18 Dec 2012 : Column 803

18 Dec 2012 : Column 804

Bill read a Second time.


Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Justice and Security Bill [Lords]:


1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 14 February.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

4. Proceedings on Consideration and Third Reading shall be taken in two days in accordance with the following provisions of this Order.

5. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the second day.

6. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on the second day.

7. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

8. Any other proceedings on the Bill (including any proceedings on Consideration of any message from the Lords) may be programmed.—(Mr Swayne.)

Question agreed to.


Queen’s Recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

18 Dec 2012 : Column 805

That, for the purposes of any Act resulting from the Justice and Security Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of—

(1) any expenditure attributable to the establishment of the Intelligence and Security Committee and the carrying out of its functions;

(2) any expenditure incurred by virtue of the Act by any government department or Minister of the Crown; and

(3) any increase attributable to the Act in the sums payable under any other enactment out of money so provided.—(Mr Swayne.)

Question agreed to.

18 Dec 2012 : Column 806

Fund for European Aid to the Most Deprived

[Relevant document: Twenty-second Report from the European Scrutiny Committee, HC 86-xxii.]

6.44 pm

The Minister of State, Department for Work and Pensions (Mr Mark Hoban): I beg to move,

That this House considers that the draft Regulation of the European Parliament and of the Council on the Fund for European Aid to the Most Deprived (European Union Document No. 15865/12 and Addenda 1 and 2) does not comply with the principle of subsidiarity for the reasons set out in Chapter 3 of the Twenty-second Report of the European Scrutiny Committee (HC 86-xxii); and in accordance with Article 6 of Protocol (No. 2) of the Lisbon Treaty on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the presidents of the European institutions.

This is the third time that I have moved a motion on this issue. My hon. Friend the Member for Stone (Mr Cash), the Chairman of the European Scrutiny Committee, is the inspiration behind this motion and I am pleased to support it. I welcome the ESC’s report on the European Commission’s proposal and I am pleased to have the opportunity to discuss it on the Floor of the House.

The Government share the Committee’s view that the Commission’s proposal is not consistent with the principle of subsidiarity. The proposal would establish a new instrument: the fund for European aid for the most deprived. It is intended to replace, from 2014, the European Union’s food distribution programme for the most deprived people. The current programme distributes food stocks such as butter, milk powder, beef, sugar, rice and cereals, and in 2012 the budget has a ceiling of €500 million.

At present, 20 of the 27 member states participate. The main recipients are Italy, Spain, Poland, France and Romania. The UK has not participated since 1998, after which the previous Administration withdrew from the scheme. Both this Government and the previous Administration have opposed Commission proposals since 2008 to extend the programme and expand its social dimension. The UK has consistently set out its concern that the programme does not comply with subsidiarity.

Nothing in the Commission’s proposals changes our position. As the Committee points out eloquently in its report, the Commission has not provided a convincing justification of the need for EU action. Indeed, in many ways the new proposal is even more objectionable than the current programme. It will be used not only to provide food aid, but to purchase and distribute basic consumer goods. Whereas the current scheme is optional, the new scheme will be obligatory on member states and they will be required to provide match funding of at least 15% of the costs.

Stephen Timms (East Ham) (Lab): I understand the Minister’s case that this could perfectly well be undertaken by national Governments, but do the Government intend to give any help to the network of food banks that is growing at a rate of, I think, three a week up and down the country and for which there is a clear need?

Mr Hoban: Food banks are undertaken by the voluntary sector. I will come on to the ways in which the Government provide support to people on low incomes or who are

18 Dec 2012 : Column 807

benefit recipients, in order to demonstrate why we do not believe that this EU programme is right. Our principal objection, of course, is one of subsidiarity, echoing the ESC’s comments, but also reflecting the previous Government’s stance when they withdrew from the scheme.

Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): To pick up on the Minister’s point that the voluntary sector makes a choice to step in, we now have up to 300 food banks across the country under the umbrella of the Trussell Trust, which estimates that it will have fed about 250,000 people in our country by the end of this financial year. Does he think that it is right that the voluntary sector has to step in to provide people in this country with emergency food aid?

Mr Hoban: The hon. Lady is a prolific tabler of questions on this matter and I have answered one or two for her today. This initiative is undertaken by the voluntary sector. The previous Government ignored the existence of food banks. Even at the height of the recession, when long-term unemployment doubled, the previous Government simply ignored them and pretended that they were not there. This Government acknowledge the existence of food banks. They play an important role and enable people on low incomes to get food, toiletries and other basic needs, and to use their incomes or benefits for other purposes. We also signpost people to food banks, but what nobody has done yet—this point has been made on a number of occasions—is analyse who uses food banks and why.

Stephen Timms: Will the Minister give way?

Mr Hoban: I want to make progress. This debate is about European proposals to spend taxpayers’ money and, if I remember rightly, the Labour party seems very keen to reduce the EU budget. We look forward to hearing what the right hon. Gentleman has to say. I do not know whether he is suggesting that we should enter this programme and that he supports obligatory participation. Perhaps he will clarify his position now.

Stephen Timms: Does the Minister accept that the number of people using food banks is bound to go up further in the coming 12 months?

Mr Hoban: I am not going to predict that. Perhaps the right hon. Gentleman has missed what has been happening recently. He should recognise that there are record numbers of people in work and that unemployment is falling. The number of people on out-of-work benefits has fallen by 199,000 since May 2010. I am not going to engage in making predictions, but I would have thought that he celebrates the fact that more people can look after their own families and that more people who want to work are getting into work, meeting that basic aspiration that we all want people to share.

The right hon. Gentleman did not say whether his party will sign up to the Commission’s proposal and whether they want to spend more taxpayers’ money in Europe. Hopefully he will mention that in his remarks.

18 Dec 2012 : Column 808

Mr John Redwood (Wokingham) (Con): I congratulate the Minister on taking a firm line on this matter. I am glad that he is opposing this regulation. I notice that all matters have to be accounted in euros, which does not seem to be appropriate for a country that still has its own currency. What does he think the outcome is likely to be in the debates and discussions in which he puts our case?

Mr Hoban: At the moment, discussions are taking place in the working groups. One discussion has taken place so far and I believe that there will be another in the new year. There is currently a blocking minority that is opposed to the regulation. A number of member states that are concerned about the EU budget and the multi-annual financial framework are keen to oppose the proposal. Of course, the money will come out of the structural and cohesion funds, so it will not be spent on other ways to improve the economy across Europe.

Kate Green (Stretford and Urmston) (Lab): Will the Minister give way?

Mr Hoban: I will make a bit more progress. I am sure that the hon. Lady has some interesting views on subsidiarity that she will want to share a little later.

The Government’s view has not changed. We are unconvinced of the merits or appropriateness of the proposal. The principle of subsidiarity, which is enshrined in article 5 of the treaty on European Union, states that the EU should act collectively only when

“the objectives of the proposed action cannot be sufficiently achieved by the Member States”

on their own, but can “be better achieved” by action on the part of the Union. We consider that the measures to assist the neediest members of society, as set out in the proposal, can be better and more effectively delivered by individual member states through their own social programmes, not at an EU level. Member states and their regional and local authorities are best placed to identify and meet the needs of deprived people in their countries and communities in ways that are administratively simple and efficient.

In the explanatory memorandum, the European Commission states that the ability of member states to support those who are at the margins of society has been diminished and that social cohesion is threatened by fiscal constraints. We recognise the need to protect the most vulnerable in society and are taking action to do so. However, as I have said, there is nothing in the proposal that could not be organised and financed by member states. The Commission provides no convincing argument for why it is necessary to superimpose a European scheme. The solution must lie with the member state, not at EU level. Member states have that responsibility and must take it. The Commission may argue that the response of member states to these issues is inadequate or that some member states make use of the food distribution programme. However, the Commission does not make the case that the situation is the same in all member states. There is, therefore, no justification for making the fund mandatory for all member states.

Kate Green: In a debate on food poverty a few days ago in Westminster Hall, which was called by my hon. Friend the Member for Liverpool, Wavertree (Luciana

18 Dec 2012 : Column 809

Berger), the Minister of State, Department for Environment, Food and Rural Affairs, the hon. Member for Somerton and Frome (Mr Heath) made much play of the fact that food poverty was being caused not, this Minister will be pleased to hear, by the actions of the Government—although some of us were sceptical—but by rising food and commodity prices around the world. Is that not exactly the kind of issue that is susceptible to collective European solutions, particularly when this country is seeing a rising number of people, including working people, having to access food banks because of the Government’s failure to act?

Mr Hoban: I am not entirely sure what European action the hon. Lady thinks would tackle that problem. We do need to examine the regulation of commodity markets, which is happening in connection with MIFID II—the second markets in financial instruments directive —at the moment. However, European Governments intervening to buy up food stocks might not be the most helpful action. Those with long memories, such as my hon. Friend the Member for Stone (Mr Cash), will acknowledge that the source of the programme in question was the intention to tackle another problem—the wine lakes, butter mountains and so on. European intervention perhaps causes as many problems as it is intended to solve.

In justifying its position, the Commission points to the Europe 2020 strategy and its headline target of reducing poverty and tackling social inclusion. However, as the European Scrutiny Committee indicated in its report, the proposal was not envisaged when the Europe 2020 strategy was devised, nor does the existence of an EU target mean that action must be taken at EU level. In any case, the EU already has instruments to strengthen cohesion in the form of structural funds. We believe that EU cohesion policy should contribute to tackling poverty and the European social fund programme should contribute to helping disadvantaged people into work.

We are also concerned that the proposal does not represent value for money and would be burdensome to administer. Using EU structural and cohesion fund processes to deliver the instrument in question would lead to heavy and costly administrative burdens on member states and partner organisations. The structural and cohesion funds are there for very different activities from the new fund. They do not buy and distribute food and consumer goods. The new fund will require different, and probably more burdensome, procurement, monitoring and auditing processes. Not only is it inconsistent with subsidiarity, it will also use resources that would be better deployed at national or local level.

If the fund were removed from the proposals, the UK could argue for an equivalent reduction of €2.5 billion in the EU budget over the seven years of the multi-annual financial framework. Given the Labour party’s view, I assume it would support that.

In opposing the Commission’s proposal, I reiterate that the Government strongly support measures to tackle poverty and social exclusion at member state level. In the UK, we have a full range of benefits and tax credits in place to cover financial needs for those in and out of work. We are investing £400 million in the current spending review period in helping local authorities prevent and tackle homelessness, and we are committed to eradicating child poverty. We are taking a new approach

18 Dec 2012 : Column 810

to tackling the root causes of such problems, including worklessness, educational failure and family breakdown. The EU structural and cohesion funds are better used in tackling the root causes of poverty than its symptoms.

On food aid, the Healthy Start scheme provides a nutritional safety net in the form of vouchers for basic healthy foods and free vitamin supplements for pregnant women and children under four from disadvantaged and low-income families. Initiatives such as FareShare and FoodCycle are good examples of essential work that charities are doing to support communities. We therefore believe that member states are capable of taking such action to help the most deprived, and we are not convinced that the European Union is better placed to take such action.

We agree with the European Scrutiny Committee that the Commission has provided no convincing argument that the proposal meets the principle of subsidiarity, and I thank the Committee for its work and for proposing the motion for debate.

6.58 pm

Stephen Timms (East Ham) (Lab): I am grateful to the Minister for setting out the Government’s position and look forward to hearing the European Scrutiny Committee’s views in due course.

First, we need to be absolutely clear that there is a large and growing need in the UK for the type of help that the fund would be designed to provide. The Minister mentioned FareShare a moment ago, and I notice that it gets a couple of mentions in the impact assessment of the fund, for example on page 100 of the bundle. As he rightly said, FareShare has never obtained any funding from the EU because the UK has not taken up the funding that is in place. It is slightly confusing that it is mentioned in the impact assessment, because that implies that it has been a beneficiary, but it has not. My understanding, however, is that €50 million is earmarked for the UK from the existing fund, none of which is currently handed over to the UK.

There is certainly a rapidly growing need for the service provided by FareShare and food banks such as those supported by the Trussell Trust, to which my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger) referred to a few minutes ago. The latest annual report from FareShare showed that it spent £1.6 million last year. As those who are responsible for FareShare say, a small fraction of the €50 million earmarked for the UK would enable it to transform what it is doing. FareShare provides food to 800 charities and, through them, to almost 40,000 people a day who would otherwise not have enough to eat. It is a wholesale operation supplying food to charities on the front line, and the food that it is distributes is sourced from food retailers and manufacturers, for whom the food is surplus to requirements.

A few minutes ago, the Minister said that everything was absolutely fine and that there really are not any problems in the UK: there are more people in work than ever before, and so on. However, the most recent annual FareShare report says:

“More people are suffering hardship and needing food support than ever before. Demand for our food is rocketing.”

The Minister, for reasons that I entirely understand, was unwilling to accept that the demand on food banks

18 Dec 2012 : Column 811

will go up in the next 12 months, but it will undoubtedly do so. Indeed, only yesterday, he sent me a written answer to a question that I tabled about the impact of the benefit cap in London. The information that he supplied was that, in London alone, 27,600 households will lose income when the benefit cap takes effect in April, and of those, 10,800 households will lose over £100 a week. There is no doubt at all in my mind or, I suspect, in the mind of any objective observer that the need for the kind of service that FareShare and food banks provide will only increase in the next few months.

The number of food banks supported by the Trussell Trust, as my hon. Friend the Member for Liverpool, Wavertree said, is about to top the 300 mark. Three new food banks are set up every week, so the number has doubled over the past year. They are all Church-based, and involve Church members and non-members in their governance; there are 3,700 churches and 3,000 schools involved at the moment. As my hon. Friend pointed out, a quarter of a million people will receive food from a food bank in the course of this year. It is a remarkable and impressive initiative, but it is also a terrible indictment that so many people in Britain cannot afford basic food, and have to go to a food bank to obtain it.

Luciana Berger: We are the seventh most industrialised nation, and the number of people accessing emergency food aid has exploded. It was 26,000 under the Labour Government—I make that point, because it was 26,000 people too many—but I wish to reinforce the point that my right hon. Friend has just made. By the end of the year, a quarter of million people will have had to go to a food bank. If Members go to meet the people who go to a food bank they will see that they do not go in with smiling faces—they go in hanging their heads in shame. Does my right hon. Friend not agree that the Government should do everything in their power to make sure that no one needs to access emergency food aid in the UK?

Stephen Timms: I completely agree with my hon. Friend, who makes a powerful and telling point. As she will know, food banks work hard to minimise the loss of dignity involved in going to a food bank. For example, they often give out food in supermarket carrier bags so that it does not look as if people have been to a food bank. My hon. Friend is absolutely right: it is a terrible indictment of the state of our nation that a quarter of a million people have to do that this year, and the number, I confidently and regretfully predict, is bound to go up over the next few months.

Why has that terrible thing occurred? It is, of course, difficult to survive on benefits or on a low working income, and the Government’s plan to uprate benefits by less than inflation will undoubtedly make matters worse over the next few months—I have spoken already about the effects of the benefit cap that will take effect in April. The plight of those who lose more than £100 a week—as many will when the benefit cap comes in—will be desperate, and a surge of people will be driven to food banks, able to feed themselves and their families only as a result of the help they find there.

The Trussell Trust—this returns to the Minister’s direct responsibilities—makes the additional point that of the 250,000 recipients we have heard about this year,

18 Dec 2012 : Column 812

100,000 are people for whom jobcentres have been too slow in making a payment or made a mistake. Food banks say that more people are turning up with no money because they have been sanctioned by Jobcentre Plus. Often, they have no idea why they have been sanctioned, and know only that they have got no money and must get food from the food bank.

Luciana Berger: My right hon. Friend will know that if someone goes to a food bank, they must tick a box giving the reason they have to access emergency food aid, and more than 40% say it is because of delays to their benefit payments. Does my right hon. Friend share my concern that in an article in The Guardian, Ministers said they aim to ensure that 80% of recipients get benefits within 16 days? Sixteen days is long enough to wait for people who have no cushion or money at all, but what about the 20% of people who have to wait for more than 16 days? Does my right hon. Friend share my concern that—

Madam Deputy Speaker (Dawn Primarolo): Order. Interventions should be brief and one at a time. The hon. Lady has made her point.

Stephen Timms: My hon. Friend makes an excellent point. As well as delays there is the problem of mistakes and people being wrongly sanctioned. Friday before last I met a young man in my constituency who has been sanctioned and told that he will lose benefits for 14 months because he is attending a residential course delivered by the Prince’s Trust. An agreement between Jobcentre Plus and the Prince’s Trust means that people on Prince’s Trust activities are not sanctioned if they are unable to sign on while on a residential activity, but in that case—and, I fear, in others—the agreement is not being properly implemented by the jobcentre.

Luciana Berger: I am grateful to my right hon. Friend and I hope not to intervene on him further. I have one more point for my final intervention. The Minister said that he welcomed the number of people who are in work, but we heard today that if people who access working tax credits call his Department’s phone line—I know this because my office called today—they are told that they have to wait three weeks for the form, and that when they get it back they must wait at least two weeks for it to be processed. Those are people in work who depend on additional funds to support them. Does he share my concern that although the Government are keen to see people in work, those are the very people who are being crucified?

Stephen Timms: That is an alarming report and I am grateful to my hon. Friend for passing it on. That matter will be on the Minister’s desk—[Interruption.] I beg his pardon; it will be on a desk in his former Department in the Treasury. There are worries—we have heard reports today—about delays in answering the phone at Her Majesty’s Revenue and Customs, and I hope that my hon. Friend’s point will be addressed.

Jim Shannon (Strangford) (DUP): The problem is not only about delays in payments but about the complications of the system and changes in people’s circumstances, financially and otherwise. Such things all contribute to the problems for those claiming housing

18 Dec 2012 : Column 813

benefit, jobseeker’s allowance, income support and so on. Does the right hon. Gentleman think that the issue is not just about the speed of the process, but about making the system easier for people?

Stephen Timms: Yes, the hon. Gentleman is right. One thing that worries me is growing reports of jobcentres taking a trigger-happy approach to sanctions. People do not know why they have been sanctioned; all they know is that their money is suddenly taken away. The network of jobcentres is the Minister’s direct responsibility.

Jacob Rees-Mogg (North East Somerset) (Con): Is the right hon. Gentleman arguing that, instead of sending a reasoned opinion on subsidiarity to the EU in respect of emergency aid, we should ask the EU to take over our social services budget?

Stephen Timms: I will come promptly to subsidiarity, which the hon. Gentleman properly asks me to address, but it is right first to set out the scale of the need for the kind of aid that, it is envisaged, would be supported through the fund.

The big need that exists is being addressed by organisations such as FareShare and the Trussell Trust network of food banks. There is absolutely no doubt that that need will rise in the coming year. However, as the hon. Gentleman rightly says, the question is whether funding through the EU is the best way to organise the provision of that help. The European Scrutiny Committee, of which he is a member, makes the valid point that there is no reason why the support cannot be delivered through a national initiative rather than by the EU—I agree with the Minister’s point on that.

Setting up a fund at EU level is costly and bureaucratic, so I sympathise with the Committee’s concerns, but the problem is that the UK Government are not providing any such support. I therefore have some questions for the Minister and want to press him further. Does he accept that food banks and others provide a vital and indispensible service, and that without them tens of thousands in Britain would not have enough to eat in 2012? Given the changes that we know are coming in the welfare system over the next few months, does he accept that the problem is bound to get worse? To what extent are the Government interested in what organisations such as FareShare and food banks must do? Will he confirm—I am confident that this is true—that there is currently no UK Government support for them? I believe that local authorities have been able to help in some instances, but local authority funds are being tightly squeezed, so that source is diminishing.

Will the Minister explain why the UK does not take up the €50 million share of the existing EU food distribution programme? That is not a partisan point, but a genuine inquiry—I was part of a Government who took the same view as the Minister, although the problem was a great deal smaller at that time, as my hon. Friend the Member for Liverpool, Wavertree has pointed out. No doubt there is a downside of taking up that aid, but it would be helpful if the Minister could explain what it is.

Is it not a bit rich of the UK Government to argue against the new programme on the ground that they could do the same thing perfectly well—they rightly point to the principle of subsidiarity—if they in fact have no intention of doing so? If the fund is set up—as

18 Dec 2012 : Column 814

the Minister has indicated, that could happen despite UK objections—will he consider making the UK share of the fund available to FareShare and others that do such a vital job?

7.14 pm

Mr William Cash (Stone) (Con): To paraphrase President Hollande, with whom I have no doubt those on the Opposition Front Bench are in agreement, a Euro handout is not just for Christmas, but for life.

As my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) pointed out, subsidiarity is the issue in this debate. I could spend a great deal of time debating this, but the European Scrutiny Committee’s report sets out some of the aspects in more detail. The Government have set out their arguments in the explanatory memorandum and the Minister has spoken, so it seems to me that on this occasion it would be more appropriate to deal with the question of subsidiarity than to attempt to deal with the questions that arise regarding the relationship between the member states themselves and the United Kingdom.

A reasoned opinion is a new procedure provided for under the Lisbon treaty. It provides a mechanism for challenging Commission legislative proposals on the grounds of subsidiarity. In a nutshell, it means that national Parliaments have eight weeks, from the publication of a proposal, to submit a reasoned opinion. If such opinions represent one third of all the votes of national Parliaments, the Commission has to reconsider its proposal. The deadline in this case is midnight Brussels time on 26 December 2012, which is why the debate is taking place now.

I am glad to read in the motion that the Government agree with the Committee’s proposals. I was also extremely glad to hear the shadow Minister effectively say that the Opposition agree with the principles that underpin our reasoned opinion. The motion before the House is to approve the draft reasoned opinion, which is set out in the annex to chapter 3 of the report, and to instruct the Clerk of the House to forward it to the presidents of the European institutions. That is the formality.

The purpose of the draft regulation is to establish a new fund for European aid to the most deprived with, as the Minister said, a proposed budget of €2.5 billion for the period 2014-2020. I am bound to point out that those years reflect the period of the multi-annual financial framework on which a number of us voted recently, with respect to the European budget, saying that it should be reduced. The object in this instance, however, is:

“to alleviate poverty and material deprivation in the EU by supporting national schemes for the distribution of food products and the provision of basic consumer goods for the personal use of homeless people or children. It would replace an existing EU Food Distribution Programme…in place since 1987”.

The new fund will be based on the EU cohesion policy and resourced from the structural funds.

With respect to the draft reasoned opinion, we conclude that the proposed legislation breaches the principle of subsidiarity for four reasons. The Commission says that there is uncertainty about the ability of some member states to provide the social investment needed to prevent further fracturing of social cohesion, but it does not demonstrate that all member states are in the same position. Furthermore, there is no evidence about which

18 Dec 2012 : Column 815

member states are unable to provide this investment. The draft regulation would, however, bind all member states.

Secondly, the Commission has not provided sufficient justification for EU action on the basis of the Europe 2020 strategy—we go into that in more detail in our report, which is available to the House. A principal objective of the proposal is a desire for a highly visible EU funding instrument to mitigate negative perceptions of the EU’s contribution to economic and financial crisis. The Committee argues that such anxieties, whether founded or unfounded, are not a legitimate basis for EU legislation.

I would argue that the answer to alleviating poverty and preventing the difficulties being experienced in member states lies elsewhere. No one can doubt that the difficulties in many member states—youth unemployment running at over 53% in Spain and Greece and vastly increased unemployment among young people and others in all member states, with one or two exceptions—are the result of the economic policies that have been pursued under the existing treaties. The answer lies in growing small and medium-sized businesses. The taxation then taken from their profits could be ploughed back into the relevant part of the public sectors in each member state—including in this country—to provide the kind of help that the Government here have rightly indicated they will provide in order to alleviate poverty, where it is necessary to do so.

The question of whether these anxieties are founded or unfounded is not a legitimate basis for EU legislation. For EU supranational intervention on poverty and social exclusion in member states to be justified, there must be evidence of a problem that cannot be satisfactorily addressed by action at national level in all member states, but this evidence is simply lacking. I am glad to note that both the Minister and the shadow Minister agree with that proposition, and I repeat that the answer lies in growth, although how we get that growth is the subject for a separate debate.

Another problem is that the rule of law, which is the basis on which the much-vaunted aspirations of the EU are meant to be based, is consistently being breached. I could give many such examples; we have reported on them in the past. There is article 122 in respect of the European financial stability mechanism, there are the breaches of the no-bail-out clauses, the failure of the rule of law in respect of the stability and growth pact and the 25/27 decision that the Prime Minister vetoed but which is still subject to a legal reserve. There have been many other instances and they are continuing.

The principle of subsidiarity, which is embedded in the treaties, is meant to mean that, where matters should be dealt with at member-state level, that is where they should be dealt with, and the EU and its institutions should not arrogate to themselves the alleged right to legislate or impose burdens on member states in contravention of the legal requirements prescribed by the treaties, one of which is subsidiarity. It so happens that in the Lisbon treaty member states agreed to this procedure for reasoned opinions, which is a way of challenging a breach of the rule of law. For precisely that reason and in the light of the arguments I have set out, we put forward this reasoned opinion.

18 Dec 2012 : Column 816

There simply is no basis in existing legislation to justify the use of this €2.3 billion for the purpose described by the European Commission. The Commission’s impact assessment states:

“European financial support can demonstrate the direct solidarity of the Union with the poor people, thus taking up on the broad request by European citizens.”

It is difficult to understand what that is supposed to mean in practice. It is just a generalised description, rather than an analysis of the use of the power for the right purpose. I am bound to ask the Minister, therefore, whether he thinks that the cohesion funds—resourced as they are by member states—should be used to

“demonstrate the direct solidarity of the Union with the poor people”

in those member states. On the use of expressions about demonstrating direct solidarity with the poor people, I am bound to say that, yes, people are being seriously adversely affected, but we should be asking what the real cause of that is, and whether this is the right way to try to solve the problem. Those generalised expressions of anxiety are not the way to run the European Union.

Jacob Rees-Mogg: Does my hon. Friend agree that that is the most extraordinarily condescending language for people who are on very high salaries and paying very low taxes to be using?

Mr Cash: I could not agree more, and I would love to go down that route. I will not do so tonight, but the overpayment of civil servants in the European Union is a scandal.

Does the Minister believe that there is evidence of a broad “request by European citizens” for this type of supranational financial support? From what he has said, he clearly does not. The Commission’s impact assessment also states:

“Currently more and more social stakeholders and EU citizens perceive the EU as a threat for their personal and collective protection.”

It goes on:

“Action at European level is required, all the more so, as a lack of social cohesion would hinder the Union's further development and undermine its legitimacy in the eyes of its citizens.”

In other words, this aspiration is based on the fact that the Commission wants to create a perception that the European Union is helping people, and it is then calling for a vast amount of money to justify that perception. In a way, this is an exercise in legitimised propaganda.

The Committee found that statement startling on a number of levels. Does the Minister agree with the Commission that the EU is perceived as a threat to the “personal and collective protection” of its citizens? Does he think it legitimate for this type of humanitarian funding to be used to reinforce the EU’s legitimacy? This is almost akin to Soviet propaganda.

A constant complaint by our Committee is that the Commission does not pay sufficient attention to the need to confirm that its legislative proposals comply with the principle of subsidiarity. I have given the House some instances of breaches of the rule of law. What kind of Government does the Commission purport to run, if it breaches the rule of law whenever it suits it to do so? When it was breaking the rules on the European financial stability mechanism, for example, Madame

18 Dec 2012 : Column 817

Lagarde came out of a meeting and said, “We’ve violated all the rules because we want to preserve the euro.” The thinking, which is very dangerous, seems to be: “Providing we can use the power that the member states have given us to get what we want, it does not matter whether we can justify our actions according to the rule of law or the principle of subsidiarity. We’re going to do it anyway, and we’re going to justify it by talking about people’s perceptions.”

It is no wonder that people like me get up repeatedly—like pestering wasps, as I said to the Prime Minister the other day—and try to ensure that we keep the European Commission under surveillance and control. That is precisely what the European Scrutiny Committee is doing. We are ensuring that these matters are properly looked at, and I am delighted that the Government are going with us on this occasion. In this instance—believe it or not—the word “subsidiarity” is not even mentioned in the Commission’s explanatory memorandum. Will the Minister give us his assessment of the Commission’s assertion that the proposal does comply with subsidiarity? Does he agree that, in order to warrant supranational action, the Commission must show that the provision of emergency aid in some member states is undermining social cohesion in others, and that there is a genuine cross-border element involved?

I am arguing the case on subsidiarity, never mind on the justification of the arguments on the merits of giving money. It is an utter, complete and devastating tragedy that people all over Europe are resorting to using food banks. I sympathise with the concerns of the hon. Member for Liverpool, Wavertree (Luciana Berger) about those very people. I do not have any problem there. It is one of the reasons why I spend as much time as I can on matters relating to international aid in countries throughout the world and in the Commonwealth. I am concerned about these people, but we cannot use this sort of legislative framework because of the misuse to which it is being subjected. So does the Minister think that the Commission has proved the existence of this cross-border element?

Mr Hoban: No.

Mr Cash: I am delighted to hear that. This is where it gets tricky for us as a Parliament. We generally agree that this is not the right thing to do and I believe that the Opposition agree with that in terms of subsidiarity, although they have expressed their view about the question of the merits. The problem is that the number of reasoned opinions on this proposal will fall far short of the minimum required to oblige the Commission to reconsider. However, in the opinion of the Committee, that does not mean that a reasoned opinion of the House of Commons is without meaning or consequence.

Finally, will the Minister tell us whether—and, if so, to what extent—the Government plan to make use of the reasoned opinion in the Council negotiations on this proposal. As I said to the Prime Minister on another subject, it is difficult—he is between a rock and hard place. There are dilemmas, but we as a Committee have a job to do, which is to point out where the subsidiarity has been breached and to present a reasoned opinion. What really troubles me is that we do our job and look to other member states that are constantly berating us for our so-called “attitude” towards the European Union. However, when there is an absolutely

18 Dec 2012 : Column 818

clear-cut breach of the rules that they have set themselves, they turn round and say, “Well, we listened to what you said. We are not going to enter into an argument with you about whether you are right on your reasoned opinion”—they cannot; there is no way that could possibly be justified—and then they say, “But we are still going to vote for it.” That is the way to destroy the European Union, and they are doing a pretty good job.

7.32 pm

Jacob Rees-Mogg (North East Somerset) (Con): As so often, the European Union finds itself in these positions essentially by accident. If we look at the documentation, we see that this proposal would replace the existing EU food distribution programme for the most deprived, which has been in place since 1987. That was put in place when the common agricultural policy was building up butter mountains and milk lakes—and, rather excitingly, wine lakes—and it was thought that it would be a good idea to distribute them to member states and the people within them rather than allowing them to rot or having to pay large sums for storage. I cannot remember anybody getting any of the wine out of the wine lake, but that problem went away when the basis of subsidising the CAP was changed and there was a move away from all the payments relating to production. Production fell to be more in balance with demand, so the lakes and the mountains dissipated.

Once the EU as an organisation has its hands on a particular power—[Interruption.]—or piggy bank, it is reluctant to give it up. It sees that it has this power that is no longer of any use because the intervention stores in member states cannot be used to provide food for the needy, so it comes up with a scheme—one that will cost €2.5 billion of our money—to provide a means of distributing that food in deprived member states. It then comes up with the reasons to justify it.

It is worth noting on page 11 of the documentation the justification in the Commission’s explanatory memorandum. It states:

“EU action is justified on the grounds of Article 174 (TFEU) which provides for the Union to ‘promote its overall harmonious development’ by ‘developing and pursuing its actions leading to the strengthening of its economic, social and territorial cohesion’, and on Article 175 (TFEU) which specifies the role of the EU structural funds in achieving this objective and makes provisions for the adoption of specific actions outside the Structural Funds.

EU-level action is necessary given the level of poverty and social exclusion in the Union and the unacceptable diversity of the situation among individual Member States, further aggravated by the economic and fiscal crisis, which has led to a deterioration of social cohesion and lessened the chances of achieving the Europe 2020 Strategy’s objective in relation to the fight against poverty and social exclusion.”

There we see the heart of the matter.

Having bankrupted its member states by making them tie themselves into an overvalued euro, the European Union now says that people are poor and suffering as a result, and that we—the European Union—must therefore look after them. That is like shooting someone in the leg and then ringing for an ambulance. It is a most unsatisfactory way of carrying on, and it does not remove the offence of shooting someone in the leg in the first place. It is, in its way, deeply dishonest, troubling and bordering on wicked that the European Union should force such great austerity on Portugal, Ireland,

18 Dec 2012 : Column 819

Spain and, in particular, Greece so that grandmothers in Greece cannot afford their housing, and then come along with a scheme that will give them a little bit of money. Although €2.5 billion of our money is a lot to us who are paying into Europe, it is not a huge amount in the grand scheme of expenditure across member states. It is a little bit of money to spend on a propaganda exercise to persuade member states that things are not as bad as they seem.

Mr Cash: Does it not smack rather of the words attributed to Marie Antoinette at the time of the French revolution, when she allegedly said of the starving people of Paris, “Give them cake”?

Madam Deputy Speaker (Dawn Primarolo): Order. I should like both hon. Members to return to the specific points that we discussing this evening. The scope of the debate is the subsidiarity issue as outlined in the proposed reasoned opinion, and that is what we should be discussing.

Jacob Rees-Mogg: Thank you, Madam Deputy Speaker. I am very glad that you have returned me to this absolutely key point.

Amendment X to the United States constitution, which is part of the Bill of Rights, provides for all powers that are not specifically designated for the United States to be reserved to the states themselves. What do we have in Europe? We have the vague term “subsidiarity”, which means that if in an impossibly short time a sufficient number of member states lodge an objection with the European Commission, it may, out of its benevolent generosity and kindness, decide to reconsider its proposals. This is what we are doing: we are saying to the European Union, “We think that what you are doing is wrong. We think that what you are doing is so fundamentally wrong that it should be opposed, and that it is indeed a scandal. We think that what you have done to member states is ruin their economies and then give them back €2.5 billion of their own money.”

The document states:

“European financial support can demonstrate the direct solidarity of the Union with the poor people”—

my hon. Friend the Member for Stone (Mr Cash) quoted this as well—

“thus taking up on the broad request by European citizens.”

Well, I do not like being a European citizen anyway. I think that it is an affront to be called such a thing. I am a subject of Her Majesty, and long may I remain so. However, I cannot imagine that anyone in this country, whether he or she accepts the term “European citizen” or not, really wants the EU, having crushed nations, then to give them crumbs from the rich man’s table.

18 Dec 2012 : Column 820

I am therefore delighted that Members on both sides of the House support the reasoned opinion.

Question put and agreed to.


That this House considers that the draft Regulation of the European Parliament and of the Council on the Fund for European Aid to the Most Deprived (European Union Document No. 15865/12 and Addenda 1 and 2) does not comply with the principle of subsidiarity for the reasons set out in Chapter 3 of the Twenty-second Report of the European Scrutiny Committee (HC 86-xxii); and in accordance with Article 6 of Protocol (No. 2) of the Lisbon Treaty on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the presidents of the European institutions.

Business without Debate

Motion made, and Question put forthwith (Standing Order No. 119(11)),

Risks and Safety Assessments on Nuclear Power Plants

That this House takes note of European Union Document No. 14400/12, a Communication from the Commission to the Council and the European Parliament on the comprehensive risks and safety assessments (“stress tests”) of nuclear power plants in the European Union and related activities; agrees with the Government that there is a need to ensure that a robust EU nuclear safety regime is in place; and supports the Government’s view that any changes to the current regime should be evidence based to ensure that they are proportionate to the risks they aim to address and do not result in a shift of competence away from Member States.—(Anne Milton.)

Question agreed to.


Hemlington Library (Middlesbrough)

7.39 pm

Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab): The petition states:

The Petition of residents of Middlesbrough,

Declares that the Petitioners acknowledge the unfair and savage cuts imposed on Middlesbrough and particularly the impact to Hemlington library; further that the Petitioners note that local authors Richard Millward and Peter Brunton support this Petition and also note the great work done by local Councillors Nicky Walker and Jeanette Walker who made this Petition possible, alongside local volunteers including school children from Hemlington Hall Primary, St. Gerard’s Primary and Viewley Hill School.

The Petitioners therefore request that the House of Commons urges the Department for Communities and Local Government to explore every possible avenue, including the obtaining of funds from the development at Hemlington Grange, to keep Hemlington Library open.

And the Petitioners remain, etc. [P001151]

18 Dec 2012 : Column 821

High Carbon Investment

Motion made, and Question proposed, That this House do now adjourn.—(Anne Milton.)

7.40 pm

Caroline Lucas (Brighton, Pavilion) (Green): Almost a year ago, an open letter from a high-profile coalition of investors, politicians and scientists to the Governor of the Bank of England warned that the huge reserves of coal, oil and gas held by companies listed in the City of London are what they termed “sub-prime” assets and pose a systemic risk to economic stability. It is that risk and what could be done to protect the economy that I want to speak about this evening. I apologise in advance for the technical nature of the debate, but I hope the Minister will agree with me that the subject is important.

I want to lay out the new maths of climate change, which quantifies the difference between the total amount of fossil fuels in existence that we know of and the amount of coal, oil and gas that can be burnt unmitigated if we are to have a decent chance of achieving the internationally agreed objective of limiting global warming to below 2°. Industry figures suggest that about 2,795 gigatonnes of carbon dioxide are locked up in the known proven coal, oil and gas reserves around the world. That figure can be compared with the much smaller amount, 565 gigatonnes of carbon dioxide, that research by the Potsdam Institute for Climate Impact Research has identified as remaining in our carbon budget for the period 2011 to 2050. That shows that only about one fifth of known fossil fuel reserves can be burnt and their emissions released if we are to stay within the carbon budget. That analysis was confirmed by the International Energy Agency in its recent world energy outlook for 2012.

Research by the Carbon Tracker initiative has shown that at the end of 2010, 745 gigatonnes of carbon dioxide were present as coal, oil and gas reserves on the stock exchanges of the world. That means that just the reserves owned by listed companies, if burned so that the carbon dioxide is released, already exceed the 2° carbon budget. In other words, there is a major disconnect between the direction the world’s stock exchanges are taking and global efforts to prevent dangerous climate change, such as the recent UN negotiations at which the Secretary of State worked hard to argue for a 2° threshold.

Lord Stern made the following observation in a Financial Times article during the Durban climate conference last December:

“As the negotiations at the UN climate change summit in Durban reach the critical stage, we must not overlook a fundamental contradiction between the way global fossil fuel reserves are evaluated and long-term policy goals. By ignoring this contradiction, companies and markets, as well as governments, are undermining management of the huge risks that rising levels of greenhouse gases pose to their survival.”

As Lord Stern indicates, if greenhouse levels continue to rise, that poses significant risks to business as well as to society as a whole. For example, the insurance and property sectors are already seeing increased claims due to extreme weather events. To give just one example, the estimated property damage costs from Hurricane Sandy are $20 billion. Once the costs of lost business are added in, that could reach $50 billion according to some estimates. Ironically, the hurricane even stopped the New York stock exchange from functioning.

18 Dec 2012 : Column 822

The UK has led the way in using carbon budgets to manage its progress on reducing domestic emissions and it is time to apply that approach to the financial markets and align the energy sector with climate targets. Otherwise, we are in danger of allowing a lack of proper financial oversight and regulation to condemn us to temperature rises of as much as 6°—a figure that was even reinforced in a report by PricewaterhouseCoopers just last month.

The financial markets are an indicator of where the energy industry is heading and at present it is clear that the diversion of capital investment away from carbon-intensive energy sources towards clean energy technologies is not occurring fast enough. Unless the financial system starts to respond with some urgency, it is increasingly exposed to the potential for a drastic correction to reduce emissions—in other words, the risk of the carbon bubble bursting.

The UK economy is particularly exposed because of the global role played by our financial sector in raising capital. London’s strong reputation attracts companies from all around the world and has resulted in it becoming one of the global centres for natural resources companies. Indeed, the UK has a much greater exposure to climate change risk through London’s financial market than it does from its own domestic emissions. Carbon Tracker analysis shows that at the end of 2010 the coal, oil and gas listed in London was the equivalent of 105.5 gigatonnes of carbon dioxide. That is 10 times the UK’s domestic carbon budget of around 10 gigatonnes of carbon dioxide between 2011 and 2050.

Very few of these reserves are actually located in the UK. For example, one third of the coal is in Australia, with major reserves also in Indonesia, South Africa and Botswana. Only a tiny proportion of the coal listed in London is actually in the UK—about 0.36%. This means that investors, such as pension funds, which put their money into so-called UK funds are in fact exposing themselves to risks around the world. For example, there are increasing constraints on the markets for coal across the world, including carbon taxes in Australia and South Africa, the EU emissions trading scheme, carbon intensity targets in China, mercury regulations in the United States, and water availability in India. Moreover, renewable technologies are becoming more advanced and more competitive on price all the time. That has led to increasing uncertainty about the viability of new coal power generation in a number of markets.

All sectors go through changes, which can result in obsolete technologies and stranded assets. The communications industry, for example, has seen a rapid switch to mobile communications. Similarly, traditional photographic equipment has been superseded by digital photography and multipurpose devices that can take pictures and share them with others. We need a similar revolution in the energy sector, which brings through new technologies and delivers the green investment and development opportunities that investors and Governments are seeking—and the markets need to reflect carbon constraints and the reality of fossil fuels as stranded assets. If they fail to do so, as Al Gore argues, fossil fuel reserves will be the next sub-prime crisis.

We therefore urgently need action better to prepare the financial markets for this systemic risk and to prevent a repeat of the recent financial crisis. In the first instance this is about ensuring that the financial system

18 Dec 2012 : Column 823

at least starts to consider the risks associated with those so-called stranded assets. HSBC estimates that carbon constraints post-2020 could impact valuations of coal assets, for example, by as much as 44%, with the actual stock impact determined by company exposure to coal. This could translate into a downside risk of between 7% and 15%, according to HSBC, adding a new dimension to risk assessment for both corporate strategy and anyone looking to avoid further economic crisis.

Around one third of the value of the FTSE 100 is currently made up of oil, gas and mining companies, with investors tied into the composition of the markets. That can be directly, through the use of tracker funds, which mirror the largest companies listed on the exchange, for example the FTSE 100 index, or it can be indirectly, by using such indices as a benchmark for fund performance, which results in funds closely matching the sector composition of the benchmark. As a result many investors end up following the market, owing to the herd mentality of the investment system.

The Kay review commissioned by the Government found that equity markets are subject to structural flaws which prevent the management of investments from reflecting the long-term investment horizon of many pension funds. John Kay recommended that metrics should be directly relevant to the creation of long-term value in companies. Until the markets are able to demonstrate that they have fully integrated such risks, it is clear that they will be subject to the dangers of financial instability. Given that climate change is an enormously important long-term systemic risk, as well as a massive market failure, it should surely be seen as a key test of whether markets have adequate information and are functioning efficiently.

The Government have already taken an important first step towards giving markets some of the information they need to deal effectively with climate-associated risk, by introducing greenhouse gas reporting as part of the disclosure requirements for large listed companies. This puts emissions information alongside the material financial data provided for the investor audience. That is a useful first step, but it is important that these emissions data also pass the materiality test, and are of use to investors. However, the current proposal is for a one-size-fits-all approach, which will not give investors information about just how exposed a company is as the result of increasing constraints on carbon intensive activities. Whether a mining company has energy efficient offices or an oil company reduces its business travel provides no material information for shareholders. Good housekeeping by companies whose core business is increasing the production of billions of tonnes of coal and oil simply will not deliver the scale and pace of change required. What investors need is a forward-looking indicator of how the stock levels of fossil fuels compare with the future market for the companies’ products—coal, oil and gas.

Therefore, I propose that the Government should demonstrate true leadership by requiring extractive companies to report the greenhouse gas emissions potential of their reserves. I recognise that it is the Department for Environment, Food and Rural Affairs that leads on greenhouse gas reporting, but I hope that the Minister can assure me that the Department for Energy and

18 Dec 2012 : Column 824

Climate Change is actively involved in discussions about the shape of the proposals and that he is using every opportunity to press for an approach that will demonstrate the UK’s commitment to global leadership and protect our economy from the threats posed by the carbon bubble.

The Climate Change Act 2008 draws its powers from the Companies Act 2006, and section 416(4) of that Act allows the Secretary of State to

“make provision by regulations as to other matters that must be disclosed in a directors’ report.”

Given the significance of the carbon dioxide potential of reserves, surely extractive companies must be required to report that vital information at the earliest opportunity. That information can then be collated by the regulator and the level of carbon dioxide in reserves listed on our stock exchange can be monitored. These data should in turn be considered and reported by the Bank of England’s Financial Policy Committee. The committee is charged with identifying, monitoring and taking action to remove or reduce systemic risks, with a view to protecting and enhancing the resilience of the UK financial system.

A number of actors from the financial markets, including Aviva, HSBC and PricewaterhouseCoopers, have already made representations to the Bank’s executive director for financial stability on that matter. Without a thermometer taking the temperature of the market, investors have no idea if the systemic risk is being managed or if the situation is getting worse. Given that most investors are tied to the composition of the market, it must fall to the regulator to take action on that kind of systemic risk and mandate disclosure. London has a reputation for strong corporate governance and transparency, which that measure would maintain.

According to the International Accounting Standards Board, the performance of an organisation is affected by the economic resources it controls, its financial structure, liquidity and solvency and its capacity to adapt to changes in the environment in which it operates. Financial performance is, fairly obviously, an organisation’s ability to earn a profit from the resources that have been invested in it. It also takes into account the actual and potential impacts on performance, viability and earnings of the activities of stakeholders and of systemic risks.

Requiring disclosure of the greenhouse gas emissions potential of reserves is therefore a matter of helping directors to fulfil the duty to report on what might affect the future performance of their company. Boards should be required to explain how their business model is compatible with future scenarios. Directors should be required to explain what level of climate change they are assuming in their strategy and which technologies they assume will be in place by what date. For example, we need to know whether the management of mining and oil companies currently assume that the world will continue on the pathway to 6° of warming.

Many business leaders have made statements supporting the 2° framework and emissions targets. They need to explain how such a position is compatible with their current business model that includes fossil fuel assets. It is clear that business as usual will not prevent dangerous climate change; on the contrary, it is much more likely to lead to catastrophic climate change. Therefore, the Government need to create a framework that facilitates change and protects the economy.

18 Dec 2012 : Column 825

This is probably a good point at which to explain briefly why carbon capture and storage is not the answer to the challenges I have outlined. CCS would obviously primarily be applied only to major coal and gas generation point sources of emission—power stations. It will have no impact on the oil-related emissions generated by transport. Furthermore, given the huge difference between the tight carbon budget and the huge fossil fuel reserves, even widespread CCS would not close the gap sufficiently.

If companies are using a business model based on CCS, they should be required to explain clearly their assumptions about time scales and cost. The International Energy Agency has indicated that commercially available CCS is not likely to come in until after 2030. That leaves around two decades of unmitigated emissions if business continues along the current trajectory, with the carbon budget well and truly spent before CCS can come in. Even at that point, it could be prohibitively expensive to retrofit to existing plants and CCS would primarily be added to new facilities. Unless investors are taking a particularly long-term view, they will not be factoring that into their assessments of a company’s value—there is too much uncertainty. Is it realistic to expect pension funds, for example, to put their money behind a technology that is not yet proven commercially and which even the industry accepts is decades away? If the future viability of coal companies is dependent on CCS in the near future, investors should know about it.

DECC has developed the capital markets climate initiative. That recognises the important role of public sector action in mobilising private capital and encouraging new markets in low carbon investments. However, at present the initiative is completely missing the other side of the equation; there is a need to change the frameworks around the high carbon end of the spectrum to drive capital towards the low carbon end. By starting to address the full picture of capital markets and climate change, the Government can redress the imbalance.

By providing better information, the Government can facilitate active shareholders challenging where capital is being allocated and help secure the significant shift in investment needed to create a green, resilient and sustainable economy. Furthermore, they can avoid picking up the otherwise inevitable tab for damage to infrastructure, property and agriculture, and consumers subject to increased volatility of commodity prices. Those are costs that neither the Government nor individuals can afford.

DECC’s own policies, of course, should also be helping to make markets more resilient in the face of climate change, not less so. Yet tomorrow sees the Second Reading of the Government’s much anticipated Energy Bill, which creates a legal framework to lock the UK into expensive, high carbon gas generation for decades to come. The Bill not only runs counter to scientific advice on the urgency of action needed to avoid irreversible climate change and prevent devastating global warming, but omits a target to reflect the independent expert advice of the Committee on Climate Change—that emissions from the power sector should be virtually zero by 2030.

We will discuss that issue in the context of the Second Reading of the Energy Bill tomorrow, so now is not the time to go into further detail. Suffice it to say that we clearly need an overall impact assessment to evaluate

18 Dec 2012 : Column 826

the health, soundness and vulnerabilities of the financial system as we proceed with low carbon transition. The Treasury will need to take a lead on much of that, but DECC has an important and key role as well. I look forward to hearing from the Minister about how he intends to play it.

7.56 pm

The Minister of State, Department of Energy and Climate Change (Mr John Hayes): I am delighted to respond to this debate and I congratulate the hon. Member for Brighton, Pavilion (Caroline Lucas) on securing it.

It seems to me that the hon. Lady’s argument is based on three fundamental misassumptions, and because of that much of her case is invalidated. The misassumptions are these. First, there is the notion that carbon-intensive industries and other parts of the economy that rely on them are at a peculiar and specific risk. The hon. Lady made that case—I shall put it as generously as I can—with confidence. However, it would be a hard case to prove and she brought very little evidence apart from the letter, sent to Mervyn King, the chairman of the Financial Policy Committee at the Bank of England, that she quoted at the beginning of her speech.

Let me deal specifically with that letter. The hon. Lady is right to say that it was signed by a number of people. The Bank’s current position is that the interim Financial Policy Committee is aware of the issue and should the FPC conclude at any point that carbon assets do pose a systemic risk to the financial system, it will report and explain that risk in its six-monthly financial stability report. It has not done so at this stage, because it has not come to the hon. Lady’s conclusion—that there is that particular risk—on which the rest of her argument is predicated.

The hon. Lady’s second fundamental misassumption—

Caroline Lucas: Will the Minister give way?

Mr Hayes: I will, but I do not want to do so too liberally; the hon. Lady will appreciate that time is short.

Caroline Lucas: I am grateful to the Minister for giving way. Will he explain whether he thinks it is a misassumption to state that only one fifth of known fossil fuel reserves can be burned and their emissions released if we are to stay within the carbon budgets? That is not predicated on any letters, but on the figures coming from some of the foremost climate institutes and others.

Mr Hayes: But this is about the connection between that fact and the effect that it has on the financial climate in which these organisations operate, on their stability, and on their attractiveness to investors. That is the myth. The hon. Lady’s argument is based not on the bald fact but on the connection between it and other things.

The second misassumption that underpins the hon. Lady’s analysis—I am afraid that I must put it this way; I always try to be generous, as you know, Madam Deputy Speaker—is that she assumes a superior grasp, or understanding, of the patterns of investment, the basis on which investors operate, and the climate and

18 Dec 2012 : Column 827

modelling that they take into account in making these large-scale investment decisions, than I would have the temerity to claim. I do not want to lecture her—I say this as a paternal bit of advice, really—but a degree of humility is required in these matters. I am by no means wedded to the idea of the market, but I do take the view that the market has an important role to play in signalling to us and to the business community what investors believe to be attractive and unattractive. I therefore do not claim the kind of insight, prophetic powers and extraordinary understanding that the hon. Lady clearly does.

The third misassumption on which the hon. Lady’s performance was based was her extraordinary ability, so it seems, to predict likely changes in the availability of technologies such as carbon capture and storage, changes in the patterns of demand for energy, and changes in cost and price. It is true—perhaps this is where we can reach a synthesis—that in acknowledging that almost all we know about the future is what we do not know, we cannot simply therefore take no strategic view or no long-term decisions. Indeed, the Energy Bill, which she mentioned, is very much about trying to take long-term decisions. However, it is best to do so on the basis that those decisions are not framed around a definitive view of what is bound to occur but an understanding that the creation of a highly responsive system will allow us to deal with those things that are, by their nature, unpredictable, or certainly so in their detail and extent.

Therefore, for the hon. Lady to claim that “carbon capture and storage is not the answer”, to use her precise words, is a pretty bold—some might say a pretty extraordinary—claim. Of course it is true that carbon capture and storage is still at the beginning of its journey and that it will take some time for it to reach the scale that will allow it to become commercially viable. She knows, however, that the Government have invested in a £1 billion competition, that we are backing four projects in that competition, and that they offer significant potential. She will also know, because she studies these matters assiduously, that the taskforce we set up to look at cost reduction for carbon capture and storage concluded just a fortnight or so ago in its interim report—a considered report that I recommend to her if she has not seen it—that carbon capture and storage could become available and commercially viable much more quickly than she has said; it speaks of the early 2020s. I recommend to her the graphic illustration of that argument in the document, which shows that carbon capture and storage is not only becoming technologically proven but is more widely admired than perhaps she wants, because once one accepts that fossil fuels and their effects can be mitigated, the rest of her argument becomes less plausible. Those fundamental misassumptions rather colour her approach to these matters.

There are further problems. I challenge the idea that investment in fossil fuels and the move to a low carbon economy are fundamentally incompatible, and I believe that the market is better able to assess for itself how to manage its assets and investment decisions and that the Government’s Energy Bill provides investment, clarity and certainty. The hon. Lady will understand that the

18 Dec 2012 : Column 828

point about long-term contracted prices is that they lower the cost of capital and create an environment for investors that is, by its nature, more certain. Not only do I think all of those things, but I think, less apologetically —not that I have been particularly apologetic so far—that the mix of technologies that we believe is necessary to deliver energy security is not only a guarantee that, in the unpredictable world that I have charted, doors will be left open that the hon. Lady would want to shut, but is more likely to deliver the kind of secure, efficient and effective future that will allow us to be confident that supply can meet demand in an affordable way.

I think there is some agreement, in general terms, on this subject across the House, although there will be differences of opinion with regard to detail. I do not want to anticipate too much of tomorrow’s debate, but the Opposition have made some plausible arguments about demand reduction, market entry, liquidity and regulation, and they will no doubt want to articulate their case tomorrow. The hon. Member for Rutherglen and Hamilton West (Tom Greatrex), the shadow Minister, is in his place. Far be it for me to write his speech for him, but I have no doubt that those things will be in it.

In those terms, I think that the hon. Lady is not only outside the mainstream, but, arguably, on the very fringe of the debate. I do not want that to be the case, because, as I have said, I am generous and am approaching the issue as paternally as I can. Dickens wrote about

“a heart that never hardens, and a temper that never tires, and a touch that never hurts.”

I do not want to hurt the hon. Lady.

Caroline Lucas: How disappointed I am with the Minister’s response. I base my statements on expert advice from financial analysts, university academics and climate experts, so his patronising response is particularly misplaced. We may disagree about the precise time that CCS will come in, but the very fact that there is uncertainty surely means that financial markets should be addressing it.

On the Minister’s point that the Greens are somehow on the fringe, we have been told that for 30 years. We were told that when we started talking about the ozone layer and about climate change, and eventually the other parties caught up. I hope that he catches up soon, too, because if he does not the future looks pretty grim.

Mr Hayes: The hon. Lady knows that the Committee on Climate Change has recognised in its recent progress report—I know that she takes that seriously and that she will have read it—that we are on track to meet our first three carbon budgets, which amount to a 35% reduction in emissions by 2020. She knows that, as a result of the levy control framework negotiations that led to the bargain between the Department of Energy and Climate Change and the Treasury, we have made £7.6 billion available for investment in renewable technology, carbon capture and storage and, at the back end of that period, nuclear power, which she acknowledged recently as salient, because it is a low carbon technology.

Caroline Lucas indicated dissent.

Mr Hayes: The hon. Lady shakes her head, but it is, of course, a low carbon technology. All I am saying is that a degree of humility in these matters is important.

18 Dec 2012 : Column 829

That is not patronising—far from it. It is about acknowledging that we want a system that is robust but flexible; that takes a strategic view but that does so in a measured way; that is balanced, not extreme. We want a system that allows investors to choose from technologies that can stand up to the kinds of tests that the market would expect. That means that the technologies need to deliver and that they need to be resilient—technologically sound and commercially viable. I believe that that can be true of carbon capture and storage and of renewables, as scale grows and costs fall.

18 Dec 2012 : Column 830

As I have said, in my view, ours is a balanced, measured, moderate and humble approach. Before the hon. Lady speaks tomorrow, I hope she will think again about the Government’s position.

8.10 pm

House adjourned without Question put (Standing Order No. 9(7)).