My Lords, Russia’s illegal invasion of Ukraine and its impact on global energy markets have affected families and businesses up and down this country. As we approach winter, this Government have made bold decisions so that homes are kept warm and businesses are kept open. On 8 September, the Prime Minister set out a comprehensive package to tackle rising energy prices. As part of this, she announced that we would bring forward emergency legislation, which is before noble Lords today.
I thank the Opposition and the whole House for their constructive engagement to expedite the Bill. Providing support to those who need it is a shared value across all parties, as seen in Monday’s proceedings in the other place. I also thank the DPRRC for its report on the Bill, published this morning. I welcome its constructive comments on ensuring that the powers in the Bill are appropriately drafted and justified. We will of course be responding to the committee shortly; however, it is important that we remember the context of the Bill and ensure that consumers are able to benefit from the Bill as intended and as I will set out.
The Energy Prices Bill means that consumers will pay a fairer price for their electricity and that no one is left behind. First, the Bill provides the legislative footing for the energy price guarantee, which will protect UK households from soaring energy prices. By reducing the unit cost of electricity and gas, the typical household will have the equivalent of an annual bill of £2,500. Effective from 1 October this year to the end of March next year, the energy price guarantee will provide domestic consumers in Great Britain and Northern Ireland with crucial support in the winter months.
To ensure that support is available up and down the country, an alternative fuel payment will provide a one-off £100 payment to UK households that use alternative fuels for heating. Heat network consumers will also receive a one-off £100 payment. We are exploring delivery routes for the alternative fuel payments in Northern Ireland as well.
The energy bills support scheme was announced earlier this year to provide £400 to support households. I confirm that, through this Bill, households in Northern Ireland will be able to receive equivalent support to those in Great Britain.
The Bill also provides support for non-domestic consumers, such as businesses, charities, schools and hospitals. The energy bill relief scheme will enable the Government to provide financial assistance to all eligible non-domestic organisations in Great Britain and Northern Ireland over the coming winter period. Bills will be reduced by a new government-supported price, which is less than half the wholesale prices anticipated this winter. Discounts apply from 1 October 2022, with an initial period of six months.
In three months, the Government will publish a review to consider how to continue support for non-domestic users, particularly those most vulnerable to energy price rises. The Bill provides that the scheme may be extended to those deemed eligible for up to four consecutive six-month periods. For non-domestic consumers who use heating oil or alternative fuels instead of gas, the Bill will also introduce a non-domestic alternative fuels payment. This support will likely take the form of a flat-rate payment delivered via electricity bills.
I raised this point about a windfall tax last week, so I thought I would be justified in intervening today. There is an argument that a windfall tax, which is predictable because the suppliers of electricity know what bills they are going to have to pay, is better in terms of promoting long-term investment in renewables, which we desperately need, than this cost-plus arrangement, which is also variable, as I understand it, by ministerial order. That provides no certainty for potential investment.
I am not sure the noble Lord is correct. The reason we have selected this mechanism is that it is a complicated picture; of course, many suppliers would no doubt argue that they have sold ahead their production to energy retailers, et cetera, and therefore the precise circumstances of every individual supplier will determine the arrangements that will be appropriate for them. It is not a windfall tax because a windfall tax would be levied on profits and would go to the Exchequer. This money clearly does not go near the Exchequer; it will go directly to consumers in the form of lower bills.
I mentioned that we will also introduce a contract for difference to existing generators that are not currently covered by the Government’s existing contracts for difference scheme. We hope that many of these suppliers will move voluntarily to contracts for difference payments, which will provide them with secure long-term revenue, and therefore there will be no need to impose this cost-plus mechanism.
The voluntary contract would grant existing generators longer-term revenue certainty and safeguard consumers from future price rises. This Bill is part of the swift, decisive action we are taking to deliver affordable and secure energy in the UK. There are no cost-free actions, but I think the whole House agrees that it would be wrong to do nothing. This Government will always act decisively to support households and help businesses grow. The consequences of not acting now would mean worse economic outcomes going forward; this Bill will provide certainty, reduce inflation and support economic growth. I would welcome the support of noble Lords in ensuring the Bill becomes law and therefore commend it to the House.
My Lords, I confirm to the Minister that we support the passage of the Energy Prices Bill, but can he explain to the House whatever has happened to the Energy Bill, which has been shelved somewhere, waiting for someone to make a decision about its future? Without support, consumers and small businesses would be facing an eye-watering increase in their bills—estimated to be somewhere between £5,000 and £10,000, respectively—so the Government have acted and the Opposition support them in doing so. Having said that, they are in a deep mess entirely of their own making.
To give noble Lords a recent example, on Monday I, and perhaps other noble Lords, received a letter from the Minister inviting me to yesterday’s briefing about this Bill. In the letter, the Minister wrote in the first highlighted, bullet-pointed paragraph:
“The Energy Price Guarantee will ensure that a typical household in GB pays around £2500 a year on their energy bill for the next 2 years from 1 October 2022”.
About half an hour after I received this invitation, this month’s Chancellor announced a screeching U-turn, and the two-year pledge went down to six months. Did no one tell the Minister before he wrote the letter? It reminds me of Prufrock:
“In a minute there is time
For decisions and revisions which a minute will reverse.”
My first overarching question to the Minister is this: can we rely on anything this Government are now saying?
The Energy Prices Bill is facing parliamentary scrutiny after it has been acted on. I thank the Delegated Powers and Regulatory Reform Committee for the report it published this morning, which is in essence a condemnatory judgment of the Government. The Bill has to take effect from 1 October 2022, but what does it do and what does it not do?
The unit price cap will mean an average consumer’s annual bill will rise to £2,500, in contrast to Labour’s fully funded price freeze at about £1,900 from September. There is no additional support for the 15% of off-grid households, in contrast to Labour’s plan which would provide £1,000 of help. There is also no additional support for customers on prepayment meters—4 million households—who use approximately 60% of their energy over the winter months as bills are not smoothed out. This contrasts with Labour’s plan, which would save them an average of £1,300. Ten million families will still spend more than 10% of their income on energy, according to a recent study by the University of York.
My Lords, on these Benches we too support the broad thrust of the Bill, but like the noble Lord, Lord Lennie, we wonder what it might look like by the time it gets to us in Committee just next Monday. We also share the concern of the Delegated Powers and Regulatory Reform Committee about the unfettered powers being given to the Secretary of State without any time constraint—powers that enable the Secretary of State to make large changes to the sector without consultation or the right to appeal. As others will no doubt point out, we are concerned that the measures in the Bill treat renewables such as wind and solar less favourably than oil and gas. However, I will concentrate on two issues not covered in the Bill which I believe should be.
The Long Title of the Bill is:
“A Bill to Make provision for controlling energy prices; to encourage the efficient use and supply of energy; and for other purposes connected to the energy crisis.”
So, in addition to pricing and supply, the Bill is also meant to be about the efficient use of energy, yet it is hardly mentioned. Unlike those in many other countries, it seems our Government have no strategic interest in encouraging anyone in the UK to save energy. The International Energy Agency describes energy efficiency in priority terms as the “first fuel”. It reckons that at least half of the improvements needed to deliver net zero by 2050 will come from greater energy efficiency. However, in the UK, far too many people cannot use energy efficiently: their homes leak heat because they are poorly insulated. Around 15 million homes are below energy performance certificate band C. In other words, 15 million homes are inadequately insulated, so they cost more to heat—on average, almost £800 a year. Yet in the absence of a clear national programme, home insulation work has plunged by 50% over the past year, leading Doug Parr of Greenpeace to say:
I am listening to the noble Lord’s speech with great interest. I understand that there are thousands and thousands of acres of factory roofs in this country. Would it not be a very good idea for them all to be encouraged to have solar panels?
Indeed. The noble Lord is absolutely right. I was going to come on to that point. The UK Warehousing Association says that if we could get solar panels on all its warehouses, we would get 15 gigawatts of energy. The difficulty—perhaps the Minister can comment on this—is that there is difficulty in many cases with connecting to the grid. We need to find ways to help them achieve that for the benefit that the Minister just mentioned. I hope we can hear the Minister’s views on these issues, without him just shrugging them off as he has in the past, saying that this is a matter for the Chancellor.
Just like warehouses, other forms of non-domestic solar are vital; solar farms provide one such example. But we hear from media reports—the Minister can perhaps confirm whether this is true—that the Environment Secretary wishes to prevent new ones being built on the apparent basis that they are a threat to food security. Yet solar farms are a major UK success story that does not require subsidy. The chief executive of the trade association Solar Energy UK told the Financial Times last week that there is more than £20 billion of private capital in the project pipeline—investment, as well as the jobs and extra finance to support farmers it would bring, that would be lost under the Environment Secretary’s apparent plans. Yet there is no serious evidence to suggest that solar farms present a threat to food security. In fact, the opposite is true. Land around and under solar farms can and does support the UK’s nature recovery and biodiversity targets with wildflower meadows, ponds and wetlands. Solar farms drive investment, create jobs and generate clean electricity. I hope we will hear from the Minister that what we hear about the Environment Secretary’s views is incorrect.
As I said at the beginning, we support the main provisions of the Bill, but believe it is a missed opportunity to, for example, set out a clear strategic plan for addressing energy efficiency and expand and make better use of solar energy.
My Lords, I am grateful to the Minister for introducing this Second Reading debate. I begin by saying that I welcome the decision to take action to protect consumers and businesses from sustained high energy prices ahead of this winter. Clearly, something needed to be done, and it is good that we are doing it. The energy price guarantee needs a legal footing, the energy bills support scheme needs to be supported too, and obviously extending measures for non-domestic customers is essential. The measures relating to passing on costs to tenants are welcome, as are those on heat networks and complaints. Then there is decoupling the wholesale gas price from the price we all pay.
Something needed to be done and this Bill is at least an attempt to do it, so its content is necessary and to be supported. However, it is possible to be supportive of the content but dismayed by the means by which these issues are being brought forward. You can be supportive of the what but very concerned about the how.
I wonder how we got here. It is not as if we did not know when winter was going to be or as if the invasion of Ukraine was a piece of news. Why then are we here in October, already facing emergency legislation being rushed through on an accelerated timescale when we had an Energy Bill that we were debating? In fact, we still have one, paused somewhere in the ether. I do not know whether I feel pleased or saddened that many people said at the time that that was not the Energy Bill that the country needed. This is evidence that we were right; the Government have now had to bring through emergency legislation to focus on the here and now and the issues of the greatest importance.
The most important issue is of course affordability; therefore, I am glad that we are now focusing on that. We could be sitting here talking about a hydrogen levy being applied to bills to pay for hydrogen heating, which would have been a catastrophic waste of time, so I am pleased that we are now at least focusing on the real issues at hand. However, this is a difficult Bill to engage with. It is highly complex, lots of the detail is missing, and the powers being taken are extraordinary. Therefore the how leaves me feeling very ill-prepared and concerned that we are not going to do the job that we are expected to do, which is to go through the Bill, in great detail and with great care, to prevent unintended consequences and to ensure that it is fit for purpose. I feel that, as it currently stands, we cannot do that job.
My Lords, I am pleased to speak on this important and urgent piece of legislation. I declare my interest as deputy chair of the Church Commissioners’ board of governors. We own stocks in energy companies. In the light of today’s developments in the other place, I should perhaps also declare that I regularly eat tofu.
It is clear that the ongoing cost of living crisis and energy insecurity necessitate swift and comprehensive action. It is estimated that this will adversely impact up to 100,000 households in one of my local authorities, Manchester, this winter. A report published in August by the University of York predicted that more than three quarters of UK households—53 million people—will have been pushed into fuel poverty by January next. It is therefore very welcome that the Government are taking action to help the public and businesses survive the coming winter. It is also good to have the clarity set out in the Bill on the energy price guarantee and the energy bill relief scheme.
However, welcoming the Bill does not mean that I, or my colleagues on these Benches when they are here, believe that it is a latter-day Mary Poppins—practically perfect in every way. While we fully recognise the urgency of this legislation, we hope that His Majesty’s Government will take seriously the calls to amend certain of its details before we reach Committee next week.
The energy price guarantee, setting a limit to the amount households can be charged per unit of gas and electricity, is clearly needed as prices continue to rise rapidly. However, it is questionable whether this should include a temporary suspension of green levies. As Energy UK said earlier this year, reducing support for
“the very solutions that will prevent a repeat of the current crisis”
My Lords, why are we here today? That is not an existential question but a very practical one. We are here because, without this Bill, households, businesses and institutions —such as the GP surgeries, community centres, libraries and, as the right reverend Prelate just said, churches being lined up as “warm centres” in this fearful winter—would otherwise face unpayable bills.
One direct causal factor here is the actions of President Putin, the instigator of the Russian attack on Ukraine, who just this afternoon announced further sweeping measures of repression on the Ukrainian territory that Russia still occupies and across much of his own nation.
However, the situation is not simple. This is, in the terminology of the planners, a wicked problem. That is not because we had to be in this situation today but because a decade of inaction and wrong action by successive Governments has left us with a fossil fuel-dependent energy system, dreadfully poor-quality housing stock and the great privatisation of homes under the right to buy. My honourable friend in the other place Caroline Lucas has a Private Member’s Bill calling for protection for private renters, a no-fault evictions ban, binding efficiency regulations and a rent freeze to address some of the broader issues for this desperate winter. But many homeowners too will soon be, or are already, in desperate straits, facing soaring mortgage payments. This comes at a time when incomes that were already insecure and inadequate and not keeping up with inflation are leaving people without reserves— 25% of UK households have savings of £2,100 or less.
We are where we are. We have a tottering Government with zero democratic legitimacy and public trust, and no consistency in policy or personnel, and they are offering us this Bill today. That is not to say that I or, I expect, any other noble Lord speaking in this debate will oppose its basic principles. The Government have no choice but to provide major support to households through keeping down the cost of energy to ensure that people do not freeze this winter, and that they will be able to afford a bite of toast, a cup of soup or to fill a hot-water bottle.
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This legislation strengthens previous action by requiring, rather than expecting, landlords and other intermediaries to pass on the energy price support they receive to end-users, such as tenants, as appropriate. This applies to the energy price guarantee, to the energy bills support scheme and to the energy bill relief scheme. The Bill will also ensure that heat networks benefiting from the energy bill relief scheme pass through cost savings to their consumers. The Bill will provide for the appointment of an alternative dispute resolution body to handle complaints raised by consumers against their heat network if it has not complied with those pass-through requirements.
Finally, we must protect consumers from paying excessive amounts for this low-cost electricity, while ensuring that no firms are unduly profiting from Russia’s illegal invasion of Ukraine. Wholesale electricity prices are currently set by gas-fired generation, which is the most expensive form of generation. This means that consumers are having to pay over the odds for cheap low-carbon generation. The powers in the Bill will allow us to introduce a temporary cost-plus revenue limit for low-carbon generators that are not currently covered by a contract for difference. This will allow generators to cover their costs and receive an appropriate revenue that reflects their investment commitment and risk profile. The precise mechanisms will be subject to a consultation to be launched shortly, ahead of it coming into force from the start of 2023.
I stress that this is not a windfall tax; this is a targeted intervention to deal with a specific problem that has occurred in the wholesale electricity market. It will help to break the link between abnormally high gas prices and the cost to consumers of low-carbon electricity. We are also legislating for powers that will allow us to offer a contract for difference to existing generators not currently covered by the Government’s existing contracts for difference scheme.
I turn to the windfall tax—or non-windfall tax—and how the Government propose to pay for this measure. They have spent the last period in office rubbishing the very idea of a windfall tax as “unconservative”, but in Clause 16 we see a windfall tax in anything but name that the Secretary of State may impose on the energy giants. The clause is titled
“Temporary requirement for electricity generators to make payments”.
I will read it out:
“The Secretary of State may, for a purpose mentioned in subsection (2), make regulations for, and in connection with, requiring periodic payments to be made to a payment administrator by … specified electricity generators … electricity generators that are of a specified description, or … electricity generators that are designated by the Secretary of State in accordance with the regulations … The purposes are … the purpose of enabling a payment administrator to obtain funds for paying to electricity suppliers in connection with reducing the cost to customers of electricity … the purpose of enabling a payment administrator to obtain funds for meeting expenditure incurred or to be incurred by the Secretary of State in reducing the cost to customers of electricity.”
If it sounds like a windfall tax, if it smells like windfall tax—it is a windfall tax. Even John Redwood described it as a “surrogate windfall tax” in the other place. Energy giants are making £170 billion in excess profits, and they may be required to make payments. Let us call it what it is: a windfall tax, and the Government should do it properly. The level set must contribute significantly to the price support for businesses and consumers. The Government must now end the absurd multi-billion-pound loophole in the windfall tax for oil and gas companies. Above all, it must be fair to customers.
Oil and gas companies are currently enjoying a massive loophole for investing in fossil fuels, so why do the Government think it right to leave billions of unearned, unexpected windfall gains in the pockets of oil and gas giants, thereby forcing people to pick up more of the costs of this support in higher borrowing and higher taxes for the future? How can the Government defend tilting the pitch away from cheap, home-grown, low-carbon power in favour of expensive, insecure, planet-wrecking fossil fuels? The powers are ill defined, the size of the levy is unknown and how much it would raise is unclear. How will the Government ensure fairness with a fossil fuel windfall tax?
The Labour Party will bring forward amendments to the Bill. In line with our fully funded policy, we would seek for the energy price guarantee to take effect from 8 September rather than 1 October. The powers in Clause 21, highlighted by the Delegated Powers Committee, and Clause 22, to modify energy licences and issue directions to licence holders, are a power grab by the Secretary of State. They are not compellingly justified and should be subject to proper parliamentary scrutiny, not the negative procedure. The Delegated Powers Committee is disdainful of what it calls “camouflaged legislation” in the Bill, saying it is “inappropriate”.
For the Government to think that the answer to a slow-to-react regulatory regime is to override it by giving powers to the Secretary of State is fanciful, especially now, with confidence in the Government’s handling of affairs at an all-time low. There is no long-term plan to get us out of the crisis. Electricity and gas prices should be delinked, and Labour would require the Government to develop a plan to do this. Consumers need some certainty to be able to plan for their futures.
There is an unfair £5 billion loophole in the existing windfall on fossil fuels, introduced by the previous Chancellor or the one before. For every £1 invested in oil, gas and fracking, companies get back 91p. Nothing like that exists for renewables or nuclear fuel, and we need this to be levelled up.
We would require the Government to report, assessing the impact of reducing the Energy (Oil and Gas) Profits Levy Act investment allowance from 80% to 5%, particularly on bills. We would also require the Government to assess the revenue and profits of electricity generators and oil and gas producers on a six-monthly basis.
On renewables, Defra is seeking to block landowners from developing solar energy farms. Some 0.1% of agricultural land is currently used for solar energy generation. If that is increased tenfold, it would mean that 1% of agricultural land was used in this way. Who does not like solar energy panels, and why not? They are capable of producing the equivalent of what 10 nuclear power stations produce for the country. We previously heard the noble Lord, Lord True, talk about the need for self-sufficiency in energy; this would be a good start.
We will lurch from crisis to crisis if we do not learn the lessons from this one. We must become much more self-sufficient in our energy production. This will mean a sprint for growth in renewables and nuclear, and a massive programme of energy efficiency across the country. The powers are with the Government, and I commend this to the House.
“It’s frankly astonishing that this dip in insulation rates comes at exactly the time we should be ramping up this proven, long-term solution to the cost of living crisis.”
Even the Conservative-inclined Sun newspaper said in August:
“Householders faced with astronomical heating costs need lagging for their homes, not a government lagging behind.”
So, measures to improve energy efficiency should be a top priority for the Government, with a clear strategy and evidence of real commitment.
As the Minister knows, I have spoken many times about the need to establish the Government’s own energy efficiency targets in law. I have argued that it is the retrofit industry that will deliver the Government’s energy efficiency targets, but the industry has lost confidence after being let down by numerous failed schemes. The industry has shrunk, and the amount of energy efficiency work has fallen dramatically. The industry itself argues that to persuade it now to invest in research, training and equipment, it needs the confidence that putting targets into legislation would give. Conservative Ministers, including the current Chancellor, have claimed numerous times to believe in doing just that—enshrining targets into law. A Defra document states:
“A legally binding long-term target gives a clear signal to industry of the direction of future government policy. This may increase investor confidence and encourage industry to invest in infrastructure and research that will drive innovation”.
The Government have two main targets: for all fuel-poor homes to be EPC band C by 2030; and for all remaining homes to be EPC band C by 2035. However, to date, the Government have refused to put those targets into law to make them legally binding as the industry has requested. I have received no credible explanation for this failure, so I will table an amendment to the Bill in Committee. Last night, your Lordships agreed an amendment to the Social Housing (Regulation) Bill which did at least put an energy efficiency target for social housing into legislation. I hope noble Lords will agree that all the Government’s energy efficiency targets should follow suit. I hope the Minister will explain in detail the Government’s plans in relation to energy efficiency and why it is absent from the Bill.
I now turn to another issue I recently raised which I believe should form part of the strategy to improve the supply of energy: the role that solar energy can play. Residential solar systems are already very popular, reducing bills and often being able to supply excess energy back to the grid at times when it is under pressure. I recently installed solar panels on my own home, adding to the 1.2 million homes that have done the same. Together, these domestic solar PV systems have the same generation capacity as the forthcoming nuclear plant at Hinkley Point. We should be encouraging more households to do the same and helping those with existing systems to get them working more efficiently.
In the March Spring Statement, it was announced that certain energy-saving materials would be eligible for a 0% rate of VAT on both labour and parts, and I welcome that. Solar panels and batteries, which store energy from solar panels for later use, are covered if fitted at the same time, but any battery added separately at a later date is not covered. Retrofit batteries will continue to be subject to VAT at 20%. Modern solar systems usually include a battery, but many systems installed just a few years ago do not. With more efficient and cheaper batteries now available, it makes sense for those with older systems to add a battery. The solar energy their panels generate can be used far more efficiently to the benefit of the home owner and the country overall. However, the 20% VAT rate is likely to deter many. I believe that retrospectively added batteries should also benefit from zero VAT and will bring an amendment to that effect in Committee.
Indeed, there are many other energy-saving items such as double glazing and draught excluders which are not covered by the zero VAT rate. Their take-up would increase were they to be included, which would again be to the benefit of the home owner and the country. I hope the Minister can share his view on this proposal.
There will be unintended consequences, not least the effect on investor confidence. It is not as if we do not have other problems facing the economy at the moment. Just at a time when we need to provide certainty to markets and give investors confidence to invest in the UK and to help us deliver a transition in our energy system to a cleaner, more affordable and secure one, we are taking legislative powers which will have a chilling effect on any investor reading them. They are so broad-ranging and there are so few checks and balances that anyone considering making an investment decision in the coming weeks will be thinking twice, and I suspect that they will think that for as long as these powers last.
That brings me on to one of the big concerns, which is that the sunset clauses in the Bill are far from adequate. In fact, they really do not exist, because if you analyse some of them, at least one of the measures, the cost-plus revenue recall measure, potentially lasts for five years, and even then, it is on a rolling basis—the Secretary of State can continue to extend that deadline. No justification is given that warrants that length of time or that level of potentiality for it to continue indefinitely. The industry is truly scratching its head—I am sure we have all had the briefings pouring into our inboxes—trying to understand how it can be possible that this seemingly unjustified approach is being rushed through at such pace.
I hope that we will hear from the Minister about the response to the Delegated Powers Committee report, which picks on just two to three of the clauses that it considers to be most problematic. Clearly, if it had had more time, it would have picked up a number of other measures, but it was not given enough time, and we received the report only this morning. It has been quite scathing about certain aspects, including Clause 9 and Schedule 1, which it highlights as bringing in “camouflaged legislation” and “sub-delegated powers” which undermine democracy and will undermine the role of this House if it is allowed to continue. It also highlighted Clause 22, where it has serious concerns about the nature of the powers being taken. We need to hear from the Government their response to those concerns.
The noble Lord, Lord Foster of Bath, mentioned that some things are missing from the Bill. I do not think that we want a huge omnibus Bill to be rushed through, so it is right that we focus on the affordability leg of the challenge we face, but imagine if we had taken the same approach to the upstream sector. Here we are, looking at a Bill that makes a set of big interventions into the market, leaving it open-ended and being expected just to trust the Secretary of State’s judgment on many things. The Bill has sweeping powers—it has been described almost as nationalisation by the back door; that is how big an intervention this is—yet, when we look at what happened up stream, the Bill that was passed to introduce the windfall tax, the excess profits levy, contained a circumscribed set of things. It was very narrow. It did not have any open-ended powers. It also had a huge get-out clause where, if the sector could show that it was reinvesting in the North Sea, up to 85% of that windfall tax would be taken away.
That is how that sector was treated: with precise, time-bound interventions. It was given clear ways in which to encourage it to invest. Compare that to this sector. It is night and day. I do not think that this sector is being treated with anything like the same degree of fairness, which we should expect from legislation. Let us turn this on its head and ask what we could have achieved had we taken these powers and applied them to the upstream sector. Imagine if we had had the ability to go in with some legislative strength and say, “We don’t want you to continue to charge us these inflated prices for the product that we license you to extract”. We are a purchaser of these products from the North Sea. Rather than simply allowing the sector to price-set then try to claw the money back, could we not have done what we are doing here and had a conversation about capping the price for our own domestic consumption? If we had taken broader powers at that time and done things correctly, we might have got a better outcome than simply allowing the sector to set whatever price it feels is necessary and then trying to claw it back through a windfall tax.
As I mentioned during our helpful briefing with the Minister, there is an international dimension to everything we are talking about here. This issue needs to be seen in that context. Obviously, we are reliant on imported energy from our neighbours, particularly Norway. I want these sorts of measures and the approach of treating this issue like the emergency it is to be evident in our diplomatic efforts with the countries that supply us with our energy. Norway is a neighbour. It delivers a huge proportion of our gas—about 60% at the moment, according to the latest statistics. What are the Government doing to have a conversation with Norway about keeping the price at a reasonable level so that it does not flow through to consumers in the way it currently does? There must be a mechanism for doing that. It is not a poor country: Norway’s profits will be excessive during this period and will end up in its sovereign wealth fund, having come from our taxpayers and out of our public spending. There must be an international dimension. I would have liked to see this Bill in that much broader context of the international elements of what we are describing.
To return to the question of equality of treatment of upstream and downstream—other noble Lords will talk to this issue, I am sure—there is a distinct difference in the time of intervention. The measures in the energy profits levy will last only until 2025 but, as we have just discussed, some of the measures in this Bill may last for five years and be extended on an indefinite, rolling basis. That is simply not equivalent. There is also the fact that, in this Bill, we talk about revenues whereas, in the other intervention, we talked about profits. Why is it called revenue in one sector and profit in the other? What is the nature of the difference there?
I have touched on the Delegated Powers Committee. I hope that, by the time we get to Committee, amendments will have been tabled to change some of the negative procedures into affirmative ones. I hope that we will insert more parliamentary scrutiny into some of the powers. We will, I am sure, have to think about requirements to consult, which are absent in large parts of the Bill. Then, perhaps, we could look at further tightening up as we get time to digest some of the briefings we are getting.
My final comments are two additional points. I want to understand how the measures in this Bill interact with other elements of government policy: specifically, capacity market payments. I wonder whether we are continuing to make capacity market payments while at the same time asking for money back. I just do not know. Some of those capacity market payments apply to some of these generators, which are outside the CfD. I am thinking here about the nuclear operators. I want to understand how they interact. There is also the carbon pricing support mechanism that we have on generators. I imagine that it is currently suspended, but I would like clarification on that, because it would be crazy for us to be requiring them to pay and then asking them to pay us back.
Finally, and not to broaden the debate too widely, it strikes me that we are dealing with a commodity-based crisis, with the pricing of commodities causing consumers to feel the pain, and with potentially very serious consequences this winter. It strikes me that when we try to intervene in this market, we must always think about how we can offer support to those most in need in a targeted way, reducing the amount of deadweight support that we give out so that we get it to the people who most need it. That must be done efficiently.
We must also think about who can bear the cost of paying for this. We should not be assuming that it should be on the public purse and that we have these uncosted borrowing and spending implications coming out of the Government, because that damages our reputation, increases the cost of capital, and has a big effect on people’s confidence in us as a country.
Where could we do this recovery? Clearly, we can take it out of the electricity market, which is making excessive profits. We can also take it from the upstream oil and gas suppliers, as we have done with the windfall. However, there is another body of people who make money in this market: those involved in the trading of these commodities. Gas, and particularly oil, are highly traded commodities. There are derivatives upon derivatives that sit on top of every physical therm of gas and every barrel of oil.
I do not have much hope for this idea because of everything that we have seen coming from the current Prime Minister, but the City of London does understand commodity trading. It is home to thousands of traders in these commodities. The energy companies have thousands of traders, all making money in this market. It is a very lucrative aspect of the financial services market. I would love it if a Government could have a conversation about whether we should be levying some kind of tax on that aspect, so that it would deflate the speculative bubble that I am certain is sitting on top of some of these energy prices that we are all paying, and which will have a very damaging effect this winter if we do not do something about it.
With those final words, I reiterate my general support for the contents but my very strong concerns for how these powers are being implemented. I look forward to the rest of the debate.
Now is the moment not only to tackle the current crisis but to double down on the strategies that will reduce, and eventually eliminate, this nation’s need for imported fuel—a need that puts us at the mercy of the international markets.
The energy bill relief scheme’s support of non-domestic customers is also very necessary. The challenge that businesses, schools, hospitals, churches and many others face is huge. Many of my churches are now working on plans to join the Warm Welcome initiative. They will extend their opening hours through the winter to offer a place for local people to cut their fuel costs by spending less time at home. Warm churches, many with free wi-fi and even free hot drinks, have a key role to play—although I confess that I never imagined, until recently, that I would be commending Church of England buildings to your Lordships’ House for their cosy warmth.
But—and here is the issue—extended opening will lead to even heavier fuel bills. Last week we announced £15 million from Church Commissioners’ funds to help keep our churches warm this winter, but that will go only part of the way. We need further clarity from the Government on how the non-domestic scheme will work in practice.
When we legislate in haste, without the usual opportunities for consultation and debate—as I accept we now must—one golden rule should be that we legislate for the minimum period necessary and with the minimum scope for Ministers to build on that legislation without full public and parliamentary scrutiny. In several respects, as earlier speakers have indicated, the Bill in its present form fails that vital test.
It is of concern that the Bill grants the Secretary of State powers to end the tariff cap when they choose, as well as broad powers to amend the energy price guarantee and energy bill relief scheme. The uncertainty surrounding the tariff cap’s duration, as the noble Baroness, Lady Worthington, has just reminded us, will likely make it more challenging to give energy suppliers the certainty they need to purchase gas and electricity in advance for customers. It is concerning that, while the Government intend these measures to be temporary, the Bill assumes they will last for a minimum of five years—longer than however many Home Secretaries and Chancellors from recent times put together.
As drafted, the Bill lacks important definitions. The term “energy crisis” is left very broad and not clarified. Further definition of this term would be greatly beneficial to ensure that such emergency power measures are used at, and only at, the appropriate time. Secondly, the Bill does not include a definition of the policy instrument it seeks to introduce. Clarifying this would surely improve the Bill. Finally, we must also ensure that, in our desire to address the very immediate and acute crisis of paying our energy bills, we are enabling and not thwarting medium-term and long-term responses to the UK’s energy security situation.
To conclude, I am sure that all noble Lords here today recognise the timely nature of these measures and welcome them overall. I urge the Government to look to improve the details of the Bill further. While I am not personally able to be in my place next Monday, my most reverend and right reverend friends on these Benches will consider tabling or supporting amendments in any areas where we feel that His Majesty’s Government have not proposed satisfactory changes to the draft legislation in response to the issues that I have raised today.
However, as our hard-working and fast-working Delegated Powers and Regulatory Reform Committee makes crystal clear, there are a number of powers in this Bill of truly extraordinary scope. We really need a new metaphor. Henry VIII on steroids is no longer adequate; we need instead Henry VIII with rocket boosters strapped to those sturdy legs. I offer that image freely to any cartoonist who wants to run with it.
I am sure that in Committee we will see alternative approaches and will debate the detail, so in the interest of time I am going to take a broad overview of a couple of key points. As a number of noble Lords, particularly the noble Lord, Lord Lennie, have already said, the Bill could create a major bias against renewables and in favour of oil and gas. That is an issue not just for the climate emergency but for future cost considerations for households, as soon as next April. It is effectively a 100% windfall tax on the more established renewable electricity generators, unlike the 25% tax on all gas and oil profits. We could end up in a ridiculous situation where energy producers get a huge tax reduction if they invest to pollute the planet but clean energy does not.
I have a specific question to put to the Minister. It builds on the questions put by the noble Baroness, Lady Worthington. Where do nuclear power stations and biomass firms, such as Drax, sit in this current constellation? The noble Baroness, Lady Worthington, also raised an interesting point about trading in oil and gas. This relates to a question I raised earlier on the economic Statement and the place of the financial sector in influencing our Government’s decision-making. I point the noble Baroness to the fact that, in the past, there have been well-developed proposals for what has been called a Robin Hood tax, or a Tobin tax—a model I prefer. That is something that the Government could well be looking at in this situation to address the points that the noble Baroness raised.
I come to my second key point, which is about community-owned schemes. There is a risk with this Bill that the Government will be subsidising people’s bills with one hand while taking money from their income with the other, when that money could be supporting local community prosperity. Any new regulations created or implemented under Clause 16 must include exemptions for community-owned wind farms, solar farms and hydro schemes that reinvest 100% of their profit back into communities. I note that the Environmental Audit Committee report of 29 April 2021 recognises very clearly the wider benefits from community energy projects. It would be totally counterproductive to take money out of communities while the Government presumably also want to promote social benefit and levelling up. Will the Minister agree to meet community representatives from England, Wales and Scotland to discuss how the implementation and model of the regulations under this clause can be written in a way that does not further handicap the community energy sector that has been left in the lurch over recent years?
I very much agree with the points made by the noble Lord, Lord Foster of Bath, about energy efficiency; it is there in the Long Title. I agree with everything he said about insulation and other energy-efficiency measures. We also need to look at the use of energy in neon lights, neon signs above shops and lighting in shops. Look across the channel—if we are still allowed to do so—where Governments have very quickly brought in a whole range of measures to reduce consumption. Surely we could match or get close to those.
Before coming into the Chamber I was reading Twitter, which your Lordships’ House might judge that I spend quite a bit of time doing. It led me to reflect, as I was assembling this speech, on the views that the public have of Liz Truss, Jeremy Hunt, Jacob Rees-Mogg and an alternative figure who trends as much as any of them, Martin Lewis of the website MoneySavingExpert. I suspect that if you were to offer the powers in this Bill to Mr Lewis, the public might well jump at the idea—indeed, I suspect that many Members of your Lordships’ House might be tempted to do likewise. That really helps to highlight the fact—more evident now than it was half an hour ago—that we have no idea who we could be giving these powers to. That instability is one more reason to say that we simply cannot allow these sweeping, massive powers—which could be deployed capriciously and chaotically, as so much economic decision-making has been in recent weeks—on something as crucial as the energy that will prevent people freezing this winter and ensuring that they can be fed and survive.