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Text of talk to CPS seminar |
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Written by Sir Bernard Ingham
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Tuesday, 10 January 2006 |
I recognise that Dieter Helm’s carbon tax could have benefits for
nuclear power. It would for a start put coal, oil and gas on a more
level footing with nuclear which now, monstrously, pays the climate
change levy even though it emits next to no CO2 or greenhouse gases.
A carbon tax is an instrument by which the market can be influenced, assuming that there is a market.
I have always been in difficulty over the popular attachment to markets, especially those described as free.
Let me illustrate what I mean by giving you four sketches from real life as I have lived it.
First, I spent roughly half my working life in the Civil Service.
During those 24 years it was my privilege to listen to many erudite
debates, involving much recourse to S-bends, Y-curves and Z-humps,
proving that black was white or that this course was better than that.
It was all splendidly learned and theoretical. And then the politicians
had to take a decision. And unless the economists had been able to show
that one perfectly practical route was indubitably cheaper than another
practical course, the politically easier way often won, even if it were
more expensive. Just think of the nuclear power station choices we have
made: SGHWR, AGR but never the American PWR until Sizewell and only
after the American-hating French, without fossil fuels, had for
security gone a bundle on PWRs.
It was, perhaps, necessary to have these learned market-based
discussions, if only as a check. But they were not necessarily
clinching discussions.
Second, in my time as head of the D/Energy’s energy conservation
division, it was my responsibility to dream up schemes to promote
energy saving. In other words, to interfere in the market to secure
policy ends. When we had a wheeze off the drawing board, as it were, we
had to go along to the Treasury. They turned up mob-handed – ten or a
dozen of the blighters, the better to intimidate you with – to test the
sensitivities, as they described it, and to try to put their dead hand
on the expenditure of money, regardless of policy to promote energy
saving. And what happened? Why, while we were meeting, my Deputy
Secretary sometimes agreed a scheme with the DTI Deputy Secretary,
squared the Treasury, and hey presto we were in business. My deputy
secretary, Philip Jones recognised that I didn’t think much of this
daft, energy-wasteful system. And when I had finished with him all he
could say, wearily, was that the process had to be gone through,
presumably to protect people’s backs.
Third, I want to cast your mind back to the miners’ strike of 1984-85.
Mr Scargill was prevented from becoming the Gauleiter of Britain not by
the market but by massive intervention in the market to ensure fuel
stocks were piled up at the power stations and every ingenuity was used
to maximise endurance and efficiency. The nuclear industry was seen as
an insurance policy against the Scargill menace. What is our
insurance policy against Mr Putin, OPEC and assorted pipeline
terrorists? To look at energy policy in narrow financial/tax terms is
to ignore considerable geopolitical risks.
Finally, I want you, if you can, to visualise my arguing about free
markets with Margaret Thatcher. In the 1980s I found all the silly talk
about free markets utterly tiresome when every market I encountered was
corralled, controlled, regulated, interfered with and, not to put too
fine a point on it, rigged. So I had a memorable encounter with her –
we discussed it again only last week - in which I asked her whether she
was prepared to leave defence, shipbuilding and steel to the whims of
the free market. In other words, was she prepared, if it came to it, to
allow the market to denude the UK of specified defence, naval
shipbuilding and steel industries? Of course, she wasn’t. So, I said,
there is a limit below which you would not allow those industries to
fall. Yes, she said, though she candidly admitted she did not know what
that limit was. So much, I said, for free markets. In the end, a
Government has to take a view – certainly in such strategic areas as
security - of what is in the national interest and engineer that
outcome, perhaps justifying it as an insurance premium it is necessary
to pay.
If you accept the logic of that, and recognise my anecdotes of how
government actually, as distinct from theoretically, operates, you will
recognise where I am going.
Energy – the means by which a nation’s economy is driven, its industry
and commerce powered, its social life made possible and anarchy
prevented, and the elderly, weak and disabled protected – does not
merely stand alongside defence, shipbuilding and steel as cases for
special treatment. It is pre-eminently a case for special treatment
because without energy we have no economy, no industry and commerce, no
social life or protection of the weak and no defence. Certainly none of
the kind we know now.
There is incidentally a direct correlation between energy use and
national wealth and a sure way to precipitate a return to poverty in
the UK is to make energy supplies uncertain and relatively expensive.
That being so, we have to raise our energy game. It may be that Dieter
Helm’s ideas are a means of raising that game. But they will not
suffice alone – assuming they will suffice at all - because there is
no, repeat no, magic formula.
They will not suffice alone for the other following reasons:
* The frenzied prejudices that surround energy policy – in other words,
the politics of energy which are driven not by rational debate but
sheer Alice in Wonderland fantasies.
* The mess we have got into by rigging the market supposedly to achieve
an environmental as distinct from energy end – namely, a 60% cut in CO2
emissions by 2050 – what with the climate change levy, the
eye-wateringly expensive encouragement of that renewable white elephant
called wind power and other such marginalia in energy supply; and the
sick capitalist joke called carbon trading.
* The hilariously funny contradictions in our so-called current energy
policy – for example, the eradication of fuel poverty, whatever that
is, while pursuing energy conservation which surely demands higher
prices; and the ludicrous activities of Ofgem, the fuel regulator – why
do we need a regulator for privatised industries? – which, in direct
opposition to energy conservation, sought when it could to pare prices
to the bone and took coal, oil, gas and nuclear generation to the very
brink of bankruptcy, leaving us with a far from robust national grid
and a reluctance on the part of generators to invest in renewal of
plant.
Which brings me to the problem of the short-termism of Ofgem
when energy policy is, by definition, a game of long-term horizons. How
the hell do we get a rational energy policy with Ofgem around?
All the carbon taxes in the world will not cut their way through that
mess. They might help to make people see sense. But, by definition,
there are people in this world who are incapable of seeing sense. I
need mention only Sir Jonathon Porritt and Zac Goldsmith who are
respectively advising the Prime Minister and the Leader of the
Opposition in this area, God help us.
So, what I am saying is this. We have first of all to decide what energy policy is about.
It is – or should be – about obtaining maximum security of supply at
competitive or affordable cost. Given the nature of the global state,
we might add a rider to say that those two objectives should be
achieved, wherever possible, through cleaner rather than dirtier means
of energy provision.
If those are our objectives, as they ought rationally to be, then we
can ask the economists, the scientists, and not least the engineers who
have been utterly ignored over wind and grid operation, how we can best
and most economically achieve them, knowing what we know now and not
what ideally we would like to see or what is theoretically possible or
might be possible when we are all dead and buried.
I have been assured by the project leaders themselves that nuclear
fusion power can be commercially available by 2048 –provided
governments do not delay decisions. That being so – and I am fascinated
by the precision of the date - we have to find a way of getting through
the next 43 years, though the issue is somewhat academic so far as I am
concerned.
It may be that a carbon tax will be part of the mix – assuming a carbon
tax can be part of the mix when we need a mix of energy sources if we
are to have greater rather than less security of supply.
So, the notion that the market left to itself or even tweaked will
miraculously produce secure supplies of energy at affordable prices
while at the same time combating climate change is for the birds. The
very idea of a carbon tax tells you so.
Somebody – and that can only be accountable Ministers – has to take a
view of what is in the national interest, what insurance premium is
worth paying to serve that interest, what broad mix of energy supplies
we need and how to engineer the result.
The market – to which both Labour and Conservatives are attached
because of its presentational advantages and because they think it will
absolve them of difficult decisions – offers no hiding place.
Let me give you just one example why. On any rational analysis nuclear
power, proved safe, reliable, clean and economic after 50 years, must
be part of the mix – and a larger nuclear contribution than we have
now. But how are we going to get it when its initial heavy outlay
deters? Indeed, how are we going to get it when Ofgem deters all or
most power station building of whatever fuel?
How are we going to get it when the Government has done nothing about
licensing new generation reactors for use in Britain; when nobody knows
what planning and public inquiry regime will apply, even though the
Government has been only too ready to wreck the existing planning
control system to facilitate useless wind power; when no one knows,
especially with Ofgem around, the terms on which competitive nuclear
will be admitted to the market; when arrangements for insurance are up
in the air, if they are anywhere; when it has done nothing effective to
solve, as only Government can, the storage of long-term irradiated
waste – CORWM, that Meacher-induced exercise in prolonged delay, will
tell us in July the preferred method but not, crucially, the site. And
so on.
All this does not mean I am asking for a subsidy for nuclear. If it is
the cheapest option, I don’t see why it should have a subsidy. Nor am I
suggesting the Government should build nuclear power stations. They
will be built by the private sector. But the Government obviously has a
great deal to do to enable the private sector to build those
unsubsidised power stations.
In short, I abhor all this loose talk about market-based solutions.
There aren’t any market based solutions. There may be market-based
crutches, helps over stiles and Zimmer-frames.
But there is no substitute for knowing what we want and deciding how we
propose to get it and using the market, as best we can, to help us on
the way. But let us never kid ourselves the market will suffice, least
of all in this absolutely crucial, overridingly important field of
energy policy.
We have to put behind us this starry-eyed love-affair with markets and
face reality. We and not markets are masters of our fate.
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