Fossil Fuels and Cost of Living Increases

Philip Dunne Excerpts

Wednesday 11th January 2023 Westminster Hall

[Caroline Lucas]

I thank the hon. Member for his intervention, with which I agree 100%. The nuclear obsession is using vast amounts of money, diverting attention and also sending mixed signals to investors, who really do not know what kind of energy future this country is planning for itself. It is a massive white elephant. Nuclear power stations are not coming in on budget and on time anywhere, and the idea that we can now achieve that here in the UK, against all the evidence in so many other countries—and, indeed, against the evidence here at home with Hinkley, for example, which is massively over budget and massively late—beggars belief.

[Philip Dunne (Ludlow) (Con)]

I, too, congratulate the hon. Lady on securing this debate, and on her important contributions to our deliberations on the Environmental Audit Committee. Just before getting diverted on to nuclear, she mentioned the importance of the energy efficiency taskforce, on which I completely agree with her. Does she agree that when the Government choose to respond to the report we published as a Committee earlier this week, which she mentioned, it would be most helpful if they took this opportunity to clarify what the taskforce’s terms of reference and primary objectives will be, so that it can be used as a Government-inspired device to accelerate this national mobilisation of energy efficiency, which we all agree needs to be undertaken?

[Caroline Lucas]

I thank the right hon. Gentleman for his intervention and his kind words. I absolutely agree: the taskforce has a real potential to make a difference, but we are still in the dark about many of the details. If the Government gave us more information, it would give a lot of comfort to a lot of people to know that there is a guiding mind that will ensure we accelerate these urgent installations of energy efficiency.

I turn to oil, gas and fossil fuels. Just as it was political choices that led to families being unable to heat their homes, so was it a political choice by the Government to protect the oil and gas companies, whose profits have grown fat from the spoils of war. As households struggle to make ends meet and our planet burns, the Government have chosen to double down on the very thing that is at the heart of these multiple crises. The UK is set to grant more than 100 licences to explore for more oil and gas in the North sea. Although the windfall tax has been increased to 35%, bringing the total tax on oil and gas to about 75%—I note, in parentheses, that that is still lower than Norway’s, at 78%—it is genuinely incomprehensible that the Government have failed to remove what is being called the gas giveaway, which means that oil and gas companies will still be able to claim £91.40 in tax relief for every £100 invested. What is more, from 1 January, a company spending £100 on so-called upstream decarbonisation—essentially reducing emissions from the process of extracting oil and gas, which of course then goes on to be burned—is now eligible for £109 relief on every £100 invested. In other words, we are paying the oil and gas companies to do the decarbonisation that they should be paying for. They are not broke; they are literally saying that they have more money than they know what to do with. I suggest that they start actually paying their own way.

New oil and gas extracted from the North sea will neither deliver energy security nor bring down bills, but will inevitably come at huge cost to the taxpayer. The hon. Member for Bath (Wera Hobhouse) mentioned Rosebank, the UK’s largest undeveloped oilfield. The costs to the taxpayer if it goes ahead are enormous. At triple the size of the neighbouring Cambo oilfield, if Rosebank is developed it would produce more emissions than 28 low-income countries combined, or the carbon dioxide equivalent of running 58 coal-fired power stations for a year. It is estimated that if it is developed, its owners would receive more than £500 million of taxpayer subsidies, as the hon. Lady said, thanks to the investment allowance—the gas and oil giveaway—in the energy profits levy. If that £500 million were not used for those subsidies—subsidies to burn our planet more—it could be used to extend free school meals to every child whose family receives universal credit. It could be used to pay the annual salaries of more than 14,000 nurses or build one new medium-sized hospital. It is genuinely baffling that the Government think that that is the best use of £500 million at any time, let alone now.

The Minister may try to argue that the development is required because the UK will continue to need gas in the future, but he knows as well as I do that 90% of Rosebank’s reserves are oil, not gas, and that it is likely to be exported, given that that is the fate of 80% of the oil that is currently produced in the UK. There are currently more than 200 oil and gas fields already operating in the North sea whose production would be entirely unaffected if Rosebank were not to go ahead, so this is not about immediately turning off the taps, as Ministers like to suggest. It is not legitimate for the Government to justify new oil and gas licences by saying they are needed. That does not reflect the reality of the situation. I know that, and I think the Minister does too.

It is patently clear that a crisis caused by gas cannot be solved by more gas. As the International Energy Agency clearly states in its “World Energy Outlook 2022”:

“No one should imagine that Russia’s invasion can justify a wave of new oil and gas infrastructure in a world that wants to reach net zero emissions by 2050.”

As a first step, the Government must scrap the so-called gas giveaway—the huge subsidy to the climate criminals who have benefited from Putin’s illegal war. Next, they must urgently work to end the age of fossil fuels for good, because time is not on our side. The Environmental Audit Committee report, which has been referred to, recommended that the Government consult on setting a clear date for ending new oil and gas licensing rounds in the North sea. Given that we are, in the words of the United Nations Secretary-General, António Guterres,

“on the highway to climate hell with our foot still on the accelerator”,

personally I think the time for consultation has gone. Will the Government explain exactly how new oil and gas licences are compatible with limiting global temperatures to 1.5°, when there is overwhelming evidence to the contrary?

The Climate Change Committee noted:

“An end to UK exploration would send a clear signal to investors and consumers that the UK is committed to…1.5°C.”

Furthermore, now that the Government have resurrected the Energy Bill, will the Minister use this opportunity to legislate for an end to the maximising economic recovery duty—a woefully outdated obligation to maximise the economic recovery of petroleum, which can have no place on the statute books of a country that has any real climate ambition? Instead of that duty to maximise the economic recovery of petroleum, will he look at the need to effect a real, just transition for workers and an orderly managed decline of the oil and gas industry? Will the Government also fully harness the potential of renewables, which at the latest contracts for difference auction were at least nine times cheaper than gas?

I welcome the concessions on onshore wind made in the Levelling-up and Regeneration Bill, but the Minister will know that a number of barriers still remain, not least the lack of targets and the strategy for this cheap and popular form of energy. Will he now also address those issues?

[Philip Dunne]

The hon. Lady is being generous with her time. I may pre-empt what she was about to come on to. In concluding her remarks on alternative renewable energy sources, will she commend to the Minister the work the Government have already done in allowing contracts for difference to be available to tidal energy systems, to provide renewable baseload electricity supply, which at the moment is a critical shortcoming in the plans?

[Caroline Lucas]

I certainly welcome that intervention and agree entirely on welcoming the use of the contracts for difference mechanism. Tidal has huge potential and that is one way to maximise that. As the right hon. Gentleman knows, we will be looking this afternoon in the Environmental Audit Committee at ways in which we can unblock more solar power, for example, by enabling the batteries, alongside household solar, to be installed retrospectively at lower VAT rates. It is odd that, at the moment, there are reductions on VAT for solar panels but not for the batteries for households that want to store energy.

--- Later in debate ---

[Derek Thomas (St Ives) (Con)]

Thank you, Sir Robert. I commend the hon. Member for Brighton, Pavilion (Caroline Lucas) for securing this worthwhile and vital debate. It comes after a year in which the Government were exercised about how to address the cost of living and reduce the demand for energy in our homes. I think we have the solution here, in this room. I hope the Minister is listening carefully because I know he wants to do some great work while in post.

Everyone here, as well as the Government, knows that an effective way to reduce demand for fossil fuels, reduce both cost of living pressures and the demand for energy more generally is to improve the efficiency of our homes. I represent St Ives and when I was elected as an MP in 2015 I was told I had the leakiest homes in the UK, possibly in Europe. That came at the time of the Paris climate agreement, when we ratified our commitment as a nation to improve all our homes to EPC grade C by 2030.

I had a discussion yesterday with someone who has done research on how much my constituents pay for energy compared with other parts of the country. Part of my constituency is the most expensive place to live in the country because of the energy used and its cost, so this is urgent. I have raised that a number of times during my time as an MP, and I believe the solution is nowhere near as difficult as we make it out to be.

The Prime Minister would be interested in this topic because fuel-poor homes work against the vision that he set out on 4 January. The hon. Member for Brighton, Pavilion referred to the fact that there was no mention in his speech about energy and so on, but he did talk about attainment, and we know that fuel-poor homes hold back attainment. He talked about the pressure on the NHS, and we know that fuel-poor homes contribute to poor health and wellbeing and increased demand on the NHS and social care. He talked about inflation and people’s incomes, and we know that fuel-poor homes absorb disposable income from the families that we have described in the past as just about managing, and we also know that fuel-poor homes reduce the availability of homes to rent. I will talk later about why that is.

Before the UK ratified the bold commitment to get homes up or down to EPC rating C, the need to retrofit homes was well documented and well understood in this country. ECO—the energy company obligation—and green deals have, as we have heard, helped in a significant number of homes, but those are often the low-hanging fruit, the ones that are easiest to do, but there are others, such as homes in my constituency and other rural areas, that need a much more deliberate focus. I ask the Minister to consider how this year can be spent on a more focused and determined way to impact on this huge problem.

The rocketing cost of energy to heat our homes must bring this vital issue to the forefront of the Government’s mind. As we have heard from my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy, work will be done to help people to reduce the energy demand in their homes. I hope that that includes a determined effort to understand how we can do that effectively, quickly, and without wasting huge sums of money on subcontracts. A company in Scotland, for example—I do not wish to pick on Scotland; this is an example that relates to Cornwall—will secure a huge Government contract and then identify companies further down the food chain to deliver the contracts, but, unfortunately, not very well. We had a huge problem with that, with the £2 billion that the Government announced during the covid time to address problems with our homes. We need, as has been suggested, a grassroots, street-by-street approach, perhaps local authority-led, to identify what can be done to improve the efficiency of the home and then get on and do it while making sure that the money is spent exactly where it is intended to be spent.

I do not intend to speak for long, but I want the Minister to consider the Government’s approach to improving our leaky homes. I am happy to suggest a pilot in Cornwall. The council has already suggested a pilot and has identified how much it would cost. It is quite a lot of money, but it would be good to test the water to see if that can be achieved.

Can the Minister say any more about what the Government plan to do to help us reduce the energy demand in our homes? Will that include support to retrofit and improve the efficiency of our homes? Can he update the House on plans to modify the EPC rating? I led a debate last summer on the problem of affordable housing and why in Cornwall, although this will be true elsewhere, the energy performance certificate drives landlords to flip their homes from long lets to short-term lets—not because the law does not apply to a short-term let, but because it is not properly enforced, whereas it is much better enforced for long lets.

The problem is not that people do not want to improve the efficiency of their homes, but the tool we ask people to measure their homes by is often a case of “computer says no”. It does not truly achieve what we are trying to achieve, which is to improve the efficiency of our homes and reduce costs. The current methodology around EPCs is flawed. BEIS agreed last summer to review the methodology and look at how we can improve that, so what progress has been made? If the Minister cannot tell us today, perhaps he will follow up with a letter.

We know that fuel-poor homes drive out the availability of long lets. That is exactly what is happening across Cornwall. We are still seeing landlords who cannot achieve EPC rating E, let alone C, so they are having to use the house for other purposes. That needs to be addressed, and quickly.

[Philip Dunne]

I thank my hon. Friend for allowing me to intervene during his excellent speech. On the subject of EPCs, in his constituency has he seen what I have discovered in my constituency? When a social landlord is faced with renovation costs to make their property legally lettable at EPC rating E, they discover that the cost is too great and consequently propose to sell the property and evict the social tenants. This is happening in a small village community where there is no alternative provision.

[Derek Thomas]

That is exactly my experience, and it has been my experience for a number of years. It is tragic. Our parish council contacted me in desperation because it fought long and hard many years ago to identify sites to build and set aside such homes, only to find that they are lost, partly for that reason. As a result, villages are being hollowed out, making it difficult to keep open the post office, the GP surgery and the local school. We should not reduce our ambition to improve homes, but there is an urgent need to understand how we can do that and fund it.

That is the experience I have had in parts of my constituency and it concerns me greatly, but I am not critical of social landlords. When I left school I learned to build homes. I built homes with blocks, cement and sand, and today lots of homes are built in exactly the same way. The insulation being put in has improved, but we are making nowhere near enough carbon-neutral homes. We can get there and there are better ways of building, but the building trade has not moved on enough to catch up with what is needed, but perhaps that is a subject for debate another day.

To touch on the problem of listed buildings, in Cornwall—I am not sure if this is true elsewhere—we are working hard to improve the quality of our homes, many of which are listed buildings or are in conservation areas. Property owners often request double glazing. Although it is now possible to get double glazing that is in keeping with such buildings, the flat answer is that it cannot be done, so we are retrofitting homes but not installing double glazing in homes that badly need energy efficiency measures.

Will the Minister provide guidance to local authorities, and perhaps even to the Department for Levelling Up, Housing and Communities, about things that can be done to improve the quality of those homes? We need a better understanding of modern methods that can be used to achieve homes that people can live in while retaining their beauty, rather than simply saying, “No, that cannot be done. You must spend a huge amount of money replacing your windows with windows that are exactly the same and no more efficient.”

Finally, will the Minister consider setting up a taskforce to look at the barriers to households installing renewable energy and storage infrastructure? Are those barriers the cost to the household, the red tape put in place by the power distributors or the restraints of the national grid? I am constantly meeting people who are frustrated because they want to put infrastructure in their homes, farms or businesses, but reasons are given about why that cannot be achieved or the sheer cost is too great. Will the Minister look urgently at setting up some sort of taskforce to get to the nub of the issue, in order to unlock the potential for renewable energy in individual homes? That will address the cost of heating and energising those homes, as well as reducing the impact and use of fossil fuels.