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There is a consensus across the House that this is an important issue, and I think there is also agreement on the diagnosis of the problem. My noble friend Lady Kennedy placed this in the wider context of the state of our democracy. There is widespread agreement, which I am glad to see the Minister has noted, about the importance of the 2014 canvass. We heard some very powerful speeches in favour of the legal requirements and graphic illustrations from the noble Lord, Lord Rennard, as well as powerful speeches from my noble friends Lord Borrie, Lord Beecham and Lord Bach. There has been a widespread feeling that it is very important that this subject is approached on a bipartisan basis. We heard that from the noble Lord, Lord Tyler, from the noble Baroness, Lady Berridge-

Lord Wallace of Saltaire: On an all-party basis.

Lord Wills: The noble Lord is quite right to correct me on that. When I say bipartisan, I actually mean a cross-party, all-party basis. We heard a very important speech from my noble friend Lord Lipsey illustrating the dangers of the Government's approach. I very much hope that the Government and all Members of this House will study his speech in Hansard because he illustrated with great precision the dangers of the approach that the Government are taking on this. My noble friends Lord Kennedy and Lord Bach also placed great emphasis on this.

The noble Lord, Lord Lexden, quite rightly raised the question of overseas voters, and although there are issues about expatriates and those who do or do not pay tax, there is a very real issue about those who are on international service working for international organisations or studying abroad but particularly those who are working for organisations such as the United Nations. The noble Lord, Lord Hannay, who is not in this place today, raised this with me when I was a Minister. We were looking into how we could address this problem. I am not sure where the Government have got to on this, but maybe the Minister will take that away and look at it.

The noble Viscount, Lord Astor, very importantly raised the question of service voting. There were plans to deal with this issue under the previous Government but they seem to have been put on the shelf by this one. I hope the Minister will take them off and get on with it. It is a very important issue, as I think all sides of this House recognise.

I am grateful to all those who came forward with positive solutions-the important issue of ring-fencing mentioned by the noble Lord, Lord Brooke, and the useful and helpful contribution from the noble Baroness, Lady Berridge, on trying to get electoral registration tied into the way that citizens interact with the state. These were both measures that I tried to introduce as a Minister and I regret to say that I failed. I failed to get ring-fencing and to secure the sort of measures that the noble Baroness, Lady Berridge, was advocating. I hope that this Government will be much more successful than I am in taking these measures forward. They are very important. We heard some far-sighted contributions from my noble friends Lord Maxton and Lord Reid about the importance of electronics and information and communication technology. This has to be part of the future.



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Finally I am grateful to the Minister for his constructive and reasoned response. I am slightly surprised about how insouciant he appears to be about the risks of the register being damaged significantly by the approach the Government are taking. There is no evidence to support such insouciance, but I welcome his undertaking to explore further this question of a cross-party group. I particularly welcome the suggestion from the noble Baroness, Lady Berridge, for a more independent component as well as the cross-party complexion of it. I hope he will set this up quickly so we can deal with all these issues.

I am not sure how I am meant to conclude this new form of debate, but I have said all I should so I am now going to sit down.

Motion agreed.

Green Agenda

Motion to Take Note

2.15 pm

Moved by Baroness Smith of Basildon

Baroness Smith of Basildon: My Lords, I am grateful for the opportunity for today's debate on the Government's green agenda. It seemed to me that 20 months into this Government it would be helpful to have a look at the Government's green agenda and green policies and how they measure up to the Government's own commitment to be, as David Cameron announced on 14 May, "the greenest Government ever".

The Minister will recall my reaction when he announced in an earlier debate:

"My Lords, whether you like it or not, we intend to be the greenest Government ever".-[Official Report, 2/11/10; col. 1576.]

I assured him then that we did like it and would support that approach but we would hold the Government to account should they fall short of achieving their objectives. It is a laudable objective and a benchmark against which the Government can be judged on the progress they are making towards their target, although I think it is disappointing that having made that pledge, which was received with great enthusiasm and hope, the Government did not set up any mechanism to allow for any scrutiny of that pledge.

It is even more disappointing then that the Government abolished the Sustainable Development Commission. I understand, perhaps more acutely than most, that it is not always comfortable for Governments to be held to account for their promises, yet perhaps it is more important for this Government as the coalition programme for government was never endorsed by the public. When Ministers make statements such as "the greenest Government ever", it is important that progress against that pledge can be measured.

Many have taken the opportunity to do so. Noble Lords may have seen that the Guardian has a green-o-meter which seeks to track how the coalition is faring on a range of issues, such as climate change, wildlife and conservation, energy efficiency and renewable power. As of October it had judged 10 policies as being green,

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13 as not being green with the jury still out on four. It reserved its strongest criticism for the Chancellor's Budgets and Autumn Statement, describing Budget day in March 2011 as a "green catastrophe".

Wildlife and Countryside Link is an umbrella body of 35 wildlife and countryside organisations, representing more than 8 million people and managing more than 690,000 hectares of land. In its document Nature Check: An Analysis of the Government's Natural Environment Commitments it reports a mixed bag of results on the 16 major commitments on the natural environment. It praises the Government on two of their commitments on the international environmental stage but classifies seven as amber (delay and underdelivery) and seven as red (not delivered or delivered poorly).

Probably the most extensive of all the reports looking across Government is that from Friends of the Earth entitled "The Greenest Government Ever: One Year On". In its fairly forensic examination it concludes:

"At this stage, the likelihood of the Coalition Government living up to its 'Greenest Government Ever' pledge is vanishingly remote ... It is ... unavoidably depressing to see just how rapidly things have gone backwards since May 2010".

The RSPB says:

"If we're honest, Cameron's greenest Government ever feels like it is being unstitched day by day".

Then, following the Government's backward move to review the targets for halving emissions by 2025, the Environmental Audit Committee said:

"It makes business think that David Cameron is not really serious about being the greenest Government ever".

Perhaps most worrying for the Government is the response from the CBI, which has accused the Government of failing to provide the leadership that business needs for green growth. Those changing decisions on feed-in tariffs, the green investment bank and zero carbon homes make business and investors cynical and somewhat nervous about the Government's intentions and commitments.

Despite those criticisms, my sense is that these organisations-their members, investors and the public-really want the Government to succeed in being the greenest Government ever and they want green growth. If we go back to "like it or not", as the noble Lord said previously, we would like to note that, despite some rare successes with which the Government do themselves credit, the record and the omens so far are not too good. However, I hope that the Minister and the Government would be sensitive to such informed criticism-the Minister seems to find it quite amusing-and would want to respond positively to the concerns that are raised. As I say, those organisations want the Government to succeed. I will address just a few of those causes of concern, and my colleagues will raise others. I hope that the Government can find some way of addressing these to bring them back on track on their pledge.

The Green Deal is the Government's flagship policy for energy efficiency, thereby reducing carbon and providing warmer homes. I certainly support this objective, and the Minister has publically acknowledged how constructive we have been. Cold homes are a serious environmental, social and economic problem, and the Government have recognised that. A Save the Children

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study found that over half of parents on the lowest incomes worry that their children's health will suffer because their home is too cold. They are right to worry. It is estimated that cold homes cost the NHS £145 million every year. The real concern, however, is the detail of the secondary legislation that will make the difference between success and failure. The Minister has been very helpful and we had a short briefing on this yesterday, but I understand that the Government have now delayed the implementation because of the amount of detail that still has to be worked out. Even the Committee on Climate Change has felt the need to send an open letter to the Secretary of State to express its concerns about some of the details of the Green Deal and the energy company obligation. It is right to delay if it is a matter of getting things right to ensure that the Green Deal will work, but can the Minister tell me when he thinks that the first home will have energy measures installed through the Green Deal? How long is that now going to take? Despite our doubts about the details, we welcome it and want it to succeed.

A huge concern is the initial exclusion of the private rented sector, which has many of the least energy efficient and coldest homes. I welcome the statement in May from the Secretary of State, Chris Huhne, in which he said:

"From 2018, the rental of the very worst performing properties-those rated F and G-will be banned through a minimum energy efficiency standard".-[Official Report, Commons, 10/5/2011; col. 1064].

That would be great, but they will not. They will be banned only if they have not had any energy efficiency measures implemented through the Green Deal. If they have had those measures installed but are still, in Chris Huhne's words, one of the "very worst performing properties" they can still be rented out. I do not understand the logic of that. Either a home is one of the very worst performing, producing excess carbon or being cold, which should not be rented out, or it is not. I urge the Government to address this as a matter of urgency. Clearly, the Secretary of State thinks that it is policy, so it should not be too difficult to change.

The announcement of the green investment bank was warmly welcomed by green groups, businesses and investors. The initial announcement of £1 billion was topped up with £3 billion in the March 2011 Budget, but not only does this fall short of the £4 billion to £6 billion estimated by Ernst & Young as needed to make it work, but the money is dependent on the sale of assets which creates uncertainty. As the bank is unable to borrow or raise money until 2015, there has to be an indication from the Government, in actions as well as words, that they remain committed to the project, and that funding will be available to make it effective. The Pew Environment Group reported that the UK has fallen from sixth to 13th in the ranking of countries encouraging green investment with a 70 per cent fall in such investment. That is a dreadful condemnation and a serious retreat from the green investment under Labour.

Let us be clear. We want the green investment bank to succeed, but there is a lot more to be done before that is the case. The Minister is nodding his head; if he could give us some reassurance on that, it would be

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really welcome. Investment and investor confidence are crucial and are critical to the success of the green investment bank. The Government have to show leadership and commitment to ensure the confidence of investors.

I will examine one area of government policy on renewables that has badly shaken that confidence and offer a way forward. The solar feed-in tariffs were brought in by the Labour Government with huge success. The Chancellor announced a cap on funding in the comprehensive spending review and, in February, announced a review of all solar PV plans over 50 kilowatts. They were then ended. He then swiftly announced further changes in funding. It was not quite as straightforward as that. It seemed to be regular announcements coming out of the department on the changes that were going to be made and consulted on.

I know that the Minister is aware that the industry is reeling from so many significant changes so quickly. The real shock was when the level of the FITs was halved. I hope that, in trying to explain or defend this, the Minister does not fall into the trap of caricaturing the opposition to changes in feed-in tariffs as those who do not want any change at all. I know that he knows that that is not true. He knows that investors, installers and customers understood that changes and cuts were needed. But it is the speed, scale and way in which the changes were made that is so hugely damaging to the industry and its capacity to grow and further reduce costs. We now see something like 20,000 jobs at risk.

I do not know whether the Minister is aware that when he capped the scheme at 50 kilowatts, that is exactly what the energy companies originally lobbied for. Friends of the Earth has taken the Government to court over this. The hearing on the Government's appeal against the court's decision is tomorrow. It would be more helpful if, rather than appealing, the Government looked at and discussed it with the industry to see what less drastic action could be taken to ensure that the industry could continue to grow to a point where any government subsidy, if it was needed, was minimal. There is no doubt that the Government's credibility with investors has been severely damaged at a time when the Government's own energy White Paper confirms that £200 billion of investment is needed in our energy system to make it fit for the 21st century. Ernst & Young has stated that the whole investor market has been ripped up by the feed-in tariff review and that revisiting FITs at such an early stage of their existence has undermined investor confidence not only in the UK solar industry but also potentially in the wider UK renewables market.

There is still a way forward on this. The court case is tomorrow, but I urge the Government, even at this late stage, to seek compromise. The Minister will find, if he talks to those who are taking the action, that they are realistic business people who want solar to succeed and understand the Government's concerns over funding.

When the Government announced that their final remaining flagship carbon capture and storage project at Longannet had failed, the dismay felt was tempered by Chris Huhne's announcement, confirmed to me by the Minister, that the £1 billion of government funding

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would remain and that they expected further promising bids. Chris Huhne said, "Absolutely. No backsliding". But what now? In his Autumn Statement, the Chancellor raided the budget. Again, we come back to investor confidence, and whether investors are prepared to trust the Government on their track record. We all understand that the economic situation is difficult, but the constant merry-go-round of policy changes on CCS, FITs, the green investment bank and even on airport expansion is creating the very situation that the Government need to avoid: that of lack of direction and confidence. Investors need the Government to show leadership.

The real opportunity to show leadership and commitment to the greenest Government ever was in the Chancellor's Autumn Statement. The message that has come out is that environmental protection has to be sacrificed for jobs and growth and that businesses should not be burdened with social and environmental goals. This completely undermines positive initiatives such as the green investment bank and the natural environment White Paper.

I genuinely want to give credit where credit is due. The Green Deal could be a success. I hope that it is. We will work with the Government to do our best to ensure that it is. The Government's role at the 2010 Nagoya meeting was widely applauded. The 2020 biodiversity target deserves congratulations. The UK position on whaling and ivory continues to be firm. The Government's own carbon reductions exceeded their target. The Government have continued our commitments on climate change. However, the issues I have mentioned-the downgrading of zero-carbon homes, the scrapping of the Marine Renewables Development Fund, cuts to the Carbon Trust and Energy Savings Trust, badger culling, the proposed forestry sell off, the U-turn on airport expansion at Gatwick and Stansted, bringing forward the previously ruled-out proposals to build an airport in the Thames estuary and the one-third budget cut for Defra in the first spending review-all cause alarm. We all know that these are difficult economic times, but there is a real prize to be won if the Government can stimulate significant investment in green growth to meet their carbon reduction targets and create jobs.

The big question for the Minister today, after the débâcle of FITs and the lack of commitment from HMT to carbon capture and storage, is how the Government will be able to reassure investors and encourage green investment. That is really the response that I am seeking from the Minister today. If he can give reassurance that the Government have such a commitment, want to ensure that they are the greenest Government ever and want to attract genuine and significant investment that can address some of the concerns that have been raised, that would be a welcome response. The Government are right to have the objective of being the greenest Government ever. There is just a little more to do to match action to those words.

2.30 pm

Lord Dixon-Smith: My Lords, it is a great pleasure to me to stand up and play Essex boy to the noble Baroness's Essex girl. Like me, she is an Essex native and I like to think that we are something special.



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Baroness Smith of Basildon: I would like the noble Lord to stop there.

Lord Dixon-Smith: Flattery gets you everywhere. I wish to look at this issue of the Government's green agenda from a slightly different perspective and take a different line across country. I remind the House that we are talking about a great international problem, and there is no future in our finding a solution to our problems if the result is that other countries simply replace what we are doing and carry on in the way that we are at present. This is a problem that in the end every country will face. Third World countries living relatively simply today will have to look at measures such as those that we are examining.

The other point that is worth noting at this stage is that the two biggest carbon dioxide emissions countries in the world, the United States and China, are also the two biggest countries investing in green technologies. Perhaps there is something in that; it is a real and remarkable point. The fact is that every major economy in the world is concerned about this issue.

I am going to begin with an interesting fact. I have obtained some information from the Carbon Dioxide Information Analysis Center at Oak Ridge in Tennessee, in the United States, where a group has plotted graphically the carbon emissions performance of almost all the countries in the world. In the instance of the United Kingdom, that goes back to about 1750. We can all make those comparisons, and it is worth looking at what has happened in the past.

For the purpose of today's discussion, I wish to tell the House that we have pledged an 80 per cent reduction in our 1990 emissions. That implies that we are going to reduce our emissions to a point that we passed in 1850 when the population of this country was 22 million. That is the breadth and depth of the task that we have set ourselves, and it is a big one. We now have three times the population using five times the amount of energy, and modern society is energy-intensive and will continue to be so.

It is inevitable that our approach to begin with is based on what we can do immediately, because that must be the quick and easy way to start. We have the Climate Change Act and we have set targets. The Climate Change Committee actually reduced the targets -I am sorry; there is a question of whether it is a reduction or an increase-rather, it set a more severe target as soon as it was formed, giving us the 80 per cent figure that we have to go for. However, the question that tends to be asked is, "What do we have to stop in order to solve this problem?". My concern with that question is that the public at large see that as a negative question, and they do not like negative questions. Somehow we have to turn it around to a positive one: "What do we have to do in order to ensure that we can keep everything going?". That is a very different approach and one that would be much more acceptable to the general public who on the whole-I say as far as I am capable of experiencing the public's views-are rather bored by the entire subject and think that it does not really apply to them. At least if we get the long-term implications right, we should begin to make some progress.



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The present problem is exacerbated by an approach that appears to treat all carbon dioxide emissions equally. I am not going to say that carbon dioxide emissions are ever beneficial, but some are much more essential to society than others. When we look at the severity of that 2050 target, I suggest to the House that we are simply looking at having emissions by that date that are essential for society-everything else has to be emission-free.

I am going to be a bit daring and suggest some possibilities that are essential. We cannot do much about emissions from agriculture, currently about 8 per cent of total emissions. The food business is an international problem. The emissions largely come from livestock-it is not really an arable sector problem. Food is both essential and the biggest single emitter of the categories that I am going to enunciate.

The smelting industries are essential to society; we cannot do without our metals. Cement manufacture is essential to society; we cannot do without construction. And finally-I nearly used a phrase that I used once before and which got me into trouble-international transport, both aviation and shipping, are now essential to all communities across the world, and we cannot cut those back. We may need to think about treating the emissions from those sectors-other people may wish to add to that list-in a different way from how we treat the generality of emissions. Outside that field, everything has to become zero-emission.

That is a harsh analysis, but we need to be moving in that direction now. We need to start thinking about those distinctions so that we know where we are going, because they define the depth of the problem that we face in trying to make homes and all land-based business and transport zero-emission. We already have a basket of technologies that would make that possible. However, there is a problem: we do not know which of those technologies will in the end be successful in the international field. We are a country that lives by international trade and development going on across the globe. As I have already said, this is an international problem, so that factor is very important.

What particularly concerns me is that in the short term we can take decisions, partly as a result of this approach, that will actually make it more difficult for us to hit the long-term targets, partly because we shall be committing ourselves to technologies that are expensive and in fact will have to be written off because they do not prove to be internationally competitive. I regret to say that I see no solution to that risk-I wish that there were one-so it is one that we are going to have to take in our development. That means that we should not put too many eggs in one basket. It also means that we should not go too quickly at present. I do not care for the targets for 2020, 2025 or even 2030, unless and until we have totally considered the 2050 target and its implications for society at large. I am satisfied that that can be done. If you supply a house with nothing but emission-free energy, then by definition, Green Deal or no Green Deal, that house is zero-emission. The same applies to every business and, if we can do it, to transport; the technologies exist. We need to take a careful look at the long term, and use that to apply our policies today.



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2.39 pm

Lord Teverson: My Lords, I will not get into the Essex origins because we went through this in a previous debate and, as the noble Baroness has indicated, it is probably absolutely the wrong route to go down.

I will reflect very briefly on some of the history of climate change. It is now 15 years since the Kyoto Protocol was first signed, although it did not come into effect until 2005. Of course the noble Lord, Lord Prescott, was very involved in making sure that that was delivered, and it was a very important role for the United Kingdom at that time. We had climate change science at that time that meant that the international community really made choices and decided to move forward, not in a perfect way but it actually moved forward. It started by setting itself targets, it determined who should be in and who should be out, and so on. Of course, since that time the scientific evidence for climate change really happening has become stronger because of the actions of human beings on this planet. So that is the background to this debate.

During that time, certainly over the first decade, we had real motivation to make sure that not only the United Kingdom but the European Union and the global community started to bring in policies, targets and plans that would make a real difference to the future of our planet and to global warming. We had the boost of "An Inconvenient Truth", the video from the other side of the pond; in our own actions we had the Climate Change Act 2008 that went through this House and the other place with broad all-party consensus. On the whole, everything was gung-ho until a couple of years ago.

Now we are in a very difficult place in many ways, because climate change is no longer fashionable, it is disputed by many people despite the facts, and we have tabloid papers particularly criticising electricity bills because of renewables-very understandable in terms of the problems of increased fuel poverty. I was very pleased that the report of the Committee on Climate Change, showing the vast increases in energy prices between 2004 and 2010, of an increase of around £450, only about £30 was due to renewable technologies. However, we have had various other assaults in terms of climate change and the green agenda, some of them very properly driven not least because of the current economic climate. What is clearly on the minds of most households and families, and therefore on the minds of most democratically elected Governments, is their economic and financial survival. They are not looking to the year 2050, as we did with the Climate Change Act.

However, that does not change what is important and what is not. We have to solve both of those crises -one medium and long term, the other immediate-in terms of getting through the democratic processes and ensuring the planet's survival in the future. One of the main reasons I was very committed to the coalition after the last election when that possibility arose was the very strong green and environmental core to the coalition's programme. Of course, at that time we knew that there would be economic difficulties. We did

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not think that everything was fantastic in terms of the economy, but we did not realise just how long those difficulties would go on.

I will come to some of my caveats later, but I want to congratulate the Government on the number of things that they have done already. Earlier this week we had the announcement of HS2. The noble Lord, Lord Adonis, who was in his seat earlier in this debate, brought that back on the agenda, and this Government have moved forward with it. There has been the Green Deal, as the noble Baroness mentioned. As we went through that legislation in Committee, we had reservations about a lot of things, and there still may be a lot of things that have to be tweaked to make sure that it works. However, certainly on briefings that we have had since then, I am very pleased that the Government are putting a lot more emphasis on the involvement of local authorities to make sure that streets and districts as a whole are converted so that that really happens. Of course, the thing about the Green Deal is that it is around energy saving. So often in the past the emphasis has been on new technologies, on ways of decarbonising power-all of which are important. However, energy saving, which is one of the cost-effective ways of producing a decarbonised and less energy-intensive economy, has often been left behind. I hope that that programme will last for decades.

We have had the announcement about the third runway at Heathrow. What we will do in the future about air travel is a more difficult issue, but the UK Government have backed Europe in terms of the EU ETS and airlines. Despite considerable resistance from China and the United States, we have gone ahead with that programme. The smart meters programme is continuing. The renewable heat initiative-again, brought in by the previous Government-although a direct cost on taxpayers in these difficult times, fiscally is still going ahead. The carbon budgets have been confirmed by this Government and go way off into the future. So even during these difficult fiscal times, we have a government programme that the coalition has stuck to. It is delivering those commitments despite great opposition from some Members of the Conservative and Liberal parties in terms of wind power and other such issues.

I would be interested to hear about particular policy decisions in certain areas. The Green Investment Bank, which has been mentioned, is clearly a very important part of the Government's jigsaw in moving the green agenda forward. I think that needs to be in place and functioning fully in its ability to bring in funds well before the next election. I would again ask the Government to look at biodiesel, a very important UK industry, to make sure that that is not held back by some of the changes announced in the Budget. On the point that my noble friend Lord Dixon-Smith mentioned about carbon-intensive industries, the Government should start to look at carbon footprint accounting on carbon budgeting, as well as the production base, because that actually gets around that problem. One is not a substitute for the other; both of them should be taken into consideration.

I will mention two last measures. One is company reporting. In the Climate Change Act we had an amendment that brought in mandatory carbon reporting.

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The CBI is very keen that this starts and that it is defined properly. I would like to see that introduced. The last one is the whole area of research and development. It is something that we ought to be doing right across Europe, particularly when we have the new financial framework in Europe between 2014 and 2020. It is a combined European effort on research and development in climate change technologies.

I think that the Government have done well in resisting the pressure-sometimes even from the office of the Chancellor of the Exchequer-to pull back on their green agenda. I think we need to move ahead. We have not had a great result in Durban; we have had a much better one in Copenhagen. Now we need to get the rest of the world to follow us.

2.48 pm

Lord Prescott: My Lords, I congratulate the noble Baroness on getting this debate on climate change, particularly as we did not get a Statement after the Durban negotiations. I understand the reasons and cast no blame, but it is important that we continue to debate this. Funnily enough, there may be more public consensus on this big issue than on the economy. The Government are basically carrying through policies that we implemented. Therefore, I congratulate them on bringing forward their statements on green schemes and policies. They are statements at this stage and we need to see how far we progress with them. Whatever we decide on the matter of climate and negotiations, to achieve green policies there are number of areas in which we have to operate. It is not sufficient to get good agreement on a global scale; we must have policies and implementation at a lower level, where it really makes a difference.

Three phases are essential to implementing such a policy. One is the global one. I have to say that what the Government achieved-particularly the Secretary of State for Energy and the Environment-at the Durban conference that I attended, has continued the principles we established at Kyoto in 1997. They fell a bit at Copenhagen, and in debates in this House I have constantly said: "You will have to extend the period beyond the Kyoto date of 2012. You will have to make sure that you have the money and you cannot have the legal framework at this stage, although hopefully it will come".

In a debate in this House in November I asked the Government if they would adopt the "stop the clock" policy that I developed as a rapporteur at the Council of Europe. I am glad to say that that is exactly what happened. They have now extended the period. They have not got rid of the Kyoto deal but have extended it to 2016. That means that the proof of the pudding will be in the eating. When they meet next time at Rio this year they will have to flesh out the bones of the framework that was established at Durban. Thank goodness this brought us back from the disastrous conference at Copenhagen. We are on the right track but we certainly have not solved the problem. We need now to make sure that we have green policies at national, local and regional levels. The green schemes that we talk about are the nitty-gritty. If we do not get it right in these policy areas we will not readily be able to achieve the targets that we accepted in international negotiations.



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I come to the second strand. We are on the right path with global negotiations but we must put flesh on the bones that were agreed at Durban and must have policies ready by 2016. We are already behind time in achieving what we thought we would through the Kyoto agreement. Perhaps we have not made a big step for mankind but we have made a small one, and that is important; we are going in the right direction. However, I wonder sometimes whether the sledge and the huskies are going in one direction while the driver is getting himself into a quandary about whether food will be provided for the dogs to allow them to achieve their target-I am flogging that metaphor to death. Basically, it is important that the national policies are right.

Of course there are things that we could do more or less of with national policies, but there is not a great deal of disagreement on the general policies on energy, on the statements that we made and certainly on the statutory requirements that set our targets. No other country has done that. It started under the previous Government and has continued under this one. They have toughened up the requirements and we are going in the right direction; there is major consensus on that. As other speakers have mentioned, that is an important step forward in keeping the show on the road to achieve those targets.

I am a little doubtful about the 80 per cent target; that is a bit of climate rhetoric. I said to the Energy Minister: "You'll be dead by then so you won't know whether you're right or wrong". We should try to avoid that rhetoric because it will give my former Permanent Secretary a chance to get up and say that it is not realistic. No doubt he will say that again today. We did not say that in government, but I understand that this House is a different place. The national policies have achieved a great deal of what we wanted to secure to keep to the targets that we agreed.

The third strand is how policy develops from national to regional and local levels. I will make specific points about that and look at the demands for low carbon. The move to renewables means major changes in this kind of industrialisation. It is a new form of industrialisation. There will be major changes in the economy, in attitudes and in culture. We want people in the communities to play their part. At the moment they are sitting, observing and thinking that it is just a global problem. That is not the case. I will use my own area of Hull as a good example of regional policies. The Humber estuary is one of the few areas in which there are developments on both sides of the river. Perhaps we built the Humber bridge to remind ourselves of this. The Humber played a major part in the first industrialisation. The port did manufacturing, importing and exporting. Coal was brought in and exported. Industrialisation was located in coal, steel and iron-all in that area. Those industries are now very much on the sidelines, although I think that there is still a role for coal. I understand all the carbon arguments, but sequestration may help us towards a balanced energy policy that includes coal. Those debates will come.

Yorkshire, with its steel and coal, was almost the centre of the development of energy, wealth and manufacturing. That was the substance of the first

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industrialisation. The second industrialisation will be built on renewables. Investment in the assets of the estuary is already turning it into a major part of the new, low-carbon industrial development. The Humber has assets on its banks that are associated with that kind of development. It will play a major part in this change. We see that in many ways as we try to get a reduction in carbon. The Humber is almost the highway of the new industrialisation that will take place along its banks. Some of the old assets are being converted to a new, low-carbon development. Right at the bottom of the estuary one finds Drax with biofuel. It is a very important development that we seem not to treat as fairly as we do the wind industry. That argument will continue. There is a mix of coal and bio, with the deep water necessary for the estuary and the promise of building more biofuel plants.

I say to the Minister that there is a tendency to look at energy distribution and pricing in terms of the lowest price that the world market has decided, but one has to have a mix of energy. That is why we had nuclear power to begin with. We need to recognise contributions to achieve carbon reduction targets. It may be a little more expensive to use one fuel than another but we have often lived with that. We now have to put into the price analysis how it reduces carbon production. That is the target we have set ourselves. We need mixed energy. It is no good concentrating simply on what is cheap internationally. We already have gas coming from certain parts of the world that we are not very happy with. I think we are all agreed that we need a balanced energy policy, although there will still be arguments about the mix.

When we contrast investment in biomass with that in the wind industry, we find that we do not give generously to the biomass industry. Those arguments will continue and I will contribute to them. We are also developing tidal power on the estuary. That is very important. It is difficult but it is certainly part of the development that is already going on now. The maritime port of Hull now calls itself a green port because it is the area in which Siemens is investing. Billions of pounds will be invested in wind turbines. Whatever the arguments about that, it is under way. We are a major centre for production, too. Coal sequestration was referred to. We have the infrastructure that brought gas in. With sequestration we can take it out of the coal industry and put it into the empty holes in the North Sea from which we originally took gas. That, too, is important infrastructure for lowering carbon emissions.

Best of all, we have wind, wind, wind. We no longer have just fishing and ports. Wind is our biggest asset at the moment. I know that it is controversial, but there is a lot of it up there. A lot of our people in east Yorkshire are not very happy about it; they do not like the high towers. They do not mind lighthouses or electric pylons but they do not want these things, which spoil their picture-book view. However, I am concerned about prosperity. My final point is that the local council, led by Steve Brady, is very much involved in the green city of Hull.

I will finish with one quick point. The community must do something. I managed to get my community to work on one idea. We are an energy poverty area;

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lots of people are in energy poverty. We got E.ON to agree to put smart meters in people's houses. The Archbishop Sentamu Academy works to get children to take the meters home. If you want to influence parents, get the kids on your side. They will soon say: "Why are you using energy in this way? Can you cut the cost of energy? Can we reduce carbon?". Cutting the cost of energy means that they improve the quality of their life. That is a better way to put the point across.

For all these things-in culture, technology and the regions-I invite the Minister and the Government to come and look at the estuarial development of low carbon, a new river of prosperity. It is good for the region and good for the country, and I hope with their green investment funds and other bodies they will take that into account and look at perhaps prioritising investment on a regional basis in the Humber, in Hull, and in the areas surrounding Humberside.

3 pm

Lord Turnbull: My Lords, in a short debate, I will concentrate my remarks on one issue only, the governance of the science, as this is vital for the credibility of the thinking upon which the Government's policies are based.

In a debate in December 2009 on a report by the Committee on Climate Change, I said:

"Below the surface there are serious questions about the foundations on which it has been constructed".-[Official Report, 8/12/09; col. 1051.]

Over the subsequent two years my concerns have increased rather than been assuaged.

The governing narrative for our climate change framework can be summarised as follows. Our planet is not just warming-this is not in dispute-but the rate of warming is projected to accelerate sharply: rather than the increase we have witnessed of less than 1 per cent per century, by the end of this century the planet is projected to be around 3 degrees centigrade hotter, taking the centre of the range. Some time during this century we will pass a 2 degree centigrade threshold, which is portrayed as a tipping point beyond which serious harm to the planet will occur. The main driver of this is man-made CO2 and the principal response must be the almost complete decarbonisation of the economies of the industrial world less than 40 years from now.

This narrative is largely based on the work of the Intergovernmental Panel on Climate Change, so the competence and integrity of the IPCC are of huge importance if it is to drive the massive social and economic changes being advocated. The reliance that one can put on the report of the noble Lord, Lord Stern, is also at issue, since it adopted large parts of the IPCC framework.

Over the last two years, there have been three separate reports on the IPCC. They are: the report by the InterAcademy Council, a collective of the world's leading scientific academies; the report written by Professor Ross McKitrick, a Canadian professor of economics who for a time served as an expert reviewer for the IPCC's fourth assessment report; and a book, The Delinquent Teenager Who Was Mistaken for the World's

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Top Climate Expert
, written by Donna Laframboise, a Canadian journalist. Although they write from three different perspectives, in different styles, the message is the same: there are serious flaws in the competence, operations and governance of the IPCC.

The reality is a long way from the way that the IPCC describes itself. The IPCC claims that it employs the top scientists in the field; it uses only peer-reviewed material; its staff are independent and impartial; its operations are transparent; its procedures for review are rigorous and free of conflicts of interest; and its role is to present objective scientific advice to policymakers, not to advocate policy responses. None of these claims is true.

There are many instances where it has not employed the top practitioners in the field, and worse, many instances where it has employed researchers who have barely completed their PhDs-and in some cases not even that. There has been substantial use of "grey"-that is, non-peer-reviewed-literature. The IPCC has been extensively infiltrated by scientists from organisations like Greenpeace and WWF. There is no transparency about how its lead authors and reviewers are selected and what their expertise is. It has been obstructive to outsiders seeking information on data sets and working methods. It is resistant to input from those who do not share the house view. It was specifically criticised by the IAC for not giving sufficient weight to alternative views.

Its review procedures are flawed, allowing too much latitude to lead authors in choosing which of its reviewers' comments to accept or reject. It has allowed lead authors to introduce new material after the review phase has been completed. Its policies on conflict of interest are inadequate. It blatantly adopts an advocacy role rather than confining itself to scientific advice. Its Summary for Policymakers is a serious misnomer. The scientists prepare a draft but this is redrafted in a conclave of representatives from the member Governments, mostly officials from environment departments fighting to get their Ministers' views reflected. In short, it is a Summary by Policymakers not for Policymakers.

In a pamphlet I wrote last year for the Global Warming Policy Foundation, chaired by the noble Lord, Lord Lawson, I said:

"In my opinion, the IPCC and its current leadership no longer carry the credibility which politicians need if they are going to persuade their citizens to swallow some unpleasant medicine. It is therefore regrettable that the UK Government has taken no steps to find an alternative and more credible source of advice".

I see no signs that serious reform of the IPCC is on the agenda for the fifth assessment. The IAC specifically recommended that the chair should serve only for one cycle. Meanwhile, Chairman Pachauri doggedly clings on.

In the field of governance, things are not a great deal better in the UK. We have seen a second instalment of the CRU "Climategate" e-mails, which tell us little new but confirm the culture of shiftiness, obstruction and the stifling of debate seen in the first instalment. We still hear from time to time the mantra of, "The science is settled, the debate is over" from politicians and even from some scientists.



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Therefore, I was very heartened to hear Professor Brian Cox, the pin-up boy of British science, and his colleague Professor Jeff Forshaw on the "Today" programme recently. Professor Cox said:

"Science is an improvement in our understanding of nature ... There are no absolute truths in science. It's the only human endeavour where that level of modesty applies".

Professor Forshaw said:

"We are always trying to improve on the theories we have got ... And we always expect that they are going to be just temporary structures and that they are going to be replaced at some point".

So let us have no more "the science is settled/the debate is over" nonsense, particularly in the field of climate science, which is so complex and so young.

My view on the Durban conference is that while many of the participants came away disappointed, it was a sensible conclusion-in the words of the noble Lord, Lord Prescott, to "stop the clock" on the emissions issue for a decade-while the science improves and the evidence accumulates, an approach I have heard suggested by the noble Lord, Lord Rees of Ludlow. However, there is good news to report. The Chancellor of the Exchequer has drawn the UK back from its extreme unilateralism, for which he should be congratulated rather than criticised.

Finally, I have a few personal observations. In my pamphlet I wrote that,

"if a technology exists only by virtue of subsidy we only impoverish ourselves by trying to build jobs on such shaky foundations".

The debacle in the solar sector was, therefore, entirely predictable. My second observation is that if a debate with the same title as today's had taken place 15 years ago when I became Permanent Secretary at the old Department of the Environment-where I had a very happy year working for the noble Lord, Lord Prescott-it would not have been so dominated by decarbonisation but would have been much more about those aspects of the environment people care deeply about: air and water quality, habitats, birds, forests and the countryside. How sad that the issues have been pushed so far down the agenda, accelerated by the misconceived transfer of climate change from Defra to DECC.

In 40 years engaged on public policy, I have come across a number of cases where there was a strong international consensus among political elites, but for which the intellectual underpinning proved to be weak, as those elites were slow to acknowledge. The first was the so-called Washington Consensus which came to be seen as promoting globalisation with the maximum liberalisation of trade and finance and the minimum of regulation, but it turned out to overestimate the efficiency of markets. I confess that I swallowed that one pretty much whole. The second is the euro, where the European political elite pressed on despite warnings about the internal contradictions of the project and even now, it has yet to acknowledge the full extent of the problem. I never bought into the euro from the start.

Climate change-or more accurately, the current decarbonisation project-is in my view the third. Originally I bought in to the IPCC narrative on the science and its impacts while remaining critical of the policy responses.

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However, the intellectual certainty is beginning to crumble. In the next 10 years I believe we will see the current narrative replaced by something more sophisticated -perhaps drawing extensively on the work of the noble Lord, Lord Hunt of Chesterton, who will speak shortly-more eclectic, less alarmist and, in Professor Cox's words, more "modest" in its claims.

3.09 pm

Baroness Worthington: My Lords, I thank my noble friend Lady Smith for securing this important debate. I would like to take a minute to respond to the statement made by the noble Lord, Lord Turnbull. It strikes me as not at all modest to suggest that we should stop our investment in alternatives to fossil fuels and wait for 10 years. If it happens that the noble Lord, Lord Turnbull, and similarly sceptical climate commentators are wrong, we are risking the future of the planet. If we turn out to be wrong, all we will have done is diminish our reliance on fossil fuels, which seems to me a good thing given that they will run out anyway and that they lead to lots of additional problems to do with air quality. It is not modest at all to say that we should stop; it is terribly arrogant to assume that we should risk the entire planet. Anyway, I am sorry-I shall return to my speech.

On the coalition's record on stimulating green growth, I will come across as being quite negative, although I will end with a positive, as it is not all bad. What I want to focus on is where the main problem lies within government. It is not with DECC; in fact, I think that the Department of Energy and Climate Change has done quite a good job of continuing many of the policies that were introduced under our Government, with substantially less budget, so I think that congratulations are in order. The problem lies with the Treasury and particularly the hypocrisy of our Chancellor on this topic. He is responsible for introducing revenue-raising policies masquerading as green initiatives, which, in reality, push up the costs of energy prices while delivering no environmental benefit. Yet it is the same Chancellor who is undermining investor confidence and risking the increase of the cost of capital for investors by calling into question the UK's green ambitions. This seems ludicrous.

I shall use a couple of examples. The carbon reduction commitment-I have to admit that it was never a very attractive policy-applies to downstream emissions of greenhouse gases from large commercial energy users. A large portion of these is already capped upstream, so it is, in effect, a duplicatory policy. However, it was at least designed to be an awareness-raising policy in boardrooms. It was also designed to be revenue neutral, with the proceeds of all the auctions being returned to the participants. One of the first actions of the coalition Government was to change all this by deciding that the revenue should be kept by the Treasury. This, of course, raises costs for all the participants, which in turn will be handed on to consumers. Does it deliver a significant environmental saving? No. As I have just mentioned, a large part of these emissions is already capped. Any savings will simply be traded away within Europe as a result of the way in which the Emissions Trading Scheme works. While the Chancellor may claim that he is putting the brakes on our getting too

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far ahead of Europe, it is in fact his department that is doing exactly that. He is adding additional costs relative to our European neighbours through his redundant policies.

The second and possibly more worrying policy is the carbon tax, which takes the form of a floor price in the carbon market. This policy applies directly to participants in the EU's Emissions Trading Scheme, which applies to 50 per cent of the UK's emissions and covers our largest point sources of emissions-our power stations and heavy industry. This flagship European policy is currently failing. It is not stimulating a significant investment in abatement-in reduction-in emissions because, for three of the four years during which it has operated, the cap on emissions has been higher than the emissions themselves. The regulation has, therefore, become almost redundant.

The solution is to adjust the cap to create greater ambition. That would rebalance the market, make sure that there were more buyers in the market than sellers and help to boost the price. That is the solution. It has not, however, been achieved to date. Sadly, that is partly because of this Government's inability to control their Conservative MEPs, who, last July, voted against efforts to tighten the cap. While we see Conservatives in Europe blocking progress, we have a Chancellor at home deciding to take unilateral action to increase the cost of emissions allowances in the UK. This is the Treasury's policy and it pushes up costs again relative to the rest of Europe. How can the Chancellor be putting a brake on our ambition? It simply does not add up.

The question is: to what end? There is certainly no environmental benefit to this policy. As I said, the way in which emissions trading works is that, if any reductions are achieved additionally in the UK, this simply frees up allowances to be sold to would-be polluters in Europe. It does not, therefore, have any additional environmental ambition, which can be achieved only if we remove the allowances, rather than just making them more expensive.

The stated aim of the policy is that it should create investor confidence, which will lead to the building of new infrastructure, particularly in the power sector. That is a laudable aim, but is this the best policy to achieve it? I would say that, if such large amounts as are being raised by this tax are being raised, there should be at least some guarantee that they will be spent on something that is actually built. The renewables obligation definitely adds to energy bills also, but it is designed in such a way as to ensure that something is actually built. There is no such guarantee with the carbon floor price. It is simply a means of raising revenue for existing players in the market. The main beneficiaries of the carbon floor price are the owners and operators of existing low-carbon infrastructure, who receive a large windfall as a result of not being exposed to the unilaterally inflated carbon price. This translates to British Energy and EDF. The income that they will receive from this policy may or may not be spent on the building of new nuclear reactors, or it may simply disappear into the company coffers.

The clearest indication that this policy is not delivering what is claimed is the fact that, on top of this, the Government are currently consulting on radical changes

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to our electricity market. If this un-green carbon tax were doing what it was supposed to do, why would we need to consult on a long-term fixed price contract for new build, which is part of a proposed package of reforms to our electricity system? It seems to be a belt and braces approach, which indicates that perhaps one of these policies, at least, is not needed. If the Chancellor is concerned about green policies and the fact that they might be putting an undue burden on our economy-when, in fact, they are probably stimulating growth and investment-he really only has himself to blame. His policy is the least useful and most expendable among the mix.

This leads to strange outcomes. Unfortunately, the Business Secretary, Vince Cable, was very damning about the UK's carbon budgets, but in fact they are a sensible policy and he would have been far more effective if he had focused his ire on the carbon floor price and the changes to the CRC scheme, which directly raises costs for the businesses that he represents. His intervention has led to a conditionality being applied to the carbon budgets, which now sends mixed signals. The UK's landmark Climate Change Act is seen as an example by many around the world of solid leadership on climate change. Indeed, earlier this week I was lucky enough to take part in a meeting hosted by Globe with a delegationof Chinese lawmakers who had come over here keen to learn from our experiences as they draft their own legislation on climate change. Sadly, we have gone from a good policy to the introduction of a review clause that muddies an otherwise crystal-clear policy that can create good, sound investor confidence.

The other serious issue that I want to raisein relation to the Government's performance is their handling of policies that are designed to stimulate investment in clean technologies. I will not dwell on the feed-in tariff fiasco, which my noble friends have already touched on. My concern is a more general one. The Government appear not to be able to see the difference between winners and losers in the race to develop new low-carbon technologies. They seem to be enslaved by slightly flawed economic models of how the world should behave and are not applying themselves to noticing how it does behave in reality. If we are guided purely by these models, my fear is that we will continue to be forced to cut off at the knees industries that are starting to blossom while vainly clinging to the notion that some of the tried and failed technologies will one day come and rescue us.

I want to mention the renewable heat incentive and the renewable transport fuels obligation, which are both examples of policies that can lead to the stimulation of jobs in new industries. However, we must learn the lessons from our experience of the feed-in tariff and have sufficient flexibility to ensure that, if those policies introduce changes, we can give sufficient notice to the industries concerned.

I shall end on a discussion of whether the tried and failed technologies that we talk about a lot will deliver, and by that I mean the current generation of nuclear reactors. We often hear the promise that we are going to build eight or even 10 new reactors to replace the ones that are closing. My reading from those whom I speak to in the industry is that there is a great deal of

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cynicism about this. It is very unlikely that we will see the scale of build that the Government are anticipating because our current reactor designs are simply not attractive. As one executive who had looked at both designs put it to me, "They are both pretty awful and we do not like them". I think that a nuclear renaissance is possible and indeed desirable, but it will have to be achieved by looking at the full range of new generation nuclear reactors. It will come as no surprise that I shall mention thorium molten-salt reactors, because of all the technologies that I have looked at in relation to climate change this one has huge potential. If we were able to match the amount of money that we are currently spending on nuclear fusion, there is no doubt that we would develop a technology that had massive potential for export. I would like to mention the Lords Science and Technology Select Committee report on nuclear research and development. It is an excellent report and I hope that the Government will respond to it, because we really do need to look again at our spending.

3.20 pm

Baroness Miller of Chilthorne Domer: My Lords, I congratulate the noble Baroness, Lady Smith, on securing this debate, but I note that her Motion talks just about the Government's green agenda. I agree with the noble Lord, Lord Turnbull, on one point: it would be regrettable if we interpreted the green agenda as meaning just carbon reduction or even climate change; it goes much wider than that. As for his other remarks, I agree with the noble Baroness, Lady Worthington, that what we should be talking about is our use of resources and the need to drive down our use of non-renewable resources, even if the science of climate change is wrong and the survival of the planet is not under threat. Trying to preserve as many resources as we can for future generations is our absolute responsibility.

I shall confine my remarks today to a completely different issue on the green agenda, and that is food. Of course, food encompasses energy use, land use and water use, while the food we waste has big implications even in terms of climate change when we consider methane escaping from landfill sites. That leads to my first question for the Minister. Other countries in the EU have now set a final date in many cases of 2015 for ending the dumping of biodegradable waste in landfill sites. Is the UK going to reconsider this? There are so many useful ways to utilise waste food. Separation technologies have progressed a long way, so it is no longer only a question of anaerobic digestion processes. However, anaerobic digestion allows the heat generated to be used and the resultant fertiliser to be used on farmland. There are a lot of interesting things to think about in this area. One of the most useful things that has happened recently is the quality marking given by the Environment Agency and WRAP to the fertiliser produced by this process. Farmers can now be sure that they are using a quality product and do not have to worry about it.

I also want to share with the House today a couple of particularly inspiring matters that Members of the House may have heard about on the BBC Radio 4 "Food Programme", which itself deserves an award.

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The first is the Derek Cooper Award, which recognises long-term work. In this case, it went to a partnership between the Health Education Trust, Garden Organic, Focus on Food and the Soil Association for all their work with schools on improving school food and children's understanding of where food comes from, as well as every aspect of how children are impacted by the food they eat. I cannot think of anything more important. The noble Lord, Lord Prescott, referred to the effect that children can have in their homes by influencing their parents, so this is not just about the children.

In schools where the Food for Life Partnership has worked, there have been tangible benefits. For example, twice as many primary schools received an "outstanding" Ofsted rating after working with the Food for Life Partnership. Nothing could be more tangible than that. I am very pleased that this Government have been encouraging that sort of very practical and important work on food in schools. Sarah Teather, the Minister with responsibility for schools, has brought in new powers so that schools will, for example, be able to offer price promotions on meals to particular pupils, encouraging more children to try a healthy school lunch. There has always been a bit of tension between local takeaways encouraging children to go in and buy a portion of chips and school canteens selling a healthy school lunch. Freeing up schools to be able to offer healthy food cheaply sometimes, as a special promotion, is really important.

The other award went to Jeanette Orrey, who has probably done more for school food than almost anybody else. She was a dinner lady but I guess she does not have much time to be a dinner lady now. She got an MBE in the New Year Honours List for services to food in schools. Those people have influenced the up-and-coming generations tremendously.

Two other examples of communities-one very big and one very small-greening themselves were outlined recently in your Lordships' House on 6 December 2011 to the All-Party Group on Agroecology. The group heard first from Rosie Boycott, who is chair of the London Food Board and its subset Capital Growth. She told us of Capital Growth's ambition to create 2,012 new growing spaces for people to grow their own food in London. This is incredibly important when you consider how few allotments there are and how long the waiting lists are-you can be on the waiting list for just about your entire adult life. This organisation has set about creating new growing spaces in, for example, skips behind Kings Cross, which is being developed. When the development moves to its next stage, the skips can be moved. Some have been created on unused land that is earmarked for development. So far, Capital Growth has 1,460 vegetable growing spaces in the capital, 50,000 volunteers, which is a phenomenal number, and 50 hectares of land. The project involves 21 London boroughs, 10 housing associations and 10,000 schoolchildren.

One of the very interesting things that Rosie Boycott told us as she showed us some fantastic illustrations of beans growing up the sides of buildings and beehives on the tops of buildings was that the spaces are never vandalised. The tangible, measurable benefits include

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better health, literacy rates going up, obesity rates dropping, an increase in science uptake in schools where there is vegetable-growing, lower crime rates-the police said that a community vegetable space means that fewer bobbies on the beat are needed-attractive routes to work and an entrepreneurial impact. Therefore, some of the work that the London Food Board has been doing reaches out far beyond food.

At the other end of the scale in terms of size but certainly not in terms of impact, the all-party group heard from Mary Clear, who has led a project in the small town of Todmorden, which has renamed itself "Incredible Edible Todmorden". She was probably the most inspiring person I heard speak last year. She told us why food is an agent for change and why growing food builds communities. She described how they had even persuaded the police to allow a vegetable garden to be built outside the police station. When the PCT was going to be rebuilt and had £20,000 for landscaping, they hijacked all the money in order to plant orchards and an apothecary garden. They also have pick-your-own herbs at the station. The fire station joined in, as did six primary schools and a secondary school. It is hard to put over the enthusiasm and energy that this town has brought to this project, but it has clearly brought the whole town together and the streets are lined with vegetables and fruit trees. It is quite incredible. If that can happen in the sort of climate that you find in the north of England, it could happen anywhere in the UK.

We should think of food as an agent for change and for reminding people why "green issues" means something much wider than just carbon reduction. We need to see it from an entrepreneurial perspective as helping economic growth as well. We must return to thinking of the green agenda as being wide, and a very good place to begin is with food. I thank the noble Baroness, Lady Smith, for giving us the chance to debate these issues today.

3.30 pm

Lord Hunt of Chesterton: My Lords, I am extremely pleased to follow the noble Baroness, Lady Miller. I used to be on the allotments committee of Cambridge City Council and tried to connect allotments with education, but without great success. Maybe, 20, 30 or 40 years on, this great development will occur. I welcome this debate also for the presence of the noble Lord, Lord Marland, who I know has put huge effort into his position as Minister, and some great benefits have come from that. But this is obviously the sweetener before a few critical remarks.

The broad aim of green policies is to preserve the natural environment for present and future generations, and to enable people to live safely and well in harmony with the environment. Most people now live in the very complex, unnatural and artificial environment of urban areas. As we have just heard from the noble Baroness, Lady Miller, that is an area, too, that we can be very creative about.

I declare an interest as a director of an environmental company and president of an environmental NGO, ACOPS.



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In an open democracy, environmental policies should be not only acceptable but actively supported. All this requires that information and advice should be available to politicians, local government and the public. Although the climate change committee, which I am pleased to say survived the Government's culling of NGOs and bodies and agencies of that sort, will continue and is certainly proving its independence, I regret that there has been a considerable abolition of the bodies that have been important in providing environmental information. The Audit Commission had an important role for local government; the Health Protection Agency has been "secretised"; research councils have become partly "secretised". I heard recently that scientists in research councils have been told not to talk to politicians without permission from BIS. This is an extraordinary situation. It is a bit like Russia in the 1970s, when we used to have conversations with the taps running, or Washington, where I can talk to government scientists only by going to Starbucks. I hope that we have not reached that stage, but it is looking like it.

The UK has a history of bold and innovative environmentally oriented policies, even when these required people to change their lifestyle and pay more. They began with the banning of open coal fires in the 1950s, which was a massive cultural change in the UK-it was of course introduced by a Tory Government. Pedestrianisation, as I know from Cambridge, was a considerably controversial matter. In London the congestion charge has been a great success and has brought about a 20 per cent reduction in traffic, whereas, as we heard this morning in a meeting to do with green policies in local government, it seems to be politically impossible still for any other borough in this country to introduce something like it. The present Government are not campaigning on that issue, yet air pollution in London and all cities of Europe is exceeding health standards and is not significantly improving.

I am delighted that the present Government are continuing the Labour policy of investing in urban rail systems, which is an important part of reducing traffic pollution, but they are not campaigning or legislating to reduce motor vehicle traffic in towns. With 20,000 to 30,000 deaths per year caused by air pollution, this should be a central policy for a green Government. Indeed, this Government are now proposing to increase the speed of cars. I suppose that you might say that the only green thing about Mr Toad was the colour of his skin.

Regarding another environmental issue, 2012 will be a very important test for the Government and particularly for Defra. I am pleased that the people in the Box today can talk to their colleagues in Defra. Defra will be implementing the marine Act, which was the really important environmental measure of the previous Government. In general, it was not a party political Act. Importantly, this year there will be a number of marine protected areas around our coasts. It is of great concern to NGOs and many bodies that the Government will weaken and not resist certain fishing, extractive industries and leisure interests, so there will not be as many MPAs, strongly policed, as there needs to be.



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One of the points made during the pre-legislative scrutiny of that Act was that we had uncertain data from Defra but extremely clear data from the European Commission. A witness talked about the reduction of fish in the waters of northern Europe and of the urgent need for these marine protected areas. New Zealand, of course, has shown emphatically that a rigorous programme of MPAs can lead to the preserving of fish stocks. We are in a critical situation. Any green Government should regard this as a very serious matter. It is also very important to negotiate with our EU partners because there are complications about applying marine protected areas when there is European fisheries legislation.

Another crucial area which many of us have discussed today is the environmental policy for reducing greenhouse gas emissions. The present Government have certainly pushed with gusto-I think that is the word I would apply to the Minister-Labour's policies for international agreements plus a vigorous national programme for lower carbon energy systems. I am particularly delighted that, like many of our Lib Dem Members, Mr Hoon has changed his spots and now strongly supports nuclear energy. The Government have also pushed forward the large offshore wind and energy conservation programmes. The noble Lord, Lord Prescott, referred to the wind programme. The UK should certainly reach the target of 30 per cent or more of its energy coming from zero or low-carbon sources by 2030. It will perhaps even exceed that. However, we should not be too boastful because in France, which of course has the lowest carbon footprint of the developed world, the Left and the Right are debating whether nuclear sources will provide 80 per cent or 50 per cent of its electrical energy. We are a long way off that.

I hope the Minister is also thinking about our nuclear programme, in so far as we do not want to repeat the mistakes of the 1960s when the two famous great nuclear Lords, Lord Marshall and Lord Hinton, produced a variety of nuclear solutions which led to Britain never exporting a single nuclear power station except Latina in Italy. So we very much hope the new programme will be systematic, and that we will use this investment to develop a UK industry. However, we will not do this by having five different nuclear power stations.

As political parties advocate the UK's contributions to reducing global emissions, they all have to acknowledge that there is a reduction in popular support for measures to deal with global warming. There is overwhelming scientific evidence for climatic events resulting from the effects of greenhouse gases, especially in developing countries and Arctic areas. Politicians in Durban and South Africa pointed this out at a meeting in Bangalore in the summer to discuss Asian climates. The consensus is emphatic.

Some of the popular understanding comes about because of the statistics of the measured trends. It is a fact that over the last 10 years the average of the temperature of both the land areas and sea areas has been static. However, over the land areas the temperature has risen significantly and over the sea areas, particularly in the eastern Pacific, it has fallen. There is a technical oceanographic phenomenon of cooler water coming

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up from this area. It is remarkable that an area of a couple of thousand square miles off South America can affect the global average surface temperature. In the deeper layers of the ocean, the temperature is getting warmer. This is why we are seeing strongly a steady rise in sea level.

At Durban, the director general of the World Meteorological Organisation presented the explanation that I have given today. I understand that an explanatory leaflet produced by the Parliamentary Office of Science and Technology-POST-will be in the Library in a few weeks. A consensus of modelling suggests that, with the emissions going on around the world, we should certainly see a rise of three or four degrees by 2100. These are extremely serious effects. It is why China has such a strong programme: it has already seen a rise of two degrees since the 1960s.

Finally, I should emphasise that the Government are continuing the programme of the previous Government, that green policies must also include the vital element of adaptation to climate change. We have a very strong sub-committee on adaptation chaired by the noble Lord, Lord Krebs. It is important to have precautions against extreme precipitation or flooding and, if possible, to do the kinds of things that they do in the Netherlands of having dykes with windmills on top so that we combine adaptation with mitigation.

3.40 pm

Lord Judd: My Lords, as a former director of Oxfam, I start by paying tribute to the quality of the work, research, analysis and advocacy on the issues we are debating contributed by NGOs such as Friends of the Earth, Oxfam, Tearfund, Save the Children, Christian Aid, CAFOD, ActionAid and others. I am sure that my noble friend, whose debate is so timely, would agree that their thousands of dedicated supporters across the country deserve our warm appreciation for making possible our input to these deliberations. The briefs are impressive and helpful. I just hope that I can do justice to those for today in what I want to say.

Notwithstanding the gravity and scale of the economic challenges facing the nation, Europe and the international community as a whole, by far the greatest challenge remains climate change. The Prime Minister on taking office seemed to have grasped this with his "greenest Government ever" prediction. However, George Osborne's contribution to the last Conservative Party conference was an explicit break with the broad consensus that has emerged in recent years that tackling climate change and protecting the environment are essential to and not in contradiction with a modern, successful economy. Indeed, the CBI and the Federation of Small Businesses recognise that. Why has the Prime Minister failed to challenge the Chancellor and reassert his own commitment? Economic discipline requires that we get the climate change priorities convincingly in place. If we do not, the economic catastrophe that will face us all will dwarf our current preoccupations.

The feed-in tariffs have been a resounding success, creating 30,000 new jobs delivering community ownership of energy, reducing energy bills significantly, including some for the poorest people in social housing, creating green energy and transforming how people think about

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energy. Yet I am afraid that the Treasury-imposed cap and the way that the Department of Energy and Climate Change handled the reduction in tariffs needed in line with falling solar panel costs is jeopardising the jobs created and the future of solar in the United Kingdom.

Instead of appealing against the High Court's decision in favour of the challenge brought by Friends of the Earth, Solarcentury and HomeSun on the handling of the case, why have the Government not ended the damaging uncertainty over the tariff level and established a system which enables feed-in tariffs to fall from mid-February, in line with the falling costs of solar technology, thereby supporting the continued growth of the industry and the employment opportunities? Why have they not increased the overall budget for the feed-in tariffs, using tax revenues generated by the jobs created, thus enabling more households to benefit from solar power? Why on earth have they not excluded housing associations, schools, council and other community projects from the damaging proposal to give multibuilding projects ever lower financial support? As things stand, if one thing is certain it is that they are making foolhardy, short-term economies at the price of aggravating the long-term economic costs and dangers to the nation. The noble Lord, Lord Stern, has estimated that in the long term, climate change could cost 5 per cent to 20 per cent of gross domestic product. He argued that this projection must be factored into the current discussion about the UK economy. Here at least the Government deserve commendation for having adopted the recommendations of the climate change committee in setting their most recent carbon budget: a 60 per cent reduction on 1990 levels by 2030.

As the key NGOs with front-line experience keep reminding us, it is the poorest countries, like Ethiopia, Sudan, Malawi and Bangladesh, which are most exposed and vulnerable to the consequences of climate change. The World Bank lists the main existing impacts and the accelerating future threats to such countries as droughts, famine, floods, sea-level rises and adverse impacts on agricultural production. The Humanitarian Response Review, led by the noble Lord, Lord Ashdown, underlined that climate change was likely to increase the frequency of disasters and that from 2015, such disasters might affect 375 million people every year. Tearfund, for example, describes as "imperative"-they use that word-the prioritising by Government of international climate change issues and of identifying and securing long-term additional finance to meet the challenges of mitigation in the reduction of emissions and of adaptation.

Tearfund, Oxfam and others, with their invaluable experience, firmly welcome the role played by DECC in international negotiations. Nevertheless, while recognising that the agreements recently reached in Durban are positive in laying the foundation for a comprehensive framework from 2020, they, like many of us in this House, are dismayed at the lack of short-term targets for reducing global emissions. Surely the Government should continue to press for a European target of a 30 per cent reduction by 2020 and to champion climate finance and the redirection of fossil fuel subsidies as the way of driving low-carbon development.



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The UK has arguably made a good start by delivering on its fast start climate finance commitment of £1.5 billion and establishing the international climate fund at DfID. The emphasis on using the available finance for adaptation is sensible, but deep concern remains that this money comes from our overseas development budget. The World Bank has estimated that adaptation alone will require between $75 billion and $100 billion a year in addition to existing essential aid commitments. As the current annual global aid flows are between $129 billion and $150 billion, it is obvious that we cannot continue to raid aid budgets in order adequately to finance climate action on a necessary scale.

Under the previous Government, some of us argued hard for a financial transactions tax. This was a cross-party drive; some of those who argued most hard are sitting on the coalition Benches. I can see one prominent player with us today. Some are even on the Front Bench. Why do the Government remain so obdurate and so firmly against this tax? A minute rate of tax could make a huge contribution towards meeting the challenges of climate change and securing a more positive prospect for the global economy and global well-being. Virtually all the relevant experienced and authoritative organisations call for this. In 2011, Bill Gates's report to the G20 argued its virtues, saying that,

Angela Merkel herself told the German Bundestag's Development Committee on 30 November last year that she was open to some of the proceeds of the European FTT, which she so strongly favours, going to finance the costs of dealing with climate change and overseas development. For the record, she said that one could talk about the use of part of the revenue from the FTT for development and climate adjustment.

Rio next June will be a make-or-break occasion. If it fails, the future costs and consequences for humanity will be incalculable and catastrophic. We must all get behind the Government in ensuring that the UK is second to none in striving for its success. This will necessitate disaggregated, specific, formal and legally enshrined commitments by Governments, but it will also involve, as my noble friend Lord Prescott so powerfully argued today, disaggregated and specific requirements for local authorities and those with regional responsibility. We are talking about no less than the survival of the human species as we know it. On climate change, we are literally all in it together. There is no corner of the world where people will be sheltered from the consequences of failure-certainly not the people of the British Isles.

3.51 pm

Viscount Hanworth: My Lords, I am in a position to repeat and summarise some of what has been said today in the course of this debate. I particularly appreciate the remarks of my noble friend Lord Judd. However, my own appraisal is by no means as sanguine as some

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that I have listened to. Also, the tendentious attack on the science of the IPCC that we have heard has filled me with despair.

In the run-up to the most recent general election, the Conservatives made some remarkable commitments that undoubtedly improved their image in the eyes of the electorate. They claimed, for example, that the NHS would be safe in their hands. They proposed immediately to curb the power of the bankers. They promised to take steps to foster industry and enterprise by favouring small and medium-sized businesses. However, perhaps the most remarkable of the Conservatives' promises was that they would become the greenest Government ever. Of late, it has become clear that every one of these promises has been broken. Today we have been discussing the Government's retreat from their much proclaimed green agenda. It might be debated whether these pre-election promises were made in a spirit of cynical bamboozlement or were instead the products of self-deception. I should imagine that they were a mixture of both ingredients.

However, if the espousal of a green agenda was a marketing ploy, it was a brilliant one. We know that, from a right-wing perspective, a concern for the environment is often seen as a preoccupation of wishy-washy sentimentalists and nostalgic romantics. It must have seemed to many that if it could adopt a green agenda, the Conservative Party had surely changed out of all recognition. Such a seemingly changed and reinvented party could easily divest itself of the unpopularity of previous Conservative Administrations.

A clear indication that the Government have relinquished their green pretences came from the Conservative Party conference in May 2011. There, the Chancellor, George Osborne, roundly declared:

"We're not going save the planet by putting our country out of business".

In effect, provisions that are crucial to our long-term survival were being regarded as luxuries that we cannot afford. George Osborne's dictum summarised his attitude to the environmental policies and protections that he and his allies are keen to dismantle. Some recent examples of the effects of this attitude should be mentioned.

The Government have proposed a new National Planning Policy Framework in which, in their own words, the presumption should be in favour of the developer. They have proposed to sweep aside the accumulation of planning laws and regulations that date back to 1947, which have served over many years to protect and preserve the rural environment. They wish to allow developers to exploit land that had hitherto been off-bounds but which has not benefited from the ultimate protections of the existing system. This is at a time when an unprecedented number of brownfield and post-industrial sites are available for development.

Under the cover of an urgent need to consolidate and simplify the existing planning regulations, the Government are proposing a wholesale deregulation. Natural England, which is the wildlife watchdog, the Environment Agency and the Forestry Commission have all been told that they are forbidden from commenting on the policy. They have, in effect, been

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subject to gagging orders. This has not prevented other organisations not under the control of the Government, such as the National Trust, English Heritage and the Campaign to Protect Rural England, among many others, from voicing their concerns.

We should not forget either that long before the issue of these planning laws arose, the Government had intended to sell the woodlands owned by the Forestry Commission in England. There had been no mention of this idea in either the Conservative manifesto or in the coalition document. Public outrage stopped these plans.

A further weakening of environmental protection is an inevitable consequence of the Government's recent Localism Act. The Act aims to transfer power from central government to local authorities and local communities. The Act removes responsibility from central government, and does nothing to ensure that local authorities will assume the responsibility instead. One wonders, for example, how the overriding commitment to reduce the emission of carbon dioxide can be maintained when councils are free to pursue local priorities and when they are accountable only to local residents. In times of economic stringency, it is inevitable that local priorities will take precedence.

The Localism Act enshrines one of the cornerstones of a conservative political philosophy. This is the belief that individuals and organisations, if left to pursue their own ends, will be led, as if by an invisible hand, to promote the interests of society at large. This is a central tenet of neoclassical economics, which was famously expressed by Adam Smith. Those doctrines may have had some relevance to the conditions of Britain in the middle of the 18th century, but they are dangerously out of touch with modern realities. There is nowadays a pressing need for strategic thinking and for concerted action to deal with modern environmental problems and to take the necessary initiatives to sustain a competitive modern economy.

Given the increasing cost of carbon-based fuels and given the manner in which their consumption threatens the global environment, a modern economy must be based increasingly on carbon-neutral and fuel-efficient technologies. It is in this connection that the Government seem to be failing to live up to their promises and our expectations in almost every respect.

Early in July 2010, the Government announced cuts of £34 million in the support provided to low-carbon technology. Capital grants to support the development of offshore wind farms were reduced by £3 million. Support for biofuels was cancelled, saving £4.7 million. The technology trials of the Energy Saving Trust were to be curtailed and the low-carbon building fund, which was to provide grants to help householders to install small-scale renewable sources of energy, was to be withdrawn, saving £3 million. These are very small sums serving important purposes, and it is absurd to withhold them. It seems that some much bigger expenditures have been deferred. We suspect that these deferments are really cuts in disguise.

The plans for the green investment bank, which was intended to make loans to households and businesses to enable them to invest in carbon-reducing measures including insulation, have effectively been suspended.

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George Osborne has drastically limited its powers by ensuring that it cannot borrow funds until the Government have completed their deficit reduction plans in 2015 or later.

The Government have drastically curtailed their subsidies for solar power-first they imposed a cap on the available finance, then they slashed the feed-in tariff for big installations over 50 megawatts so as to concentrate the subsidy on householders. Now they are planning to halve the subsidy for them and for everyone else. They intend to reduce it even further for multiple installations and to specify that buildings must meet high energy-efficiency standards before they qualify for a rebate. These cuts threaten to have a fatal impact on Britain's solar industry.

From my own point of view, one of the most distressing spectacles recently in Westminster has been the announcement in the House of Commons of the outcome of the Durban climate conference. The Secretary of State for Energy and Climate Change, Chris Huhne, was able to tell the Commons that talks had resulted in an agreed plan to begin negotiations for a new agreement. This agreement would not take effect before 2020. The goal of limiting average temperature increases to below 2 degrees above pre-industrial levels had been relinquished. Notwithstanding the evident satisfaction of the Secretary of State at the outcome of the conference, which had seemed to be in doubt until the eleventh hour, the long delay before any effective international agreement can materialise is a frightening prospect. The Chamber of the House of Commons was virtually empty on that occasion. Very few Members from the Conservative Party were present. This speaks of an extraordinary insouciance in the face of the pre-eminent threat to the global environment.

3.59 pm

The Earl of Lytton: My Lords, I apologise to the House for being a late addition to the debate, but the opportunity to speak for four minutes in the gap is a great aid to energy efficiency delivery-so here goes.

I very much welcome the opportunity to debate this extremely important issue. As I explained to the noble Baroness, Lady Smith of Basildon, before the debate, I have strongly felt all along that there has been a moral and economic imperative, as a baseline starting point, to be less profligate with our energy use. I have a few interests to declare. I am a landowner, a chartered surveyor with a particular interest in older building stock, a member of the Country Land and Business Association and its heritage working group, and I chair a small energy panel for the South of England Agricultural society, of which I am a trustee.

I very much welcome the policy on green energy, and my only concern is that it could work better. That is where I am coming from. I am glad to say that my first point has been much more ably made by the noble Lord, Lord Judd, with regard to the changes to the solar photovoltaic feed-in tariff. They were a somewhat lamentable move. The noble Baroness, Lady Smith, mentioned investor confidence-and so do I. We need to move to somewhere near a single-pot budget that is allocated according to cost-benefit rather than having

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different little pots that risk running out and being hypothecated towards only certain aspects. We need to look at energy in the round.

Many projects, apart from solar and photovoltaic, have to reach a very advanced stage before they can be certain of getting any subsidy allocation at all. This lack of security and certainty adds to the costs and risks, and makes such projects relatively unattractive to prospective applicants. The financial prop that the Government could offer through effective preregistration would significantly reduce the risks and raise a scheme's viability. I do not suggest that this be done without due consideration to the cost-efficiency of the scheme in question.

The minimum code C level of thermal efficiency for buildings with solar photovoltaic that are to benefit from a feed-in tariff is another concern. The site and location of a PV panel is a very different concept from the nature of the fuel and the energy efficiency of the building or structure to which it is attached. The two are not ad idem. There has been a little incoherence here and I should like that issue to be addressed. Only 9 per cent of properties in the UK, according to my understanding, achieve code C. Their energy use and generation may coincide, but given that 75 per cent of homes are not heated by electricity, one can begin to see the disparity. I would hate to think that we were eliminating good and worthy green energy-generation sources simply because of some other relatively unrelated criterion.

Consumer knowledge of and control of how energy is used is vital. The cost-benefit of the myriad schemes and products with which we are presented is an issue that is reaching a level of incoherence. Although smart metering will help, it will deal only with the electricity aspect. What we need is a complete lifecycle energy assessment for all products and processes, and informed choices could thereby be made. That will empower people and lead into a better concept of energy conservation. It would certainly-to use the point made by the noble Lord, Lord Turnbull-avoid people chasing grant and subsidy regardless of the internal efficiency of the project or product in question.

I shall conclude there because my four minutes are up, but I thank your Lordships for your indulgence.

4.04 pm

The Lord Bishop of Bath and Wells: My Lords, I thank the House for its indulgence in allowing me to speak in the gap today, and I am sorry that you are not hearing the rather more mellifluous tones of the right reverend Prelate the Bishop of London, who was expected to speak today. Sadly he has been called away to the bedside of Lady Runcie, the wife of the former Archbishop of Canterbury, who is believed to be in the last hours of her life.

It is a tribute to Members of all parts of this House that although there is debate on the various issues in the green agenda, it has not become a denominator in party politics. This is one of the most depressing aspects of political life in the United States, and it is vital that the environment does not become a political football. But there is a temptation, in a time of economic anxiety, for the green agenda to lose priority. I believe

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that one of the reasons for that is that the "economy", in common parlance, is conceived in narrow financial terms, such as the inflation rate or gross national product. The gross national product is, of course, calculated excluding externalities such as costs to the environment. If we want sustainable prosperity then our accounting practices must be developed to include such factors.

A focus on sustainable prosperity suggests that growth without limits is not a plausible option. At the same time, all the world's wisdom traditions regard human beings as accountable tenants for the earth, responsible for the web of life from which we have emerged. Perhaps "economy" is best understood as the laws of home and management, and truly sustainable prosperity and well-being requires us to broaden our concept of the economy.

Here I must declare an interest as a member of the Church of England's attempt to put its own house in order as a response to the green agenda. The programme goes under the name of Shrinking the Footprint. Indeed, my own residence, which is the rather splendid palace in Wells, has become the first residence to have instituted a truly green restaurant, shop and education centre on an ecclesiastical property. It is also developing a community garden, very much following many of the suggestions made by the noble Baroness, Lady Miller of Chilthorne Domer, in her speech, and I am particularly pleased about that. Why? Because it helps make the global local, and the local global, and if people are to understand these things, they have to be able to see them being worked out in their reality.

That in some ways draws me to the main purpose of my short speech. In view of the somewhat abrupt change in the level of feed-in tariff incentives for installing solar photovoltaic panels, I believe that it is important that we continue to recognise this as the most practical and potential way for so many people. Will the Minister give me a response to three quite specific requests which affect all places of worship? Would it be possible to allow places of worship until 31 March to complete and install projects in the pipeline with the benefit of the current FiT regime? Speaking for my own churches I believe that some 200 were actively planning to install panels when the cut came into place. Secondly, would the Minister give consideration to including churches alongside other community projects for a specific community tariff after 1 April? We have been working closely with the Jewish community in this particular area. Finally, would the Minister consider exempting churches-because of their special characteristics which often preclude the kind of alterations necessary to get close to even a C-rating-from the need to obtain energy performance certificates, providing that some other suitable benchmarking audit system can be put in place?

I want to give just a note of praise to the chairman of Shrinking the Footprint, the right reverend Prelate the Bishop of London, who has an alternative benchmarking scheme which has been developed with expert partners in the Diocese of London. To offer a little help to the Government, that could, with government approval, become a national test of energy efficiency in respect of church buildings. Thank you.



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4.09 pm

Lord Grantchester: My Lords, this has been an excellent debate on one of the fundamental challenges we face at a transition to a low-carbon economy with environmentally sustainable new technologies. It is also an excellent time, as we draw near to the end of the first Session of the Conservative coalition, to assess the reality of actions against the prospectus of promises of the new Administration.

In her opening remarks my noble friend Lady Smith gave a telling assessment of the new Government's commitment to be the greenest Government ever. She longed to be impressed by the coalition but remains unconvinced.

On inheriting the momentum set by the Labour Administration, the coalition agreement included more than twice as many green polices as any other area. In their first days in power, the Government signed up to, and subsequently met, the 10:10 pledge to reduce government emissions by 10 per cent in their first 12 months. On the international stage, the Government continued the leadership of Labour by working as part of an EU delegation in Durban to pave the way for a new, legally binding treaty by 2020.

At home, the Government signed up to the climate change committee's fourth carbon budget to halve the UK's carbon emissions by 2027, giving the UK one of the most ambitious emissions reduction plans in the world. However, the week of speculation and rumour of a Cabinet in deadlock that preceded the decision betrayed an increasingly stark divide on the environment at the heart of government. It is a divide between the fair-weather environmentalists, who still perceive environmental considerations as an afterthought-an expendable burden-and those who argue that a sustainable economic future and a sustainable environment are necessarily dependent.

The green agenda means nurturing change through growth options, encouraging entrepreneurship and innovation even through tough times, rather than restricting future options. We have heard how, in the Autumn Statement, the man setting the Government's financial priorities is firmly in the "fair weather" camp. By painting environmental regulation as a ridiculous cost to business, the Chancellor has shown his true colours after his rhetoric of 2009 when, as shadow Chancellor, he described the choice between economic growth and the environment as "a stale argument".

My noble friend Lady Worthington today extended criticism of the Treasury into the emissions trading scheme and the balance of revenue with its expenditure on green policies. My noble friend Lord Judd also asked searching questions of the Treasury. The Chancellor singling out the habitats directive in particular in his Autumn Statement is perhaps emblematic of an underlying attitude, and especially counterproductive as the Government, recognising the resonance of things such as "Hugh's Fish Fight" with the public, have taken up the debate in Europe on the issue of progressive reform of the common fisheries policy, which has presided over the current overfishing of European waters by 73 per cent. The habitats directive is key to delivering an ecosystems-based management of our marine and coastal resources. Watering down-if I may use that

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expression-the habitats directive will undermine the key framework needed to deliver a sustainable future for our fisheries.

These sorts of confusing mixed messages towards the environment must serve as a harsh warning to the Government. I am grateful to the noble Baroness, Lady Miller, for placing her remarks on resources, agricultural impacts and the challenges faced with food in schools, on the record.

The various voices within government that create a false opposition between the environment and economic growth fail to recognise two important things. First, the biggest deterrent to the emerging high-tech innovations that our low-carbon economy needs to be built on is uncertainty: market uncertainty fostered by policy reversals, particularly the solar industry retrenchment that has landed the Government in court; investor uncertainty, fostered by ideological divisions, particularly the lack of clarity over the Green Investment Bank; and financial uncertainty fostered by a lack of vision, particularly delays on the first carbon capture and storage project.

Secondly, short-term budgetary belligerence can come at a high long-term cost: the high cost of ignoring that growth needs encouragement and a commitment to policy stability. My noble friend was particularly critical of the Government's contradictions. Of concern are the proposals in the draft national policy framework which will allow developers to recoup legal costs from environmental agencies and other statutory bodies advising on future developments, which will serve as a significant deterrent to agencies already threatened by significant budget cuts to doing their job in critiquing plans for the future. I know that this may not be in the Minister's portfolio, but do the Government believe that the draft national planning policy framework will lead to fewer challenges to planning applications on environmental and sustainability grounds? What areas of the habitats directive do the Government believe should be rolled back, and what impact does the Minister anticipate this will have on the delivery of ecosystem services? What steps are the Government taking to implement the proposals of the natural environment White Paper?

In the energy sector, the coalition recognised the direction of travel set by the previous Labour Administration. The transition to a low-carbon economy will require investment. By investing in more diverse energy sources, the UK will be less vulnerable to fossil-fuel-distorted price hikes. By investing in insulating buildings and homes better and creating more fuel-efficient cars and methods of transport, the UK demand for energy can be reduced. By investing in industries that suit our geography and skills, such as offshore wind and carbon capture and storage, the UK can develop competitively priced energy security.

All the contributors today recognised in some way the size of the challenge. In recognising the problem, the noble Lord, Lord Dixon-Smith, brought to our attention the question of whether there is an absolute to achieve in carbon reductions. The noble Lord, Lord Teverson, was happy with the achievement so far in recognising the core green agenda, but asked for far more emphasis on the Green Investment Bank and

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looked for more research to inform our decisions. The noble Baroness, Lady Worthington, took up the challenge with an interesting overview of the unintended consequences of government monetary levers, which my noble friend Lord Judd also drew attention to, and the contradictions between short-term finance and long-term objectives.

My noble friend Lord Prescott also drew attention to this global recognition, and asked for it to be translated into good regional and local action plans. He drew my attention, at least, to the problem that transfer pricing will require differing energy sources as it translates into energy pricing. The noble Lord, Lord Turnbull, was concerned about the lack of alternative scientific and views, and about how that may be constraining in our policy objectives.

The financial benefits of the various low-carbon support mechanisms accrue either to big utilities or to wealthy investors, and the cost is often borne by ordinary energy consumers. Perhaps the Government need to reflect on this and on how the impacts of their policies translate across the economy. The principal delivery mechanism has been the renewables obligation and the pledge that, by 2020, 20 per cent of our electricity should be generated from low-carbon sources. This transition investment has led to a fierce debate about the rising costs-I am sorry, I have been confused by the time; it says five minutes in front of me-and about who should shoulder the burden and in what percentages between industry, household and government.

Green energies to build a low-carbon economy could be no more expensive than other options. DECC's Chief Scientific Adviser, David MacKay, has been reported in the media confirming similar findings by Mr Mackenzie in the EU 2050 roadmap and Ofgem's Project Discovery. This concludes that the renewable/highly energy-efficient combination scenario comes out cheaper than the high-nuclear/less energy-efficient scenario. There is a strong economic case in favour of renewable technologies beyond climate change and energy security reasons.

The renewables industry still needs the coalition Government to develop a coherent industrial policy around the renewable energy target. Joined-up government is, as ever, hard to achieve, and schemes such as the electric vehicles show that BIS, DECC, the Department for Transport, CLG and the Treasury need to understand the important role that renewables can play in rebalancing the UK economy and supporting newer manufacture.

The call to transform the new economy needs to be met by all sectors. Labour's leader has coined a new term to draw attention to the impact of this conservatism-the "squeezed middle". In this debate we do not mean hard-pressed families, we mean mid-sized technologies between domestic and utility scale, which are being squeezed out as being unable to contribute. On the one hand, EMR is too complex for many important investors such as mid-sized companies, farmers, and public sector and community schemes-all could be catalysts for a new economy; on the other hand, the feed-in tariff has focused on the domestic and is now in chaos. Will the Minister say how these vital new investors can be encouraged and included within the wider policy framework?



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The coalition Government are barely one Session into the new Parliament. There is still some way to go before half-time. Have not the Government to regroup quickly and urgently if they are to get the UK economy into a game-changing performance?

4.20 pm

Lord Marland: My Lords, I am very grateful to the noble Baroness, Lady Smith, for initiating this debate. I am sure that I speak on behalf of all noble Lords here in saying that our thoughts are with the former Archbishop and his wife at this very difficult time and I quite understand the reasons why the right reverend Prelate the Bishop of London is not in his place today.

The reason I am very grateful for this debate is that it is very important, as a number of noble Lords have said, that we keep the green agenda at the forefront of people's minds because there are signs that people's attitudes are changing towards it. Therefore, it is fundamental that in a debate like this we pursue the green agenda. It is very important for me because I learn a lot. We have seen today a broad canvas of ideas, views and information that I find extremely valuable, as I am sure everyone else does.

The delivery of this agenda is clearly critical. Before I get to the excellent work that the Government have done, I will deal with one or two specific points from noble Lords. The noble Baroness, Lady Smith, as a native of Essex, along with the noble Lord, Lord Dixon-Smith-I am glad to see that the natives are not revolting from Essex-asked quite reasonably about scrutiny. Here we have it before our very eyes. We have eminent Lords and Baronesses challenging us on every occasion as to government policy, and, of course, the Committee on Climate Change, which does a fantastic job, sets targets for us. Therefore, I do not believe for one moment that there is no scrutiny in this area.

The noble Baroness asked about the Green Deal. Clearly it is a very complicated project, made more complicated by the very significant and excellent input from this House in the legislation. We have a very good working dialogue, as the noble Baroness referenced. Yesterday we had another session where we sought to inform each other and move the matter along. We want to get it right, and it is very important that we get it right for consumers, that there are warranties in place to protect them and that we do not go off half-cock. We are committed to getting this off the ground in 2012 and, as the noble Baroness knows, no one is more committed to it than I am.

I will deal later on with her points on solar PV, which a number of noble Lords mentioned. As for CCS-carbon capture and storage-we did pull the plug on the first coal-powered power station. I was responsible for the negotiations. I was not prepared to commit taxpayers' money to something that was being incorrectly priced by the only winners we had in the project. However, we are working to a very fast and hard timescale and I am convinced that by this time next year we will have established a winner for a gas carbon capture and storage project. It is quite clear that the Chancellor has committed the £1 billion of funds available. Through that, there will be leading technology, jobs and growth.



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My noble friend Lord Dixon-Smith asked whether the targets for 2020 were the right ones or whether those for 2050 were right. I think that he preferred the latter. It will come as no surprise to him that we have targets for both. We look at both very carefully and have to interweave them because, as the noble Lord, Lord Prescott, said, there is no one product fits all policy for delivering energy to the country. We will have to deal with all manner of policies, get the mix right and deal with inclement weather. For example, if there is another nuclear incident in Europe it will lead to the destabilisation of our nuclear policy. We will have to deal with that. Therefore, we will have to have flexible targets. However, the noble Lord is quite right to say that we have to look to 2050.

As always, I am grateful to the noble Lord, Lord Teverson, for his support and various comments. The noble Lord, Lord Prescott, rightly referred to the Humber estuary with its wonderful deep waters. We were delighted that Siemens decided to move there. I know the area well and looked very carefully at potential sites where more infrastructure buildings could be put. The area of the Humber estuary has a very knowledgeable workforce and I believe that it can become one of the great offshore gateways. Like the noble Lord, I was disappointed that the Statement on Durban was not debated here. Of course, that was an opposition decision. I was rather relieved that I did not have to stand on my feet for another 40 minutes.

The views of the noble Lord, Lord Turnbull, are well known. I will not engage with him on the IPCC. It is not something that we can unilaterally change. It will require international agreement. Some of his points are well known, and quietly we have made our position well known to the IPCC. I am also grateful that he was right on the euro.

The noble Baroness, Lady Worthington, criticised the carbon price floor. I do not know how we will get nuclear power-or even thorium nuclear power-off the ground unless we have a carbon floor price that sets out a very clear pathway and an encouragement to the nuclear industry, as well as a negative view of those who are producing high-carbon electricity. Therefore, I think that the carbon price floor is a very positive step. Of course, we could go on for a long time on the subject of thorium; we have had some good exchanges on that.

We welcome the great knowledge about food shown by the noble Baroness, Lady Miller of Chilthorne Domer -much more knowledge than I was able to deal with. Her main point was about landfill. The Treasury has done the right thing in raising the landfill tax by £80 a tonne by 2015. Capturing methane and turning it into electricity is a positive way forward to make sure that landfill is dealt with properly. Push and shove methods are far better than very prescriptive policies.

The noble Lord, Lord Hunt of Chesterton, gave us a very good overview from his position as an eminent scientist. He complained that we do not have enough quangos. I do not complain about not having enough quangos. I am interested in delivery and do not believe that quangos in general are delivery bodies. Obviously some are, but they often get in the way of delivery, which will be so fundamental to what we must do. I was also grateful for his words about my gusto.



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As always, the noble Lord, Lord Judd, made a very intelligent contribution. The work of Oxfam should not be denied; it has been very formative. We are delighted that it is subscribing to the climate change agenda. As he rightly-and often-says, we are all in this climate change thing together. There is no point pretending we are not and it is a fundamentally wise thing to say.

Listening to the noble Viscount, Lord Hanworth, I must say that I thought that I might go out and kill myself. He was so gloomy and in despair over my own great party, and I could not really agree with a single word he said. However, he is right to tell us about the economies and great benefits of the low-carbon technology. It would be interesting to know what Adam Smith himself would have made of it all.

We were grateful for the intervention of the noble Earl, Lord Lytton, with his great knowledge of councils. He quite rightly said, as did the noble Lord, Lord Turnbull, that we should not set up grants where all people end up doing is chasing them. That indeed is what the solar panel FIT became-a grant-chasing product-with disastrous consequences.

The right reverend Prelate the Bishop of Bath and Wells raised a number of items. I have worked very closely with the Church of England on "Shrinking the Footprint" and have attended a number of events. We think it is a remarkably good scheme. It is so good because it shows leadership, and that is what the green agenda is all about: showing leadership, and showing people the reasons for doing it and why they should be doing it. We are very grateful for the leadership-from all churches, actually-on this issue, but I know that he is not expecting me to make special exceptions for his churches, even though I am a great admirer of his wonderful cathedral in Wells.

The noble Lord, Lord Grantchester, asked me questions way beyond my mandate. It is bad enough having to know what is going on in your own brief, let alone other people's. Fisheries-for heaven's sake! He has time to withdraw-he can tell me afterwards-but if he really insists on me writing on our fisheries policies, the ecosystem, the natural environment White Paper and our policy on that, I am totally happy to write to him or get someone even cleverer than I to do so. He is quite right that it is about joined-up government.

However, I must rebuke noble Lords. I felt that, as in "Hamlet", you doth protest too much. You should lift your eyes upwards and not down, navel-gazing. Look up and think of the achievements that you have made and that we have made. I am grateful to the noble Lord, Lord Prescott, because he was so positive in what he had to say about what is going on. He did not bring any party politics into it-which was a bit of a change, actually, I must confess. It was being recorded and may well be on YouTube. The noble Lord was positive, and because he was positive and because my Secretary of State is so positive, we are leading the world in the climate change agenda; and because noble Lords throughout this House have been positive, we have been able to keep the green agenda at the forefront.

To those who criticise this Government for not doing anything-there is only one thing that we have done that is predictably different from what the previous

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Government had done, and that is stop the feed-in tariffs on solar PVs. Why did we do that? Because we did not think it was fair on taxpayers to spend £8 billion to achieve 0.1 per cent of our electricity demand. There are far better ways of committing that money for heavy lifting-and there was a scam. There is still a scam going on. Last week, my phone went at my home. "Mr Marland"-shows how out of date they are, six years out of date-"I have got a government-backed scheme guaranteeing this for solar panels. Are you interested?". I said, "I think you have got the wrong man here" and put the phone down pretty quickly. But this scam is still happening and it is not in the best interests of taxpayers. Let us get it off the agenda and let us stop moaning about it. Let us move on to the really big points of nuclear, of clean gas, of all the things that will keep the lights on in this country-and renewables. Let us not run away from renewables. Renewables will be fundamentally important, because they give us security of supply and help us with regard to our agenda.

Lord Teverson: My Lords, perhaps I may suggest to the Minister that he is being too modest. Although it was a difficult period and a difficult thing to do, we have a solar power industry that will survive into the future, which would not have happened. It could have been done better, but it will still be there and will, I hope, resurge as those prices come down. We are not out of solar. We can actually keep solar because of that decision.

Lord Marland: I am grateful. The Whip has just said that it is very rare that I am modest, so it is quite nice of the noble Lord, Lord Teverson, to say that. The fact of the matter is that the solar industry is going on. That is what my story indicates. It is still out there selling and that will go on if people want to do it. Frankly, that is what it should be about.

What have the Government done? The Opposition talk about the green investment bank. We have committed funds to the green investment bank. It is highly technical and difficult to set up a bank. We have committed funds-we set aside £3.1 billion for the investment bank-and that will happen. As I said, we have committed £1 billion of new money for carbon capture and storage. We have the world's first incentive scheme for heat Nowhere else in the world is that happening. We have put £400 million to support low-emission vehicles. We have a mass rollout of smart meters by 2014, which will allow the consumer-merely by putting on their reading glasses-to see what they are spending on electricity. We are reforming the market to encourage investment, which is absolutely critical, as the noble Lords have said. We have had the fourth carbon budget, which requires us to cut emissions by 50 per cent. We fully subscribe to that and we are on target for it. We have cut our own government emissions by 14 per cent despite the 10 per cent target we set ourselves. We even got No. 10 to cut its emissions by 10 per cent-it was a very close-run thing. We cut our own government emission by 14 per cent last year. It will be 25 per cent by 2015-not a small target.

As I said, Durban was, largely, a triumph. As the noble Lord, Lord Prescott, says, it is rebuilding the mess that happened at Copenhagen; it is rebuilding

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trust among countries. There is also work towards a legally binding agreement-a fantastic achievement. Twelve per cent of our capacity now comes from renewable electricity. It will be 15 per cent by 2020. We are on target for that commitment and making very good strides. Around 40 per cent of households now recycle their own waste. This is good for the green agenda. Some 3.5 million more homes will be insulated by the end of 2012. We have spent £92 million cleaning up our rivers. We have had the big tree plant campaign, which was launched to plant 100,000 trees. The Green Deal, which we talked about earlier, will unlock about £7 billion of private sector investment. That should generate 100,000 jobs. We are, therefore, doing a lot.

Contrary to what the noble Viscount, Lord Hanworth, was saying, we have increased our grants. Seventeen grants were awarded to separate companies last year-a total of £18 million. We spent another £28 million in 2009-2010 across the Government. We continue the commitment made by the previous Government. We have six wave and tidal companies receiving grants of £22 million through our own good offices. The Opposition are, therefore, wrong to criticise us. By criticising us, the Opposition are criticising themselves-they have been fundamental to this development. We have done this together. I go back to the words of the noble Lord, Lord Judd. We all know that we are in this together-up to our eyeballs-and it is our job to make sure that the consumer is at the heart of our decision-making. We must help to educate consumers that the green agenda is part of the important decision-making that supports them. I am grateful to the noble Baroness, Lady Smith, for this excellent opportunity to respond.

4.38 pm

Baroness Smith of Basildon: My Lords, as ever, the noble Lord is engaging and entertaining in his responses, and as ever, he has failed to answer the most significant questions that were put to him. I take some exception to his comment that the House doth protest too much because it means that he has misunderstood the nature of today's debate. He said that noble Lords had been saying that the Government have not done anything. No Member of your Lordships' House suggested that the Government do not have any achievements. In fact, no one denied those achievements and they were praised. What the debate was around was whether this is the greenest Government ever, as the Prime Minister promised, and if it is not, whether there are areas in which the Government can improve, which the noble Lord seems to have rejected. So I am sorry he has treated the debate in this way.

I put one major question to the Minister which he failed to answer. I hope that he will come back on it. Whatever he says about the decision on feed-in tariffs, there is no doubt that it has had a major impact on businesses and investors. Many business people and investors are now very cynical about the Government's commitment. That confidence needs to be rebuilt if we are going to achieve the Government's own targets on investment for green growth. That is why I asked him most specifically whether he could give assurances on green growth and the Government's commitment.

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What actions are the Government going to take to improve the perception, which is justified given some of the decisions that have been made, that the Government are not serious about green growth? I am sorry he failed to answer the question. He often promises to write to me, and if he wants to do so on this occasion, I would be grateful. Otherwise, I assume that the Government have no plans to encourage the green growth that is so necessary.

We have had a very worthwhile and interesting debate. It was tabled with the intention of putting forward suggestions, recognising successes and looking at where improvements can be made. I had hoped that the Minister would respond a bit more positively by saying that changes can be made. Finally, I would add that I am proud to be a native of Essex. I suspect that my accent is more Essex than that of the noble Lord, Lord Dixon-Smith. It is not something I regard as derogatory, but with some pride.

Motion agreed.

Financial Supervisory Framework: EUC Report

Copy of the Report

Motion to Take Note

4.41 pm

Moved by Lord Harrison

Lord Harrison: My Lords, I present the report entitled the EU Financial Supervisory Framework: An Updateproduced by the European Union Sub-committee on Economic and Financial Affairs and International Trade which I have the honour to chair. The global financial crisis has demonstrated that the existing structures for supervising financial institutions and monitoring systemic risks are inadequate. This in turn has triggered a debate on how best to redesign the financial supervisory architecture of the European Union. Consequently, in September 2010, the EU passed legislation which laid the foundation for a new EU supervisory architecture. The new framework has two strands. The first is the overarching European Systemic Risk Board, which has responsibility for macroprudential oversight of the EU financial system and for assessing and proposing ways to reduce systemic risks in the financial sector. Below the ESRB are the three European Supervisory Authorities: the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. These ESAs strive to harmonise and co-ordinate the work of member states' national regulatory bodies. They draft and implement technical regulatory standards, and mediate between national supervisors where conflicts arise. When an emergency situation is declared by the Council, the ESAs have enhanced powers to co-ordinate member states' responses and, if necessary, to make binding decisions on national supervisory authorities or indeed on individual financial institutions. In general, however, financial institutions continue to be supervised by national authorities.



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The committee examined the proposed legislation setting up the new EU financial supervisory system in its 2009 inquiry on the future of financial regulation and supervision. After the new ESAs were established on 1 January last year, we decided to return to the topic by taking evidence from the UK national regulator, the Financial Services Authority as well as from the European Banking Authority. We wanted to discuss how matters had progressed and to explore key issues that we had previously raised with the Government in our area report. This report was published in July and the Government's response, for which we are grateful, was received in September.

The committee's key conclusions were as follows. First, we affirmed support for the single rule book, operable across the member states. Given the cross-border nature of many financial services, it is important that national supervisors apply the same regulatory standards enforced with the same powers across all the member states. However, the financial sector is a global industry and we asserted that global co-operation is also essential to ensure that risks are minimised rather than simply relocated. The committee was anxious to enshrine the principle that day-to-day supervision of financial institutions should remain at the national level and we stressed that this should be reflected in any new legislation proposed at the EU level. However, we noted that there were some situations in which the ESAs could and should override national supervisors, especially in response to an EU-wide crisis or emergency. Our witnesses sought to assure us that there were safeguards in place to prevent such powers being used routinely or inappropriately, and we expressed the hope that this will indeed be the case. Furthermore, we expressed the wish to be consulted if the Government were ever to envisage asking the Council to declare an emergency and, similarly, to be informed forthwith if they detected that another member state or ESA was likely to request that an emergency be declared.

We also endorsed the principle that national supervisory authorities should occasionally intervene in exceptional circumstances to impose temporary restrictions on certain financial activities in order to ensure general financial stability. We welcomed the co-ordinating role of the ESAs to ensure that such actions take place in a uniform and co-ordinated way across the European Union. However, in our view ESAs should only have the power to temporarily ban certain activities or products in a crisis when an emergency has been declared by the Council. Where the legislation setting up the ESAs allows for the ESAs to be granted enhanced powers in certain areas without the need for the Council to declare an emergency, we argued that future sectoral legislation should only confer such powers as the exception, not as the rule.

One such exception to the principle, in our view, related to short selling and credit default swaps. Given the highly cross-border nature of this trade, we argued that giving ESMA such intervention powers might be necessary to preserve financial stability in the European Union. I wonder whether the Minister has pondered the far-reaching consequences of this ban on CDSs and on short selling. In relation to contributing to macroeconomic stability, the committee stressed the importance of information-sharing among the supervisors.

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We also welcomed assurances by the EBA that bank stress tests would be strengthened in the light of the failure of these tests in 2010. Indeed, we concluded that the rigour of the stress tests would be an important measure of the independence of the EBA.

Finally, we reflected on the United Kingdom's influence. The UK is the centre of financial services in the European Union and we emphasised the importance of the United Kingdom Government and the FSA taking leadership roles. We commended the FSA for its constructive approach in seeking to engage with the ESAs. Yet we were concerned that the Government's proposal to abolish the FSA and replace it with the Financial Conduct Authority, the Prudential Regulatory Authority and the Financial Policy Committee could compromise the UK's leadership role. We called on the Government to explain what structures and mechanisms they planned to put in place to ensure that the new bodies work together effectively to present a cohesive and unified face as well as ensuring that the residual task of the seceding FSA should be covered by the United Kingdom's new national supervisory structure.

Although the Government's response broadly reflected the committee's point of view, there were some differences of emphasis. The Government continued to express concern about the use of the triggers for ESMA's intervention powers in relation to short selling and credit default swaps. On the question of keeping the committee informed about any such emergency, the Government stated that they would inform it as far as is possible about a Council declaration of an emergency, or of subsequent use of emergency powers by the ESAs, in a form consistent with any restrictions resulting from the possible confidential nature of such decisions-perhaps that could be elaborated. On the domestic supervisory role of the United Kingdom, the Government stated that they would legislate to require establishment of a statutory memorandum of understanding between the Treasury, the Bank of England, the PRA and the FSA, and would support the further use of memoranda of understanding to frame the new regulators' relationships with other UK authorities. I look forward to the Minister's reply, which I am sure will explain the Government's position in more detail.

So where do we stand today? Events have moved on since the report was published, in particular as the euro area crisis has deepened, and the new bodies have played a high-profile role. For instance, the European Banking Authority's December assessment that European banks needed €115 billion of funding to withstand financial shocks underlined not only how serious the crisis had become but also the EBA's active and interventionist role. Moreover, the UK Government's reported demand, in negotiations at the Brussels summit in December, that the EBA remain in London demonstrated not only how important this body has become to the Government but also the potential isolation that they face as a result of not joining in with the other 26 member states. However, the collapse of Dexia in October, in spite of the fact that it had comprehensively passed the EBA's stress tests as recently as July, once again called into question the effectiveness of its system of bank stress tests. ESMA's role in the regulation of high-frequency trading, over-the-counter

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derivatives and credit rating agencies, as well as its power to ban certain activities or products, continues to be subject to intense debate, as does EIOPA's controversial assessment of the solvency of pension funds.

Are the Government sure that British experts are available for use with the new structures? Do we have sufficient resources accorded to the new supervisory authorities to ensure that they do their work?

ESMA has had responsibility for credit rating agencies since 1 June of last year. This forms a new and important departure, and I would welcome the Government's response to this development within the single market in financial services.

4.53 pm

Lord Marlesford: My Lords, I pay tribute to the noble Lord, Lord Harrison. It is not just that he made a very good speech on our report; he has also been a very good chairman of Sub-Committee A, a committee which is quite tough to guide because there is such a diversity of view on the EU among its membership. That diversity is thrown into ever sharper focus as one EU crisis develops into the next.

I suppose that in your Lordships' House and in the country as a whole the views can be seen as stretching from the totally disillusioned, who now feel that the whole enterprise should be abandoned-at least by the UK, to those whose tribal loyalty to the EU leads them to feel that we have to stick with it come what may.

I am not saying that either of those persuasions is directly represented on the committee. But inevitably, as events unfold, we are aware of those positions even if neither of them is actually an option. Incidentally, I should say that I do not regard myself as either a euroenthusiast or a eurosceptic. I suppose if I am anything at all, I am a eurochallenger.

The second reason it is a tough committee is that there is a very high technical content to many of the issues we seek to address. What makes it particularly hard is that factual information is often either deliberately concealed by the parties or simply not available.

This has, of course, been the case since the world financial crisis first started to unfold back in May 2007, when the depth and breadth of the toxicity of financial instruments, initially mainly inside the United States, started to emerge.

What a far cry it is since the American state-sponsored mortgage-granting agencies, Freddie Mac and Fannie Mae, appeared to be a brilliant concept for increasing home ownership, an objective that the now shrunken giant of American banking, Alan Greenspan, so enthusiastically and unwisely espoused. But the lesson in all this is that, to quote the NKVD man in Kravchenko's I Chose Freedom:

"Comrade Stalin has taught us to trust one another but at the same time to check and recheck".

I make no apology for saying once again that it is now recognised, as it was by many at the time that, conceptually, the euro was flawed from the start, based as it was on a single monetary policy but independent

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fiscal policies. From that emerged the myth, peddled over the past 10 years, that the sovereign debt of all euro countries was equally safe. This suggestion on its own has created a moral hazard of the ECB having a potential liability which it could only meet by switching its printing machines onto constant. And we all know where that leads.

To state that the necessary change for the system to work is the establishment of a euro-area ministry of finance is futile, as the people of Europe show no signs of wanting it. We therefore have this plethora of new supervisory bodies: ESRB, three ESAs, EBA, ESMA, EIOPA-which the noble Lord, Lord Harrison, and our report have described very clearly. The whole question of these bodies being able to override national supervisors is a central issue. It has been suggested that this should only be done in emergencies but who defines an emergency? If the existence of an emergency is seen as too sensitive to be revealed, what then?

There is the crucial question of whether the European Banking Authority has the capacity to carry out the stress tests which are intended to give early warning that banks are in danger of going bust. As banks spend a great deal of their time concealing the reality of their financial positions, I would put my money on the bankers hiding what they wish to hide.

I have for some years been concerned about credit card debt in this country, the £60 billion debt on which interest is being paid, currently at a rate of 17 per cent. It amounts to nearly £1,000 for every man, woman and child in Britain. At my instigation, the noble Lord, Lord Myners, when he was the Minister responsible in the last Government, wrote to the banks, asking them at what level they were valuing these assets. Only one of them even replied. One thing on which I warmly congratulate the Government is their decision to separate high-street banking from the much more risky investment banking. This is being done in the teeth of opposition from the banks.

I am worried about the way in which some of the senior eurocrats are suggesting that they might be able to suppress inconvenient facts. I am thinking of course of Commissioner Barnier, who is keen to ensure that the credit-rating agencies do not publish inconvenient truths about the value of sovereign debt in euro-area countries. Having realised that his edict would not be enough to get what he wants, the Commission is now putting together a complicated set of procedures which credit rating agencies would have to comply with before the European Securities and Markets Authority allowed them to publish their credit rating. There was an interesting piece in yesterday's FT by Martin Fridson, in which he expresses considerable doubt as to the merits of such proposals. I certainly share those doubts. I have absolutely no brief for the credit rating agencies-which Sub-committee A has also recently studied-which failed investors and savers deplorably with their absurd endorsement of doubtful financial instruments of debt.

Finally, to illustrate my readiness to see the merit of regulatory action in financial matters on a European level when it is appropriate, I would like to make a specific proposal, which I hope the Minister will communicate to his Treasury colleagues. There has been much fully justified criticism of the way in which

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overseas entities and individuals have been able to avoid paying stamp duty on transfers of expensive houses in the UK. This could be dealt with at an EU level by simply requiring full compliance with national law, including tax, before any transfer of real estate is accepted as having taken place. In the UK, the courts would simply refuse to recognise title unless the proper stamp duty had been paid on a change of ownership. That, I think, would fix it.

In conclusion, I am rather doubtful that Humpty Dumpty can be put together again. I hope that he can, because I am a strong supporter of the EU single market and even the EU as a global political player. Sadly, the debacle over the eurozone has diverted a vast amount of the time-some say as much as 80 per cent-that Europe's top leaders have been able to apply to world problems of peace and stability. I fear that that means that EU influence has greatly diminished over that period. As Britain is probably the most financially sophisticated and experienced country in the world, it is crucial that we play a full part in offering our expertise to help the euro-area put together the best financial supervisory framework possible. I hope that the House of Lords Sub-committee A can play some small part in that.

5.03 pm

Lord Newby: My Lords, this is a very timely debate given the state of play in the development of both the EU financial supervisory framework and our own financial services architecture. Nobody could accuse the EU or the British Government of not acting to put in place new structures which aim to stand a better chance than their predecessors of preventing another bubble-based banking crisis. As the noble Lord, Lord Harrison, pointed out, at the EU level we have the ESRB and three sectoral regulatory bodies. Here in the UK we will soon have a new Financial Policy Committee, a Financial Conduct Authority and a Prudential Regulation Authority, along with the Treasury and the court of the Bank of England involved in setting and implementing financial regulatory strategies.

All these bodies are new or in gestation so there is a considerable degree of uncertainty about how well they will work, both individually and-possibly more importantly-in relation to each other, particularly at times of financial crisis. The noble Lords, Lord Harrison and Lord Marlesford, talked about how the European bodies would operate, what constitutes an emergency and what powers they would exercise in those circumstances. The truth is that, at the moment, we do not quite know because they are so new that they have not yet had to invoke those powers. From the evidence that the sub-committee took, it is clear that they are still feeling their way in some respects on how those powers would actually be used.

I have had the privilege of serving on the Joint Committee on the Financial Services Bill and as part of our work we looked at how the new UK bodies would relate to their European counterparts and how the UK interest would be best represented. It is on this area of the sub-committee's report that I would like to concentrate my remarks this afternoon.



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There are several obvious problems. First, the structures of the European and British bodies are quite dissimilar in that at the European level, we have three sectoral bodies covering banking, insurance and markets and at the UK level, we have two: one covering prudential regulation and one covering conduct of business regulation. These clearly are not equivalent bodies. When those involved in the FSA or the EBA have been asked whether this matters not, it has been pointed out that across the EU, there are many forms of regulatory structure and the twin-peaks approach that we are going to be adopting is by no means unique. As a matter of principle, however, I do not think one could argue that three bodies playing two bodies with completely different remits is an ideal starting point. It is an issue that we have to address.

Secondly, as has been mentioned, the European bodies are very lightly resourced for potentially a very big job, particularly at a time of emergency. The European Banking Authority will have 120 staff; if there is an emergency tomorrow, it could be asked or expected to wield powers across the whole of the EU and it will clearly struggle to do it. There is no prospect in the foreseeable future of these bodies getting any additional resources, which is a bit of a worry. There is also a more general worry that its 120 staff are playing 3,500 staff of the FSA; no doubt, staffing will increase in the equivalent bodies across the EU. Therefore, it is going to be hemmed in as regards what it can do simply through the paucity of its own resources.

The third problem is obviously Britain's relationship more generally with the EU. At the ill fated recent summit, it was regulation of the financial services sector that was cited as the reason for the UK Government refusing to go along with the rest of the EU. Some of the arguments that were advanced seemed to me quite bizarre. It was suggested that we should have, as a matter of principle, a declaration that there would be no moving of the European Banking Authority out of London. No one was suggesting that it would be moved out of London, so why was that a big issue? It was suggested that there was a huge problem in that the EU was going to stop us increasing the capital requirements in our banks beyond a certain level, when it was absolutely clear from both the EBA and Commissioner Barnier that, whatever they originally thought in this area, they were not going to push this as an issue. Therefore, we have been pursuing lines of argument related to the management of financial services regulations which seem to me to be bizarre. Whether they are or not, however, they have undoubtedly caused major difficulties in our short-term relations with at least some of the principal member states. However, it seems to me-I am sure everybody would agree, whatever their views on the euro, the eurozone and the Prime Minister's strategy-that it is absolutely key for the UK to be in a position to maximise its influence in EU financial services regulation. Therefore, we now need to think about how we can best achieve this.

First, there is our role within the EU and, in particular, the supervisory bodies. I gather that, despite the screaming headlines, the attitude of many of those involved in managing the process in member states and EU institutions has not undergone a revolution; and that there is still a residual willingness to work closely with

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the UK on these matters, which is almost surprising in some cases. This is particularly true given, first, the small size of the resource at the European level; and, secondly, the even smaller resource and aptitude for involvement in detailed negotiations on many of the technical issues in many smaller member states with small financial services sectors. There still seems to be a very big opportunity for the UK to play a major part in those bodies. We have not been frozen out and we must make sure that we remain as active as possible.

Secondly, there is a problem with the new architecture throughout financial services regulation and how it relates to the European bodies. According to the draft Bill, the PRA will exercise the UK vote on the European Banking Authority and the insurance authority, while the FCA will exercise the UK vote on the European Securities and Markets Authority. However, substantial areas of the ESA's work that are not the primary responsibility of the institution that holds the voting seat apply, so there will be a real problem there with the relationship between the UK and the European bodies. That can be dealt with only through good co-ordination at the UK end.

As the noble Lord, Lord Harrison, pointed out, the Government plan to have an MoU involving all our bodies here that are related to this. However, as we saw with the tripartite agreement, MoUs on their own are not worth the paper they are written on if the participants in the MoU never meet or if they have fundamentally different views about what to do. It seems that although an MoU is no doubt necessary, it is not sufficient in this area. In their evidence to our Joint Committee, a number of bodies-including the CBI and Nationwide, for example-suggested that a way of dealing with this would be to establish an international regulatory committee of the various bodies of the Bank and the Treasury here in the UK. It would be responsible for co-ordinating British involvement in the European regulatory activities. This seems to me to be an extremely sensible suggestion.

The Joint Committee suggested that this committee should, because of its importance, report to the Chancellor and be chaired by the Treasury. I agree, although I might add, in parenthesis, that it should be chaired by someone from the Treasury with a sophisticated understanding of how the EU institutions and authorities work and what is realistically achievable in both the short and medium term. This may be a big ask but it is the best chance that we have. These are sensible suggestions, which I hope the Government will adopt. I also hope that the Treasury and the Bank will encourage their brightest people to work with the EU bodies, either as UK reps on their various committees, or as permanent or seconded members of staff. British voices around the table need to be as numerous and as resonant as possible.

I realise that the Government are still considering our committee's recommendations and it may be slightly premature for the Minister to give a definitive response on this issue. However, I hope he will urge those of our recommendations that relate to EU co-ordination on his colleagues.



12 Jan 2012 : Column 314

5.14 pm

Lord Kerr of Kinlochard: The noble Lord, Lord Marlesford, was quite right to start with a tribute to the noble Lord, Lord Harrison, the chairman of Sub-Committee A. As a fellow member of Sub-Committee A, I strongly endorse these plaudits.

I want to commend our little report and to put three questions arising from it to the Minister. The questions follow, quite neatly, the logic of the remarks of the noble Lord, Lord Newby.

The City of London, as one of the three great global financial markets, is recognised in most, though perhaps not all, EU capitals as a major EU asset. In most other EU capitals, with perhaps one significant exception, the health of the City is seen as important to the Union. The City's voice is being given due weight, so witnesses told the committee, as the EU's financial supervisory framework develops. This seems to be developing in ways in which the committee, certainly, and, we understood, the Government, supported. That was the message of the admirably clear and positive reply to the committee which the Financial Secretary sent on 21 September. I am grateful for that reply.

The UK is playing a leading role in setting up the new structure, as one would expect, given the pre-eminence of the London market. Of course, qualified majority voting applies, so we cannot be sure of getting our own way on every issue, but so far, so good. The City is pretty relaxed, the committee's report is pretty reassuring and the Government's response is equally reassuring and supportive. So far so good, or so I thought. Here I come to my first question to the Government. Is it the case, as reported in the press, that one of the safeguards sought by the Prime Minister in the middle of the night of 9 December was a carve-out from qualified majority voting and a return to unanimity specifically for decisions on the scope of the new ESAs; and, if so, why?

The City of London has benefited enormously from Mrs Thatcher's success in securing qualified majority voting for the internal market in the Single European Act by persuading her colleagues in other European capitals, and, in particular, her colleague in a particular European capital, to drop the unanimity requirement for single market legislation-it had protected only protectionism. The City as a result grew much stronger, absolutely and relative to other EU markets, as a result of pan-European liberalisation made possible by the Single European Act. As a result, the whole EU economy became more competitive. The task is by no means yet complete, but there has been considerable net gain, and, in particular, a net gain for the UK as well as the EU. For that, we all owe a great debt to Mrs Thatcher.


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