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Lord McKenzie of Luton: My Lords, I reject the assertion that liabilities cannot be met. The public finances are sound, as demonstrated in the Pre-Budget Report and previous reports before this House and the other place. In respect of comparisons with private sector schemes, most of those are, of course, funded schemes. Government schemes are unfunded, and the key test of affordability is the sustainability of those cash payments year by year into the long term.
On PFI, which is stretching the question a bit, we have debated this before. Some are on the balance sheet, some are not. Independent advice is taken as to which fall on which side of that line. On public sector debt, which we debated recently, work is being done to properly categorise the extent to which that is not included in the figures. A report was made to the Treasury Select Committee on that in November of last year.
Lord Campbell of Alloway: My Lords, would the Minister be prepared to deal in a Written Answer, if he finds time, with the question put from my own Front Bench?
Lord McKenzie of Luton: My Lords, I thought I had dealt with each of the questions that have been posed. I am happy to look at the record and, if I have not,
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write further. On the updated forecast, as I have said, as soon as all the accounts are laid before Parliament, the Treasury has committed to bring forward a new estimate. That is what the answer says, and that is what will happen.
Gas Imports
2.59 pm
Lord De Mauley asked Her Majesty's Government:
Whether they propose to reappraise their energy policy in respect of reliance on imported gas in the light of the recent dispute between Russia and the Ukraine.
Lord Davies of Oldham: My Lords, in November, the Prime Minister announced a review of energy policy to explore options to help meet the medium and long-term goals in the 2003 energy White Paper, to report to the Prime Minister and Secretary of State for Trade and Industry in early summer. The recent Russia/Ukraine dispute reinforces the importance of making progress on an EU energy policy, as agreed at the EU informal heads of government meeting at Hampton Court in October.
Lord De Mauley: My Lords, I thank the Minister for his Answer. What comfort can he give us as to the security of gas supplies for the future? Can he unequivocally confirm that the security of gas supplies will not be adversely affected by the arbitrary cutting off of supplies by producers, or by any country through which gas is piped?
Lord Davies of Oldham: My Lords, in some respects the crisis over the Russian/Ukraine position has alerted the whole of Europe to the need to guarantee the security of pipelines. It is an issue that we brought before the European Community in very strong terms under our presidency during the past six months, and our arguments were aided by the development of that crisis. The noble Lord will recognise that we need to safeguard our energy supplies. Gas is only one part of that and we do not receive gas directly from Russia at present. I can assure the House that part of the energy review will look at the proper functioning of the European gas market and the provision of gas to that market, as well as at other sources of energy.
Lord Redesdale: My Lords, what urgency is now being given to moving forward the interconnector from the Norwegian gas fields to the north-east and why greater urgency has not been given to that in the past? Also, what progress is being made at Milford Haven to allow liquid gas from Qatar to be received?
Lord Davies of Oldham: My Lords, I can give reassurances on both those fronts. The Milford Haven project, which involves a massive extension of our capacity to store liquid natural gas, is well on course and will be ready next year. The pipeline from Norway is on course and on schedule and will become
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functional at the back-end of next year. In both those cases, we are making the progress that we predicted in the 2003 White Paper and the targets will be hit.
Lord Berkeley: My Lords, can my noble friend assure the House that lessons will be learnt from the disastrous fire in the oil terminal at Hemel Hempstead before Christmas? Clearly, the country will have to store more gas and petroleum products to be certain of the continuation of supply.
Lord Davies of Oldham: My Lords, that is a very important point. The ministerial response to that tragic event was that the location of gas and other fuel storage should be included in the review of our energy provision.
Lord Howell of Guildford: My Lords, the Minister said that Europe has been alerted by the Russian/Ukraine dispute over gas prices. Is it not a fact that continental Europe is already almost 50 per cent reliant on Russian gas piped from Siberia? Indeed, some countries, such as Austria and Slovakia, are 90 or 100 per cent reliant, and the projection is that European dependency will go up to 80 per cent. Can the Minister assure us that when the new north-European pipeline, which will run between Russia and Germany with proposed branches off to the UK, is built, we will not drift into the same degree of reliance, and that instead we will develop our reliance on Norway and other sources, as has already been suggested? Maybe not on Qatar, where the other day we found that ships that were due to come here were diverted to America where there was a shortage of gas. Will the Minister convey the impression of less drift in energy policy that seems to come from the Government at present?
Lord Davies of Oldham: My Lords, I refute the concept of drift. The moment that we were aware of significant malfunctioning of the European market, which related particularly to the question of gas supplies to Germany, we got in contact with the European Commission. The Chancellor of the Exchequer and the Secretary of State for Trade and Industry wrote to the European Commission and demanded immediate action. Assurances have been given that action is being taken.
The noble Lord is right that other countries are much more dependent upon single sources for gas supplies, in fact for energy as a whole, than is the case for the UK. We already pride ourselves on diversified resources, but that does not alter the fact that we need an energy review to look at the various sources, not least because of the point made by the noble Lord that, at times, because of market forces, ships can be diverted when they are already on the high seas and when the contract has been signed for UK destination. We need to look at that issue.
Lord Truscott: My Lords, will the Minister take the opportunity to ensure that, in the forthcoming discussions on the G8 summit in St Petersburg, the
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Government will remind the Russian Government not only of the importance of being a reliable supplier of energy but also of having a true open market economy and upholding the principles of democracy?
Lord Davies of Oldham: My Lords, on the first point, President Putin is chairman of the G8 this year and has already indicated that he intends to put the security of energy supplies as the prime issue during his presidency. So we have that assurance already. On the more general question of the market mechanisms with regard to Russia, I can think of no one in this place who is better equipped than my noble friend to recognise that there are many obstacles to be overcome. The recent conflict between Russia and Ukraine shows how far countries from the former Soviet bloc have to go in terms of open markets. But there is no doubt that the G8 will be a forum for these issues, particularly in the context of energy policy, as soon as it meets this year.
Lord Ezra: My Lords, the noble Lord indicated that the forthcoming energy review will deal with medium and longer-term issues. What about the short term? We have already had all these problems over the gas supply situation, and we are likely to have them for the next two or three years. Will the Government indicate what urgent short-term measures will be taken to deal with this situation?
Lord Davies of Oldham: My Lords, certain developments—for example, the Norwegian pipeline and the question of the storage for LNG—are on course to deal with the short term. That is not for this present winter but certainly with regard to subsequent winters. As we expressed earlier in the autumn, we have real difficulties with regard to this winter. They reflect the fact that the actual level of North Sea production declined much more rapidly than all expert opinion had anticipated. That has thrust us into greater dependence on imports than otherwise would have been the case, but I assure the noble Lord that while looking at the medium and long term we are very cognisant of the fact that we also need to have successful strategies in the short term.
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