Green Alliance’s summer reception – What is the future of UK infrastructure?

Speech by Rt Hon Ed Balls MP, Shadow Chancellor

Green Alliance’s summer reception – What is the future of UK infrastructure? 

10 July 2013, BMA House

 

Thank you very much indeed Matthew for inviting me along and to Martin for that

commentary on the paper from Green Alliance.

Martin has the advantage that I decided I would sort of organise my remarks and put them out

in a blog this evening on the New Statesmen, and I foolishly gave Martin a copy of my remarks

in advance and then I let him go before me. So he was able to ask me all the difficult questions

before I even had my go. But very typical of you, if you ask me.

I was first hired by Martin Wolf to work as a Financial Times leader writer in 1989 – which is

really quite a long time ago. And Martin’s sort of laser-like analytic skills but also courage and

independence and values I’ve known for very, very many years – so it’s a great honour.  It’s the

first time we’ve been on a platform together. There was one particular occasion I remember

doing an editorial at the FT in 1992…. where I was writing about – there was a monopolies

and mergers commission report about the Thai beer industry and its importance and

recommending it be broken up. And I wrote an editorial for the Financial Times supporting

this, this report. And, and I took my leader through to the editor at the… just before the

deadline. He was a very, very nice man and he said: This is quite controversial, and I’m not

sure how it’s go to go down. He said: Could we just add the words “or may be not” at the

end? And, and I said: Well, you know, it’ll be fine by me but you’d never get it through

Martin Wolf. And Martin is always somebody who had some very clear arguments and

convictions and views. And, and you’ve heard that tonight. And I‘m going to attempt to

respond to all of your points Martin in, in my remarks.

The other thing that I should just say: The last time I stood at this very place was on the Sunday

morning. It was a meeting of the the Board of Deputies, which meets on a Sunday morning,

which is like the convention of the Jewish community here in London, and I’d been invited to

come along and speak. And I’d just moved from being Shadow Home Secretary to Shadow

Chancellor. And I made a very clear and emphatic commitment on a difficult technical issue

called “Universal Jurisdiction” and then found out two hours later that it was very clear and

full of conviction but it wasn’t Labour Party policy at all. And in fact the person in charge of

Labour Party policy on this matter was Yvette Cooper, who was really displeased with me for

having made this announcement without any prior consultation with her. I’m really hoping

that I’m not going to make the same mistake again this evening. And I’ve tried really, really

hard to consult very widely with all my shadow cabinet colleagues to make sure that I don’t

make any mistakes. I don’t know whether Caroline and Mary are here yet but they may be

coming along. But anyway I consulted with the leader of the Labour Party and he agrees with

everything I’m saying. So there we are.

Let me – as I said I going to respond to your remarks Martin. One thing I’m not going to do is

spend any time on the first point, other than to say: I, as Martin and others have, have consistently made the argument for three years that unless you get the economy growing,

unless you act quickly and decisively short and medium term, then we going to end up with

much lower growth and a higher deficit and more unemployment then we need. And I think

the evidence so far has borne out that case and as Martin said he has not succeeded in

persuading the Chancellor and neither have I. But there we are. We keep ploughing on. So let’s

take that as a given.

The question then is: is Martin right on his second argument? That there should be, as Green

Alliance say in their paper, a focus on low carbon infrastructure as part of that short and

medium term stimulus. And then also, what that means how we can show we can actually

deliver that. And that’s what I’m going to – to talk about. One thing I would just say from the

beginning and this may be an obvious thing for many of you to hear. But to me it’s very

striking because I’ve over 15, 16 years now – 17 and 18 years actually – of being involved in

these debates, sometimes intensively and then less so – I worked very closely with Michael

Jacobs before we came into government in ’97, and Dan Corry and then in government when

was at the Fabians and then when he came into the department. I have to say, the idea, 10, 15

years ago, that you have a meeting of major environment organisations like Greenpeace,

Friends of the Earth, Green Alliance, alongside large companies and the CBI and they would all

be in agreement, I mean, it’s very striking. 15 years ago there would have been a complete

standoff. And it’s – it’s interesting how this debate has changed and that the scope and breath

of the consensus across business and the wider green movement about the importance of, of

investing long term in sustainable, reliable, affordable energy. That consensus is very striking.

As I said, there’ll always be debates and arguments about the detail, but I think that consensus

is strong. And it needs to be, as I’m challenged by Matthew, it needs to be at the centre of our

economic policy going forwards. And in fact, it needs to be, to succeed, at the centre of a cross

party consensus which crosses parliaments and crosses political parties. 

And I do think and my answer to Martin’s second point is that this is a necessity, but I do think

that it is also a great opportunity for a number of the five reasons that he set out. I do think

with the right leadership we can see progress on that international agreement, and I’ll come

back to that in a moment. I thought President Barack Obama’s speech a few weeks ago in

George Town was very striking and very important, and I think Paris is another important

milestone. I think it’s good for the UK to get ahead of the curve for a range of industrial and

jobs and technological reasons and the reality is that if you look at the mix of our energy over

the next 10, 15, 20 years – unless we act in a decisive way to renew our infrastructure and

change direction we are going to end up much more heavily depended, dependent, on one

energy source – imported – which is not without further action consistent with our climate

change objectives. But even if you put the climate change objectives aside we’re going to need

major investment anyway, and therefore we might as well make sure that we do that major

investment in a way that passes the five tests that Martin set out. I have to say as someone who

has also been quite a fan of five tests assessment, I thought Martin’s five tests were almost as

good as the five tests which meant that we didn’t join the single currency in 2003, but that’s a

completely separate issue. The interesting thing to – as I just said – there is a great deal of

gearing up for a lower carbon future going on. The Green Alliance paper is striking about the

scale of the investment which is potentially in the pipeline. I was particularly struck by the fact

that in offshore wind alone investment planned and in the pipeline is worth more than all planned spending on gas, roads and airports combined. But that might partly reflect the

inability of any government to invest in airports – but to put that to one side – and the thing I

hear all the time talking to business audiences is that people see a massive opportunity here for

very substantial investment which can create a huge number of jobs, lead in our innovation,

put the UK ahead of the curve – the ability to bring a lot of expertise and supply chain

investment on the manufacturing side as well as in power generation and adaption here into

the UK. But on the other hand, if we don’t do these investments, because of those energy

vulnerabilities I talked about the likelihood is we’ll end up with more imported energy

potentially at higher prices rather than lower prices – and if we wait, and this is one argument

that Martin didn’t put in his five tests – if you wait and delay to see whether or not there’s

going to be that international consensus for a low carbon future and then realise late in the

game that you need to make those changes then potentially that ends up being rather more

expensive than if you move earlier and in a more sensible pace. And so I think that there is a

real – it’s not only about the opportunity in terms of investments in jobs but it’s also about the

potential costs to consumers and to our economy more widely if we have to try and run to

catch up at a later stage.

But the other think I hear all the time – and you heard that from Matthew – is a real frustration

at the moment which crosses the business and campaigning and environmental and green

world that, at the moment, the leadership, the clarity, the certainty, the road map which

people need to apply scarce capital to make long term decisions. The leadership from

government is currently not there. That there is a fear that we are about to snatch defeat from

the jaws of victory – to not move forward in the way in which we should, that for a range of

short term political reasons difficult decisions are being ducked or fudged. And I do think there

is a very substantial risk of that at the moment. There is a broad based concern that there isn’t a

decarbonisation target in the energy bill. The potential for fracking is being used to encourage

the idea that a new dash for gas could make the kind of investments we need in renewables

unnecessary. The Green Investment Bank is currently not fit for purpose to do the job it was

intended to do over the next few years. And those things and others which I’ll come back to,

are creating an uncertainty and a short-termism in an area where only predictability and

stability and certainty will give business and private capital the confidence to invest. I was

going to quote Chancellor George Osborne’s speech from five years ago this very night – but

Matthew beat me to it – he actually did go on: he said “we will not shirk from the fight” he

said “I do not pretend any of this will be easy, there will be difficult battles ahead”. Well, he

was right about all of that. But I fear that we are at the moment that missing a big opportunity.

And let me explain what I’m arguing today that we need. The first thing is not a complete

solution – I think in the end one of the things that I’ve learnt about politics and policy is that,

as Martin said, targets alone aren’t enough but they’re important. The issue is whether or not

the revealed preference of people who announce targets, is that they’ve then got the

commitment and resolve to go on and deliver them. And in the end, because no one can ever

see the future, – it either has to be very, very costly, or you have to have developed a

reputation for doing what you say. And in some ways, the fact that we introduced the first

climate change levy in 98/99, that we, from the Treasury, commissioned the Lord Stern report

into climate change, and then went ahead with – as we heard earlier – with really quite

revolutionary changes in the UK legislation in the second half of our time in government. In

some ways those I think are more important signals of intent and commitment than anything we can say at this point. I can remember being in debates and discussions where the green

lobby thought we were not doing enough, and the manufacturing lobby thought we were

doing nowhere near enough, but there was a stand-off between the business world and the

environmental world and where senior politicians of my day said you know “why are we

doing any of this because it’s a thankless task?” but they actually did stick to the course. And as

I said I think that’s rather an important point in the context of George Osborne’s speech of five

years ago. The fact is the government is still committed to the 2015 goals, 2050 goals, which

were enshrined in that first climate change act for 2050 which passed with cross party support

when we were in government. The thing that is frustrating is that the independent Committee

on Climate Change that legislation then set up made absolutely clear that decarbonisation by

2030 was necessary to meet that 2050 goal, and the fact that the government has so – or the

Treasury – has so explicitly blocked that 2030 goal being put into legislation, does I think lead

to a lack of certainty and a lack of confidence. Revealed preference – what you do matters more

than what you say. We voted for the 2030 goal in parliament in recent months and the

Treasury lead the opposition to that target in 2030. I think that’s a problem – I think that the,

that as Europe debates now, whether we should at the European level be putting in place

renewable and efficiency targets for 2030 – again, we will see whether or not the government

is committed to this agenda. I think there is a real opportunity in the run up to 2015, the Paris

meetings, the next round of international talks, for the UK to show that we and our European

partners can lead. And I don’t see evidence at the moment of that leadership. We now would

be legislating for a 2030 decarbonisation target. We would be supporting and leading efforts

for Europe to deliver on those objectives. I would very much like to look forward to a Prime

Minister Ed Miliband, with Francois Hollande and the next German Chancellor, all signing up

to a 2015 Paris deal on behalf of European governments, alongside an American President

committed to similar objectives. And I hope that’s we’re we can get to. 

What I can’t do today is say in 2 years’ time here is our manifesto commitment, ‘cos we’re not

going to do that in any areas until we know where were going to be. And I don’t know how

far backwards things will go in the next one or two years. We aren’t planning to rip up the

legislative framework which has been in place, but we want it to deliver. And we would be

legislating now for the 2030 goal. I think we would also be clear in the area of the energy mix

in a way that the current Chancellor is being very confusing and debilitating. We’re happy to

support efforts to find new domestic gas supply, although there are considerably

environmental issues which would have to be overcome if that’s to succeed. But even then, the

view that I see, from experts from across the spectrum is that we are unlikely to see, through

fracking, an impact upon prices and supply in the UK or in Europe, equivalent, or anywhere

near equivalent to what’s happened in the United States. The prospects for that are at this stage

at best uncertain, and any balanced and low carbon energy strategy for the next few years is

going to need gas and it’s going to need renewables, in our view it will need nuclear too. And

I think it would be much better if the Treasury were to say that, and we’re very happy to say

that. The idea there is a choice between investing in domestic gas through fracking on the one

hand – even if done in a proper way – and investing in renewable energy for the future – in

our view that’s a false choice. And I think that that’s something that the Treasury should be

willing to say. In answer to Martin’s question about pricing: when we introduced the climate

change levy at the very beginning of the last decade – 98/99 – we introduced the climate

change levy in the UK as a sort of down payment before you then moved into a more European based carbon pricing system through energy trading. We now seem to be in the

rather perverse situation where, at the moment EU energy trading doesn’t seem to be working

very well at all, and rather than arguing for necessary reforms to make European energy

trading and carbon pricing work better the government seems to have retreated back into

simply having a domestic carbon tax, the carbon price floor. And even if Martin was right in

the argument he made, surely we ought to be making that argument at a European level rather

than simply at a UK level. Again I fear that that’s an area where we could be making more

advance by making our arguments internationally rather than domestically. 

The second area where we think as well as setting clear objectives, is how you deliver

innovation. And again, carbon capture and storage, the last Labour government didn’t have a

brilliant record – but we seem to again be seeing that process stalling once more. And as for the

Green Investment Bank, that was a Labour proposal. It was taken forward by the government –

but I fear, even though the early signs are that they’re making good progress in establishing

expertise and reputation, the Green Investment Bank is being substantially held back from the

kind of leadership role that it could and should be playing. Perversely, the Chancellor

arbitrarily tied the decision about whether the Green Investment Bank should have the ability

to access capital on the open markets to his target for national debt. Because he’s not meeting

his national debt targets in 2015 or 2016, currently it’s back to 2017/18 – that has ended up

with him de facto delaying the ability of the Green Investment Bank to access capital markets til

then. It leaves the bank in limbo, with neither co-investors or the sector able to plan ahead.

This seems to us an opportunity that the Chancellor should be grasping and he’s not. In our

view the government should end the current uncertainty and commit now with a sensible time

to plan for the GIB to be able to borrow in the way that was intended in 2015. If the

Chancellor’s not going to do that in the coming months then the next Labour government will

do so as soon as we can, straight after the next general election, so that the Green Investment

Bank is actually able to play the role it was intended to play and start to give some leadership

and certainty in the delivery of the innovation process around renewables and clean

technologies. And I think that signal now, an action now, would also mean, we can see more

momentum in a third area where we’ve seen real problems – which is around domestic energy

efficiency.  The construction industry I know is crying out for some more clarity around zero

carbon homes – a policy that we introduced in 2007. In fact I did, at the Treasury while Yvette

was the housing minister, so I remember those debates very well. There’s still no clarity from

the government about what’s going to happen about the future of zero carbon homes, and that

is a loss. And as for the Green Deal – clearly so far, it has been a palpable failure, and we just

need to do more. When you look at the value for money for an individual household, at the

interest rates people are expected to pay, and compare that to the German alternative, it’s not

very difficult to see why this scheme at the moment is just not delivering either for the

industry or for consumers. And this an area where Caroline Flint, our Shadow Energy Minister,

is working hard to see what more we can do to really get energy efficiency more central into

our planning and our thinking. And those three points – around targets, around the Green

Investment Bank and around energy efficiency – they all add up to something rather bigger –

which is that, as Green Alliance challenges us, we need to put our thinking about planning for

a low carbon future at the centre of policy making. It can’t be peripheral. Sir John Armitt,

who’s here tonight, is doing some important work for us: looking at how we can ensure that

the way in which our country makes decisions about long term infrastructure – in the public sector but also more widely – has more stability, has more clarity, has more certainty about

delivery, making it harder for governments to renege, to change the rules of the game, to drag

their feet. And I think, as we can see from the numbers, if 70% of our infrastructure pipeline is

set to be low carbon, John Armitt’s proposals, and the commitment from a government to

long term consensus to infrastructure planning, will have a major impact on the future of our

energy policy as part of our wider approach to the infrastructure. 

Let me just end by saying this: I was very struck reading President Barack Obama’s speech, in

which he addressed those people who worry about climate change goals, and then said

American ingenuity means we’ll be able to rise to the challenge and deliver and defy the

sceptics. And, I think if America can rise to that challenge so can Britain. We were a country

which led the industrial revolution. We know that we have major advantages in these

technologies, in our track record, in our expertise here in our country. We have a ready-made

need for infrastructure investment in low carbon technologies which can provide the seed bed

for the innovation which can then produce export markets for the future. And, but that means

that you’ve got to take this challenge seriously, and you’ve got to want to commit to ambitious

goals domestically and internationally and then use that to drive policy. I hear ministers at the

moment talking about the global race, and at the same time see them ducking the challenge of

leadership around low carbon technology. I often feel that this is more of a race to the bottom

rather than a race to the top. And it doesn’t have to be that way. The costs of failure if we don’t

act are well known, but the potential gains to the UK in balanced, cheap, secure energy supply,

alongside investment jobs and global leadership in the technologies of the future – I think

that’s a prize worth grasping and we are looking forward to the opportunity to make that a

reality. Thank you.

ends

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