Who runs Britain’s energy policy?

A smaller cut in wind power funding comes at the cost of a commitment to decades more of dirty and expensive gas.

Who runs Britain’s energy policy? We have a Department of Energy and Climate Change – you might think from their name that they do. Or perhaps it’s Chancellor George Osborne’s Treasury that calls the shots? Now you’re getting warmer.

This week's announcement by the Energy Secretary, Ed Davey, that he had secured only a 10 per cent cut in wind power funding, was heavily spun as a victory for the Lib Dem-run department. Given that the Treasury had been demanding 25 per cent cuts, this seemed a victory indeed – but one with a huge hidden cost. Because, as payment for this victory, Davey has been forced to quietly concede to another of the Treasury’s demands: a commitment to decades more of dirty and expensive gas.

We know this to be the Chancellor’s wishes, because on Monday someone leaked a letter – effectively a ransom note – that he had sent to Davey outlining his position. In it, Osborne demanded that the Energy Secretary issue “a statement which gives a clear, strong signal that we regard unabated gas as able to play a core part of our electricity generation to at least 2030 – not just providing back-up for wind plant”.

Acceding to this outrageous demand would mean seriously jeopardising the UK’s fight against climate change. As the Government’s independent advisors, the Committee on Climate Change, stated in response: "This would all lead to a second dash for gas. This would be incompatible with the government's climate change goals."

But on Wednesday, DECC dutifully trotted out a press release stating that “the Government… is today confirming that it sees gas continuing to play an important part in the energy mix well into and beyond 2030”. Some victory.

The exchange has also highlighted the hypocrisy of the Treasury in its assessment of what merits public subsidy, and what must go without.

Osborne stated in his letter to Davey: “While your proposals [on renewables funding] achieve some savings we will still be paying more than £500m more to support renewable generation in 2013-14 than we collectively agreed was affordable”. No-one disputes that as technology costs come down, public funding for renewables should decline; the renewables industry itself was offering up 10 per cent cuts.

But wait; what’s this? On Wednesday, as DECC announced its cuts to renewables funding, the Treasury simultaneously unveiled £500m of tax breaks for offshore gas drilling. What’s unaffordable to spend on clean energy suddenly becomes eminently affordable to spend on drilling up the dirty stuff.

Enough is enough. The Chancellor must be prevented from undermining the UK’s green economy – as the CBI recently stated, it’s one of the few parts of the economy still growing. A high-carbon energy system will lock the UK in to a high-cost as well as high-polluting future. So in whose interests is the Chancellor acting?

It’s now up to David Cameron and Nick Clegg to back their Energy Minister over the Chancellor. They should insist that the Energy Bill includes a target to decarbonise the UK’s electricity system by 2030 and unlocks support for clean British energy. The alternative energy strategy that George Osborne would have us follow is a dirty and dangerous dead end.

Guy Shrubsole is an Energy Campaigner at Friends of the Earth. For more information on Friends of the Earth’s Clean British Energy campaign: www.cleanbritishenergy.co.uk


Photograph: Getty Images

Guy Shrubsole is energy campaigner at Friends of the Earth.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.