Examination of Witnesses (Questions 247-259)
MR STEPHEN ALDRIDGE, MR NICK HARTLEY, MR GORDON MACKERRON AND DR CATHERINE MITCHELL
WEDNESDAY 24 APRIL 2002
247. Good morning ladies and gentlemen. Thank you for coming so early. We are delighted to see you. Thank you also for your report which is extremely interesting. Is there anything that you would like to add, however brief, before we ask you some questions about the report?
(Mr Aldridge) Yes, if we may. I shall make a few brief opening remarks about the PIU and the status of the report and Nick Hartley, the Team Leader, will then say something briefly about the substance of the report. I am Stephen Aldridge, and I am one of the Deputy Directors of the PIU.
(Mr Hartley) I am Nick Hartley. I was the Team Leader for the report and I am a consultant working for OXERA Consultants Limited.
(Dr Mitchell) I am Catherine Mitchell. I was seconded to the PIU.
(Mr MacKerron) I am Gordon MacKerron and I work as a consultant with National Economic Research Associates. I was also seconded in as a team member.
248. Thank you. Carry on, Mr Aldridge.
(Mr Aldridge) Perhaps I can say something briefly about the PIU and the status of the report. As many of you may be aware, the PIU was set up towards the end of 1998, essentially to strengthen the capacity at the centre of Government to address cross-cutting issues or issues of a strategic or longer term nature. The unit reports to the Prime Minister, but keeps in close touch with the Cabinet Office Ministers. The projects that we carry out are ultimately determined by the Prime Minister, but the unit consults more widely on topics and many are suggested by departments. There are a number of distinctive features to the role of the unit. Perhaps I can go through a few of those. First, all of our work is project based; we do not have day-to-day responsibilities for particular policies. Secondly, as you will have heard in relation to members of the energy team, the project teams that undertake the unit's work are drawn, either on secondment or loan, from Whitehall departments, the wider public sector and/or from the private and voluntary sectors. That means that we can tap into a full range of expertise on a project-by-project basis. Thirdly, in undertaking our projects we strive to be both analytically rigorous and creative in the approach of the project to identify solutions to policy problems. Fourthly, all our projects normally have a sponsor or lead-Minister as well as an advisory group. That advisory group will typically comprise a mix of Ministers, officials and external stakeholders. That provides a key source of critical feedback on whether the right questions are being asked by the project team and also on the conclusions. Finally, the PIU project teams consult very widely, inside and outside Whitehall. The Energy Review Project attracted some 400 submissions and the team held numerous meetings with a range of stakeholders. In general, PIU reports culminate in a published report. Such reports may be "of the Government", in which case they are a statement of Government policy, or "to the Government", in which case they are a contribution to the debate rather than a statement of policy. The Energy Review Report is a "to the Government" report. Therefore, today we can explain the analysis and the thinking underlying the report, but Ministers will decide how to take forward the report and what implications it has for existing policy in the light of the consultation process that is shortly to get under way. The Government have said that they will publish a White Paper on future energy policy by the end of the year.
249. When was the PIU set up?
(Mr Aldridge) At the end of 1998.
250. How many full-time members are there?
(Mr Aldridge) It varies, depending on our workload. Currently I believe there are around 70 or 80 people.
251. Seventy or 80 people full time?
(Mr Aldridge) Yes.
252. That is quite a lot. How many reports have you produced?
(Mr Aldridge) I think we have published around two dozen reports.
(Mr Hartley) With your permission, Chairman, I would like to say a few brief words about our general approach. Our report aims to develop a framework within which policy should be advanced both now and in the future. To my mind that framework is one of the most important parts of the report, although it is not one on which much comment has been made. The framework recognises that the essence of the energy problem is the need to construct policy within a framework of uncertainty; that is uncertainty about technology, uncertainty about markets and uncertainty about resource availability. The fact that the world is uncertain implies that sensible decision-makers will try to maintain as much flexibility, diversity and resilience as possible. We need as many options as possible and we should not try to construct a long-term plan for the energy system. However, that does not mean to say that decisions should be put off. There are often long time lags in the energy systems. Those must be anticipated. So far as possible it is right to try to avoid major sunk investments and commitments, while more investment accumulates, but that is not always possible. We started from the proposition that there is likely to be the ultimate need to create a low-carbon economy. In that case we need to start now to address the issue of how best to put in place the policies leading to such an economy. This provides the long-term vision for the ideas set out in our report and also the refocusing of energy policy objectives to recognise the greater importance of the environmental objectives. That said, in my view it is vital to establish a framework for policy development that allows policy-makers to return to major issues at regular intervals. We envisage another major review before the end of this decade. That means that policy-makers need a good flow of information about the successes and failures of existing policies. It is critical that good means of monitoring and assessment are developed. That is a constant theme of our report. One core judgment in the PIU report is the belief in the importance of market-based decision making. Our general belief is that current structures of energy markets are broadly on the right lines, although equally it was central to our work that we consider the likely limits to market-based decision making, and I hope that our conclusions are useful. A final point is that we had at most eight months from start to finish. The implication is that we could not do everything. We were not willing to draw firm conclusions about issues that we had not considered in depth. Therefore, there are some areas where we simply had to say that further work is needed. It would have been odd if that had not been the case. Our report says that what is proposed is a radical programme. Some people have doubted that. They have suggested that the report is a recipe for inaction rather than action. I have to say that I disagree strongly. The key issue is that we are not calling for action on traditional energy fronts. In the past we have seen intervention to help coal; we have had the moratorium on gas-fired stations; and there have been revisions to the regulatory regime for the UK continental shelf. We have not called for immediate action on those fronts. We have called for a change in methods of decision making, in Government, in industry and by consumers, concerning the way in which energy is used and produced. The report calls for a step-change in policy towards energy efficiency and identifies the potential for a much greater contribution from embedded generation. It also calls for a change in public attitudes. That is at the heart of our report. We are very pleased to be here to answer your questions about it.
253. Thank you. As you say, eight months is not a long time in which to produce a report on a topic as big as this. Were you able to carry out any original research, or was it all desk work?
(Mr Hartley) We had some original research done for us by some outside consultants. If you look at the back of the report you will see a list of working papers that were produced. Although I said that the energy review itself took eight months, within the PIU, work had been done previously on renewables. That enabled us to make a more rapid start on renewables than would otherwise have been possible. There is some original research, but we were also greatly helped by the amount of assistance that we were given by the industry, by NGOs and by the public. We had a process of investigation and received a huge amount of evidence.
254. One aspect of this is purely engineering, as opposed to economics and so forth. Are any of you engineers?
(Mr Hartley) No, we do not have any engineers on our team. We had economists on our team and we had people who were scientists or people with a scientific background, although they were not employed on the review to exhibit their scientific knowledge. We had engineering consultants. If you look at our working papers you will see that we had a working paper the impact of which
255. None of the lead players was an engineer?
(Mr Hartley) None of the lead players in the team is an engineer, no.
(Mr Aldridge) I think it is important to emphasise that we had access to scientific and engineering expertise through our supporting consultants, through our advisory group and through those who gave evidence.
Chairman: The reason I ask is that engineering considerations are hugely important and change one's judgment quite dramatically.
256. Your August 2001 scoping note stated that work to date had been focused on several areas, including the assessment of current policy and developments to 2010. But there is very little comment in the energy review itself on the existing balance of policy instruments and their adequacy? Why is that?
(Mr Hartley) Our task was to look towards a long-term development of energy policy. We had a 50-year focus. That meant that it was not appropriate for us to deal with all the existing instruments of energy policy. We had to lay down a longer-term framework and that is what we did. We looked forward, for instance, at the importance, as we see it, of carbon pricing. That was the long-term vision that we had and was not necessarily a recommendation about exactly how that is pursued in relation to existing policies.
257. As the review team, did you feel that you were hemmed in, in any respect, by Ministers or other departmental interests?
(Mr Aldridge) There have been some suggestions in the media that that may have been the case. We would reject those. The approach that was taken to the project, as Nick has said, was a very open one. The report attracted a great number of submissions and there were numerous consultations with external stakeholders. We were also able to use our advisory group to play a critical challenge and sounding-board role to ensure that we were identifying all the relevant issues and analysing those as rigorously as we could.
258. How many drafts did the report go through before it was finally issued?
(Mr Hartley) It went through three drafts, I think.
259. Brian Wilson chaired your steering group and he took a view that he felt free to comment on issues during the time that he performed that function, including the role of nuclear power. To what extent, if any, was the report softened in successive drafts?
(Mr Aldridge) Perhaps I should explain first that it is normal practice for all PIU projects to have a sponsor or lead Minister. The PIU is part of the Civil Service, we are accountable to Ministers and our report had to go through a collective agreement process. Inevitably, reports go through a number of drafts. On this particular project, the lead Minister, Brian Wilson, recognised from the outset that this would be a "to the Government" report and was anxious that it should be analytically driven, rigorous and so on. That is what the team was encouraged to do during the course of the project.
1 The Energy Review. A Performance and Innovation Unit Report, Cabinet Office, February 2002. Back