Category: Debates

Rt Hon Sir John Redwood MP (Wokingham) (Con): I strongly support the Bill and congratulate the Minister on his presentation. I hope that the Government will urgently reform the energy directives and regulations that have made us cruelly import-dependent such that we now have to buy excessively expensive energy on the world market when we should drive for self-sufficiency.

Dean Russell, Parliamentary Under-Secretary for Business, Energy and Industrial Strategy: I thank my right hon. Friend for his intervention. It is ultimately about ensuring that we are doing the right thing by people across the country. The truth is that the Bill is a framework, and this is not the time to debate the minutiae and the details as there will be plenty of opportunities for that in Committee, the future stages and statutory instruments. We should welcome the Bill’s framework, which is about taking back control for the country.

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Rt Hon Sir John Redwood MP (Wokingham) (Con): I thank my right hon. Friend for all the great work that has been done on the draft legislation. Does he not find it an odd paradox, or contradiction, that many Opposition Members come to this place apparently to form laws but do not believe we can ever make a law that is good, and we need to rely on EU law in so many areas where I think we can actually do better?

Rt Hon Jacob Rees-Mogg MP: I am grateful to my right hon. Friend, who is wise, as always. But it is even odder than that, because there is this very strange view that laws that came in without any scrutiny at all—regulations of the EU that became our law automatically—cannot be removed without primary legislation. That is just bizarre.

The laws with which we are dealing came in under section 2(2) of the European Communities Act. Either they came in with minimum scrutiny but could not be amended or changed, or they came in with no scrutiny at all. I know that my hon. Friend Sir William Cash disagrees with me on this, but we are not using this procedure to repeal Acts of Parliament. Even though these measures have the effect of introducing EU law, an Act of Parliament has had full scrutiny in the House, and to be repealed it deserves full scrutiny to be taken away. That is the correct constitutional procedure.

Rt Hon Sir John Redwood MP (Wokingham) (Con): When will the Government and railway companies come forward with proposals for an improved pattern of services that attracts many more fare-paying passengers? We need to get the deficit down very quickly and the best way of doing so is by getting more people paying fares willingly.

Kevin Foster, Minister of State, Department for Transport: My right hon. Friend is absolutely right. Clearly, demand patterns have changed dramatically during the pandemic. For example, a lot fewer people are commuting into London at 7 am to 9 am and then leaving between 5 pm and 7 pm, or they are doing that three or four days a week rather than five, so there is a need to look at how we can adapt. We are giving slightly more flexibility to some operating companies, and looking at how we use our ticketing and, in particular, our ticket pricing. The rail sale was a great way of getting a lot of people on to trains that might otherwise have been relatively quiet, producing new revenue to the railways. In addition, as I said in response to the SNP spokesperson, Lumo is targeting traffic that goes by air to get it on tracks.

Rt Hon Sir John Redwood MP (Wokingham) (Con): I am glad the Minister agreed that the £60 billion for the energy scheme will of course adjust according to market prices, and let us hope that the current downward trend in some of the gas prices is continued. We need a mild winter and other bits of good fortune, otherwise we could be back facing even bigger bills. I am sure we are all appreciative of the fact that the new Chancellor wishes to review the scheme after March, because this is a very expensive scheme and there may be better ways of doing it to contain the expenditure.

I hope, for example, that consideration will be given, where price controls are still being offered to consumers, to limiting the amount of subsidised fuel any household can buy to a reasonable amount for a normal household, so that those who are in richer households and making much bigger demands on the fuel system would pay for the additional fuel they need—if they are lucky enough to have a heated swimming pool, or whatever it is—and would pay the full price on the extra fuel that such luxuries require. That is offered as a hopeful idea of how one can start to grapple with the very high costs of this scheme without in any way undermining the crucial guarantee to all those who are struggling with their bills already and want this kind of security.

I also have some concerns about the Bank of England estimate. It is quite true that, from Chancellor Darling onwards, quantitative easing decisions have always been jointly taken by Chancellors of the Exchequer and Governors of the Bank of England. One of the main reasons why they have always been joint decisions is that the Bank of England always understandably insisted on a complete capital guarantee against losses on the bonds, because it was envisaging buying so many bonds that they became very big for the Bank of England balance sheet, and it wanted to be reassured that the Treasury and taxpayers stood behind the system in case of losses.

To the extent that this supplementary estimate is to make good losses on bonds that the Bank of England is selling, I have these questions. First, why does the Bank of England think it must sell bonds at this juncture, when the United Kingdom bond market, the American bond market and lots of other bond markets around the world are particularly depressed by the need for a counter-inflation strategy based on high interest rates? We are crystalising a loss that, as I understand it, the Treasury then has to pay for, whereas if we have an unrealised loss, no payments are of course needed until eventual redemption, and very often the redemption value of the bond is considerably higher than today’s price in the market. I cannot quite understand why the Bank needs to sell these bonds now, and as this has always been a joint policy in which Chancellors have been very heavily involved and have heard Bank of England advice—Chancellors had to sign it off because the taxpayer is at risk, not the Bank of England itself—I hope this will be carefully re-examined.

To those who say that we do need to be selling bonds as well as putting up interest rates to curb inflation, I would say they should be careful not to overdo it. If the Bank really does feel it has to tighten even more, it can do so by a further rise in interest rates; it does not have to do so by selling bonds. Very directly, as we see tonight, the sale of these bonds can realise a loss and then can trigger a cash requirement on taxpayers and the Treasury at an extremely bad time for such a cash requirement. I think all of us have much better priorities than paying for bonds that are underwater, when we see the current state of the economy and the need to route more money to individuals and companies in the right ways, to see off a longer and deeper downturn and provide some balance in the public accounts. I ask the Minister and Chancellor to think again, and to talk again to the Governor of the Bank of England about their joint responsibility. They must ask whether this is really the right time to be crystalising losses, resulting in unspecified amounts of money that will have to be paid.

Rt Hon Sir John Redwood MP (Wokingham) (Con): I welcome the Government’s announcement today that this scheme should be time-limited to six months and that a different scheme should be developed against the possibility that energy prices remain very high for the months thereafter. I do not think that we can go on indefinitely at the rate of the cost of this particular scheme over the winter. If this continues, we need to target the support much more clearly on the many people and families in this country who could not afford the bills otherwise and leave those who have rather more money and are using rather more energy on luxuries to pay more of that for themselves. We have time to sort out a scheme that we can target better. I am sure that this Committee, and the dialogue that will continue, will make sure, through pressure from Back Benchers and Front Benchers, that we do not leave anybody out. It is very important that everybody has proper support one way or another so that they can afford their energy bills this winter and beyond.

I am also sure that the long-term solution is more domestic energy. We cannot carry on relying on unreliable imports, which can, at times, force our country to pay extreme prices on world markets to top up our gas or electricity because we do not have enough for ourselves. We are a fortunate country with many opportunities to produce fossil fuel and renewable energy. We have been a bit lax in recent years in not putting in enough investment, so I hope that the Secretary of State will look again at the incentives—as I am sure he will—and at the predictability of contracts and investment, so that Britain is a great place in which to invest for these purposes, and so we can exploit more of our energy and have more reliable supplies, even generating a surplus in some areas so that we can help Europe, which is very short of energy and does not have many of our natural advantages.

My concluding point is that we cannot go on for too long with a complex net of subsidies, price controls and interventions without damaging the marketplace more widely and sending the wrong signals, so I am glad that this measure will be short-term. We need a better system for the future so that there can be plenty of support for those on low incomes if energy prices remain high, but also much more investment to solve the underlying problem.

Rt Hon Sir John Redwood MP (Wokingham) (Con): What will the impact of these measures be on the growth rate, and will we still avoid recession?

Jeremy Hunt MP, Chancellor of the Exchequer: I will publish the economic forecasts from the OBR when I make my statement in a fortnight’s time. I think it is better for me to wait until I hear that. The proper answer to my right hon. Friend’s question is that what we are seeking is a long-term sustainable increase in the economic growth rate. That is a central policy of the Prime Minister, which has my wholehearted support.

Rt Hon Sir John Redwood MP (Wokingham) (Con): I disagree with new clause 2 and new clause 1. I welcome very much the legislation. One of the objectionable features of the original proposal was hypothecation, because I do not think it is possible to identify a single tax that just happens to meet the costs of a particular service, let alone a tax that would then have revenue growth at the right pace to take care of the needs of that service. This one was particularly misleading. There was no way that the amount of tax to be levied got anywhere near paying the full costs of social care. It was misleading to make people feel that social care might be as cheap as this particular tax, although the tax itself was burdensome on all those who go to work.

There are still strong elements of hypothecation in new clause 2, which I would equally object to. Again, we should not mislead people into believing there is a simple, relatively low tax that takes care of a huge problem—social care. Indeed, when the Government compounded the difficulty by saying that in the first instance the tax would be mainly used for the health service, and by some magic that would drop away and it would go to social care, it all became incredible to me. That is why I did not like the idea in the first place. It is very good news that we are sorting it out.

The challenge of new clauses 1 and 2 is a perfectly fair one, and I think the answer is straightforward. Social care does need more money to go into it, and it will need progressively more. If we fund our social care better and expand it, it will release some of the pressures on the NHS. There are some people who could vacate a bed quite safely and get better social care if that were available, so this is worthwhile expenditure from that point of view as well. Above all, it is worthwhile expenditure because people deserve better care and better treatment and that should be funded out of general taxation.

The Government are right now to abolish the hypothecated specialist tax, to give up the idea that there is a single, relatively low tax that solves all the problems, and to accept that social care and NHS provision together is a major claim on the general taxation of the country. If the general taxation of the country does not reach total spending—it does not seem to at the moment—it is also a claim on borrowing.

On that last point, we should remember that for the previous two years the Office for Budget Responsibility grossly underestimated the revenues that came into our economy, and we borrowed considerably less than it was forecasting. It may not be so wildly wrong this year, when it looks perhaps as if its borrowing forecast is a bit on the low side, but we must remember that the way to pay for these services is to grow the revenue. That was what we were doing last year and the year before, and that is what we must do next year, to take care of the need to spend more on the NHS and social care.