Energy Bill [HL]

Baroness Noakes Excerpts

Tuesday 8th February 2011 Grand Committee

[Lord Lea of Crondall]

I am comparing the price elasticity of home heating with the price elasticity of petrol for your car. That is my main point. It is precisely because people do not generally in this country freeze to death that price elasticity is different.

It is necessary to note that, in practice, the people at the bottom are stopping motoring. There is another statistical problem, or fallacy, built into the ONS statistics. Because they have disappeared from the statistics, it does not look as if the detailed distribution for motorists is as bad as it was. It is rather like saying, “The working class can no longer go to the Costa Brava for their holidays. We do not want that riff-raff going there anyway”. They are out of the statistics and they are out of the motoring statistics. This is another problem with the idea that we can easily use the price mechanism to determine consumption, even though in an ideal world it might be somehow very nice if there was a big reduction in motoring or airline expenditure. As I said in an earlier intervention, the logic is to have the same market externality carbon price, whether it is for aviation or for anything else. But how do you deal with the poverty effects on home heating?

I have three other points. At Second Reading, I used the phrase, “hypothetical hypothecation”, which will not get wider circulation in the bar in Burton upon Trent. We need a statistical picture which would be revealed by hypothetical hypothecation—I will not use the word again I can assure you—but would be quite separate from the actual amount of recycling of revenues within the system to deal with the actual regressiveness.

On the consultative forum, people will ask themselves intuitively, “Where is all this money going?” There is an extent to which we want to say that it is obvious how we are going to spend it. My noble friend Lord Prescott always used to say, “It doesn't matter if someone is charging £50 to drive 100 yards down Piccadilly in a Rolls-Royce. You can throw £50 notes out of it and that will satisfy the Rolls-Royce driver”. But Ken Livingstone or somebody like that would put it all into new buses. That is hypothecation. There is implicitly some undercurrent of the need for hypothecation—with a less fancy word—in what we are talking about. We need a statistical picture that would be revealed by hypothecation even though that is separate from the actual amount of recycling of revenues.

Finally, on fiscal arithmetic, there is a price floor for carbon, which is currently £15 per tonne. The power industry argues that the price needs to be about £35 a tonne to provide a viable return and the noble Lord, Lord Stern, for his part, is in a different fantasyland with an assumption of £75 a tonne at 2010 prices to make his scheme work.

Putting all that together, we have to take a crack at what I am saying in my first amendment so that there is no doubt that we have an agreed statistical basis. Who is going to agree it? That is the second amendment. A consultative body, I might be told by the noble Lord, Lord Marland, is not going to be flavour of the month with a coalition Government who is scrapping public bodies right, left and centre. However, I will make a practical point that even the Government’s own philosophy on the Public Bodies Bill is that it is not supposed to be the slaughter of the innocents. It is supposed to be ostensibly the slaughter of those who are not fit for purpose. I radically disagree with some of the conclusions that they make about that, but fit for purpose this would be. It would have a very clear purpose to get agreement, understanding and therefore some ownership of buy-in on behalf of their constituents—in every sense of that word—and all the different stakeholders in the country.

We have got to a point where this will literally begin to make sense in the bar in Burton upon Trent. It is those people who will complain about the price of heating, petrol, congestion taxes, parking taxes or whatever. This is where the regressiveness issue provides a bridge with the consultative stakeholder forum I referred to on Amendment 37B.

I should leave it there. I thank the noble Lord, Lord Marland, for his co-operation in getting some of these statistics sorted out with the department and the Treasury. I beg to move.

[Baroness Noakes]

My Lords, I rise to support the principle behind the amendment of the noble Lord, Lord Lea of Crondall. I am not sure that the wording is easy to follow because it starts with the term “fiscal instruments”. The noble Lord went on to talk about a lot of the things that are leading to increased energy prices. He referred to the document put out by the department last summer showing the impact of policies on prices. Most things that have an impact on prices are not fiscal instruments in the way that you would customarily describe them in the sense of specific moneys going in or out of the Treasury. They are items that are borne by the energy companies and passed on to consumers. At the heart of what the noble Lord, Lord Lea of Crondall, was talking about is an important issue: there is a complete lack of transparency on the impact of the Government’s various energy policies and the way in which they impose costs on the energy sector, which are in consequence passed on to consumers. It is important that we have greater transparency.