2 April 1998

Alan Simpson MP (Lab. Nottingham South) Author, Securing Britain’s Future, An Alternative Budget Report, March 1998

Energy policies, from The Alternative Budget

The main part of the Budget that I offered, on an energy and equity basis, was in relation to a programme to end fuel poverty in Britain, over a period of fifteen years. The idea is to create a virtuous circle in which we both save energy and create work, and cut carbon emissions and raise the quality of people’s life – also saving money over that next fifteen year period. The proposals are essentially to try to tackle the backlog of some seven to eight million housing units in Britain, which are woefully inadequately home-insulated against heat loss. We have set out quite detailed calculations about how that could be done on the basis of 500,000 properties per year for each of the next fifteen years. Into that equation I have built all of the costs of the employment that it would generate, the tax revenues, savings to the NHS, and also the savings in terms of reduced carbon emissions. So essentially this was an attempt to try and define a different approach to economics, where we look towards the notional sustainable energy environmental policies which both generate work and take us into the next millennium, thinking about the economics of consuming less, which is diametrically at odds with all of the pressures in all of the energy industries today, where competition seems to be the bench-mark against which they are tested, and reduced prices, and increased consumption, all of which have very serious and negative environmental consequences.

This is not the official line. It has been received with a great deal of enthusiasm and interest outside the Treasury/Downing Street circles as a fairly serious and thought out approach to running the economy differently. But it would be dishonest to suggest that this was welcomed, because it really flies in the face of some of our economic preoccupation's, which seem to be about finding ways of tinkering with environmental and energy reduction policies, but still pursuing market deregulation and increased competitiveness as the mainstream of economic thinking, and that’s probably where my suggestions differed.

The Treasury has not been persuaded because of two things. The first is that it implies initial costs which have to be met – of about a billion and a half over each of the initial years. In some cases I think the annual costs go up to a maximum of just under four billion in one year. After you are half way through the programme the income stream begins to outstrip the costs stream, and that is when it begins not only to pay its way but repay its way. The problem with the Treasury is that they are obsessed at the moment with reducing government spending.

The Treasury is obviously concerned about the initial investment. Again I tried to set out a variety of ways in which that could be funded, one of which is that we inherit a legacy of under-taxing the petroleum extracting industry in Britain to the tune I think of about 30 billion over the last 15 years. Now if you were to remove some of the exemptions that the Conservatives gave to the oil industry, what you would then do is to have at least enough money to cover the costs of fully financing this scheme. I think that it would be a helpful idea to say to the industry that is most responsible for carbon emissions and ozone damage that they would pay the central part of financing a scheme which dramatically reduced these effects of energy consumption. Again, I expect this has to be seen in the context of lobbying for budgets yet to come rather than influencing the thinking of where we are now.

There is a glut of oil now and prices are at rock bottom. Meanwhile, a number of oil economists/geologists predict oil shortages and consequential dramatic price increases in the medium term. Have you detected any interest in addressing this issue and the economic disaster that may follow?

That analysis is one that I share. There is a sort of false summer that we seem to be in – a false cosiness that we seem to be enjoying about the present reduction in oil prices. When I mention the idea of raising tax revenues, they say, "Oh, well, we may not be able to continue producing oil if you put that level of tax on it". And my response has been to say, "Fine, if we are at this stage forgoing extracting and using some of our oil reserves when the prices are ludicrously low, those reserves are not going to migrate to Switzerland or to the Bahamas to be extracted at a later date". I think it would be a tragedy, for whatever degree of dependency we still have on oil, if at the point at which prices then go through the roof we find that we haven’t got any left. The oil industry doesn’t have the slightest interest in that.

We have a dreadful sense, I think, of poor stewardship of the natural resources that we have. That is partly what underpins the basis of the budget that I tried to submit. We should cease to be talking about the exploitation of natural resources and begin to talk more responsibly about the stewardship of natural resources. We should talk about agendas which seek to reduce consumption, or the need for consumption, rather than see economic growth only in terms of increased consumption. And we need to look at a much more ambitious programme of replacement, in terms of our national dependency on energy reserves. I think the target we have at the moment 20% by the year 2010 should come from renewables. The present position is just under 2% of our energy supplies come from renewables. Well, in truth, I think, as a society, environmental impact will drive this agenda far faster than anyone appears to be willing to recognise, and that we ought now to be pursuing a more ambitious programme of the promotion of renewable energy sources.

How do you reconcile a pursuit of renewable sources with the problems in the coal industry, because they are in the front line?

Well, I’m not sure that they are the front line any more. I think the front line has moved. You might argue that that would be where the gas industry has taken over. But all of the energy suppliers, fossil fuel industries, are going to face a century ahead which will be much more critical of their use in ways which damage the environment to an even greater degree than they already have done. So that the idea of looking at whether those energy resources can be developed in non-polluting terms, I think is going to be one of the two central issues, around which the big politics of the next century are going to be driven: non-damaging production processes, and access to energy, food and water. In the context of that first issue, the coal industry must face the big question of whether there are processes for extracting coal and converting it into energy which are not ozone-polluting.

Kyoto is going to require us to pursue a policy of reducing carbon emissions. There is no way of avoiding that. I do think that when the industrial world understands the agreement that they entered into, which is about global targets for contraction, and a convergence process based on per capita pollution quotas. The transfers that take place between the industrial and the developing worlds, which may see the trading of quotas, will still be in context of overall reductions in carbon emissions. And in that sense the coal industry will have to be a part of that. The environment will not be sentimental about whether it sustains life or doesn’t.

Unless you have low or medium impact technologies, which would allow the use of coal without adding to global carbon emissions, I don’t know whether there is an answer.

Is the Government seeking greater reduction from people cutting back on their motoring than from home energy savings, in order to protect coal industry jobs?

I think that there are two separate issues. One is, I suspect that the issues in relation to coal, the policy in relation to coal, is one almost of benign neglect. There is perhaps an assumption that it is becoming a residual energy force that would be just not competitive with gas and electricity and oil. So that having no particular policies is in itself a form of policy. In terms of the taxation on oil or petrol, which I completely support, that addresses other issues, in which you were talking about the quality particularly of the urban environment and the way in which this rolls on into questions both about urban congestion and urban pollution that is entirely driven by car consumption of fuel. I am a great supporter of this, except that I think there has to be a carrot and a stick, and it’s hard to see where to put aside funds that restore the primacy of public transport infrastructures, so that what the public are offered are safe, efficient, reliable forms of public transport, which move large numbers of people around cities and between cities in ways which are just not going to be possible in your own car. I think that has to be the other side of the petrol taxation coin. It is no good just punishing people, because if there are no other alternatives you are still going to be left with high costs of personal transport, in the absence of any public transport infrastructure that would replace it.

But we ought to be honest about the scale of the damage. Before bus de-regulation took place, Britain had seven domestic bus and/or coach manufacturers, I think now we’re down to maybe one, and all of this is because bus de-regulation drove the notion of competition around reduced price fares. The first casualty of this was the rate of bus replacement and bus reinvestment, so that people were just putting old boneshakers back onto the roads and were having to compete on a price only basis. And to stay in business many of the big operators cut back dramatically on their bus replacement orders. It meant that the manufacturers successively went out of business and virtually all of the new purchases that take place in the UK now are of buses and coaches that are manufactured in Scandinavia or other parts of Europe. So I think that we would have to begin a rethink of how we re-skill and re-equip and rebuild a domestic bus and coach industry that would meet the long-term needs of a new transport programme which was going to be a centrepiece of how we saw people moving about in the next century. Otherwise, by taking that step and not thinking it through about how we supplied vehicles for our own needs, we’d simply be precipitating a balance of payments crisis which increased the more we put public transport infrastructures at the centre of our planning, and because we cannot produce to meet those needs we’d have to import them.

I am very interested in electric and hydrogen-powered buses. There is a friend of mine who worked at the University in Hawaii, who came and stayed with us when he was in transit to Germany; the reason he was going there is that he was the advisor to Mercedes-Benz, who were running two separate fleets of cars round the country, both driven by hydrogen, one in something which is a dry powder form, which produced an electrolytic reaction - I don’t quite understand the mechanics of this - but one was liquid hydrogen and one was a dry powder process. And they were conducting detailed studies on the fleet they were already running - this was two years ago. Now his argument to me was that they had already sorted out the technology of running vehicles into the hydrogen age rather than the petroleum age. The main issue that they had to address was a national network of outlets; that you had to be able to go into a garage forecourt and fill up, or whatever the equivalent was. That, rather than anything else, was the final stumbling-block. They were already clear that they had the technology to make that sort of quantum shift in thinking and organising towards energy sources of which the by-product was water vapour. But it was the national and international infrastructure of outlets that they’d been unable to make progress on because national governments were still heavily influenced by, or indebted to, large-scale corporate petroleum interests. So I think that is the political dimension of that shift in energy use.

There is a colossal amount to be done. But in reality the big debates will be structured outside Parliament, and Parliament will be influenced more by the nature of those debates amongst the public at large than by the discussion processes, inside Parliament. I think that that may be a sad reflection on the state of British politics at the moment, but if anything the size of the Labour majority means that the executive will be somewhat dismissive of the arguments that back-bench members try to make to them. There is enough of a majority to be able just to disregard almost everyone and go off and do your own thing. What the Government is much more sensitive to is shifts in public opinion and public thinking. So debates which emanate from a public level are far less able to be controlled by the parliamentary machine and far more likely to impinge upon the considerations taken on board by the Downing Street advisors and the key players in the Cabinet.

Although I’m involved in the parliamentary process because I want to be part of the rewriting of laws, I’m absolutely clear that history will tell us all that societies change when the people in them decide that they have to change, and that far more often than not the political process follows a paradigm shift amongst the public at large; and that there are some issues occasionally where Parliament is ahead of the public. But in most cases we are not and democracy does not end when you have the right to elect a parliament. It’s the beginning of a process, and all the best parliamentary advances have been driven by a public demand for change on a scale that Parliament is still somewhat fearful of. So I think that’s where we are now, and I’m very excited about the opening up of a public debate which will force this Parliament to catch up with what this society I think is already wanting to move to.

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