Examination of Witnesses (Questions 320-339)
MR STEPHEN ALDRIDGE, MR NICK HARTLEY, MR GORDON MACKERRON AND DR CATHERINE MITCHELL
WEDNESDAY 24 APRIL 2002
320. In terms of the effect that that will then have on fuel poverty insofar as (possibly wrongly, possibly rightly) governments up until now have attempted to address fuel poverty through this, where does that leave that debate on fuel poverty and how does that square with what Dr Mitchell just said about people understanding the need to go down certain routes when often, as we saw with the fuel protests last year, all that people care about is the price that we pay. The concerns of the social equity is part of all of this.
(Mr Hartley) The social implications of higher carbon valuation are absolutely key. We have identified fuel poverty as one of the major constraints which we see at the moment on using prices in order to pursue environmental objectives. That is why we endorse very strongly all that the Government is doing in order to reduce the amount of fuel poverty. A lot of policies have already been put in place to reduce fuel poverty. A very strong element of the Government's policy towards energy efficiency is to increase the energy efficiency of the fuel poor. That is absolutely vital as a means of providing the basis on which we can then make a further step. Unless we can do that, it will remain a major constraint. We have a big problem in this country. We have a very inefficient stock of houses and until we can make a real dent in that and really increase the overall efficiency of large numbers of our houses, it is going to mean that it is going to be very difficult to use prices as a means of signalling the environmental costs of energy use.
321. If you had a Housing Minister sat here and a Treasury Minister sat alongside, how would you be recommending them (through the recommendations in the PIU Report) to square housing and social policies alongside energy policies? How would the Housing Minister or Treasury Minister be able to have the ammunition that they would need for the investment in our housing stock coming through from this cross-cutting energy review you have done? How would you equip them to deal with that?
(Mr Hartley) That is a very good way of putting it. Maybe I could return to your initial question about shadow pricing. I have been talking about the long-run circumstances in which the economy as a whole faces an actual price fall for carbon. A shadow price is different of course. It is a price which is imposed within the Government machine and we would say it is appropriate for the Government now to start taking into account the costs of carbon and the values to the economy of reducing carbon emissions when making its judgments about housing policy.
322. Given that for any policy to be in a position where governments can implement it, that policy would need to have the broad support and understanding of people to allow that to go forward, what would you be recommending the spin doctor or Communications Minister in terms of getting an understanding? If we are going to address fuel poverty what economic instruments would we need? How would we be able to make sure there is a public understanding of the objectives in order that there could be some kind of consensus to enable these policies to go forward? Have you given much thought to this.
(Mr Hartley) I am not very good at spin doctoring, I am afraid.
323. That is slightly tongue in cheek.
(Mr Hartley) Certainly one of the implications of what I am saying is that one has to accept that there may be public expenditure implications of policies which improve parts of the housing stock. Clearly, we can do quite a lot to improve the housing stock by using mechanisms like the Energy Efficiency Commitment which imposes a cost on the user. There are also public expenditure implications where Government decisions about either local government stock or central Government stock of buildings involve higher expenditure costs in order to save carbon. If you want to ask how can that expenditure be justified, I think it has to be justified in terms of the longer-term gains from reducing the costs of carbon to the environment.
324. So going back to paragraph 3.44, does that mean then that in terms of Mr Aldridge's permanent membership of the PIU that there will be scope there to link in with the Treasury in terms of getting these internalised costs to be pursued through Treasury instruments in terms of housing policies and cross-cutting policies elsewhere? Is there a mechanism to do that?
(Mr Hartley) The mechanism that we are recommending is that Government should form a new Sustainable Energy Policy Unit. That is our proposed means of making sure that policy development throughout Government is joined up. That would involve the Treasury as well as the DTI and DEFRA.
325. Where would that fit with Mr Porritt's Sustainable Development Commission?
(Mr Aldridge) The proposal in the report is that it should be a Sustainable Energy Policy Unit rather than having a broader sustainable development remit. The proposal is that initially it should be located in the DTI. The proposal in the report is that the staff of the unit would be drawn from not just DTI but other Whitehall departments and indeed outside.
326. Have you looked at the responsibilities which the Sustainable Development Commission already has so that you do not have one Royal Commission and everybody else is saying where does the responsibility for co-ordination of broad sustainable development issues come from?
(Mr Aldridge) You are talking of sustainable development more generally?
327. I am talking about the Sustainable Development Commission which Mr Jonathan Porritt chairs at the invitation of the Prime Minister.
(Mr Aldridge) Within Government the relevant co-ordinating unit is the Sustainable Development Unit within DEFRA. That has across-Whitehall responsibility for co-ordinating sustainable development policy.
328. Why create a new one then?
(Mr Hartley) We are talking here about a unit which is responsible to ministers which is rather different from the Sustainable Development Commission.
329. Is not the one in DEFRA responsible to ministers?
(Mr Aldridge) It is.
330. Is that not meant to be cross-cutting even though it has got its home in DEFRA?
(Mr Aldridge) It is. The particular focus of the Sustainable Energy Policy Unit would obviously be energy policy. There was a judgment about where that unit was best located. The view of the report was that there were advantages in co-locating that unit with the rest of the DTI's Energy Group in order to ensure that that policy was joined up within DTI but using mechanisms such as bringing people in on secondment and, using the accountability of the Sustainable Energy Policy Unit to the Ministerial Sub-Committee on Energy Policy to ensure it had the appropriate across-Whitehall focus and input at the same time.
331. I have to say that I am not convinced that sufficient thought has been given as to how these different groups, commissions and units tie up. It seems to me that they all do the same thing in their own little bit. The PIU was to co-ordinate that across departments just as this Committee does.
(Mr Aldridge) The PIU does not have a co-ordinating responsibility for sustainable development policy. There is already a Sustainable Development Unit within DEFRA that has that function.
332. So why can that not be doing it? Why create another body? Why not be energy efficient about the number of commissions you have?
(Mr Aldridge) This partly comes to more general issues about the way in which energy policy responsibilities are organised within Whitehall. It may be helpful if Nick were to say a bit about what the rationale for the Sustainable Energy Policy Unit was.
333. I think you have been invited to say what the rationale for it was.
(Mr Hartley) We regard the Sustainable Energy Policy Unit as something that can provide a new role within Whitehall. It would provide an analytic capability which is not there at the moment, a means of bringing together analysts in different departments, involving them at a much earlier stage in the development of policy-making. It would enable the Government to review the trends in energy markets and see what the implication of those were for policy. It would provide a means of co-ordinating.
334. Is that not what the unit within DEFRA is meant to be doing just as you have been set up to have an Energy Minister who has been your Chairman. It was nonetheless set up by the Cabinet Office. What is the difference from a DEFRA unit that has been there to cross-cut across Government but happens to have its home in DEFRA? How does that link in with what Jonathan Porritt has already been set up to do? Why can sustainable energy policies not be placed within there? Why do we have to keep on having more and more and more?
(Mr Hartley) Energy policy making has quite a widespread agenda but it is not the complete sustainable development agenda. There is a range of issues concerned with energy regulation, concerned with environmental regulation, concerned with the activities of the Environment Agency, the activities of DEFRA on energy efficiency, and the activities of the DTI in energy regulation. All those need to brought together and discussed in a way that I do not think is happening at the moment anywhere.
335. Did you look at the terms of reference of the unit placed within DEFRA in terms of its role and responsibilities?
(Mr Hartley) Yes. It has wider terms of reference than the terms of reference applying specifically to energy policy making.
336. I am fascinated by this discussion because it borders on one of my areas of interest. On Page 144 of the Report you talk about the incoherence of Government strategy at paragraph 8.13. You say that the existing structure of institutions involved in nuclear energy policy making and delivery lacks coherence, which I read to be "incoherent". You then go on to say that Government should aspire in the long term to bring together in one department responsibilities for climate change, energy policy and transport policy. Is it not a fact that we once upon a time had a Department of Energy with a cabinet minister and it was seen to be an important area of Government policy? Now we have incoherence and you are saying it should only be an "aspiration" of Government to have a single department. In the meantime we have this multitude of agencies, units, commissions and whatnot. Because you do not call upon the Government in a recommendation to have a single department, that is only an aspiration. You put forward this other alternative, which has some of these functions but does not have the political backing or political will to make it work.
(Mr Hartley) It is our long-term vision that those elements of policy should be brought together. That would be a department that is certainly bigger than the old Department of Energy. It is a department that is in some ways focussed on the climate change agenda. It brings together responsibility for transport policy, for energy policy, for climate change policy and sets the policies which we think cohere into an obvious department. We have to face the reality that the Government has recently reorganised itself and created new departments. It has split up some of the responsibilities for transport and separated them from energy efficiency and climate change which was not the case prior to the General Election. Quite how quickly the Government should pursue our recommendation I cannot tell you.
337. You say in the long term this should be an aspiration. Surely, in the meantime all the people working in these various disparate units will not feel the pinch on their collar because the PIU Report says that all their efforts are scattered to the winds and at some point they are going to have to come together again.
(Mr Hartley) That is why the immediate need is there for the Sustainable Energy Policy Unit to be concentrating these various elements of policy making and making sure that people do start to talk together and do start to develop policy along lines that at least recognise the wider implications of policies taken in one area on another.
338. Another reason why we need more engineers in Government and a few less lawyers. We would then have some coherence.
Mr Best: Absolutely right.
339. One suggestion has been that the unit you have recommended should be some sort of agency which would have much more clout and financial support. Have you any response to that?
(Mr Hartley) We did think about that. Our conclusion was that we wanted a unit of this kind to be plugged directly into ministerial responsibility and decision making. That is why we are recommending that the unit should report to a ministerial cabinet committee. We think that is very important. Ministerial involvement in the activities of the unit is quite key.