I remind the House that I offer business advice to an industrial and investment management company.
With oil at $28 a barrel, the North sea and its supporting investments face a very damaging threat. None of us can know whether in the near future OPEC might change its policy and suddenly reduce capacity to put the price up; and none of us can know exactly when enough capacity will be closed elsewhere in the world where there are exposed investments and very high costs to get supply back into line with demand and to get the oil price higher. All we can do at the moment is try to manage what we have. Today, we have a very low oil price by recent historical standards, and it has completely undermined the business model and the investment case for many parts of the industry.
I am delighted that the Secretary of State has pledged strongly that she sees the North sea as a fundamental part of Britain’s energy requirements in the future and a fundamental part of our whole industrial base, as indeed it is. The North sea has not just spawned substantial energy reserves and large tax revenues for us, but enabled the growth of a large number of highly skilled and technical jobs, with talented people working in a large number of companies.
The Scottish Nationalists are saying, “Let us review oil taxation again and have lower rates going forward”. At the moment, as there is no revenue coming into the Treasury from North sea taxes because the oil price is so low and the investments so damaged, I am quite relaxed about that advice, and I am sure that my right hon. Friend the Chancellor will be thinking very carefully about how he can support my right hon. Friend the Secretary of State for Energy and Climate Change going forward with more investment. I have to warn Members that even if he were exceedingly generous about future rates of North sea taxation, it is not going to be enough to make a difference against the background of oil costing $28 a barrel.
What we are now battling for is not the revenues we used to get from North sea oil taxes. What we are now battling for is the very substantial income tax revenues that we have been getting, as the United Kingdom and as Scotland, from the very highly paid jobs in the Aberdeen area and the other supporting areas for the North sea. If we are not careful, $28 a barrel oil will lose a large number of those jobs—some have already gone—and flatten the incomes of many others. It will mean a very big hole in the Scottish income tax revenues on top of the damage done to the United Kingdom/Scottish revenues from the oil itself. That is why I hope that the Treasury and my right hon. Friend the Secretary of State will work with the industry to come up with any kind of scheme to give us a chance of reinvesting. We need to use the best extraction techniques and the best modern technologies. Of course we need the industry to work on its cost base, but that will require something very major.
My right hon. Friend the Secretary of State is also right that security of supply must be her single most important consideration. She is trying to balance security with costs and green issues, but I think she is right to regard security as fundamental. If there are tensions, the Government must surely put security of supply before all other considerations.
I notice that we are beginning to rely rather more in our policy on interconnectors. Let me provide a word of warning: they may provide a short-term solution, but to interconnect our supply to the continent of Europe—
a continent very short of its own indigenous energy resources—does not necessarily make us more secure. Bearing in mind the importance of Russian gas throughout our continent, particularly the further east we go, I do not wish my country to be geared in the long term to an energy-short continent dependent on Russian good will. I think our security of supply must rest on indigenous UK energy resources—renewable and carbon-based in the right balance, but above all coming from generation sources that provide continuous and flexible supply.
I fully support the Bill in its wind provisions. I am a long-standing critic of wind, which I think is far too expensive. The main reason for it being far too expensive—let us be clear on the Conservative Benches, if not elsewhere in the House—is that we cannot rely on wind, requiring the building of two lots of power generation in order to be secure. There is the wind, which works sometimes, but 100% cover is necessary in many cases via other types of generation in case the wind does not blow. Given that the wind has a habit of not blowing when it is really cold and when industry might need quite a lot of energy, it is important to have that further back-up.
That brings me to the second most important proposition that my right hon. Friend has to handle, which is cost. We all witnessed an extremely sad announcement earlier today—one of a series of sad announcements about our steel industry. The Minister chided me when she said that if I believed in markets why would I want British investment projects to be buying British steel? Let me reassure Ministers that I always buy a British-made car because I live in this country. My salary here is paid from the taxes paid by people who go to work in my country, so I think it only courteous to buy some of its more expensive products when I have the money to be able to afford a car. Similarly, I like to holiday in England because it adds to the jollity of nations and provides circulation of the salary I am paid here.
I have always been someone who believes that if we live in a society or a political community, we should accept mutual obligations. I thus strongly believe that when we are voting on huge sums of money to go into very large investment programmes that have a large steel component, we should go to the next stage and say, “By the way, we want competitive British steel to be at the core”. We should be able to lay that down as a requirement. There would still be competition between the different British producers to keep them honest, but we should surely want to use our public money in that way.
Our problem on cost is that because we have so much wind in the system and we have to provide alternatives and back-up on top, the cost of our energy has become very high, which is undermining the industrial policy that my right hon. Friend the Chancellor set out in the previous Parliament seeking the march of the makers. We will get the march of the makers on the scale we want only if we offer cheap energy. Our energy needs to be cheaper than Germany’s, not dearer. It needs to be competitive with that in China and the United States of America, whereas it is far from competitive at the moment.
Modern industry is very energy intensive. It is not just the so-called energy-intensive industries that might attract some subsidy; the general process industry is energy intensive as well because it is highly automated
and the grunt is now provided by electricity-driven machinery, not by human hands and arms. We need to understand that one of the core elements of any successful industrial policy must be cheap energy, so I wish my right hon. Friend every success in trying to bring together those three different components of her policy to put more emphasis on cheaper energy. To do that, we need to end these large onshore wind subsidies. To do that, we need a new generation of electricity plant that has cost as one of its main considerations. That may well be gas plant, but it will have to operate for considerable lengths of time in order to get the proper economies of scale.
The danger of the system we have inherited is that it makes sure that we pay as much as possible for energy at any given time. If very dear energy is available as wind energy, we have to run with that, which makes the cheaper energy dearer, because the base-load cannot be run any more, so the costs of switching on and off become rather large.
Three cheers for the Bill; I fully support it. Three cheers for the Secretary of State, but for goodness’ sake let us not rely on foreign supply and let us not rely on wind. Let us have some decent reliable base-load electricity at a price industry can afford.
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