By Iain Martin
A lot of people, said David Cameron, had warned him he was “mad” to treat
the environment as the number one concern. In response, he told them he
felt deeply about climate change. He wanted, he said, to push the issue
right up the agenda.
It was December 2006, and Cameron had chosen to address an organisation
called Green Alliance on the eve of the first anniversary of his election
as Tory leader. Citing his party’s then-fashionable mantra (“Vote blue, go
green”), he spoke that evening of his ambitious plans to run the most
eco-friendly government in history.
“We’ve said very clearly in my party not just words, not just good
intentions but we want to see an increase in green taxes as a proportion
of the total, we want to see the climate-change levy turned into a proper
carbon levy, we want to see aggressive and far-sighted targets for
emissions from cars, because we think that there’s a huge amount that we
can do in terms of leadership on that front, and as I’ve said, we want
annual targets for carbon emissions… I want the Conservative Party to help
lead the green revolution in Britain.”
How times change. Almost seven years on, the Prime Minister’s official
spokesman admitted on Friday that “green subsidies” designed to boost
eco-friendly renewable-energy firms are under review because of their
impact on household bills. Such subsidies for renewable energy companies
must not last a minute longer than necessary, Cameron said last week.
The Prime Minister’s number one concern now is no longer the environment,
associating himself with building windmills or recycling rubbish. Instead,
it is the looming general election and the cost of living.
The shift from Cameron’s green rhetoric of seven years ago can be accounted
for mainly by what has been happening to household energy bills since the
financial crisis triggered Britain’s worst economic downturn in seven
decades. Prices have doubled in the past eight years, contributing to the
squeeze on living standards.
While about two-thirds of the increase in recent years is estimated to be
down to demand for gas as emerging economies compete for resources
green subsidies are responsible for some of the remainder.
Anger in parts of the Tory heartlands about the landscape being despoiled
by subsidised wind power has also played a part in the leadership
rethinking its policies on the environment and energy, as have complaints
from industry. At the recent Tory conference, George Osborne said that the
UK should not be a leader in tackling climate change if it made industry
uncompetitive. Other Tory frontbenchers, including Michael Fallon, the
energy minister, have also stressed their concern. Fallon told a meeting at
the conference: “We shouldn’t put British industry at a disadvantage
against Europe and the US. For our manufacturers, this would be assisted
suicide.”
But it was the bold declaration by Ed Miliband in his speech to the Labour
conference that he would freeze energy prices for consumers if he won the
next election that has really left the Conservatives scrambling to respond.
Since then, Osborne has been leading the charge. The Chancellor is at war
with Ed Davey, the Liberal Democrat energy and climate change secretary,
because Osborne wants to use his autumn statement at the beginning of
December to show that he is on the side of families feeling the pinch. One
of his targets is the package of various green measures designed to deal
with climate change, measures that are the responsibility of Davey’s
department.
At the centre of the latest conflict between Osborne and Davey is the
Energy Companies Obligation (ECO). The scheme imposes demands on power
companies, forcing them to be more energy-efficient, with the costs then
passed on to the consumer. It was launched in January and replaced several
other schemes pioneered by Ed Miliband when he was energy secretary. The
Tories want to look at scaling it back.
Says a senior Tory: “There are seven deadly green taxes. But ECO is the
biggest. Davey is dug in, but he is going to have to move. We’ve got to get
these taxes down.”
There seems to be little practical room for manoeuvre on the other six of
the seven. On the subsidies for renewables, many of the contracts with
those building wind farms are already signed and it would be difficult
legally to change the agreements.
The Energy Companies Obligation is the tax in Tory sights. Ministers are
pushing for its implementation to be delayed, which could mean a delay in
the costs being passed on to customers.
But Davey is determined not to be bullied by Osborne and the Tories. Last
week, he responded to the Chancellor’s machinations by writing to energy
firms demanding that they explain to regulators how much it costs for them
to comply with the scheme. The suspicion is that the energy firms have been
exaggerating the impact of it, and lobbying the Chancellor for help to
boost their profits. Davey’s supporters also point out that the ECO levy is
responsible for only around 5 per cent of energy bills, and that even if it
was axed, which they are determined it will not be, any saving could easily
be wiped out by future rises unveiled by the energy firms.
“There are no easy answers,” says a source in the Department of Energy and
Climate Change. “There is no big pot of money for us to dip into that could
easily reduce prices. Half of the bill is wholesale energy costs that the
Government can’t control.”
Last week, Vince Cable, the Business Secretary, moved to defend Davey’s
stand. “It is a continuing argument in the Coalition, because Liberal
Democrats have been arguing that we need to maintain a long-term priority
towards a less carbon-based and polluting economy,” he said in an interview
with the BBC. “What we shouldn’t be doing is scrapping our environmental
policies. That would be very short-sighted and foolish.”
The Lib Dems also ask why all this is being reopened now. Last autumn, the
green initiatives for the rest of the parliament were agreed by the
so-called quad that decides on policy. The quad’s members are Cameron, Nick
Clegg, the Deputy Prime Minister, Osborne and Danny Alexander, Chief
Secretary to the Treasury. The Treasury was concerned that the
environmental subsidies were too generous, but an agreement was arrived at
that Osborne and others want revised only a year later.
“They have to understand the world has changed. Bills keep going up,” says
a Tory minister, by way of explanation.
The Lib Dem suspicion is that it may be Tory hot air. The Conservatives are
certainly keen to give the impression they are ditching their green
policies with an election in the offing, which demonstrates handily that
they are prepared to do battle with the eco-friendly Lib Dems. They can
then paint their Coalition partners as wedded to high taxes and obsessive
greenery in the run-up to the election.
A Whitehall source says: “It’s about the politics now. You are getting to
the point where the parties are thinking about what goes in their manifestos.”
Indeed, watching the three party leaders arguing shamelessly over energy
bills and climate-change policies is, at points, jaw-dropping.
While Cameron mocks Miliband’s proposed energy freeze and points out that
in the last Labour government he was the energy secretary who piled extra
costs on to consumers, the Tory leader backed Miliband’s green policies at
the time and has continued in a similar vein in office.
In 2008, on its second reading in the Commons, only five Conservative MPs
voted against the Climate Change Bill. Cameron, Osborne and the entire Tory
front bench trooped into the division lobby to support the bill, which had
been steered through the Commons by Miliband.
There was a virtual consensus at Westminster before the financial crisis
and even long after it that renewable power and green taxes were what
mattered most when it came to energy.
That means that successive governments have been very slow to respond to
warnings about Britain’s looming energy crisis.
In 2002, only the efforts of Brian Wilson, then energy minister under Tony
Blair, managed to keep open the option of new nuclear power projects, to
the fury of the green lobby, but there has been very little progress on
building new plants since then.
Belatedly, the current Government is promising imminent progress on nuclear
power. This week, Osborne is expected to sign a deal in China with the
state-run energy firm to allow the Chinese a role in building a new
facility at Hinkley Point in Somerset. The plant is scheduled to open in 10
years’ time. The much talked of boom in shale gas – tapping fresh deposits
from rock deep below the earth’s surface – is also years away, even if the
environmental objections can be overcome.
Meanwhile, as the parties squabble over what to do about the consequences
of their own assorted policy failures, prices are on the up again. On
Thursday, SSE (Southern Electric, Swalec, Scottish Hydro and Atlantic)
announced increases of between 8.2 per cent and 9.7 per cent for its
customers. The bill for consumers keeps on rising.
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