Sam Hall: The solution to a gas crisis is not to deepen our dependence on gas

10 Jan

Sam Hall is the Director of the Conservative Environment Network.

With Ofgem’s price cap review weeks away, political attention is turning to an inevitable hike in energy bills and the rising cost of living.

Conservative MPs were right last weekend to highlight that affordability is a critical energy policy goal and that steep bill rises should be curbed. But this can and must be pursued in tandem with our net zero goal, which insures us against much greater economic costs and national security impacts in the future due to dangerous levels of climate change.

There is little disagreement among experts on the root cause of the current price spike: rocketing wholesale gas prices, which increased by more than 400 per cent across Europe last year.

It’s important not to conflate security of supply and cost. The UK will keep the lights and the heating on this winter. The issue is that we are having to pay over the odds for gas because it’s in high demand, particularly in Asia, and supply to the European market is being strategically constrained by Vladimir Putin.

Some commentators have argued that the UK is in a poor position to manage this global price rise due to climate change policies which prevent us exploiting domestic fossil fuel reserves.

But the fact is that climate policies have not constrained gas production from the North Sea, as gas production has been roughly flat for a decade according to the latest official statistics. The main constraint on North Sea production is the relatively high cost of production compared to other gas basins.

In fact in 2015, seven years after the Climate Change Act, the government passed legislation to give the oil and gas regulator new duties and powers to maximise the economic recovery of oil and gas from the UK Continental Shelf. Arguably, this should be amended now to include a Net Zero duty, reflecting the faster projected falls in fossil fuel demand and increased risk of stranded assets, but the maximising economic recovery duty remains in law and Ministers have been clear that North Sea gas will be needed during the transition.

Climate policies are not to blame for blocking fracking, either. Despite the Government removing multiple regulatory barriers to fracking in the 2010s and expending huge political capital in the process, shale gas companies were unable to frack without exceeding legal limits on earthquakes and alienating local communities.

It was the regulator’s report on seismicity which led to the government’s decision to impose a moratorium, not any climate policies. I’m sure the fact that only 19 per cent of the public support fracking made the decision easier still.

But even if we’d offered more tax breaks to North Sea producers and somehow overcome the various economic, environmental, and political barriers to fracking, it is highly unlikely that the UK could have produced sufficient gas to make a significant dent on the 400 per cent increase in natural gas wholesale prices currently being experienced in the European market to which we are connected via multiple pipelines and whose prices we therefore follow.

The fact is that if we’d had more renewables on the grid, and had put in place a long-term set of financial incentives for homeowners to insulate their homes, we’d have lower demand for gas for heating and power now and therefore be less exposed to the current price rises.

Yes, more variable wind power on the grid would have reduced aggregate demand for gas over the course of the past year, enabled gas power stations to be used more as back-up on calm days rather than as baseload all year round, and reduced our exposure to European gas prices.

And yes, clean technologies already exist, from hydrogen and battery storage, to interconnectors and demand response, to keep the lights on when the wind doesn’t blow.

But rather than relitigate past debates, we must deal with the current acute situation and look to our future energy policy.

First of all, the Treasury should consider providing some short-term relief – with options including targeted support to vulnerable households via Universal Credit or existing schemes such as the Warm Homes Discount, or wider measures such as funding some of the legacy environmental and social levies on bills out of general taxation on a temporary basis.

Funding some of the levies from the Exchequer would be expensive, but would also support Net Zero by making lower-carbon electricity cheaper relative to higher-carbon gas, which the government has already committed to doing in the Heat and Buildings Strategy.

Long-term funding could come from a carbon tax on gas, once prices stabilise. In the short-term, this would offer a de facto tax cut to the many businesses and middle-income households who will struggle with rising energy bills, as well as the fuel poor. While none of these proposals would be sufficient to halt the rise entirely, this is a key opportunity for the Chancellor to burnish his tax-cutting credentials and alleviate some of the cost of living pressures this spring.

In the medium-to-long-term, though, the focus must be on reducing our dependence on gas, by insulating more buildings, improving industrial energy efficiency, and investing in new home-grown energy generation that delivers reliable, clean, and affordable electricity, as well as creating jobs and export opportunities in sectors that are forecast to grow rapidly.

As we do so, we must be extremely cautious about adding further costs to energy bills through future policy choices. As ministers commission a new fleet of nuclear power stations, for example, the industry must demonstrate it can achieve significantly lower costs than Hinkley Point C. Bioenergy should do more to prove its positive climate impact and reduce costs before it gets new subsidies. And when establishing support schemes for nascent technologies, such as low-carbon hydrogen, the Treasury should opt for taxpayer-funded mechanisms rather than bill levies.

Ultimately, we need to break away decisively from this cycle of fossil fuel price shocks, which have been weaponised for decades by unsavoury regimes to advance nefarious geopolitical objectives. Russia provides a third of Europe’s gas, and this is unlikely to change any time soon due to Nord Stream 2.

With Russian gas exports to Europe around six times total UK gas production in 2019 (the last ‘normal’ pre-Covid year), there is no plausible scenario for increased domestic production which would insulate us from Putin’s grip on the European gas market.

The solution to a global gas crisis is not to deepen our dependence on gas. For the sake of our bills as well as our security interests, we need to double down on homegrown green energy instead.

Simon Fell: The Government must resist calls to change its policy on fracking

15 Oct

Simon Fell is the MP for Barrow and Furness.

I welcomed the Government’s effective ban on fracking just before I was elected as the MP for Barrow and Furness two years ago.

I have always urged the Government to keep local safety and environmental concerns at the forefront of its decision-making when it comes to the extraction of shale gas.

Viewing the challenges caused by wholesale gas prices rocketing these past few weeks, I’m as sure as ever that fracking is not the solution and believe the Government should resist calls to change its policy.

Let’s not forget that the sole reason why the moratorium was put in place is because the Oil & Gas Authority – the independent regulator – found it was not possible to accurately predict the probability or magnitude of earthquakes linked to fracking.

In other words, fracking to extract shale gas just isn’t safe. This has been echoed multiple times recently by the Business Secretary, citing the “shaking walls” and “falling plates” after fracking in Lancashire.

It is also worth remembering that, shortly before the Government’s moratorium on fracking was announced, the companies involved were asking the Government for earthquake limits to be relaxed to make fracking more commercially viable.

So fracking fell at the first hurdle – safety. But there are others it would have to clear if we were to begin scaling it up.

The second hurdle is popularity, and the simple fact is that fracking is deeply unpopular. It drives down house prices, brings more heavy traffic which country roads can’t handle, and pollutes the natural environment. The views of local communities should come first, and they overwhelmingly oppose fracking.

This is a crucial point, because fracking is often depicted as an industry which would scale up in the Bowland-Hodder and Midland Valley areas (i.e. in the North of England and Scotland). But the Weald basin – which stretches across the bottom half of South-East England – would also be opened up to exploration if we were to change the current rules to suit the fracking industry.

It’s extremely doubtful that Conservative MPs and their voters in the South would stand for this. New Conservative heartlands in the North shouldn’t be expected to either.

In Barrow and Furness at least, this opposition certainly isn’t due to ‘energy NIMBYism’. I’ve joined countless other Conservative MPs in supporting more renewable and nuclear energy investment in our constituencies. That’s because, with clean energy, there’s much more public support and a much stronger business case.

Even if the Government were to ignore public opinion, face-down a Conservative backlash, relax our regulatory and planning frameworks, abandon a manifesto pledge, and undermine Net Zero, one of its core domestic and foreign policy agendas, there is still the issue that the economics of fracking do not add up.

First, what sense is there in pivoting towards unpopular, uncertain, unsafe fracking just as the clean energy revolution is gathering pace around the world?

Solar and wind enjoy strong public backing, including among Conservative voters, and are the cheapest new electricity sources available to us. The solutions to wind lulls or cloudy days exist – whether battery storage, interconnectors to Europe, or clean hydrogen. They just need scaling up.

Given the North West’s existing expertise and supply chains in nuclear energy, why would anyone call for investment to be diverted from new nuclear to shale gas extraction?

It’s very doubtful that the American shale gas boom in the late noughties is something that could ever be repeated in the UK. Even if we could overcome all the local democracy challenges that prevented fracking when the Government was committed to exploiting our shale gas reserves, shale gas would not be able to meet a meaningful share of UK gas demand over the next decade to have a meaningful impact on prices.

It’s also worth remembering the National Audit Office’s finding that, since gas is a globally traded commodity, UK gas prices inevitably reflect those in Europe. It would require an impossibly large influx of fracked gas to make a dent on European prices and therefore to cut British households’ gas bills.

During the next decade, more and more private investment will continue to surge in the direction of renewables, as has been the trend for a number of years. The opportunity costs would be staggering if the UK opted now to invest in a declining industry right as the global transition to clean energy picks up pace. The truth is that, even before you turn to the environmental damage it causes, fracking’s time has been and gone.

Fracking is a non-starter for a legion of reasons. The Business Secretary is right to reject calls to start this debate all over again when there are more important and urgent decisions to be made to tackle the challenges we face now. The only way to protect consumers from the price of natural gas is to invest in clean energy and energy efficiency as quickly as possible.

Interview with Kwasi Kwarteng: “My job is to make us not lose sight of the fact that we are Conservatives”

1 Oct

Eloquent, ebullient and frequently bursting into laughter, Kwasi Kwarteng did not look as he gave this interview yesterday morning like a minister in the middle of a crisis.

He is confident the petrol supply situation is “getting better”. Britain, he says, is making the transition from a low-wage economy with high immigration to a high-wage economy, which is what people wanted when they voted for Brexit, and although various business associations are resisting this change, it will happen quite rapidly.

As Business Secretary, Kwarteng is opposed to tax rises: “I don’t believe we can tax our way to wealth.” He calls himself “a pragmatic Thatcherite”, outlines how that philosophy can meet present-day challenges, and expresses no sympathy for gas suppliers who have got into difficulties: “Why on earth did they enter the market?”

Kwarteng communicated the genial toughness which is evidently intended to characterise the Johnson Government’s approach to business, with those who merely want to preserve the status quo granted no sympathy.

The Department for Business, Energy and Industrial Strategy (BEIS, pronounced “Bays”) is housed in a dreary modern building at the end of Victoria Street, but from Kwarteng’s office on the eighth floor enjoys a spectacular view of Westminster Abbey.

He said that unlike Angela Rayner, he would never use the word “scum” to describe political opponents, and neither would Boris Johnson. In Kwarteng’s view, it is sometimes best just to stand back and let the Labour Party argue with itself about subjects which are of no interest to most people:

“I think the best approach is for us just to simply allow the Left to have these incredible navel-gazing debates on identity politics, because actually Critical Race Theory is not something that comes up on the doorstep, it’s not something that’s going to put food on anyone’s table.”

Kwarteng, profiled on ConHome after his appointment in January, said his department is not there to act as “a cash dispenser”, but to enable private investment. He is heartened to have confounded the head of Goldman Sachs, who predicted that after Brexit no one would invest in Britain.

The Business Secretary began by discussing what should happen in the coming days in Manchester:

ConHome: “What’s the conference all about?”

Kwarteng: “The conference is about focussing us to win the next election. It’s only two and a half years, tops, until May ’24, and we’ve got to focus obviously on trying to consolidate our coalition, and that’s all about economic opportunity, that’s all about the Prime Minister’s phrase talent is everywhere but opportunity is still focussed in a few areas.

“And that’s the intuition behind the levelling up, that phrase, if you like.

“My job is to make us not lose sight of the fact that we are Conservatives. We believe in markets, we believe in individual responsibility, we believe in the ingenuity of the individual to come up with ideas that can transform society.

“It’s very difficult sometimes to make that voice heard, when we’ve had all the interventions that we’ve seen with respect to the Covid response.

“And just to illustrate that, I was elected in 2010 and the deficit then was £160 billion, something like that, and it seemed like a huge amount of money, we were talking about Greece, we were talking about bankruptcy.

“We’ve just spent in one year, ’20-’21, £350 billion on Covid support, well over twice what the deficit was. And no one batted an eyelid.

“And there’s that great phrase in one of my favourite books, The Economic Consequences of the Peace, John Maynard Keynes, and he says that before the war we spent millions, after the war we spent hundreds of millions, and we discovered we were all so much richer, so [laughing] it was a completely different order of spending and nothing bad happened.

“And our job I think is to try to get back to some kind of – and I know the Chancellor’s very much on this – to try to get back to some sort of fiscal discipline.

“But it’s hard. There are lots of competing pressures. You saw David Davis say with the foreign aid cuts, their argument was we’ve spent hundreds of billions, what’s a few more million?

“The way I see BEIS, and I’ve talked about this a lot, we can’t see BEIS as a cash dispenser. Officials think of BEIS sometimes as if it’s DWP, or as if it’s the Health Service.

“But it’s an enabler. We should think about the money we spend as enabling private capital investment. If you speak to Michael Heseltine, he’s quite good on this stuff, he talks about his career and he says he was never in a big spending department, he always saw himself in departments which were driving private economic growth and investment.

“So he was Defence Secretary, he was sort of equivalent to Michael Gove, I mean he wouldn’t want me to say…”

ConHome: “Is it too late for you to bring Michael Heseltine back in some form, by the way?”

Kwarteng: “Look, I mean, we have differences over Brexit, I’m not going to bring him back in tomorrow. But he was a great minister, and I enjoy talking to him.”

ConHome: “Brexit was a vote for many things. It was in part a vote for lower migration of a sort, higher wages, a different economic model.

“Isn’t what’s going on with this difficulty with the petrol fundamentally about the sort of economy we want. The road haulage people, like some of the fruit pickers, like some meat processors, basically want to go back to the old ways.

“They want Government to issue hundreds of thousands of visas, and they’re trying to use public pressure to get you to change course.”

Kwarteng: “That’s absolutely right, and I’ve said this a number of times, certainly privately. The reason why constituencies like mine [Spelthorne] voted decisively for Brexit, 60 per cent to 40 per cent, was precisely this issue.

“I remember three weeks before the referendum in 2016, I came out of Staines station and someone came up to me and said ‘I’m voting for Brexit.’

“And I said, ‘Oh, why are you doing that?’

“And he said, ‘Well I haven’t had a wage increase in 15 years,’ and he was someone who worked in the building trade, lots of people do work, certainly in my constituency, in that kind of self-employed, small business, logistics, construction world.

“And that was in his mind what this was all about. And so, having rejected the low-wage, high-immigration model, we were always going to try to transition to something else.

“What we’re seeing now is part of that transition. You’re quite right to say people are resisting that, particularly employers that were benefiting from an influx of labour that could keep wages low.”

ConHome: “Aren’t you therefore in a very difficult political position, because they have a kind of weapon, which is the queue, the shortage.

“All you can do, other than take various emergency measures, is tough it out.”

Kwarteng: “I think this is a transition period. As economists would describe, between Equilibrium A and Equilibrium B there’s always going to be a transition period.

“I think it could be quite short. I think what we’re seeing already is quite a lot of investment in the UK. I’ve got a list on my board of lots of things we’ve announced, of investments.

“The head of Goldman Sachs said to me three years ago, ‘No one’s going to invest in the UK because of Brexit.’

“And then about three months ago I said to him, ‘Look at all the investment.’

“He said, ‘Ah, that’s because your assets are cheap [laughter].’ They can hop on the left foot and then hop on the right.

“And we’re seeing investment, we’re seeing success. You speak to investors around the world, they’re all very interested in Britain.

“Not just because of the success they saw with things like the vaccine rollout, great science base, great intellectual capital, but also they see us as a less highly regulated, if you can believe it, jurisdiction than many others around the world.”

ConHome: “How long will this transition take? Because a counter-argument would be it would take a few years to scale up…”

Kwarteng: “No, no, the whole issue of immigration into the UK was something that happened, this particular issue of immigration from the EU, was something that started in 2004, and completely transformed the way we did our economy.

“In fact, the Romanian extension was in 2013, I remember Mark Reckless and Keith Vaz, they were on the Home Affairs Select Committee, they went down to Luton and welcomed these people.

“And that was only eight years ago, and then three years after that we voted for Brexit. I think in terms of the global economy, I think you can see very rapid shifts.

“I think in a year we could be in a totally different place to where we are today.

“I’ve just been speaking to people in the steel industry and they’re saying there are high steel prices, they think they are going to sell lots of product, Liberty are going to do a financing deal that I’ve read about in the newspaper.

“Three months ago, these people were saying this is a disastrous situation.

“So in terms of the economy, I think things can turn round very very quickly, and in five years’ time I don’t think we’ll be talking about this. We’ll be talking about other things.”

ConHome: “Will petrol stations be back to normal by the…”

Kwarteng: “Yes, they are. I’ve got some data here.” [Cameron Brown, Kwarteng’s special adviser, quickly removed two sheets of paper bearing what look like coloured graphs.]

ConHome: “Is that the hand-out? Is that for us?”

Kwarteng: “I think things are stabilising, is the word we use. And I think it’s getting better. There’s been an intense period of anxiety and a lot of pressure.

“That was an extraordinary thing about the power of the media. If I look back on Monday 20th September, my two issues there were carbon dioxide, and the shortage of it, and the gap with the energy suppliers.

“Those were the two issues. This petrol forecourt thing literally flared up I think on the Thursday, there was a leaked conversation, the thing was splashed in the paper on the Thursday.

“There was a full-blown crisis by the weekend, which is now stabilising, and I am hopeful that it will recede, but let’s see.”

ConHome: “Are there any circumstances in which you could conceivably imagine referring to your political opponents as ‘scum’?”

Kwarteng: “No, never. I don’t know whether she was as they say under the influence, or tired and emotional. I don’t know what that was all about.

“Famously it was Aneurin Bevan who said ‘they are lower than vermin’, but he was sober and that was a deliberate piece of insult.

“I don’t think it’s helpful, talking about scum. I think she’s trying to speak to that visceral tribal anti-Tory thing, to shore up the base, but in terms of the wider electorate, I think that doesn’t really work in Britain, that kind of name-calling.

“I don’t think it’s very prime ministerial. The funny thing is, she tried to say the Prime Minister says these things.

“Boris never says things in anger. All of those phrases, they’re either dressed up in the fancy-dress costume of metaphor, or there’s an ironic thing.

“I can’t remember him at any time in 30 years saying ‘So and so is scum’. There’s no venom in the way he uses words. So I think equating that with the Prime Minister is completely inaccurate. He never abuses people in the way that Angela Rayner did.”

ConHome: “No, he doesn’t. Nor does he say, as you quote Margaret Thatcher saying on page four of your book, Thatcher’s Trial: ‘Moral qualities were the secret of our economic success.’ That’s another thing you can’t imagine Boris Johnson saying.”

Kwarteng: “The whole first part of that book is rooting her philosophy in a kind of Manichean Methodism. That’s intellectual history.”

ConHome: “So what are you? Are you a Thatcherite or a pragmatist?”

Kwarteng: “I’m a pragmatic Thatcherite.”

ConHome: “She was a pragmatic Thatcherite, actually.”

Kwarteng: “She sort of was. The thing that fascinated me about doing research about her is she did have this Manichean, you’re either with us or against us, good/bad, black/white, very binary way of thinking.

“But within that, you’re right, she was pragmatic, and she picked her battles when she could. I’m struck by the way in her first term, everyone says they only got going in the second term, in the first term they did some pretty radical things, like get rid of price controls, get rid of exchange controls – I mean, that was a big deal – and some of the privatisations.

“I think to be a Thatcherite in 1985, and to be a Thatcherite in 2021, are always going to be slightly different things. The context – and this is what I love about history – there’s always a context to these things.

“In 1985, you’re trying, essentially, to denationalise, because you’ve had 40 years of quite sclerotic, unimpressive growth, and a huge expansion of the public sector, that can’t respond to innovation.

“In 2021 we’ve got a triple whammy of Brexit, where we have to think about how we’re going to reorder our legal subsidy control, that sort of stuff; you’ve got Covid, which was an unprecedented situation in which the whole world reacted to a global pandemic in a way it never has done; and then you’ve got the whole Net Zero agenda, which whether I like or not, whether you like it or not, is part of the law of the land, we have a legal obligation to try to decarbonise our economy by 2050.

“So these three things frankly didn’t exist in 1985, and we’ve got to navigate them, and we’ve got to use our ideas, our brains, our philosophy if you like to deal with that situation.”

ConHome: “One of the issues that keeps coming back is tax. In the run-up to the Health and Care package you said ‘I don’t see how we could increase National Insurance’, though to be fair you then made some qualifying remarks after that, to suggest it might be possible.

“The point is, very plainly you really didn’t like it very much.”

“Do you think we’re near the point, with a pretty high tax burden as a percentage of GDP, that we’re basically running out of room to raise taxes?”

Kwarteng: “I will frame my answer to your question, or your thoughts, very broadly.

“I’ve never understood how we incentivise economic activity by increasing tax. I always come back to that. We can talk about raising taxes in the short term to deal with a short-term crisis.

“But broadly, higher tax is basically a tax on economic activity.”

ConHome: “What’s the first thought that comes into your mind when you hear the Chancellor say, ‘We’re going to put up corporation tax?”

Kwarteng: “He is I think doing a fantastic job. It was only just a little bit more than a year ago that people were saying there’s going to be massive unemployment, there’s going to be a huge kind of catastrophe.

“And I think he’s navigated that really nimbly. And that’s all I would say on that.

“But broadly, do I believe in higher taxes? No. I don’t believe we can tax our way to wealth.”

ConHome: “And you don’t think we’re near a point where having put up a number of taxes…”

Kwarteng: “You’re doing a really good job of getting me to stray outside my portfolio [laughter]. But I’m not going to go there. I am a low-tax, small-state, what’s the Gladstonian phrase, let…”

ConHome: “…money fructify in the pockets of the people.”

Kwarteng: “That was very clumsy.”

ConHome: “It’s memorable.”

Kwarteng: “Fructify in the pockets of the people. I’m a great believer in all of that. But you know, he didn’t have to deal with Covid. And actually he probably wouldn’t have bothered. I mean he would just have let the thing rip.”

ConHome: “The present Prime Minister is much more Disraelian, actually.”

Kwarteng: “He’s more like Disraeli arguably on public spending as well.”

ConHome: “Disraeli would have said Gladstone was worse than Covid.”

Kwarteng: “Absolutely.”

ConHome: “The wind sometimes doesn’t blow, though it does today, as we can see from the flag on the top of Westminster Abbey. And sometimes the sun don’t shine. Is there a risk that this drive to Net Zero will compromise security of supply?”

Kwarteng: “I think that’s a perfectly legitimate question, and when I answer these questions I pivot back to the Prime Minister’s ten-point plan, The New Decalogue as he calls it.”

ConHome: “That was a satire.”

Kwarteng: “He said it ironically and I’m saying it ironically. And in that, there’s a clear commitment to nuclear power.

“Now I think our nuclear power story has been a shame, because we had early advantage, we were very good on nuclear power, but we simply haven’t invested in it enough in my view over the last 40 years.

“And I think that’s a key missing piece of the puzzle, in terms of energy security.”

ConHome: “But what about security of supply, is that going to be all right?”

Kwarteng: “I saw Iain Martin today in the paper. This is not a supply issue, OK, it’s a distribution issue.”

ConHome: “At the moment, yes.”

Kwarteng: “It has never been a supply issue.”

ConHome: “And will not become a supply issue?”

Kwarteng: “I do not believe it will become a supply issue. It’s like an old-fashioned bank run. But actually, in terms of security of supply, that has never been an issue.

“The point is getting the supply distributed properly, and of course with the HGV driver issue that’s been more challenging.

“In terms of the energy issue, the gas suppliers essentially came into the market with a price cap and then they failed to see that if wholesale prices were significantly above the price cap they’d be out of pocket, and some of them didn’t even hedge for that.”

ConHome: “The price cap stops it being a proper market, doesn’t it?”

Kwarteng: “Yes, but why did they enter it?”

ConHome: “Why did the Government impose the price cap?”

Kwarteng: “That’s a very good question, but once it’s there, why on earth did they enter the market? They still thought they could make money.

“And then when the wholesale price was much higher than the price cap they complained, but I said, ‘The price cap was there when you entered the market, you should have sold oranges or something, or entered another business.’

“They knew what the situation was, and then some of them expected government bailouts, and thankfully that hasn’t really had any resonance, because people could see that they entered the market, they’ve been caught, the tide has revealed that they were wearing nothing, and I’m afraid some of them are going to have to exit the market.

“Having said all that, some of the smaller companies have really driven innovation in the market, so the price cap has allowed for greater competition, has allowed for new entrants, and now, some of those entrants who haven’t been as well-managed are having to leave the market.”

ConHome: “This is probably the moment to sneak in the fracking question. It comes up a lot. People on the Right say look, we have this shortage, why haven’t we fracked?”

Kwarteng: “So I was very pro-fracking. My first summer as Energy Minister, we had Cuadrilla fracking in Lancashire, and I remember speaking to the MP, and he was a pro-fracking person, and the limit I think was 0.5 on the Richter scale.

“This thing came in at about 2.9, and walls were shaking and plates were falling off them.

“And someone said we’d never have had the coal industry if we’d had that approach, which may or may not be true, but the coal industry started in whenever, 1650, and we’re talking about 2020 when we have a full democracy and all the rest of it.

“So we said that we would impose a moratorium and when we had new evidence that this could be done without too much disruption we would look at the moratorium again.

“And I think there were too many communities that were being disrupted. We’re a small country. The fact that it can work in the United States, and it works successfully, it’s what a thousand times bigger than England? Something like that.

“They would frack in a hundred places, and maybe one would be successful. But we don’t have that luxury here.

“There’s also geological questions. I know a firm that Tim Eggar was involved with, they fracked all over Poland and it didn’t work.

“So I get the whole fracking thing, but I don’t think it’s the answer. I think more nuclear is the answer. I think a wider range of renewable technology and things like tidal stream, those sort of things, can help us as well.”

ConHome: “The Government takes Critical Race Theory seriously enough to have a minister go to the Despatch Box and say it shouldn’t be taught in schools.

“Why is it that Kemi Badenoch seems to be the only Conservative among a mass of MPs who takes Critical Race Theory seriously?”

Kwarteng: “No one knows what Critical Race Theory is. If you ask 360 MPs what Critical Race Theory is, how many do you think on our benches would be able to give you a coherent answer?

“To be fair to Kemi Badenoch, that is part of her brief. She was Minister for Equalities even when she was in the Treasury.

“And she’s got a particular approach, I think a very robust approach to a lot of this sort of thing.

“I think the best approach is for us just to simply allow the Left to have these incredible navel-gazing debates on identity politics, because actually Critical Race Theory is not something that comes up on the doorstep, it’s not something that’s going to put food on anyone’s table.”

ConHome: “Are you saying it’s not a problem in any way?”

Kwarteng: “I’m saying I don’t see why we should engage with it. Even your readers, people who subscribe to ConservativeHome, I’d be amazed if more than about five or ten per cent know what Critical Race Theory is.

“I’m trying to run a business department that affects the whole of the UK economy. My views or otherwise on Critical Race Theory are singularly irrelevant to how I do my job.”

ConHome: “Can only women have a cervix?”

Kwarteng: “What did Sajid Javid say? I agree with him.”

ConHome: “I think he said it defies science.”

Kwarteng: “All these things, I know they’re very important to a minority of people, but they’re not really levelling up issues, they’re not about the prosperity of the UK, they don’t deliver jobs.

“It’s the worst kind of rabbit hole which I don’t think sheds any light on anything, it doesn’t improve people’s lives.”

ConHome: “Can you deliver levelling up, Net Zero, industrial strategy, skills, without more localism – without more elected mayors?”

Kwarteng: “Really good question. I think you’ve got to have more local involvement. I think the Prime Minister’s view, which I share, is we shouldn’t get into a theological debate about the structures and what the people are called.

“We’ve got to just deal with what we have. Because if you were very rationalistic and Napoleonic about it, dare I say, you would just spread the combined mayoral authorities across the UK.

“You’d divide the UK up into mayoralties and then you’d have a little mayor with a little badge.”

ConHome: “You’d have a Mairie.”

Kwarteng: “Exactly. We’re not going to do that, so we’ve got to work with the structures, and some of them do work very well, the mayoralties, some county councils work very well, we’ve got to work with the kind of patchwork that we have, we’re not going to rationalise things in a kind of centralised way.”

ConHome: “If Johnson wasn’t Prime Minister he’d be finishing his book about Shakespeare. What book would you be finishing?”

Kwarteng: “I’ve already got one on the stocks about the Congo called Masters of the World, and it’s been there since I’ve been made a minister. I’ve done the research, so it’s simply a question of cleaning up the text.”

Sam Hall: We should urgently wean ourselves off gas – and not give up on Net Zero

24 Sep

Sam Hall is the Director of the Conservative Environment Network.

Energy prices are rising sharply as we head into the autumn. This is causing short-term pressure on household bills, hiking the cost of living, and exacerbating fuel poverty.

The principal reason is that global gas prices have spiked, pushing up domestic prices by more than 250 per cent since the start of the year.

This is due to rising demand for gas in Asia and Europe as the global economy picks up post-Covid, and Putin’s Gazprom restricting supply through Ukraine, likely in a bid to apply pressure on Brussels to approve the Nord Stream 2 gas pipeline.

But instead of drawing the conclusion that we should urgently wean ourselves off gas, some have attempted to blame the Government’s Net Zero agenda.

Some, for instance, claim that low wind output is driving up prices. It is true that wind speeds have been lower than normal this month. Wind is intermittent, so there will be days when wind is low which will push up prices, and days when it’s high which pushes down prices.

But price impacts from variable wind output typically last days, rather than months, and do not cause chronic price rises like we’re seeing now. Indeed power prices are already falling again, precisely because wind speeds are picking up.

As an aside, due to the fact wind turbines are getting bigger, their “capacity factor” (i.e. the amount of generation relative to generating capacity) is increasing. This means that offshore wind farms coming online now will produce electricity more consistently than their predecessors – a further example of how private sector-led innovation is driving us towards Net Zero.

Some commentators have blamed the “green levies” on energy bills. Yet there are hardly any levies on gas bills (around two per cent of the bill), and they are a smaller share of people’s electricity bills (23 per cent) than the wholesale price (30 per cent).

These levies also fund crucial fuel poverty schemes, not just legacy renewables projects. Although levies are going up as new renewables and nuclear come online, this is gradual and doesn’t cause spikes like the current one.

Offshore wind strike prices are less than a quarter of what they were in 2015. The level of subsidy required by new UK offshore wind projects is minimal, potentially even negative if wholesale prices continue to grow year-on-year. Substantial future rises in these levies from the Government’s commitment to quadruple offshore wind capacity are unlikely.

Finally, others have argued that green policies blocked fracking, which would have cut gas prices. But as even fracking companies admitted back in 2013, domestic shale gas extraction wouldn’t have cut bills.

Our fracked gas would have been traded as part of a large European market, meaning there would have needed to be an implausibly large amount of new UK gas to disrupt the balance of supply and demand in Europe enough to push down prices here.

So if Net Zero isn’t to blame, how should the Government respond? One idea gaining traction is to take environmental levies off people’s bills. Although the levies aren’t the cause of the price spike, removing them would offer some relief to consumers by delivering an immediate cut to their electricity bills in particular.

Since they are underpinned by legally-binding contracts with energy generators, the levies must be funded by other means. The Treasury could temporarily fund them out of general taxation.

But since this would be expensive, once gas prices have fallen, the Treasury could introduce a small carbon charge on gas bills to cover the costs of the levies longer term.

Gas bills currently have no carbon price, a reduced VAT rate, and hardly any levies, despite the fact it’s now a higher carbon fuel than electricity. This creates precisely the wrong economic incentive for consumers and businesses when they are deciding what new heating system to buy.

To protect those in fuel poverty, as I argued a few months ago on this site, some of the revenue from the gas carbon charge could be recycled and given back as a carbon cheque to people in receipt of Universal Credit and other vulnerable households.

Cutting electricity prices in this way would have a range of benefits. Many of the poorest energy customers use electricity for heating. They’d face no gas carbon charge and pay lower levies, so this would reduce fuel poverty.

It would also support heat pump deployment, critical for reducing our gas dependence and reaching Net Zero, by reducing their running costs relative to gas boilers. Similarly, it would incentivise more industries to switch to lower-carbon electricity, while boosting the competitiveness of those already using electricity.

Another option that the Treasury will currently be considering is simply subsidising the energy bills of the most vulnerable households. This would deliver short-term relief and would target public funds at those most in need, but wouldn’t move us longer term away from gas.

We’d risk a repeat of this problem in a few years’ time when gas prices inevitably spike again. And if the Treasury has to issue more short-term relief, it could end up being worse for the public purse.

Longer term, the Government needs to accelerate its deployment of renewables. Renewables are cheaper than new fossil fuel generation, support tens of thousands of jobs in our industrial heartlands, and reduce our dependence on volatile gas. As well as rolling out the cheaper, more established renewables, we should scale up support for nascent renewable technologies such as floating offshore wind and geothermal.

The £9.2 billion energy efficiency fund from the Conservative manifesto should be delivered in next month’s spending review and front-loaded as much as possible. Better home insulation will mean people using less gas to keep their homes warm, delivering short-term bill savings and reducing gas demand.

And, finally, we need to reform the Capacity Market – the Government’s policy for buying reserve generation capacity to ensure security of supply – so it actually brings forward new, clean, flexible storage and generation technologies, and doesn’t just subsidise existing gas power stations. This would also make us less reliant on volatile gas as a back-up for wind.

This is a worrying time for billpayers and lays bare the cost of our gas dependency. The Government should act now to relieve some of the pressure on people’s cost of living at the same time as driving forward its Net Zero agenda. The two go hand in hand.