Fairness at Work and Power in Communities — House of Commons, 2022-05-12
Topic: Energy
Liam Fox (Conservative, Centre-right): It is always a pleasure to speak in this House, but it is a particular pleasure for me today, as it is 30 years to the day since I stood on almost the same spot to give my maiden speech in the House of Commons. It is a pleasure, too, to speak in a debate about the communities up and down our country Nothing undermines the stability of our economy, community and families more than inflation. It inevitably hits the poorest in society hardest, and it is therefore a moral as well as an economic hazard. As Milton Friedman said, inflation is taxation without legislation, except that no one wins, including the Treasury As a result of the covid-19 pandemic, the global economy suffered a negative supply shock, with an initial fall in output followed by an increase in prices. That has affected a wide range of global commodities, but nowhere has the effect been felt more than in the energy sector. The complication here is that the current surge in prices is the result not of a single shock of the pandemic, but of a number of supply and demand factors that have affected the market in recent times. Members who are interested in a detailed analysis of this subject should read the report by Carlos Fernandez Alvarez and Gergely Molnar, written and published by the International Energy Agency, because it answers the question that many of our constituents are asking us: why has energy suddenly become so expensive At the beginning of the pandemic, fossil fuel prices fell to their lowest in decades. That was followed by a strong rebound as the global economy recovered, and it was exacerbated by a cold winter in the northern hemisphere and lower than average wind generation in Europe. However, the main driver of price increases has come on the supply rather than the demand side. The commodity price collapses of 2014-15 and then 2020 resulted in diminished investments in oil and gas, which increased the vulnerability of the sector. Governments across the world have failed to sufficiently scale up clean energy sources, renewables and technologies to fill the inevitable gap Those problems were exacerbated by the recent lockdowns, which pushed essential maintenance work from 2020 into 2021. That led to restrictions on supply just as demand was quickly recovering. That was particularly true in the UK and the Norwegian sectors of the North sea. Similar problems affected the gas industry. The global economy has seen an unavoidable inflationary shock, but—and there is a big but—we can be sure that this is not the whole story when it comes to the price rises that British people face today, not only in energy but across a range of commodities. How can we be so sure? If we look across the global economy at the variability of inflation rates, we see a very large difference. In Japan, which imports all its fossil fuels, the latest inflation figure shows a rise to 1.2%. China is 1.5%. While inflation in the eurozone has surged to 7.5%, Switzerland, a European but non-eurozone country, has inflation of 2.5%. In the UK, we are above 7%, and the US is 8.5% and rising, so something other than energy prices has been behind our inflationary phenomenon In fact, we have two different inflationary surges—that of global commodity prices, as I mentioned, which affects everyone, and that of monetary inflation, which afflicts those countries where central banks have allowed persistent increases in the amount of money in circulation relative to existing output. The group-think mentality of central bankers in the United States, the eurozone and the UK has reinforced the idea that they have stumbled on some kind of monetary alchemy that makes it is possible to continually expand the money supply, unrelated to output, without creating inflation. Perhaps that is an uncharitable view, and they knew all along that they would create inflation but were simply responding to their political masters. However, that raises questions about the independence of the central bank in the first place. Either way, it is a wholly unacceptable position It is almost universally accepted that the first duty of Government is the protection of its citizens. As a former Defence Secretary, I am only too aware of the many external threats to the safety of our people and our country, but there are other threats that I believe we have a right to be protected from: the debasement of our currency, the erosion of our earnings and the devaluation of our savings. I believe it is fundamentally wrong for Governments to engage in structural profligacy, spending excessively across the economic cycle and passing ever-larger amounts of debt on to the next generation I also believe it is the duty of central banks to safeguard the value of our money and our savings. The Bank of England persisted beyond any rational interpretation of the data to tell us that inflation was transient, then that it would peak at 5%. It has consistently underestimated the threat There are three things I would like to see. First, the Treasury Committee should launch an investigation into why the Bank of England so comprehensively underestimated the inflationary threat; secondly, the monetary policy report should go back to being the inflation report and thirdly, the Government should think about what guidance might be given to the Bank of England on considering and reporting monetary stability I will say a word about the Government’s forthcoming Levelling Up and Regeneration Bill. We all understand the need for housing targets. We must have social mobility, ensuring that the next generation can participate in the benefits of home ownership. We need more affordable homes to allow young people to continue to live in the communities in which they grew up. However, targets for housing must be just that—targets for local authorities, not instructions to local authorities. I am delighted that the Government seem to have changed the direction of travel to move in a much more rational direction than previously We must also accept in planning that local authorities have competing priorities. To give one example, in my North Somerset constituency we accept that we need to have more housing and that the Government will set targets, but at the same time the Government say, understandably and correctly, "Don’t build on the green belt", and, "Don’t build on floodplains." That limits the space to build further housing. I would like to hear the Government make very clear that, where local plans are being constructed and conflicting priorities are being applied to them by Government, it is the local authority that will get the benefit of the doubt when it comes to the Planning Inspectorate That brings me to the issue of the green belt itself. According to the Government’s national planning policy framework, the green belt serves five purposes: "to check the unrestricted sprawl of large built-up areas; to prevent neighbouring towns merging into one another; to assist in safeguarding the countryside from encroachment; to preserve the setting and special character of historic towns; and to assist in urban regeneration, by encouraging the recycling of derelict and other urban land."