§ Mr. Robert Ainsworth (Coventry, North-East)I am pleased to have the opportunity to raise the subject of the Government's energy conservation programme—the second time I have raised this topic on the Adjournment. The Under-Secretary of State for the Environment, the hon. Member for Croydon, Central (Sir P. Beresford), replied to a similar debate in February 1995.
I am raising the matter again to review the various Government schemes, to point out apparent shortfalls and to seek assurances from the Minister that the Government are still committed to those policies and will continue to work towards achieving their objectives. Last February, the Under-Secretary's reply did not address the figures that I presented, showing shortfalls in most of the Government's targets. Indeed, Peter Smith—the chairman of the Royal Institute of British Architects energy and environment committee—wrote to me to say that he wished that the quality of the questions had been matched by the quality of answers. I am pleased to see the Minister of State in his place, and that gives me more confidence that the issue will be addressed properly this year.
I am also pleased at the timing that I have achieved. For once, I have got it right. The debate is being held on the day the United Kingdom report comes out, and the comments of the Secretary of State have been widely reported in the press. I have provided the Minister with a summary of the points that I intend to make and the questions that I intend to raise, and I look forward to his answers.
First, I wish to examine the progress that has been made in each of the schemes in the climate change programme. No discussion of this programme could proceed without mentioning the Energy Saving Trust. Last year, I pointed out that only 10 per cent. of the trust's originally projected funding was likely to be available, and it expected to make only 10 per cent. of the energy savings—and hence carbon dioxide reductions—that it originally intended to deliver. I tabled parliamentary questions on the matter earlier this year and, sadly, the story has not changed. The trust is underfunded, and is expected to save only 0.3 million tonnes of carbon—a reduction from the original target of 2.5 million tonnes.
This year's figures show that no progress has been made on last year's figures, despite an assurance given in last year's debate that the Government's new powers to contribute to the trust's running costs represented
an important first step in establishing funding for the trust and the schemes that it brings forward."—[Official Report,17 February 1995; Vol. 254, c. 1314.]I hope that the Minister can tell us more about some of the schemes.Last year, I stated that I was pleased that VAT was not raised to 17.5 per cent., as the Government had intended. Apart from breaking their election promises, I felt that the increased fuel poverty that that would bring was totally unacceptable. However, as I said last year, the Government must address the hole that their defeat on VAT has left in the carbon dioxide programme. In addition, how are the promised reductions in prices that the Government are using to sweeten the planned nuclear sell-off expected to affect carbon dioxide emissions? The DTI's annual report on energy states specifically that a 944 10 per cent. drop in fuel prices tends to lead to an increase in consumption of between 2 and 3 per cent. Do the Government have any programmes to address that?
These two policies were originally intended to provide 40 per cent. of the climate change programme, yet they have not been implemented in full. Consequently, the Government's commitment to energy saving has to be questioned. Energy Paper 65 may claim that we will reach our carbon dioxide targets despite this—something that I still doubt and will address later—but the Government's two main policies to reduce energy usage have not worked. I would like the Minister to admit that, and accept that, if both policies have failed, new ones must be implemented in their place.
It is not just those two policies that have failed. The Government have long said that the public sector should lead the way with energy savings and should demonstrate what can be achieved. Government Departments and health authorities were set a target of reducing energy usage by 15 per cent. in the five years up to 1995–96. Last year, I pointed out that—after four years of the project—things were not looking good.
At that stage, health authorities had delivered only 7.9 per cent. of the savings, and some Departments were not even producing figures. One year on, my prediction that the NHS would fail to meet its target has been borne out. According to a parliamentary answer on 9 January, the 7.9 per cent. savings figure that I quoted last year has been revised to 6.5 per cent. The Minister for Health himself has said that, by 1996, savings are expected to be 8.3 per cent.
Other Departments are not doing much better. By 1993–94—three years into the programme—Departments had achieved only 6 per cent. savings on average. Again, that falls far short of the target. Some Departments have not shown a serious commitment to the targets and, if they are supposed to be setting an example, they are leaving a lot to be desired. It is simply not good enough, and it is not just a case of the public sector setting an example. Energy efficiency measures save money. Why should we be cutting services to reduce Government spending when we could be cutting energy use in the public sector? I hope that the Minister will tell us how he plans to improve performance, and will give an assurance that Departments will take the new targets of 20 per cent. savings between 1990 and 2000 a little more seriously than they took the previous ones.
Last year, I used figures from parliamentary questions to show that progress towards the target of 1,500 MW of new renewable generating capacity was falling behind. The figures showed that 74 MW of new capacity was coming on line each year, against a target of 150 MW. Updated information has shown that this trend has continued. Between the end of 1993 and the end of 1995—the most recent figures available—the rate slowed further, to only 45 MW of new capacity each year. I have been assured that contracts are in place to enable the targets to be reached, and that the rate of new renewable capacity coming on line is increasing. I hope that the Minister can confirm that, and I hope that he will reconfirm the Government's commitment to those targets.
For combined heat and power plant, the target required an average of 300 MW of new capacity each year. Last year, I calculated that the rate so far had been 200 MW. I am pleased to say that, one year on, the situation is 945 improving. Last year, 400 MW of combined heat and power came on line, and I hope that the Minister will confirm that the rate of growth of CHP will continue and that the Government are still committed to the target of 5,000 MW by 2000. The rate will need to increase further if the shortfall from earlier years is to be overcome. I will be delighted if the Minister will confirm that that will happen.
Another policy set out in the climate change programme was the improvement in the building regulations, which came in a year late but is now in force. The regulations do not yet apply in Scotland. I know that this is beyond the remit of the Minister, but if he is aware of any plans to extend the regulations across the whole of the United Kingdom, I hope that he will tell us in his reply.
The original climate change programme also claimed that new standards would be introduced for improving the efficiency of domestic appliances by 10 per cent. by 1997 and 40 per cent. by 2000. I have tabled several parliamentary questions on that statement, but have never received an assurance that the 40 per cent. target still exists. I understand that the standards being adopted for fridges and freezers will give a 15 per cent. saving. Further measures are under discussion. Reading between the lines, it appears that the 40 per cent. target has been abandoned. I hope that the Minister can tell us the Government's present thinking on that. If the target is now considered impossible, what energy saving does he expect to be delivered? I look forward to his reply.
I am fully aware that, according to Energy Paper 65, the United Kingdom will manage to achieve the carbon dioxide targets. Last year's debate took place before publication of that paper, and I commented then on the likelihood of it making that claim. The Government increased the prediction of how many gas-fired and nuclear power stations would be on stream by 2000. Those predictions are very optimistic, with a great reliance on elderly Magnox stations and gas-fired stations that have only recently passed the first stage of planning permission.
I am not the only one who sees problems ahead. DRI McGraw-Hill calculated that the United Kingdom's carbon dioxide emissions would increase up to 2000. More recently, stories in the press have shown discrepancies between European Union predictions of emissions in 2000 and those of the International Energy Agency. Interestingly, none of the independent studies casts the United Kingdom's emissions in quite the same light as Energy Paper 65. Predictably, EP65 is far more optimistic than any of the independent reports.
Such discrepancies lead me to believe that our carbon dioxide emissions should be monitored independently, with reports presented in the House. Although I am happy to raise the matter in an Adjournment debate every year, scrutiny should be more rigorous and Ministers should be more accountable for the programme. I hope that the Minister will deal with that in his reply.
I also hope that the Minister will accept that the climate change programme set out to meet the Rio targets should still be carried out. The energy-saving measures that it set out are an important step towards improving energy efficiency. They should be not abandoned, but expanded.
946 I hope that the Minister will confirm that the Government remain committed to the targets set out in the climate change programme.
Having run through a review of the Government's policies, I will suggest how energy efficiency could be promoted. I am firmly of the opinion that our carbon dioxide targets will not be met, so I hope the Minister will take these suggestions seriously. I hope that he will ensure that the Government reduce the rate of value added tax on energy-saving materials. The Paymaster General promised to consider ways to do so on Third Reading of the Finance Bill. The Government narrowly won the vote, but in a recent answer to my hon. Friend the Member for Ealing, Southall (Mr. Khabra), they seemed to be backing away from that promise. That one measure would kick-start sales of energy-saving products, giving the market a much-needed boost. It would also remove the anomaly that was pointed out by the then Chancellor of the Exchequer, the right hon. Member for Kingston upon Thames (Mr. Lamont), that energy saving was taxed at a far higher rate than energy use.
I also welcome the Home Energy Conservation Act 1995, which is now in force. The Minister can do two things to strengthen that Act. First, I hope that he will ensure the speedy passage of the Energy Conservation Bill, which sensibly extends the Act. Secondly, I hope that he will consider local authorities' concerns that the £3 million given to them this year under the new burdens procedure has not been confirmed for future years. That money was to assist local authorities with the preparation of reports under the Act, and its withdrawal will make life difficult for councils. I hope that the Minister can confirm that that extra money will be forthcoming, as I have heard rumblings that the Department of the Environment is trying to withdraw it—rumblings that I hope the Minister will squash in his reply.
The Minister should also reinstate the £31 million removed from the home energy efficiency scheme budget. That was taken despite promises from Ministers that the level of funding was fixed for three years. The removal of that money has restricted the number of houses that can be insulated and will have pretty dismal effects on businesses that had expanded to do the installation work. They had planned to carry out £100 million-worth of spending under the scheme. By reneging on that promise, the Government have left some of them having to lay off staff and sell equipment that is no longer required as demand for work dries up.
The Minister is both knowledgeable and committed to energy efficiency. I was disappointed with the reply to the debate last year and I hope that the hon. Gentleman will shed a little more light on the Government's position and direction than his colleague did last year. In the light of the reports in the press today, I am compelled to say that, if the Secretary of State is going to Geneva to wave the flag on energy conservation in the wider world—I sincerely hope that he will do that—he will not be credible unless he can show a genuine commitment to the domestic policies that are supposed to be in place to honour the commitments that we have already given. Rhetoric is not enough, and it simply will not do.
§ The Minister for Construction, Planning and Energy Efficiency (Mr. Robert B. Jones)I congratulate the hon. Member for Coventry, North-East 947 (Mr. Ainsworth) on once again selecting this subject for discussion. We go back a long way in our interest in it and I certainly welcome the opportunity to exchange views on the subject in this domain as opposed to our previous one. The hon. Gentleman had a long list of questions, a number of demands that would knock holes in the income side of the Government's accounts, and a raft of proposals that would extend expenditure commitments. My eyesight may be failing, but I do not see alongside him any bag of gold provided by his right hon. Friend the Member for Dunfermline, East (Mr. Brown). Judging by the various things the right hon. Gentleman has said, I suspect that the hon. Gentleman does not have much influence with those on the Labour Front Bench.
I can reassure the House that this Government remain whole-heartedly committed to promoting energy efficiency. It is an important issue globally, as the hon. Gentleman and I recognise, and a cornerstone of the United Kingdom's climate change programme and sustainable development strategy.
I am pleased to report that the UK is on target to meet its commitment to return greenhouse gas emissions to 1990 levels by 2000: we expect carbon dioxide emissions to be between 4 and 8 per cent. below 1990 levels. That achievement reflects the impact of the whole package of measures set out in the UK climate change programme.
The hon. Gentleman cited some European data to raise questions. The Commission's estimates would suggest for the EU a 3 per cent. overshoot, but those are econometric projections and take no account of implemented or planned actions to limit or reduce emissions. They are based on modelling exercises, which appear likely to overestimate emissions. Member states' projections are more likely to be accurate than those of the Commission. Moreover, the Commission's approach takes no account of one crucial fact: member states do not simply undertake modelling exercises, but are obliged to take corrective action if, on the basis of actual emission trends and future projections, they consider that they are no longer on course to meet their climate change commitments for 2000.
I do not want to seem to be saying that we are complacent. It is clear that further commitments are needed to combat climate change—not least in the light of the report that my right hon. Friend the Secretary of State published yesterday, reviewing the potential effects of climate change in the UK.
Internationally, the UK is calling on all developed countries to agree a new target to reduce total greenhouse gas emissions to between 5 and 10 per cent. below 1990 levels by 2010—a challenging, but achievable, target that demonstrates the UK's continuing commitment.
Environmental issues, however important, are not the only driver behind energy efficiency. There are real opportunities for British business and domestic customers alike to save money. That has to be a powerful incentive—indeed, it has been described as the win-win scenario. I believe that there is also an important chance for British businesses to improve their environmental image and their competitive position.
No Government could rely entirely on legislation for improved energy efficiency. In some limited cases—for example, building regulations and energy efficiency standards for consumer products to which the hon. Gentleman referred—regulation is an appropriate way to make progress, but in general, Governments need to use a different, and wider, range of tools.
948 In large part, improved energy efficiency means influencing people's behaviour. We need—and have—a comprehensive package of measures to alert people to all the benefits of energy efficiency; to give them the technical information to decide what to do, and what it is worth to them; and to encourage market forces to operate, so that consumers can invest wisely in energy efficiency improvements.
That approach is fully in line with our deregulation initiative, which is not about "tearing up regulations" but about avoiding inappropriate regulations in the first place. It may be harder work for the Government to operate information and publicity campaigns than to make regulations, but I believe that it is more effective, and cheaper for those affected.
We provide a wide range of information for all types of consumers. In particular, we provide detailed technical information on energy efficiency technologies and their potential to generate energy and money savings. That information, which is generated by the energy efficiency best practice programme, is directly applicable to "energy professionals"—architects, process managers, building services people, and so on. It also helps us to develop our own policy.
The best practice programme is highly effective. Our research shows that, by December 1995, it was stimulating investment by business to generate energy savings worth some £450 million a year, at a cost to the Government of less than £20 million a year. That is a pretty good gearing ratio and is well on course to meet the programme's target of generating £800 million a year in savings by the year 2000.
For business, we believe it is important that senior management should take the lead by taking responsibility for energy efficiency. All the signs are that an energy-efficient business is a well-managed and therefore competitive and successful business. Certainly, the energy management performance of signatories to our Making a Corporate Commitment campaign is significantly better than that of non-participants. The hon. Member for Coventry, North-East might like to know that I am persuading those who are committed to running seminars for their supply chain to get the message back down the line. That is an effective way of doing it, because, if one's biggest customer says that that is something one should do, one takes more notice.
It is not enough for us to badger consumers. As the hon. Gentleman said, the Government also need to take a lead on energy efficiency. We have set specific targets for the Government estate—a 15 per cent. improvement by March 1996. The latest figures we have published, for 1993–94, show a 6 per cent. improvement over 1990–91. That is good progress, because one faces other problems in terms of increasing demands for energy—for example, through increasing reliance on office machinery. That, in turn, is a challenge for the manufacturers of computers and other equipment. They must try to improve energy efficiency. There is also the need for the right ambience, which is a problem in energy consumption.
I hope to publish the figures for 1994–95 shortly. We are currently discussing what further targets should be set for the period up to 2000. Progress continues to be reviewed at regular meetings of Departments' Green Ministers.
949 The Government are also taking the lead in new and more energy-efficient ways of supplying consumer needs. We are widely promoting combined heat and power, in the public and private sectors, and setting an example by installing it in Government property: for example—I do not know whether the hon. Gentleman is aware of this—in the Whitehall district heating scheme, and in my Department's new headquarters.
We set a target, in the climate change programme, of 5,000 MW of installed CHP capacity by the year 2000. We have already achieved a total installed capacity of about 3,500 MW—5 per cent. of United Kingdom electricity generation—on around 1,300 sites.
To take that further, our UK strategy for combined heat and power was launched a few days ago. That is intended for a broad audience, including both the wider public sector as well as industry. It records what we are doing to achieve our target, sets out our plans, and makes clear the wider context in which our policy is operating.
In general, we believe that, since investment in energy efficiency is highly cost-effective for consumers, with short payback periods, Government money should not be used directly to fund energy efficiency improvements. However, there are some areas where we are satisfied that Government funding is justified to overcome barriers to energy efficiency.
The home energy efficiency scheme is an important way of helping the fuel poor—those who cannot readily afford to make home improvements—by providing advice and grants for insulation and draught-proofing. It improves living conditions, and helps to save energy.
We are continuing to refine the scheme, to ensure that it is targeted to where it can do most good. That is why, although we were not able to maintain the budget for HEES last autumn, we ensured that grants would continue to be available, in full, to those in the greatest need.
We recently issued a consultation paper on ways of developing HEES. Our intention is to increase choice for eligible householders, by making the scheme less prescriptive and more flexible. We can do that by linking the grant-aided measures available more closely to the energy standards of people's homes. HEES is already good value for money, and we want to continue to secure the maximum benefit for every pound spent, whether the benefit is expressed in economic, social or environmental terms.
The Government are not the only player in relation to energy efficiency. We are also working to encourage others. The hon. Gentleman cited the Energy Saving Trust, which, in particular, represents an important partnership between energy suppliers, the energy efficiency industry and the Government, in promoting energy efficiency, recognising that all those parties have a role to play. The trust is a catalyst for the promotion of energy efficiency, with the aim of bringing about self-sustaining markets for energy-efficient goods and services, particularly in the developing competitive energy markets.
The role of the trust has continued to evolve. The Government are now providing funding of up to £50 million from 1996 to 1999 to enable the trust to develop a programme of work, to assist the market to 950 work in the interests of customers. A key feature is the development of partnerships which will bring in funding from third parties: Government money being used to maximum advantage, to kick-start initiatives which should become self-financing. I am pleased to say that the work programme, launched in April, is developing well, and will continue to contribute to further savings in carbon dioxide emissions.
The hon. Gentleman referred to the private Member's Bill introduced by the hon. Member for Nottingham, South (Mr. Simpson) to amend the Home Energy Conservation Act 1995, in particular to add houses in multiple occupation to the definition of residential accommodation, and thus require local authorities to identify and report on energy conservation measures for such houses too. The hon. Gentleman will know that the Government support that Bill, and I am glad that it is making good progress.
The hon. Gentleman referred to VAT. He will know that that subject has been raised on a number of occasions with my right hon. and learned Friend the Chancellor. The Government's long-standing policy is one of a simple taxation system, with just the standard rate of VAT operating in conjunction with the zero rate. The 8 per cent. reduced rate for domestic fuel and power is the exception. Long-term retention of that, as the hon. Gentleman will know, was not of the Government's choosing. I understand that my right hon. and learned Friend has no intention of extending that unique reduced rate to other areas of spending.
My right hon. Friend the Paymaster General has set out the Government's view that, notwithstanding all the arguments made by the energy efficiency industry, it would be difficult to set a special rate for energy-saving products. To try to do so might well achieve little and would certainly complicate the operation and administration of the tax. There seems little doubt that it would give rise to disputes about the energy-efficient qualities of various products—about the boundaries between those goods and services that should and should not be included.
The hon. Gentleman asked about the costs to local authorities of implementing the Home Energy Conservation Act 1995. The specific new duty on local authorities is to prepare one energy conservation report covering relevant properties in their area, and £3 million has been made available for that purpose under the new burdens procedure.
Future work under the Act will take the form of updates to energy conservation reports. That will form part of the existing housing investment programme process, which is, of course, an exercise that local authorities already have to go through and are well geared up to carry out. The alignment of the process with HIP was specifically designed to minimise the extra work for them.
The new burdens procedure is designed to meet the cost of new activities, but it does not involve new money. Specifically, it means that, within the Department of the Environment's budgets, if we were to agree to providing further resources to local authorities in relation to the Act, it could come about only by our finding savings elsewhere within the energy efficiency budget. We can only switch resources from one programme to another.
I am grateful that the hon. Gentleman has not sought to challenge the actions we are taking to improve energy efficiency. He has suggested a number of ways in which 951 he believes that we should do more and said that more resources should be committed to it. I have to say that, however much I might agree with him in principle, budgets are not unlimited. One of the hard jobs of being in government is to make difficult decisions about conflicting priorities.
We remain fully committed to tight control of public expenditure, and spending on energy efficiency has to compete with a wide range of other priorities. We have to make judgments about what is affordable. We have some scope for redeploying uncommitted resources among different parts of my Department's programme, but new resources can only be sought via the annual public expenditure survey discussions.
I recognise the hon. Gentleman's concern about the reduction in the HEES budget, but I can only say that future levels of funding have to be determined annually, via the public expenditure survey.
952 The hon. Gentleman has raised many issues and has expected me to compress my answers into a short time. This is an important subject and I welcome the hon. Gentleman's commitment to it. He should rest assured that the Government in general, and I in particular, remain as committed as ever.
§ It being Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.
§ Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.