Budget Resolutions and Economic Situation
It is a great pleasure to follow the right hon. Member for Godalming and Ash (Sir Jeremy Hunt). He gave a very thoughtful analysis—when he was not selling his book, but I am not going to accuse him of that being his primary reason. He mentioned breathing space. I do not think he was saying that it was not important to people, and he acknowledged that. The breathing space gives a direction of travel and, to answer some of what he was saying, that is the context for the Budget. It was very much a Budget for energy and cutting bills. It was very much a Budget for tackling growth challenges and for showing how important growth is, as set out by my right hon. Friend the Member for Hove and Portslade (Peter Kyle), who has left his place. That is for a very good reason: we are in the middle of the second big energy shock in a few years. To the right hon. Member for Godalming and Ash’s concern about mortgage rates, I add my concerns about the impact of inflation if we do not tackle the costs of energy and the impact on prices more widely. That is true for consumers and it is true for businesses and the wider economy. Bringing down the cost of energy had to be a fundamental part of this Budget, and that is exactly what it was. Progress has been made and will continue to be made. I note in the Red Book that gas now sets the price of electricity 60% of the time. Just two and a half years ago, that figure was 98%, so huge progress has been made. It is also the case that opportunities are available for people to switch to electricity. It is up to nine times <span id="344" class="column-number" data-column-number="344"></span>cheaper to drive an electric vehicle compared with diesel, and not all of that is due to the exceptionally high prices that we have at the moment. However, these things point in the same direction: that the energy transition is in our interest, through ending our dependence on the uncertainty, the danger and the threat that we face from having to import oil and gas. I know there are people who will claim later in this debate that it can all be got from the North sea, but it simply cannot. There would not be enough of it, even if we were to increase production. The announcement on Jackdaw is welcome. It will increase by a relatively small amount the amount of gas coming ashore to the UK to be used here, but it is a welcome amount. As well as the challenges around costs, there are huge challenges on how we move on from here, including challenges around how to build out the grid further. The Budget’s announcements mark the start of how to address the challenge, and I will come back to one or two of them later. The Budget contained a range of measures on bills, and I think they are about more than breathing space. They include the VAT cut that was confirmed by the Chancellor today, and the council tax cut of £100, which will benefit 32,200 households in my constituency alone. We should be welcoming these proposals. The ending of standing charges for gas will help some of the people in the greatest fuel poverty around the country, and I welcome the announcement of something similar to come on electricity standing charges. It must be right that, at this time, in this scale of crisis, the priority is to help people with their energy bills and to use the bank surcharge for a year to do so. It is also welcome to see no more policy costs on bills, and the announcement of a longer-term commitment there is very much in that vein, too. We heard earlier in the week about the use of loans in the warm homes plan to make it easier for people to take advantage of the technologies in moving to electrification. To the point about the reduction in the amount of time gas sets the price on the system, the increase in renewables on the system is, as the Red Book sets out, closing the gap between electricity and gas prices. It is crucial that it is made as attractive as possible for people to move to electricity, in transport and in home heat, and that is one of the things the warm homes plan will help with. The more people can take advantage of these things, the cheaper it will be for them and the greater will be the opportunities for industry. The warm homes plan is a confidence builder for industry to invest in the installation of technologies such as solar, storage, heat pumps and other forms of electric heating and, potentially, hybrid heating. My Committee will be looking at that in our inquiry on the subject, which we are about to start. This builds on the £150 off from scrapping the energy company obligation scheme and the moving of the renewable obligation to the Exchequer, as well as the £50 million of help for homes that rely on heating oil for their heating. On the subject of energy security, there are good commitments in the Red Book on the expansion of renewables, and also on nuclear. I welcome the statement on the need to review and reform the institutions—the National Energy System Operator, Ofgem—the way the Department operates and the uncertainty and confusion over where the networks fit into the picture. This is <span id="345" class="column-number" data-column-number="345"></span>absolutely essential if we are to roll out the grid faster, to make the most of the opportunities in the new technologies, and indeed to move ahead with nuclear. I note the recommitment in the Red Book to the application of the findings of the Fingleton review. This is something my Committee has called for, because we need to have certainty on the siting of the next large-scale nuclear power stations after Sizewell C and Hinkley Point C, and also on what comes next after Wylfa with SMR2. There will be good support from the British industrial competitiveness scheme, with 10,000 energy-intensive businesses benefiting. My Committee will also be asking about the cost control framework and the reforms to the market. We certainly need to know more about what they are. As has been pointed out, more detail is needed, and my Committee’s role will be to try to identify exactly what is going to come next. There is a strong link between the new generation of electricity and cutting bills. There is also a commitment to continuing to break the link between the price of gas and the price of electricity, especially by fixing the price for new renewable projects, which will provide protection against volatile gas prices and the uncertainty that we all face now. I see this Budget as an important next step in the commitment on energy. I see energy as a fundamental part of the growth agenda, as well as recognising the importance of delivering energy security. The Government have taken a pragmatic approach. We heard an intervention earlier about the energy wealth fund. It is a huge shame that the then Conservative Government did not set up a sovereign wealth fund in 1990 like Norway did, because had they done so, it would now be worth over £1 trillion to this country. However, we now have an energy wealth fund, and it is part of the economic opportunity of the 21st century. We have seen success in the latest auction rounds, commitments on nuclear, rapid progress on renewables and the warm homes plan. Alongside the announcements on procurement and more widely, these present an opportunity to support the economy and develop jobs and growth, as well as keeping down bills. This is a Budget for energy bills and for energy security, but it is also very much a Budget for growth through investment in energy.