the reduction in subsidy necessary as they become more cost-effective; and without transparency about the real subsidies that the Government are offering the nuclear industry, and the structuring necessary to get the development we need, we will not have a successful energy policy.
Order. The debate finishes at 4 o’clock. I intend to call the Opposition spokesman at 25 minutes to 4. Then the Minister will respond and the Committee Chairman will make his final remarks. Time is tight. I think that two hon. Members want to catch my eye.
I shall be extremely brief, Mr Amess. I congratulate the Minister of State, my hon. Friend the Member for South Holland and The Deepings (Mr Hayes), on taking on his new responsibility. I also want to express my appreciation of his predecessor, my hon. Friend the Member for Wealden (Charles Hendry), who made himself remarkably accessible and reached out to hon. Members like me who have constituencies with significant energy-producing resources and establishments.
I want to mention two such establishments today. One is the largest oil refinery in the country, at Fawley, and the other—also at Fawley—is the power station, whose future is under extreme threat: it is doubtful almost to the point of extinction. Fawley power station is a reserve station. It was set up in the shadow of the great oil refinery next door. Its future is doubtful because of European legislation. Unless an alternative power generation role is found for the site, compatible with European legislation in the future, it will cease to make even a reserve contribution. I will flag up today the point that I used to make to the Minister’s predecessor: sometimes emergencies happen to a country—situations of extreme peril—when restrictions must be set aside.
I still feel that it is worth the Government’s examining the possibility of keeping the Fawley power station in a reserved condition. If an extreme situation of national danger arose where we needed emergency extra supplies of electricity, inevitably it would involve a temporary setting aside of such things as European and environmental restrictions on what could be allowed in power generation. There could be a strategic role for Fawley power station in an emergency—something that I hope the Minister will consider.
Finally, in the time available, may I say that we are greatly concerned—by “we” I mean local oil refinery people and, nationally, the UK Petroleum Industry Association—that oil refining in this country does not compete on a level playing field with oil refining abroad? Unless the Government adopt a somewhat reduced, laissez-faire attitude—they keep saying that they believe in an open and competitive market—the sadly diminished number of oil refineries in the UK could go below a critical mass, to the strategic disadvantage and, indeed, endangerment of this country.
As the second hon. Member to speak who had nothing to do with the report, I congratulate the Select Committee. Three of the report’s features strike me as particularly good. It was short, which is always good for Select Committee reports. Secondly, it talked about gas storage. It is odd that we talk so little about gas storage, because it is a structural issue. Thirdly, I want to talk about recommendations 5 and 6, which ask the Department to publish performance indicators on security and the route or road map that we are trying to get through. That is needed, because there is a lot of misinformation on this subject and the Government’s response to the recommendations was quite weak; the only part that was perhaps adequate was the last sentence, which stated:
“The Government continues to examine options for further improvements.”
That needs to be considered by the Government, and I would just like to put into the mix four potential issues that have not been talked about.
Biofuels are rapidly becoming the biggest source of renewable energy in the UK. We have to be very careful on this with regard to security. In October, the United Nations described the increasingly prevalent practice around the world of turning corn and wheat into ethanol as a “crime against humanity”. One of the best points in the speech by the hon. Member for Brent North (Barry Gardiner) was about how the geopolitical aspects of shale gas are affecting US foreign policy. That is absolutely right. There are geopolitical issues in continuing to put corn and wheat into cars and power stations, as though we are pursuing some great environmental truth when we are not, and that is difficult.
The unique point about the UK’s energy position compared with the rest of Europe is that we have to spend £200 billion in the next decade. We will apparently double the amount of electricity that we currently generate at the same time as decommissioning coal stations—let alone the oil refineries to which my hon. Friend the Member for New Forest East (Dr Lewis) referred—and nuclear power stations. It is beginning to look like a very difficult issue indeed, and the Minister has come in just in time to manage it.
We have put ourselves in a position, particularly on nuclear, where we are negotiating with a single supplier. People talk about the cost of nuclear. A colleague of mine who I used to work with once told me that, if he was running a utility and was dealing with the UK Government, the only coherent strategy to take would be to wait until they were desperate enough to pay the money. Roughly speaking, that appears to be what is happening, and I wish the Minister luck with those negotiations. In a scenario in which we are not going to let the lights go out—let us assume that that is going to be the case—I always thought there would be a dash for gas. When considering a strategy, one always asks, “If this strategy fails, how do we know it has failed?” The dash for gas is obviously the default.
In the past few months, and possibly the past year, there has been another emerging aspect of strategy failure: the increasing amount of imported electricity through the interconnector from France and Holland. Currently, we import approximately double the amount of electricity that we generate from renewables. If there is a policy failure above all policy failures, it is the fact that this country is apparently no longer able to generate its own electricity and has to take electricity from the French and the Dutch, even though much of it is generated using relatively cheap nuclear power.
I add in passing that in the past six months there have been two announcements about increased capacity in the French nuclear grid—1.6 GW in Flamanville and 1.8 GW in Penly—coming on stream in the next 18 months. France appears to be able to do this a lot more easily than we do. This may be an issue for the Select Committee, but I do not wholly understand why the French can get nuclear power stations on stream without the pain that we apparently need to go through. A road map of the Department’s plan in this regard would be very useful. The fundamental strategy of putting out the energy market and saying that the market will decide will become increasingly untenable, as we get close to the day when the lights might go out.
Finally, what is causing so much error in policy is the conflict between the Climate Change Act 2008, which I support, and the need to reduce emissions and the EU 20-20-20 directive, which states that not only do we need to reduce emissions, which I support, but that that must be done with renewables. That has caused a huge amount of misallocation of capital resource and expertise. Germany is often used as a great example of a country that has hit the renewable button hard and has done it well. It is true that Germany has four times as many renewables as the UK. It also has 30% more carbon per head than the UK, because it burns more coal. We have to focus on what matters, and the directive is deeply flawed and has caused a misallocation of capital and the resources that go with that. The Minister may wish to consider that in the months and years ahead.
It is a pleasure to serve under your chairmanship, Mr Amess. This is a welcome and timely debate. Debates on Energy and Climate Change Committee reports are, by their nature, wide-ranging and touch on a number of issues. As the hon. Member for Warrington South (David Mowat) said, the report is relatively short, but issues of energy security and energy independence touch on a wide range of Government policies, not all of which are the responsibility of the Minister. I commend the speeches by the Chair, the hon. Member for South Suffolk (Mr Yeo), and other members of the Select Committee for touching on some of those issues. Given the time available, I do not intend to repeat points that have already been made, but I will perhaps come on to some other recommendations in the report.
I congratulate the new Minister on his appointment and welcome him to his post. As other hon. Members have said, he takes up his post at an important time for energy policy. He follows the hon. Member for Wealden (Charles Hendry), who had the respect of hon. Members across the House and the entire industry for the diligent way in which he undertook his duties, and for the accommodating way he would listen to and engage with different views from across the political divide on the areas for which he was responsible. I wish him well in whatever he does next. I wish the Minister well, too. He was well regarded for the seriousness with which he engaged with the skills agenda, his previous portfolio. As my hon. Friend the Member for Brent North (Barry Gardiner) made clear, the skills agenda is perhaps even more important in the energy sector. I look forward to discussing these issues with him in the House in the months, and possibly years, ahead.
Energy security cuts across many areas of Government policy, so there are many challenges for the Government as whole. As the hon. Member for South Thanet (Laura Sandys) said, this is an ongoing issue, not a new challenge that has suddenly arrived. It is to the detriment of government and governance when a difficult challenge gets left and is pushed along a bit on the agenda. There is a danger in the timing of such things. As the hon. Member for Warrington South said in a slightly different context, people keep waiting until it is almost too late, and sometimes the decisions are not necessarily the right ones and the costs associated with fixing them do not necessarily provide the best value for the taxpayer.
On page 43 of the report, the Committee described energy security as
“keeping the lights on, buildings warm, vehicles moving, businesses operating and electrical appliances running”.
That is a good, practical encapsulation of energy security. Although it is not the most glamorous subject and does not always attract attention in the same emotional way as other aspects of this brief, it is important to the economic future of our country. It is difficult to overstate the importance of those factors, because a safe and secure energy supply is vital to our economic recovery, both in creating jobs, which are desperately needed for millions of people throughout the country, and ensuring that businesses can rely on the energy supply.
I want to mention a couple of recommendations in the report. The report is almost a year old and makes points about the Government’s electricity market reform policy proposals. Since it was published, the Committee has undertaken pre-legislative scrutiny on the draft Bill. It is striking, however, that much of the criticism from the first report, even after pre-legislative scrutiny, remains valid. I am sure that EMR issues are high in the Minister’s in-tray and that he looks forward to responding to the Committee’s report on the draft Bill before it is introduced later this year. The EMR process is a key feature in securing the UK’s energy supply for the future, in terms of securing investment and setting out the certainty and predictability, as hon. Members have mentioned, which are important in getting investment in place.
Both reports touched on the capacity mechanism. I am sure that the Minister will be keen to deal with that as soon as possible. In the evidence to the pre-legislative scrutiny report in March, Ian Marchant of SSE commented—I do not agree with everything that he says, but I agree with this—that the
“the biggest issue at the moment is…uncertainty…the Government has created”,
for want of a better phrase,
“a known unknown.”
Knowing that there will be a capacity mechanism but not exactly what it will be, people will wait and see what the mechanism is, so there is a danger of creating a hiatus in investment. It is vital that we deal with that matter as soon as possible.
The Committee considered the relationship between Government and industry, specifically in relation to the oil and gas offshore industry and the impact that that can have on investment in the UK. It concluded, in reference to the measures announced in Budget 2011, that there is a need for a constructive relationship to restore industry confidence and maximise the benefits from the UK continental shelf. That is important.
I appreciate and acknowledge that since then the Department has done work to reinvigorate PILOT, the industry-Government body, and on establishing the fiscal forum, which is important. Although any Government have the right to adjust their fiscal policies to meet circumstances, the way that the changes were announced at the time—almost without any prior warning or degree of consultation—highlights the possibility and danger of an adverse impact on investment and, therefore, on revenues coming in. Various statements were made at the time about the impact of those changes, but because it is such a long-term industry those will not yet be known for certain. However, the report touches on that important point.
My previous point feeds into the wider, broader issue of certainty. Government decisions in the past couple of years serve to underline the degree of uncertainty. Oil and Gas UK claimed at the time that the UK was regarded as one of the
“most unstable…provinces in the world by many investors”.
Thinking about some other environments, that is quite an alarming statement. I hope some of that damage has been or is in the process of being undone. Similarly, in relation to other measures, including the feed-in tariff, renewables obligation and the banding review, about which there was movement backwards and forwards, sometimes such public discussions and squabbles send a signal to the wider investment community that they cannot necessarily rely on what the Government will do. That is a dangerous position to get into. I hope that the Minister, in his early weeks and months in his new role, seeks to provide the appropriate amount of certainty and predictability.
The hon. Member for New Forest East (Dr Lewis) mentioned the refining industry. The Government have committed to undertake a refining strategy, which is timely, and they will publish it later this year. However, that is too late for people employed at Coryton refinery. It is worrying when a fully functioning refinery with high environmental standards—perhaps one of the best in the UK—is closed with the loss of an estimated 850 high-skilled and high-paid local jobs that made a significant contribution to the local economy. The strategic issues in relation to our refining capacity are serious, as is our ending up importing refined product as a result. I hope that the Minister and the Committee will consider those issues. The Committee has a full agenda, but it may wish to consider these issues and keep an eye on them, because Select Committees can bring a degree of vigour and impartiality to such discussions.
During pre-legislative scrutiny the Committee criticised the draft Energy Bill for not including any measures on demand reduction. Hon. Members have mentioned demand reduction. It is hard to disagree with the Committee’s saying,
“It is completely unsatisfactory that DECC's work was not completed in time to be published alongside the draft Bill. This suggests that DECC is still failing to give enough priority to ensuring that demand-side measures contribute to our energy policy goals.”
Over the summer the McKinsey report, published for further comment, highlighted 11 key barriers to capturing the potential of energy reduction. Other hon. Members may have missed the Secretary of State’s saying that he was intending to graft some demand-reduction measures on to the draft Bill—that was at a Liberal Democrat summer school, so the attendance and attention might not have been huge—but I note the Committee’s warning that
“adding last-minute measures to an already pre-determined structure of a Bill may severely limit what can be achieved on demand reduction”.
That is important.
I take that on board, Mr Amess. I concur with my hon. Friend.
There are many challenges for the Minister to deal with—many of them covered in the report—and I am sure that he will seek to do so in his diligent manner. Although we in the Opposition will always seek to scrutinise effectively, we will not oppose for the sake of opposition. We hope, in these areas and many others, to address the energy challenge of the country and be an inquiring, critical colleague for him in the months ahead.
As ever, it is a pleasure to serve under your chairmanship, Mr Amess.
Benjamin Disraeli said,
“What we expect seldom occurs, but what we least expect generally happens to us.”
In that spirit, I stand here as the Minister responding to this important debate. I thank the Committee for drawing the matter to the House’s attention.
Energy security is a vital subject with ramifications and implications of all kinds for our economy and for wider society. In addition, there are implications for employment, skills and many other areas, as the shadow Minister, the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), who I look forward to working with closely, said. That is why energy security is at the heart of the Government’s energy policy.
Time does not permit me to go into the detail that I would like, but I will happily write to hon. Members about any queries that they might have, in particular those arising from the debate or indeed from the Committee’s report, because that is the right thing to do in the circumstances. I also want to take some time to thank my predecessor, as several hon. Members already have. I will of course draw on his experience; I am meeting him for lunch next week—[Interruption.] I will be paying. I will also draw on the experience of members of the Committee.
The business of ensuring that we can maintain energy supplies without disruption, and that we have adequate infrastructure investment to do so, is central to our aim. That objective sits alongside and must be delivered with others to which hon. Members have referred. Significant among them is the affordability of energy, but we also have obligations in respect of carbon emissions and renewables. My hon. Friend the Member for Warrington South (David Mowat) made a powerful point about some of their perhaps contradictory effects, on which I shall ask my officials to brief me thoroughly after the debate.
Fundamentally, the basis of our energy security policy is to ensure that there are competitive market structures that incentivise companies to provide reliable supplies at attractive prices, combined with robust regulation. The arrangements must be made to work in the national interest. Obviously, there have been no major physical interruptions to UK oil supplies in recent history, and electricity capacity margins are currently very high. Our gas market coped admirably with the coldest December for 100 years in 2010 and, more recently, with the cold snap that we had this winter. In addition, in recent years, the gas market has brought forward import infrastructure equivalent to some 150% of annual demand.
My hon. Friend the Member for South Thanet (Laura Sandys) is nevertheless right to say that we must not be complacent. Politicians, at least in this country, are accustomed to being fired, but not to being fired at, and I hear what she says about that not being true elsewhere. We certainly need to recognise the challenges that we face with a degree of seriousness that affirms that this is an imperative.
The challenges can be summarised as follows. First, over the coming decade, UK production of oil and gas will continue to decline and our dependence on volatile global fossil fuel markets will increase. In the longer term, the pressure on price from increased global demand creates uncertainties—that was mentioned by the Committee Chairman, with the point clarified still further in an intervention—and supply constraints are expected to increase.
Secondly, many of our coal and nuclear power stations will reach the end of their lives over the next decade, as hon. Members know, and we need to ensure that the market brings forward sufficient generating capacity to replace them. I have asked about that already in the Department, and the Committee is familiar with the issue.
Thirdly, the Climate Change Act 2008 committed the UK to reducing our greenhouse gas emissions by at least 80% by 2050. European legislation commits the UK to producing 20% of its energy from renewables. Those are most ambitious goals, which brings me to the fourth challenge: the tough market conditions for energy investors and developers. With typical courtesy and acumen, the hon. Member for Brent North (Barry Gardiner) made a salient point about the need to ensure the circumstances in which investment is possible. As the shadow Minister said, we must ensure a degree of certainty and predictability in an extremely volatile set of world circumstances if we are to get the necessary investment. Investment requires such a spirit of certainty, and the Government must help to deliver that, irrespective of world conditions which are, to put it politely, challenging.
In addressing the challenges, we have developed a vision for the future of energy security in which low-carbon technologies, including renewables, nuclear, and fossil fuel generation equipped with carbon capture and storage, compete on price. As several hon. Members said, that diversity of provision is at the heart of our vision. Our aim is a secure energy system with adequate capacity, diverse and reliable energy supplies, and a demand side that is responsive to unexpected changes in supply.
As has been said, the policy response involves huge uncertainties—we are predicting for at least a 40 or 50-year period, which is bound to be full of change. The carbon plan explores a range of plausible scenarios of what the UK might look like in 2050. Our energy mix and energy security challenges will depend on which of those scenarios ultimately comes to pass.
I can deal only with headlines in the time available, but there are key elements of policy; we certainly have to focus on adequate capacity, which raises the issue of the reduction in demand, which was mentioned by the shadow Minister and my hon. Friend the Member for South Thanet. Secondly, we have to look at energy efficiency in business and the public sector—that is critical. The Energy Efficiency Deployment Office will publish the Government’s energy efficiency strategy before the end of the year. As the shadow Minister emphasised, we will certainly be looking closely at electricity market reform, which includes the difficult issue of the capacity market, on which I know there are different views in the House, as well as in the sector, as I found out last night when I met a range of players from it. Nevertheless, that debate needs to take place if we are to get our thinking right about certainty and predictability.
[Mr Graham Brady in the Chair]
We constantly monitor and assess risks to ensure that there is adequate gas capacity, and the Government are working to ensure that planning and regulatory barriers are minimised so that the market can continue to provide such capacity. The UK oil refining industry, with its good links to other European refiners and access to North sea crude oil, provides the UK with a secure, reliable and economic source of transport fuels and other petroleum products. I heard what my hon. Friend the Member for New Forest East (Dr Lewis) said about that, and I emphasise that the UK’s refining industry has developed a strategic policy framework for the UK—we will be saying more about that before the end of the year.
I have talked about the diversity at the heart of our policy. That diversity requires each part of the energy mix to be commercially viable. Many points were made about viability and its relationship with what the Government do and do not do. I do not have time to respond to them, but I assure hon. Members that such points are at the heart of my early investigations into the subject, my discussions with officials and my connections with the industry.
On reliability, it is vital that we have the right electricity grid to connect generation to demand if we are to ensure energy security, to meet our climate change targets and to deliver affordable electricity. The “connect and manage” grid connection regime is enabling the faster connection of new generation projects, and significant transmission investment has been approved in principle by Ofgem to extend and reinforce the onshore transmission network. As has been said, gas plays a vital role in our electricity supply. My hon. Friend the Member for Warrington South talked about a dash for gas. I would not put it in those terms, but he is right that gas will continue to play a significant role, and it is vital that we have a considered strategic view of what that means.
I thank the Minister for giving us at least a brief set of headlines in response to the debate. He did not have time to do more than that, so we sympathise with him. I reiterate that we are looking for an energy policy that is made in the Energy Department, not in the Treasury, and for a policy that is predictable, certain, stable and supportive of the goals of affordability, security and low-carbon.
Building Regulations (Electricity and Gas)
[Relevant documents: Tenth Report from the Communities and Local Government Committee, Session 2010-12, HC 1851, and the Government Response, CM 8369.]
It is a pleasure to serve under your chairmanship, Mr Brady, and to introduce the report of the Select Committee on Communities and Local Government on “Building Regulations applying to electrical and gas installation and repairs in dwellings”. It is hardly a short title to trip off the tongue or a subject to get the heart racing, but it is nevertheless an important subject for people’s safety in the home. We are trying to prevent householders from doing the wrong thing, particularly inadvertently, or creating serious difficulties for themselves.
Before I proceed any further, I welcome the right hon. Member for Bath (Mr Foster) to his new position and congratulate him on his appointment. I look forward to many further opportunities for us to discuss this and other matters relevant to the Select Committee. I have known him for many years and have engaged with him on a number of subjects, although not this particular one. I have a lot of respect for him, and I very much hope that we can continue to make progress on the matters before us as well as others. It is entirely appropriate at this stage to mention the hon. Member for Hazel Grove (Andrew Stunell), who used to be the Minister dealing with this issue. He came to the Select Committee and gave us the Government’s response. I place on record our appreciation for his work in this area.
I will not detain the House for long. Having taken evidence—our report is evidence-based—the Select Committee reached a consensus about the way forward, which is broadly reflected by the Government in their response. There are one or two details that I will address and an area of disagreement that I want to highlight, but by and large the Government’s response was positive. That has not necessarily been the case with all our reports, so this occasion will not quite be a baptism of fire for the Minister. I accept that this is a complicated policy area, and I do not necessarily expect him to be able to relate to every aspect in detail. When the Committee considered it, we found ourselves on a fairly short and sharp learning curve trying to get our head around the technical aspects.
I will divide my remarks, as our recommendations and report are divided, into gas and electricity. They have common features, as do our recommendations, but equally, there are differences in how the two operate. In some ways, gas involves more complicated arrangements, because of the relationship between Gas Safe and building regulations. I will not try to explain it in detail during this debate, and I do not necessarily expect the Minister to do so either, but the arrangements are complicated.
We received expert advice that despite the complications, by and large, the arrangements work reasonably well. The one difficulty—I will come to it when discussing our recommendations—is that if we as politicians have trouble getting our head around the relationship, heaven help the ordinary member of the public who is having work done in their home. By and large, individual householders put their trust in the person or organisation they employ to do the work, and assume that everything will be okay.
The key to several of our recommendations on gas is simply raising public awareness, whether about ensuring that an installer registered under the Gas Safe scheme is doing the work, the importance of notifying authorities to get approval under building regulations for the work or the potential for carbon monoxide poisoning, the silent killer. It is important that public awareness of those issues is raised. We mentioned them all and called on the Government to embark on more high-profile programmes and work with the industry to increase public awareness, and the Government accepted our recommendations.
My hon. Friend will know that I am a long-term anorak on this issue because the little boy of a wonderful constituent of mine died overnight as a result of carbon monoxide poisoning by a faulty boiler and a gas leak from next door. I am a long-term campaigner. We were pleased with the report, but we were less pleased with one aspect of the Government’s response, namely the division between the two Departments. The Department of Energy and Climate Change was positive about the green deal meaning a carbon monoxide detector in every home, but the Department for Communities and Local Government was not as positive. We wanted to knock the two Departments’ heads together so that deaths and serious injuries from carbon monoxide come to an end or are drastically reduced.
I pay credit to my hon. Friend, who has been a long-term campaigner on the issue of carbon monoxide, the potential for problems and the need for alarms to be fitted. He has done that work over a number of years. He drew my attention to the issue well before we began the Select Committee report, and his credentials are unmatched by anyone else in the House. I was going to come to that point later, but I will raise it now, because it is important. It is the one clear issue of disagreement in the whole report.
The Government have accepted that carbon monoxide alarms should be fitted where new solid fuel appliances are fitted or where, as part of the green deal, a change in a property’s air-tightness is assessed by the installer of heating or energy efficiency systems, but not, as a general rule, where a new heating appliance such as a gas fire is fitted in a property. The Select Committee disagreed. We took evidence, and virtually all the evidence we had proposed that alarms be fitted whenever new relevant heating appliances were installed.
Our evidence suggested that, as a minimum, 12 to 15 deaths a year are due to carbon monoxide poisoning. The reality is that because it is a silent killer and because people, especially elderly people, often have other symptoms that might be deemed relevant to their death, carbon monoxide is not always identified as a problem when someone dies. There could be other deaths that should properly be attributed to carbon monoxide but are not recorded as such. Thousands of people are admitted to hospital each year—maybe only to accident and emergency—suffering the effects of carbon monoxide poisoning. Again, they are not necessarily all identified as such at the time.
That is an area of difference between the Government’s response and the Committee’s recommendations based on the evidence that we took. I know that the Minister is new in his post, and I do not expect a different answer from him today, but will he take another look? It is an additional complication to say that apart from solid fuel fires, where work happens in a house, air-tightness must be assessed, and only in those circumstances will a carbon monoxide alarm be deemed necessary. It is an undue complication. The public will much more easily understand that if they fit a new gas fire, they should install an alarm. The two go together.
The cost of an alarm is a few pounds. On top of the cost of the gas fire and the fitting, that is a very small amount. The idea that that is somehow extra red tape and bureaucracy is not true. It is a very small additional safety measure that could save the lives of 15 people a year at the very least. It might save more, and it might stop other people from becoming injured. Will the Minister take another look at it?
I associate myself with the remarks made by the hon. Member for Huddersfield (Mr Sheerman), with whom I co-chair the all-party parliamentary group on carbon monoxide. I particularly welcome paragraph 27 of the report, which says:
“We recommend that the Government co-ordinate a concerted effort by the various industry organisations to continue to raise public awareness of carbon monoxide poisoning, to be overseen by the Government.”
Is the hon. Gentleman aware that the newly named all-party carbon monoxide group will launch the all fuels carbon monoxide awareness forum in October—just next month—to bring together all those who are running campaigns on carbon monoxide. That should make public awareness campaigns much more synchronised and effective. It is good that the Minister now knows that.
I entirely agree with the hon. Gentleman. I congratulate him on his important work on the matter over the years. There is no difference between the Government and the Committee on our recommendations on awareness. The question is simply about mandatory fitting of alarms when all kinds of new heating equipment are fitted.
The one aspect of the awareness campaign on which the Government seemed a little less than enthusiastic was our recommendation about making things clearer to the public and trying to ensure greater understanding of the public’s responsibility concerning notification and building regulations on appropriate work. The Government said that awareness campaigns must make it clearer that people have a responsibility to use registered installers for gas work, but then said that they do not want to introduce confusion by referring to building regulations. The next recommendation to strengthen compliance with building regulations did not seem to fit with that approach. Perhaps the Minister will have another look at that, because awareness in general is needed, but that includes awareness of the responsibility on householders regarding building regulations, as well as the responsibility to ensure that a registered installer does the work.
That is a complication in the scheme, and everyone accepts that it is a necessary complication, but it is necessary to explain it better. The Committee was alarmed to hear that 50% of work on gas appliances in the home could be done illegally. That work might involve small jobs, or it might be that work is not registered or reported even when it is done to a proper standard, but that was a concern. We recognise that awareness campaigns, as well as the clampdown on the enforcement of building regulations, to which the Government agreed, are important.
Anoraks of the world should unite on this matter. What is really worrying is that with all the public awareness in the world, the fact is, as all the research that I have done as chair of the Skills Commission shows, that it is terrible that the consumer does not know whether the person coming into their house to do gas or electrical work—the position is a little better in the gas industry—is competent. It is almost impossible to tell. Training and qualifications are all over the place.
There is a problem with gas and electrical work, and I will come on to that. On gas, the Government response said that 81% of people were aware of the need to use properly qualified and registered gas engineers. There is probably a greater instinctive understanding among the public that gas can be dangerous and that work should be done by someone who knows about it. I suppose the counterpoint is that if 81% of people are aware of that, 19% are not. That 19% could be putting at risk not just their house, but their neighbour’s house. Greater awareness is necessary.
In response to another recommendation, the Government said that a programme of measures is needed to strengthen enforcement of the regulatory regime. We welcome that response, and they have promised to report in due course on how successful such measures are.
Turning to electrical work—and this was something that, in addition to the carbon monoxide issue, triggered the Committee’s inquiry—it was possible that the Government would water down part P of the building regulations. I am pleased to see my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) in his place, as he has campaigned long and hard on the matter. I do not pretend to be an expert, but he is, and he understands the regulations backwards. It was an important step forward when the regulations were introduced. All the evidence to the inquiry was that they had been successful, had improved electrical safety in homes, and had ensured that more electrical work, although not 100%, was done to a proper standard. The Committee made it clear that it did not want any diminution in the application of the regulations and the requirement to comply with them. The Government accepted in their response that they did not want to water down safety measures, but said that they were still considering the consultation.
I want to pick up one issue on which the Committee was absolutely clear, and to obtain some assurance from the Minister. Having heard the evidence, we said that it would be completely wrong to water down in any way the requirement to use someone belonging to the competent person scheme or to notify the authorities for building regulation approval when electrical work was done in bathrooms, kitchens or outside. There is a potential safety risk, and I should like an assurance from the Minister. I hope that he can give it today, but if he cannot perhaps he could give a quick response in writing to the Committee. It is really important. There have been tragedies in the past, and I think that they have affected the families of hon. Members. That is one reason why the regulations were introduced. If just one socket is badly fitted in a kitchen or outside, someone could be killed. That is the truth of the matter, and we must be very, very careful.
My hon. Friend the Member for Huddersfield (Mr Sheerman) referred to the importance of public understanding. The Minister is on a learning curve, as was the Committee, and when we asked our first questions it was with quite a lot of ignorance. We asked about the responsibility on householders, and whether, if they employed a properly qualified electrician, it was the electrician’s job to ensure that everything was done correctly. The answer was no; it was the householder’s responsibility. It is not necessary to ask 100 people in the street to know that 99 of them probably do not know that. Of 100 members of Parliament, 99 probably would not know that. Some members of the Committee said that they had had a kitchen fitted, but were not sure whether the person who came along to fit the sockets was a member of a competent person scheme, although they were probably a qualified electrician.
When members of the public go to a kitchen supplier saying that they want a couple of sockets here and there, and new light under the cupboards, they do not ask whether the person who will do the electrical work as part of fitting a new kitchen is a member of a competent person scheme, whether the work complies with building regulations, or whether it is necessary to notify the council about the work. They are probably more interested in whether the new kitchen looks nice, what the price is and whether they are getting good value for money, which is understandable. The Committee made it clear that the rules should be specific about work in these areas, that there must be compliance with the regulations as they stand, and that work should be done by a member of a competent person scheme or conform to building regulations if substantial work is done anywhere in the house.
There must be more public awareness. The Government accepted that it is a matter for them, local councils, and the industry. The Committee also recommended, and the Government accepted, that something must be done about toughening up the competent person scheme, the concern about conflict of interest, and ensuring that organisations receive levies from the companies and individuals who are part of the scheme. There could be a conflict. The Government have accepted that, and that they must toughen up the requirements and introduce more vetting organisations. There is agreement about the need to toughen up the rules. The whole industry, including the Electrical Safety Council, which expressed concern about watering down the regulations, should be involved. We must raise awareness.
To speed things up, and perhaps reduce costs when small amounts of electrical work were involved and the electrician doing the work was not a member of a competent person scheme, we suggested that a registered scheme member could come and sign off the work. We thought that that would be a safe change that the Government might be prepared to consider.
Finally, I mention the major retailers, to which the Committee has written suggesting that more could be done to alert the public to the requirements. Much of the illegal work might be done by householders buying electrical sockets from a DIY store, thinking that they are competent to fit them in their own home. Alternatively, it could be carried out by a small tradesperson buying sockets to fit a kitchen, then putting them in, even though they are not classed as a competent person under the scheme.
The other day, we met the British Retail Consortium, B and Q, Homebase, John Lewis and Travis Perkins, to discuss their roles and responsibilities. When new products come online, or when existing products are changed, those retailers will now look at getting an agreed form of words across the industry. Companies will opt in on a voluntary basis but hopefully, 100% will volunteer, so that recommendations on installation requirements can be put on goods or packaging, perhaps accompanied by signs in the store, if retailers want them, or on their how-to cards or websites. Specific information will be available to individuals—whether they are householders or small tradespeople—about the requirements when fitting electrical sockets and other items of electrical equipment in potentially dangerous areas, or when it is done on a large scale as part of the major rewiring of a house. That will ensure that people know a competent person must be used, or that the matter should be reported for building regulations approval.
We think that retailers can do more. We were pleased that the companies we met agreed in principle to talk within their industry about reaching a voluntary agreement, meaning that they can be part of raising public awareness. That is not the solution in itself, but if the industry, Government, councils and the Electrical Safety Council can do more to make the public aware, we can save lives, which is very important.
It is a complicated issue. The reality is that instinctively the public assume that if a person is employed, it is up to that person to do the job properly. We have to get over to householders that the responsibility lies with them. We must explain the basic things that need to be done, in order to ensure that those responsibilities are carried out properly, so that people’s safety and that of their families is not compromised in any way.
First, I draw attention to my interests as declared in the Register of Members’ Financial Interests. Secondly, I welcome the Under-Secretary of State for Communities and Local Government, the right hon. Member for Bath (Mr Foster), to his new post. I have known him for many years—I will not go into the detail of how we put our lives at risk in a context with strong health and safety connotations—and, on the back of that, I know that he will be sensitive to and aware of the significance of the issues that we are discussing. I wish him every success in his new role. Thirdly, I congratulate my hon. Friend the Member for Sheffield South East (Mr Betts), the Committee Chair, on an excellent report that addresses a difficult, complex subject.
Building regulations are not necessarily the best known or most popular area of policy. Even among MPs, as my hon. Friend rightly said, there is probably widespread ignorance about the implications of the regulations which, nevertheless, play a huge role in not only improving the standards of building work, but protecting the public from unnecessary risk of injury or death. Given the important role of building regulations, we should take them very seriously, as the Committee has done. Its report is excellent and I am glad that it appears to have had some impact on the Government’s thinking. I hope that we can take that further today and in the months ahead.
Among the changes in which I was involved when I was the Minister with responsibility for building regulations—more than a decade ago—were improvements to part B, on fire safety, and part M, on access to buildings, for which I earned the opprobrium of a heritage lobby, which described me as the greatest enemy to the English doorstep ever. I will pass over that point, however. We also looked at part L, on thermal efficiency and energy performance, and changes over the past decade have made enormous advances on energy efficiency and the response to climate change.
During my time as the responsible Minister, I was surprised to discover that no building regulation related to the safety of electrical installations. There were regulations on virtually every other area of building work in which public safety was an issue but, extraordinarily, electrical installations were not included. The recognition that lives were being lost—not only due to electrocution, but because of fires caused by defective electrical installations—was a real stimulus to look closely at the need to bring electrical works within the ambit of building regulations and, in 2005, Parliament eventually agreed that part P should be introduced. I am glad, because all the subsequent evidence shows that there has been a significant reduction in the numbers of fires, injuries, and deaths attributable to electrical installations in buildings. That gain was highlighted not only in the Committee’s report, but by virtually every witness who gave evidence to the Committee, so there is a large measure of agreement that part P has helped to improve the quality of electrical installations, reduce risk, save lives and avoid injuries.
The Government’s proposal, as part of their deregulatory agenda, that part P might be revoked was a concern to all of us who care deeply about the subject. I welcome the fact that the Government’s response to the report sets out that they no longer propose to revoke part P. In my view, doing so would have been a foolish, retrograde step. However, the language in the Government’s response still gives cause for concern that the impact of part P could be significantly weakened.
Given my right hon. Friend’s experience—and, even more appropriately, because he is the Member for Greenwich—it is worth saying that although many people in the coalition Government do not like regulation at all, we should all be proud that not one person died during the recent Olympic construction work, which is absolutely a first, compared with what happened in Greece, Sydney and Beijing. That was due to good regulation, and the balance between good management and regulation.
On part P, the word on the street, and from people I trust in the industry, is that the Health and Safety Executive is trimming the part down and rationalising it, rather than getting rid of it.
I thank my hon. Friend for his kind words about my constituency. I am very proud of it, and particularly of its role in hosting six of the Olympic events, in which Team GB did extraordinarily well. I am also proud of the wider achievements of the Olympic construction process, which involved no fatalities. That was an extraordinary record compared with international competitors.
My hon. Friend talks about the HSE, but responsibility for building regulations rests with the Minister and his Department. The HSE obviously has an interest, but my understanding is that it is not open to the HSE to water down part P of the building regulations. If it proposes to do so, I hope that someone will talk to it quickly and say that such responsibility rests with the Department for Communities and Local Government, and specifically the Minister who is responding to this debate.
The Government’s response sensibly backed away from their initial proposal to revoke part P, but it still left grounds for concern that the part’s impact could be significantly weakened. The Government’s response is silent on whether they might exclude certain categories of electrical work, including that taking place in higher risk locations, such as kitchens, bathrooms and gardens. The Committee considered such a proposal and strongly rejected it, as the Chair of the Committee emphasised.
Frankly, the Government’s response is evasive and couched in language that raises justified concern that they may well be intending to do what the Committee urged them not to. The report’s clear recommendation is:
“we do not endorse any diminution of Part P, taking minor works in areas of higher risk such as kitchens, bathrooms and gardens out of its reach.”
Paragraph 25 of the Government’s response says:
“The Government agrees that any changes should not unduly diminish safety. The Government will consider all responses to the consultation in relation to Part P and electrical safety carefully before implementing any changes.”
There are two grounds for concern. First, there is no specific reference at all to the clear recommendation not to proceed with an aspect of the Government’s earlier set of proposals: to remove from the remit of part P minor works in high-risk locations such as kitchens, bathrooms and gardens. The second ground for concern is the use of the weasel word “unduly”. I know the Minister well. He is a plain-speaking person who speaks his mind, so I hope that he will ensure that the weasel word “unduly” is deleted, because there should be no diminution of safety—full stop. In high-risk locations, minor works can be just as lethal as major installations in any location. A minor work that is done incorrectly in a kitchen can kill people.
During the parliamentary debates that led to the introduction of part P, reference was made to a particularly sad case, which was also cited in evidence to the Select Committee from Paul Everall, the former head of the building regulations division at the Department, who is now the head of LABC—the organisation representing local authority building control departments. The Chair of the Committee has also referred to this case, which involved the daughter of an MP who was electrocuted due to unsatisfactory wiring in a kitchen. That illustrates just how lethal faulty works are, even if they are of a minor nature, so can we please have no weasel words about not “unduly” diminishing safety, and no suggestion that somehow minor works can be excluded without extending the risk to the public?
Having said that, I would be the first to agree that if we can reduce the cost of compliance with regulations while maintaining safety, we should certainly explore that option. There is growing consensus that the answer probably lies in enabling DIY installers to have their work certified by a member of a competent person scheme, rather than having to obtain building control approval in all cases. The industry supports that proposal, the Select Committee supported it and LABC also appears to be supportive. It appears to be common sense, and it holds out the prospect of making real savings and reducing the burden of regulation without weakening safety. That should be the objective, so I hope that the Minister will follow that route.
One benefit of part P has been the extent to which it has led to a substantial increase in the number of contractors belonging to competent person schemes and thus being subject to regular checks and regular pressure to raise their standards. Before the introduction of part P, only 13,000 contractors were members of such schemes, whereas I understand that the figure is now about 40,000. That suggests that some 27,000 more contractors enrolled in competent person schemes.
The Committee’s report highlights a point about the independent supervision of competent person schemes, but the Government have accepted its recommendations on that, so we can look forward to the operators of such schemes probably having to secure UCAS accreditation, which would be a sensible response to the concern. The key point is that more contractors should be encouraged and persuaded by a variety of means to become members of competent person schemes so that they are subject to regular checks. That would ensure that standards of performance continually improved.
Another key issue is public awareness of the requirements of part P and the implications of undertaking DIY electrical work. As the Chair of the Committee emphasised, the householder is the person responsible, but who can tell how many people are really aware of that? Very little is done to remind members of the public of their obligations and the risks associated with such DIY activity.
The Committee emphasised the importance of better information to extend public awareness and suggested the mandatory labelling of relevant electrical fittings with health warnings. The Government’s response to the report shied away from mandatory labelling and instead put faith in voluntary action by retailers and others. There is not much hard evidence to support the Government’s optimism that that will have the desired result that retailers will do the right thing and ensure that they do much more to bring to the attention of members of the public who are purchasing electrical fittings the fact that there are certain obligations and risks of which they need to be aware.
After I discussed this with the Electrical Safety Council, Daniel Walker-Nolan, the policy and research manager at the council, sent me a note. I shall quote it because it is relevant:
“With regard to DIY retailers providing information to consumers on Part P, there is a mixed picture. Some don’t, B and Q in particular do not appear to mention it in any of their literature. There is some very basic information provided by certain companies such as Homebase but in our experience, generally retailers don’t actively draw attention to its existence or promote it. It would be interesting to see what evidence the government can cite to support their claim. Anecdotally, I’m informed that some retailers did actually promote information on Part P when the requirements were first introduced but stopped doing so quite quickly thereafter because it was having a negative impact on sales.”
That is a cause for concern. I hope that the Minister will reflect on it and take further advice to determine what more can be done to ensure that members of the public are alerted to their responsibilities and to the risks of undertaking electrical DIY work without ensuring that it is checked as compliant with the requirements of part P.
I have focused on part P for obvious reasons, but I add my voice to those of hon. Members who have emphasised the need to do more to tackle the problem of carbon monoxide poisoning. The obvious case for doing more to prevent unnecessary deaths due to carbon monoxide poisoning, and, in particular, to get more carbon monoxide alarms into homes where risks exist, has rightly been highlighted by the Committee. I hope that the Government will consider that further, because this is, again, an area where lives are at risk.
I hope that the Minister will enjoy his time with responsibility for this—shall we say—recherché area of policy. As he well knows, individual Ministers, individual politicians and individuals’ choices can make an enormous difference. In this area, we are talking literally about a matter of life and death. As he pursues his responsibilities, I hope that he will be mindful of the very real impact that an individual Minister can make to improve public safety and save lives.
It is a pleasure to speak under your chairmanship, Mr Brady. I, too, start by welcoming the right hon. Member for Bath (Mr Foster) to his new ministerial post. I am sure that we will joust cheerfully across the Chamber and this room on a number of occasions.
I also thank my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) for bringing in the regulations in the first place. He has done a lot to protect and enhance public safety. However, I have to say that by the time I had reached page 3 of the Select Committee report, I was beginning to wonder whether I was actually so pleased that we had part P, because this is not an area that is easy to grasp. I hope that hon. Members will bear with me when they understand that today I have had a range of planning matters to deal with. I am, nevertheless, pleased that we are having this very important debate.
I again thank the Select Committee Chair, my hon. Friend the Member for Sheffield, Attercliffe—
Apologies. I thank my hon. Friend the Member for Sheffield South East (Mr Betts) for yet another excellent Select Committee report. I thank the Select Committee for undertaking the report. Given the Government’s wish to consult on changing part P and part J of the building regulations, an in-depth analysis was essential to look, in particular, at the extension of the range of simple jobs that could be carried out without notifying building control, and at possibly revoking, or at best watering down, part P. The Select Committee has done us all a great service with the report it produced.
I welcome recommendations 1, 4, 5, 11, 12 and 13, which all relate to raising public awareness of the potential dangers of gas and electrical works. As we heard from many Members, good public awareness of the potential dangers of such works and of the responsibilities on homeowners could ensure that such works are carried out responsibly and could contribute to an improvement in safety standards. It is important that the report emphasised raising public awareness and doing everything possible to ensure that homeowners are aware of their responsibilities. If we went on to the street outside and took a random sample of people, we would find that a number of them would not be aware of their responsibilities, so the task to be undertaken is huge. I am pleased that the all-party group on gas safety is setting up a forum to bring together organisations working to raise awareness of public safety. I hope that that happens quickly.
I also welcome recommendation 2, which proposes strengthening the enforcement powers. That would enable local authorities to bring prosecutions up to three years after the completion of work that is found to be sub-standard. It would serve as a greater deterrent to cowboy workmen, and I hope that it will come into operation swiftly.
Recommendation 3 deals with carbon monoxide alarms, and I know that the all-party group on gas safety has taken up that issue: the hon. Member for Huddersfield (Mr Sheerman) said earlier that he would set up a new forum to deal with it. All MPs are concerned about carbon monoxide poisoning, which is a problem in my constituency because of the many students in private lets. It is important that they are protected, and I would like the legislation on carbon monoxide strengthened, not weakened.
The hon. Lady and I know the value of Select Committee work, because we served on one together for a long time. Students often used to be the victims in cases of carbon monoxide poisoning, but when we introduced a regulation that required an annual check on a landlord’s premises—without one, a landlord would finish up in prison if one of their tenants died from carbon monoxide poisoning—the problem involving students almost disappeared. Is it not odd that no annual check must be carried out in an ordinary homeowner’s premises? We have seen deaths shift from tenants to the regular homeowner.
My hon. Friend makes an important point, which strengthens what I said about the need for regulation. We strongly wish to ensure that the regulations are not watered down in any way. Indeed, there is a case for extending them to other categories.
Recommendations 6 to 13 deal with part P. All Members will have received an important briefing from the Electrical Safety Council. More than any other information I received, it highlighted that the result of the regulations being in place is an excellent safety record. That is a very strong argument for keeping them as they are. The ESC said that in its opinion, part P
“Contributed to 17.5% reduction in fires…Nearly 20,000 more electrical contractors are having their competence assessed and samples of their work checked regularly…It is easier for householders to identify competent electrical installers…85%”
of its members
“said Part P should be retained but with some amendments/improvements…53% had seen an improvement in the standard of electrical work since Part P was brought in…96% said that DIY work should not be excluded from the need to notify…Only 4.19% found that the standard of work carried out by non-Part P Registered Installers was ‘usually good’”
compared with over 64% of members
“finding that the standard of work carried out by Part P Registered Installers”
was good. That clearly seems to demonstrate that part P regulations work effectively, and I hope that the Minister will take that on board.
Recommendations 8, 9 and 10 relate to changes to the competent person scheme. A number of people think that the scheme could benefit from reform. We will be interested to hear what the Government will do about it. Although the Government’s response acknowledges the importance of raising awareness, I am concerned about the lack of a specific plan or a time scale to bring that greater public awareness about or to initiate activities relating to it. Will the Minister clarify what action he will take?
Recommendation 3 recognises the difference that carbon monoxide alarms can make and discusses the Government’s new green deal. The detail of what the Government will do on it is not clear. It looks as though rules on carbon monoxide alarms will not go beyond the existing housing regulations. I noted that when the Minister’s predecessor, the hon. Member for Hazel Grove (Andrew Stunell), gave evidence to the Select Committee, he said that he did not think that there was a case for requiring carbon monoxide alarms in all dwellings. Bearing in mind what was said earlier, it is important that the Minister looks at the matter.
Some of the evidence from the safety councils and evidence given to the Select Committee mentions the cost of carbon monoxide alarms. If they were bought in bulk and distributed through the local authority, the cost to homeowners could be significantly reduced. I am not suggesting that the local authority pay for them, but they could be obtained through a local authority buying in bulk. I would like the Minister to think about such a scheme.
Most people take out home insurance—an immense amount of money is spent on advertising home insurance policies on television—so would it not be sensible for the Government to lean on insurance companies to say that unless there is a smoke detector and a carbon monoxide alarm in a house, it will not get insured? That would save an awful lot of worry and work. They cost only £15 to £20 to put in, so why are we still waiting for pressure to deliver a safe environment in the home?
I thank my hon. Friend for that point. That measure is one of a number that the Government should consider to increase the uptake and use of carbon monoxide alarms. Following this report, I hope that the Government will come back with a range of actions that they will take to raise public awareness and increase the use of alarms, where that is possible.
As we have said, the issue is very important: we want to ensure that public safety is maintained and to avoid fatalities and injuries when possible. I am not totally happy that the Government are relying on a voluntary agreement with retailers in relation to the public being given more information when they buy electrical goods or seek to have them installed, particularly in the areas of higher risk—kitchens, bathrooms—that we have talked about. I know that the Electrical Safety Council has welcomed the Government’s initiative to get retailers onboard through a voluntary agreement. If that voluntary agreement does not produce real action by retailers, will the Minister look again at that area?
Finally, I, too, have noticed what the Health and Safety Executive has said about the whole issue, including its concern that regulations dealing with gas and electrical safety are not in any way reduced or watered down by the Government. I know that the Government are still looking at the evidence and considering their approach to part P. While they do so, will the Minister look very closely at the evidence produced for this debate and the evidence contained in the Select Committee’s report?
It is a great pleasure to serve under your chairmanship, Mr Brady. It is also a great pleasure to follow the hon. Member for City of Durham (Roberta Blackman-Woods) and I, too, look forward to friendly jousting over the weeks and months to come. I want very much to thank all hon. Members who have spoken, all of whom have considerably more knowledge on these issues than I have had.
I want to put firmly on the record from the start that, as hon. Members have said, although the issue has been described as complex and recherché and as one that really matters only to people in anoraks, it is vital and crucial. I was delighted to hear the reference made by the hon. Member for Huddersfield (Mr Sheerman) to the specific example of how, more widely, health and safety regulations have played a key role in ensuring the fabulous result on the Olympic park. The work done by the Olympic Delivery Authority has been phenomenal, but that is in part because it built on existing regulations, to which it had to have significant regard. We will all, regardless of our party political allegiances, also be grateful for the fact that Paul Deighton is to be brought into the other place and will contribute to party policy.
I want to make it clear that a really important point was made by the Chair of the Communities and Local Government Committee, the hon. Member for Sheffield South East (Mr Betts), to whom I will no doubt refer many times later. It is that there is a total lack of awareness, in many places and for many people, about the responsibility of home owners and the crucial need to get that message over. Perhaps this debate, in its own small way, will contribute to doing so.
I congratulate the Select Committee on its report and its Chairman on his excellent work. I am particularly grateful to him for his very generous opening remarks about my predecessor, my hon. Friend the Member for Hazel Grove (Andrew Stunell). When he was in my post, my hon. Friend took building regulations extraordinarily seriously. He was a great advocate for them—so much so, that one of his first actions was in relation to them. He recognised not only their importance, but the need for them to be properly maintained and to remain fit for purpose. For that reason, in July 2010, he initiated an opportunity for people to comment. Alongside the parallel work done in the Cabinet Office, through the Your Freedom website, that enabled him to develop several proposals that have become the subject of further consultation.
As the House will know, the problem is that when there is a consultation, some people come along and say, particularly about part P, that they want to get rid of regulations, and some say that they want to extend them and their scope. In the light of such mixed views, it became clear that we needed to explore how further to improve part P. We worked with the industry to understand its concerns, and that led to the set of proposals contained in the further consultation on changes to building regulations that was published by the Department on 31 January.
A comment was made about the HSE looking into part P. If I am wrong about this, I apologise to the House—I am a new Minister—but my understanding is that the HSE has no responsibility for building regulations, so I was somewhat taken aback by that remark. During the consultation, the Select Committee decided to inquire into this area, which was very welcome and timely. We very much welcome the report, which has provided more evidence for us to continue to consider.
I want clearly to say that I am going to disappoint all hon. Members present, but also in one sense to please them as well. I will disappoint them by saying that we have made no decisions on any of the issues. We are continuing to consult and to consider, and no decisions have been made. We will make them as quickly as possible. I hope, however, that it will please people to know that my mind is not closed on any issues that have been raised, and I immediately promise that all of them will be considered carefully—not only those raised today, but those raised by other people.
I am delighted to see the Minister in his place—we have known each other for a very long time—and I welcome him to his post. May I say that we are delighted that he has not made up his mind?
I may have been wrong about the HSE. In this House, not many people admit that they might have got something wrong. I had just picked up that the HSE might have been fiddling around in the area, which is not one that I know well. What I know well is that the message is simple, is it not? We do not want people to die unnecessarily from bad electrical installation or from carbon monoxide poisoning. We know a lot about that, and may I extend the hand of friendship and say that, if there is anything that the all-party groups on common monoxide and on home safety can do, we will be happy to do it in talking, helping and supporting the Minister, as he learns his brief?
I am grateful to the hon. Gentleman. The Chairman of the Select Committee said that when it studied the issue, it was on a steep learning curve, although it had several weeks in which to do so. I am on an even steeper learning curve, having had less than 24 hours to try to master the brief. In doing that, the one thing that I have learned is that the issue really is very important.
I am grateful that, as well as part P, the Committee looked at part J. Although it did so, we have concluded that, as the regulations in part J were most recently updated in October 2010, there is probably no need to change them. That is why I want to concentrate on part P, which covers the safety of electrical installations and applies, of course, only to dwellings in England. Certain types of work need to be notified to a building control body unless they are carried out by an installer who is registered with an authorised competent person self-certification scheme. Such schemes oversee the competence of their members, and membership allows the members to certify their own work.
Our proposed amendments to part P, set out in the 2012 consultation, were aimed at reducing bureaucracy and costs for electricians and DIY-ers, particularly for those who do simpler jobs, such as installing additional socket outlets. We also looked at how local authorities could be allowed to step away from a situation in which they currently act, unnecessarily, as an administrative middleman.
The right hon. Member for Greenwich and Woolwich (Mr Raynsford) deserves huge praise for his work on the introduction of part P, and I thank him for it. I especially want to thank him for giving me some advance notice of what he intended to say today. I know that he is concerned about changes to the type of work covered by the regulations. He is also concerned about the weasel words that have been used so far. Although I must disappoint him in this area, I will try to give him a degree of comfort. While we are looking at changes to what work is notifiable, they will not affect the general requirement that all work must be carried out safely. I hope that that gives him a little comfort, but we will have further discussions about the concerns that he has raised.
The right hon. Gentleman has also been concerned about the defined competence scheme, which, for those who are not entirely familiar with it, relates to specific types of electrical work that are often carried out by general trades people, such as the electrical works associated with the installation of a boiler. We are aware of the calls to end such a scheme, which would effectively force people to join full competent person schemes. As with so many issues that we are debating, this is a complex matter. I can only assure the right hon. Gentleman that we will consider very seriously his comments on that issue, and we are grateful to him for making them.
Let me push the Minister a little further. He said that although he had an open mind and was still considering whether there might be changes to part P, there would be, if I remember his words correctly, an obligation that all work should be carried out safely. However, without the remit of part P, that guarantee cannot be met. If works are outside the remit of part P, no one will necessarily know whether or not they have been conducted safely. Will he clarify those remarks and say whether I am interpreting his words correctly, because that would give me great comfort?
The right hon. Gentleman knows me extraordinarily well, and he has also occupied the same position as me. He knows that there is no possibility whatever, having spent a long time coming to a form of words that I can give him, that I will, on the hoof, change them. None the less, I am grateful to him for his suggestion. Perhaps, on a future occasion, I may end up uttering the very words that he has sought to put into my mouth, but, at this stage, he has not yet succeeded.
On exactly that point, the Minister said that he was considering the extent of the work that might be notifiable. He did not explain the scope of work that might be required to be done by a competent person. Was there a reason why he said one and not the other?
I fear that the Chairman of the Select Committee is pushing me as hard as he might, but I will go to this stage and no further. If it gives him any comfort, I do genuinely understand the point that he has made.
Making the public and home owners aware of electrical safety and their own liabilities is crucial. We have already agreed with the Committee in its report in June that new conditions of authorisation, which will require scheme operators to promote and publicise the benefits of competent person schemes, will be put in place. We are also looking at other ways in which we can go further. We see considerable merit in the scheme providers working in partnership with retailers, manufacturers and one another. We will look into that and ensure that the measures that they take to promote the schemes are as effective as possible. However, I am not convinced at this stage that further legislation is required for such things as the labelling of electrical products.
The hon. Member for City of Durham asked me whether, if there was clear evidence that a voluntary code was not satisfactory, we would be prepared to consider an alternative route. The answer is yes, but there is a long way to go before we have such evidence. I hope that the industry and all its relevant parts will come together to work effectively on those issues.
The straight answer is no, but I will go away and think about it.
The new conditions of authorisation also provide that each scheme must be independently audited, which sits well with the Committee’s recommendations for stronger, independent scrutiny of the schemes. The Committee also considered whether registration of electrical installers should be mandatory, as it is for gas installers, and concluded that that was not justified. The Government welcome and concur with the Committee’s views on the matter.
The Select Committee report asks on a number of occasions for the Government to report back, within two years, on the progress that they have made in carrying out a number of its recommendations. The Government have agreed to do that, and we will be monitoring the outcome of any changes made to part P and will report back to the Committee, within two years of when any changes take effect, as set out in the Government’s formal response.
With respect to gas safety, the building regulations cover the installation of combustion appliances, such as the provision of chimneys and hearths and energy efficiency. However, safety with gas itself is controlled through the Gas Safety (Installation and Use) Regulations. On the face of it, like so many issues, that can seem complex, but there are obvious reasons why such a volatile fuel should attract greater scrutiny than other sources of heat.
Under the Gas Safety (Installation and Use) Regulations, any engineer carrying out gas work for financial gain or otherwise must be registered with the Gas Safe register, which is operated independently and overseen by the Health and Safety Executive. Installers who are on the Gas Safe register can self-certify their work, which would also be caught by building regulations. That ensures that any legislative overlap does not manifest itself in practice, and that competent installers are able to carry on their business without undue bureaucracy.
In their evidence to the Select Committee, officials from the register suggested that they could improve their work in relation to building regulations. There is a particular concern that many registered installers are not making the necessary notifications under building regulations—the Chairman of the Select Committee, the hon. Member for Sheffield South East, made that point—and that is something that my officials continue to work with officials from the register and with the Health and Safety Executive to try to resolve.
The Gas Safe register also has a programme of consumer awareness campaigns to raise public awareness of gas safety risks. Those include national TV advertising campaigns, as well as national and regional press and radio campaigns. However, as the Chairman of the Select Committee and others have said many times, householders are ultimately responsible for their homes and potentially liable to correct any unlawful work. Nevertheless, the message is clear—to protect themselves, householders should use only Gas Safe-registered engineers.
I know that the Minister is new to his post, but evidence given to Baroness Finlay’s committee, which was looking at the long-term effects of carbon monoxide poisoning, showed that with Gas Safe and registration, it is still possible for someone to be a taxi driver one day and 10 days later to be going into people’s homes as a gas fitter; as I say, that is evidence, not just my view. Using the register is not as easy and as safe as everyone might think. There is Gas Safe, but there are some real problems about the training of gas engineers, as there are about the training of electricians.
I am grateful to the hon. Member for drawing my attention to that issue again. It is another thing that I shall be putting in the basket of things that I will have to look at following this debate.
May I also say that I welcome the news of the establishment of the all-party group on gas safety, which has looked at carbon monoxide? I have no doubt that it will have a particular role to play in raising awareness about the dangers of carbon monoxide.
Much has been said already about carbon monoxide alarms. That issue was considered at some length by the previous Administration as part of their review. We agreed with the changes that they proposed and we introduced them in the summer of 2010. However, I suspect that I will disappoint a number of people by saying that that review concluded that it would be disproportionate to require carbon monoxide alarms in all new homes. Research found that the risk from carbon monoxide poisoning is far lower for modern gas appliances, due in large part to their increased safety specifications. Therefore, we have no plans to extend the requirements in building regulations for carbon monoxide alarms, but we will still promote their voluntary use alongside the key messages regarding regular maintenance by registered installers.
Reference was also made to the green deal, and to issues such as retrofitting and so on. We will continue to look at the issues that were raised in respect of the green deal and in due course we will bring forward proposals.
I will end by thanking members of the Select Committee in particular for the work that they have done on this very important issue. As we have seen, clearly there is much that we have agreed on already, particularly the benefits of raising public awareness about gas and electrical safety. We will continue to consider all the proposals from the Select Committee and other proposals that we have received during the period of consultation. I look forward to working in the future with all Members who have shown a particular interest in this issue, so that we can achieve a safe environment which is, after all, what this has all been about.
Thank you, Mr Brady, for calling me to speak again.
I shall just make one or two points very briefly, to pick out key issues from the debate. I congratulate all right hon. and hon. Members who have come along to Westminster Hall today. They have made very telling and informed contributions to a debate about what is in the end, despite the technicalities involved, a very serious matter indeed that affects the lives of everybody in a home in this country.
As the Minister has just said, there is clearly a lot of common ground between what the Select Committee proposed and the Government’s response, in terms of the need to strengthen the enforcement of the Gas Safe scheme of building regulations with regard to gas installations. The Government have accepted that, in terms of improvements to the competent persons scheme in part P and in terms of raising public awareness. The Government have accepted those things in principle, although we obviously want to see the details. They have also said that they will produce a report to the Committee in due course outlining the measures that have been undertaken and their effectiveness. That is important, because in the end it is the effectiveness of these measures that really matters.
There are just three key issues that, as yet, we have not yet got complete agreement on. First, I was a little disappointed to hear the Minister’s last comments about carbon monoxide alarms. It seems to me that such alarms are a very low regulatory burden. There is a very small cost involved, and such alarms can save lives.
The Minister did not read out these words in the Government’s response:
“However, we will continue to keep this under review.”
I would have thought that the time when a new Minister comes in is the best time to have a review of an issue such as this. I ask him again, especially given the small cost involved, to simplify the issue—with new heating installations, a carbon monoxide alarm should be fitted. The two things go together; installing them together seems to make common sense. I ask him to reflect on that point again.
Secondly, regarding the possible amendments to part P of the building regulations, I will come back to the response that he gave to my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford). My right hon. Friend rightly identified the word “unduly” as being perhaps the key word there. The Minister’s assurance about not compromising safety was welcome. Obviously, we want to see how that objective will be achieved. If he is suggesting some extension of the competent persons scheme to allow a member of the scheme to sign off work done by another electrician, that might be a way forward. Obviously he is not going to commit himself at this stage, but clearly he has accepted that that is potentially a sensible way forward. It may be what he is thinking about.
Thirdly and finally, there is an issue that, again, we might be making progress on. If we can get voluntary agreements to work, that would be desirable. As I mentioned earlier, members of the Select Committee met retailers the other day and representatives of the British Retail Consortium have gone away to see if they can get agreement from their members. If the consortium comes forward with a robust scheme about advising members of the public who buy certain electrical equipment of the need to comply with the regulations, that would be a major step forward, and the consortium’s members can advertise such a scheme on their websites and on notices in their stores. If that scheme works, that is fine.
However, what the Minister said in response to my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) about what would happen if a voluntary scheme failed was really helpful. The fact that he could not give a time scale is understandable at this stage, but the fact that he said that if a scheme fails there is the long-stop possibility of regulation might concentrate the minds of retailers and others, and encourage them to develop a robust voluntary scheme that actually works. If that happens, that would be a very good way forward, and the Minister should be congratulated for at least beginning his ministerial task by perhaps nudging retailers and others in the direction of voluntary arrangements, which would remove the necessity for him to act in the future.
Once again, I thank all right hon. and hon. Members who have participated in the debate this afternoon, and we look forward to hearing further comments from the Minister on these matters in due course.
Question put and agreed to.