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  • David Jones – 2014 Speech on Growth in Wales

    davidjones

    Below is the text of the speech made by David Jones, the Secretary of State for Wales, in Cardiff on 30th June 2014.

    It is generally recognised that there nothing more important for our nation’s long-term economic prosperity than investment in infrastructure.

    It is what gets people to work, facilitates communication and helps British businesses to compete in what is an increasingly globalised economy.

    I am pleased, therefore, to be here today to speak to you about what we in government are doing to ensure that Britain gets the infrastructure it needs to compete effectively in the global race.

    Our inheritance

    It is now just over 4 years since the coalition government came to power.

    Our inheritance here in Wales was an infrastructure that had been severely neglected, was in dire need of upgrade, and was inadequate to cope with modern demands.

    There was little plan for investment, not even on the main road route into South Wales – the M4 – despite general recognition that its improvement was desperately needed.

    Energy infrastructure was coming to the end of its operating life without any commitment on the investment required to replace it.

    Indeed, it is fair to say that for almost a decade under the last administration, Britain was without any coherent energy policy.

    Wales’s railway infrastructure was neglected, too.

    At the end of 13 years of the last government, Wales remained the only part of Europe, other than Albania, without a single centimetre of electrified railway track.

    And Wales also lagged well behind the rest of the UK in broadband provision. It was notorious for “not spots”.

    Mobile telephone coverage in large parts of Wales was, frankly, appalling.

    Not only did the last government fail to “fix the roof while the sun was shining”, it failed to fix the infrastructure, too.

    Wales was being expected to compete in a 21st century global economy when it was struggling with an obsolete, 20th century infrastructure network – it was an impossible ask. Wales – and Welsh businesses – deserve better.

    Long-term economic plan

    We know that investment in infrastructure is one of the driving factors of economic growth.

    And when we came to power we didn’t just inherit an infrastructure that was unfit for purpose; we inherited an economy that had suffered the worst economic downturn since the 1930s and a deficit that was the largest in peacetime history.

    We had to get the deficit down and to do so required difficult, and sometimes unpopular, decisions.

    But because of the difficult spending decisions we have taken, we have been able to prioritise public investment where it is needed most and to create the right conditions for private investment in infrastructure.

    Ensuring the United Kingdom has first class infrastructure is a crucial part of our long-term economic plan: supporting businesses, helping them create jobs, and offering the prospect of a brighter future for the British people.

    And – whisper it – our plan is working!

    Britain is now the fastest growing major economy in the West. There are more people going out to work than ever before, and confidence is returning.

    But, as any business man or woman here will recognise, getting banks to lend has sometimes proved problematic.

    So we have also used the strength of the national balance sheet to provide £40 billion of UK Guarantees to get infrastructure projects going, which otherwise would have stalled because of financial difficulties.

    So in this year alone, new projects worth an estimated £36 billion are due to start across the United Kingdom, helping creating thousands of jobs, securing future growth and delivering the world class infrastructure that the country – Wales included – deserves.

    Private sector

    Key to infrastructure investment is a confident private sector. And the private sector is indeed investing.

    Some 200 projects across the UK are due to be completed this year – including the Gwynt y Môr offshore wind farm, which is currently the largest in construction anywhere in Europe.

    But this has only been possible because we took the difficult decisions required.

    We know that the old model of the public sector funding our entire infrastructure network is not sustainable, nor is it desirable.

    We understand that unlocking and stimulating private sector investment is crucial.

    Because it is the private sector that will provide the majority of UK infrastructure investment between now and the end of the decade.

    Broadband

    But the government does have a significant enabling role.

    We have, for example, invested significantly in better broadband.

    We know that this investment will pay dividends; it is estimated that every £1 government invests delivers benefits of around £20 to the economy.

    In Wales, we have increased our support for broadband to almost £70 million to allow the Superfast Cymru programme to go even further.

    This is direct United Kingdom government funding for a programme managed by the Welsh Government under the guidance of Broadband Delivery UK – an excellent example of Wales’s two governments working positively together.

    But there is still more we need to do.

    Even with significant investment in the pipeline, there will still be parts of Wales in 2016 that will not be benefiting from high speed broadband.

    That is why earlier this year we announced that we are providing an additional £10 million for those areas which are the most “hard to reach.”

    This funding will allow market testing of solutions proffered by suppliers for the areas not covered by the superfast broadband rollout.

    Businesses in our super-connected cities of Cardiff and Newport can also now apply for vouchers to improve their broadband connectivity, which is vital for a modern business to compete and grow.

    And it’s not just in fixed broadband connection that we have plans to improve Wales’s digital connectivity.

    Our £150 million mobile infrastructure project will see masts going up across the country, significantly extending coverage across Wales.

    Transport

    And let us consider the issue of transport.

    Just as Wales needs to be better connected through our digital infrastructure, we need a transport network fit for a modern economy to prosper.

    As I mentioned earlier, the congestion along the M4 at Newport is one of the most pressing road transport issues for the whole of the UK, let alone Wales.

    And in the 15 years that have passed since devolution, nothing has been done to ease that congestion.

    But upgrading that important stretch of highway is crucially important.

    Indeed, the director of CBI Wales said recently that if the Welsh Government does not build a Newport relief road Wales could “miss out on millions of future investments and hundreds of new jobs.”

    The Prime Minister put it even more starkly: he called the M4 at Newport “a foot on the windpipe” of the South Wales economy.

    So in November of last year, we gave the Welsh Government the borrowing powers it needs to raise the necessary finance for this project.

    We now expect to see firm progress.

    And through the Wales Bill – currently passing through Parliament – we are providing the Welsh Government with the opportunity to acquire extended borrowing powers to enable it to upgrade Wales’s road infrastructure yet further.

    We want them to take those powers, and trigger the referendum need to do so as quickly as possible.

    And let us consider Wales’s railways. As a government, we are serious about giving Wales a railway that is fit for the 21st century.

    Our plans for rail are the most ambitious since Brunel was transforming Victorian Britain.

    We are investing £9 billion over the next five years to upgrade railway networks across England and Wales.

    As part of our investment, we are committed to electrifying key rail routes including the Great Western main line.

    But let me say this quite clearly.

    It is a matter of great concern to me that, while we remain absolutely committed to perform our part of the bargain we struck with the Welsh Government in 2012 to electrify the main line through to Swansea, the Welsh Government remain reluctant to fulfil their side of the deal, and fund the electrification of the Valley lines.

    I am seriously concerned that their stance is putting this transformational project at risk.

    We stand ready to discharge our part of the bargain.

    We want to help them to get this scheme underway and will continue to work with them to try to make this happen.

    HS2

    And let us consider HS2.

    As we improve our rail services within Wales, we must not close our eyes to projects across the border in England – indeed, we must seek and exploit every opportunity to connect Wales better.

    The economy of Wales is inextricably linked to that of England and our transport systems need to reflect this.

    Sir David Higgins highlighted in his report the need to be alert to opportunities to connect services into HS2.

    With the planned HS2 hub station at Crewe only 20 miles from Wales, we must be looking at how investment in Wales can link into the new network.

    The development of HS2 is a huge opportunity for Wales and I believe that we must welcome it enthusiastically.

    Energy

    Nowhere is the close integration of networks more evident than in the case of energy infrastructure.

    Wales has always been central to the UK’s energy security, and Wales’s potential in the sector is enormous.

    We have the natural resources, the skills, the expertise and the enthusiasm to generate a significant proportion of the electricity Britain needs.

    The UK National Infrastructure Plan lists more than 15 Welsh energy projects already in the pipeline, from large scale offshore wind farms to micro generation; and there is the potential for more.

    We need to show Wales is open to diversity and innovation when it comes to growing the energy supply. Hitachi’s decision to build a new nuclear power station at Wylfa Newydd highlights the attractiveness of Wales as a place in which to invest.

    Their investment will create thousands of jobs and provide massive supply chain opportunities for British companies.

    And last autumn, we announced that we are working with Hitachi to support this development with a sovereign backed guarantee through the UK Guarantees Scheme.

    Holistic approach

    While broadband, transport and energy are, in their own right, key areas of infrastructure, we need to be holistic in our approach to infrastructure planning.

    Let me illustrate this by a real life example.

    Following the announcement that Hitachi would be investing £20 billion into nuclear energy projects in the UK, I met members of their executive team on Anglesey to discuss their proposals for Wylfa.

    Bear in mind that this is the largest investment in Wales for generations.

    This project will rightly showcase Wales as a leading place for investment.

    During the meeting one of the executives, needed to make an urgent call but was unable to do so because there wasn’t a mobile signal!

    Remember that we were discussing £20 billion of investment – it was embarrassing, to put it at its mildest, that he was unable to complete such a basic function.

    So the moral is that infrastructure improvements don’t happen in silos.

    Providers and investors need to work closely together to deliver infrastructure collaboratively.

    We cannot have one sector investing in world leading technology if the supporting infrastructure is not up to scratch.

    Planning

    As we call on investors to be more collaborative in providing the infrastructure Wales needs, it is also essential that they should be able to invest quickly and with confidence.

    There is absolutely nothing more crucial to efficient infrastructure development – or, for that matter, to economic growth – than a benign, flexible and practically-focused planning regime.

    Because developers need be assured that Wales is a welcoming place in which they can invest with confidence.

    In England, planning reforms are underpinning our long-term economic plan by unblocking the system; and we are determined to do all we can to make sure that it improves continuously.

    We have, for example, radically simplified planning guidance.

    What used to consist of thousands of pages of often impenetrable jargon and otiose waffle has now been cut to around 50 pages of clearly written, plain English.

    Guidance that, remarkably, actually guides, rather than impedes.

    Our reformed system means we can deliver the infrastructure that people want and need, by working with, not against, investors.

    The hard fact is that, as a consequence of Eric Pickles’s reforms, the planning system across the border in England is now substantially more streamlined and accessible than that in Wales.

    That is not good for Wales, and will only work to its disadvantage.

    So, I urge the Welsh Government to look at what is happening in England and take action in their forthcoming Planning Bill, to implement similar, effective reforms to the planning system to enable the infrastructure Wales needs, to get going.

    Infrastructure report

    A year ago at this very conference I told you about a new Infrastructure Working Group I had set up.

    Its task was to identify Wales’s future infrastructure priorities and the challenges they face.

    I am delighted that today we are publishing our report, which sets out the infrastructure we need for a modern economy to build a more prosperous Wales.

    This report highlights the key themes I have outlined today.

    We need to remove the barriers to infrastructure investment in Wales, especially around planning.

    Investors need to unlock all existing sources of finance, including UK Guarantees.

    Infrastructure providers need to be holistic in infrastructure.

    Planning and Wales’s two governments need to work together in planning and delivering Wales’s infrastructure needs.

    Concluding remarks

    My message to you today is: after years of neglect and inaction by previous administrations on infrastructure – we have a plan.

    Our long-term economic plan is bringing stability and competition back to our economy and ensuring a brighter future for our nation.

    We are investing in infrastructure across the country, to create a more balanced, resilient economy.

    If we are to be ambitious for the economy in Wales, it is essential we are bold and clear in our infrastructure plans.

    I can not reiterate this strongly enough – infrastructure is an absolutely vital part of our long-term economic plan and will continue to play a central role in improving our long term economic security.

    Building a more prosperous Wales, fit to compete in the global race, demands world class infrastructure.

    We are determined to do all we can to deliver that for the people and businesses of Wales.

  • David Jones – 2014 Speech to Welsh Local Government Association

    davidjones

    Below is the text of the speech made by David Jones, the Secretary of State for Wales, to the Welsh Local Government Association in Llandudno on 19th June 2014.

    Introduction

    Today, I want to talk to you about our changing local democracy.

    About what I believe is the need radically to decentralise power: to move it away from Westminster and Cardiff and closer to the people and communities it serves.

    And about advancing localism and embedding it in our political system.

    As a government, we are strongly committed to localism, and we have achieved a great deal already.

    But I have real concern that there is a growing divide between the devolutionary approach to power that we are adopting at United Kingdom level and the picture here in Wales.

    I believe much more could and should be done in Wales to push power down to local authorities and local communities.

    A matter, I’m sure, of particular interest to all of you here today.

    We are living in an age of localism

    As a government, we believe that it is right – no, essential – that those who represent local people and serve local communities should be given the right degree of power to make decisions about the issues that matter to those people and communities.

    We are keen, enthusiastic proponents of devolution.

    We believe in developing the devolution settlement in Wales, and that is why the Wales Bill, which is currently passing through Parliament, will give the Welsh Government and Assembly more powers to take decisions that affect the people of Wales.

    But let me be clear: we don’t believe that the progress of those devolved powers should come to a stop in Cardiff Bay.

    We believe in a dynamic form of devolution – with power cascading down to the right level at which it can best be exercised.

    The problem is that, in Wales, this simply isn’t happening.

    Power is devolved by us in Westminster to Cardiff, but, too often, that’s where it hits a barrier.

    Instead of cascading down to local communities, it is restricted and confined, as if behind a dam, in Cardiff Bay.

    For that reason, local councils in Wales increasingly enjoy less power than their counterparts in England.

    Indeed, it is a sad paradox of devolution in Wales that the devolutionary process, far from pushing power away from the centre, has actually led to more centralisation of decision making – but in Cardiff, rather than Westminster.

    And if you live in a community away from the capital, Cardiff can be as remote as London from your everyday life.

    Indeed, given the train services, to us here in North Wales, Cardiff is, in journey times, actually further away!

    Differences in Approach between England and Wales

    We don’t think that is right.

    As a government, we at Westminster are unashamed, enthusiastic localists.

    And with localism you really have to mean it, want it, be committed to it…

    …and deliver it.

    It isn’t enough simply to pay lip service.

    Williams Review

    Now, I have no doubt that, as members of this Association, you are currently spending a lot of time considering the recommendations of the Williams commission.

    The Welsh Government are, of course, also considering their response to those recommendations.

    I believe that their response to Williams will be pivotal to the development – or lack of development – of localism in Wales.

    This is an opportunity that should be seized by ministers in Cardiff Bay.

    An opportunity for them enthusiastically to devolve more power to local authorities across Wales.

    To show the same enthusiasm for localism that we have at Westminster.

    To give you the power to make the right decisions…

    …to take the right actions…

    …to use your local knowledge to improve the lives of people in your parts of Wales.

    Because reforming local government shouldn’t be about central government – whether in London or Cardiff – taking the opportunity to impose more micromanagement on local government.

    It should be empowering local authorities, local councillors, and ultimately individuals, to develop their own responses to their own, unique challenges.

    And that is what we, as a government, are doing in England.

    Breaking down, for example, the barriers that have stopped councils, charities, social enterprises and voluntary groups working together, and sharing responsibilities and budgets for the benefit of those who need their help.

    Because we believe that people who share communities are very probably best placed to make the right decisions for those communities.

    And we want to trust and enable them to do so.

    Planning and housing industry red tape

    Sadly though, in Wales, decisions are increasingly being centralised by the Welsh Government; and those decisions are only serving to impede locally-driven development.

    I believe that decisions about housing stock, for example, are best made at the local level, not by officials hundreds of miles away whose knowledge of local needs and priorities will inevitably be less than that of local elected representatives.

    A flexible, practical planning regime is all-important.

    It is key to economic growth.

    And stimulating and supporting the housing and construction industries is critical to our economic recovery.

    In England, our radical planning reforms are underpinning our long-term economic plan by unblocking the system.

    And in this way, boosting house building and attracting new investment into the market.

    And those reforms are working.

    In 2013, new home registrations rose in England by 30%; the highest level since 2007.

    Sadly, here in Wales, it is a different picture.

    Last year, Wales was the only region in the United Kingdom that saw a fall in the number of new home registrations: a decline of 12 percent.

    The latest construction figures also show that output in Wales is lagging well behind the rest of the country.

    Over the last year, new house building in Wales declined by almost 7 per cent, as opposed to growth of almost 34 per cent recorded across Great Britain as a whole.

    Let’s be frank.

    These are shocking figures.

    They indicate, as clearly as they could, that there is something seriously wrong in the planning and regulatory system in Wales.

    The Welsh Government need to take urgent action to improve the planning process.

    In England, we in the United Kingdom Government are determined to do all we can to make sure that it improves continuously.

    We have, for example, radically simplified planning guidance.

    What used to consist of thousands of pages of often impenetrable jargon and otiose waffle…

    …has now been cut to around 50 pages of clearly written, plain English.

    Guidance that, remarkably, actually guides, rather than impedes.

    So the planning system across the border in England is now much more accessible – much more user-friendly – than here in Wales.

    It will therefore come as no surprise that developers increasingly find England a more welcoming place to develop.

    That should be a concern to everyone, at every level of government, in Wales.

    And let’s consider the issue of regulation.

    As a government, we don’t believe in regulation for the sake of it.

    In fact, we believe that there should be much, much less of it; and where it is necessary, it should be sensible, better and smarter.

    So we have conducted a “red tape challenge”, testing the need for thousands of regulations.

    As a consequence of that exercise, almost half of the Housing and Construction regulations considered are going to be scrapped or improved.

    Changes which we estimate will save businesses almost £90 million a year.

    In the Queen’s Speech, we announced an Infrastructure Bill, designed to bolster investment in infrastructure and to reform planning law – creating jobs and improving economic competitiveness.

    We are committed to implementing a zero carbon standard for new homes from 2016.

    But we understand that it is not always feasible or cost-effective for house builders to mitigate all carbon emissions on-site.

    So, rather than a rigid, top-down approach, we are introducing flexible means for house builders to meet the zero carbon standard.

    ‘Allowable solutions’, where minimum energy standards are set through the building regulations and the remainder of the zero carbon target is met through off-site abatement, will provide builders with just that flexibility.

    That’s what we’re doing in England.

    Regulating fairly, proportionately and sensibly.

    However, in Wales, all too often the Welsh Government seems intent on maintaining, and even increasing, the burden of regulations on councils and businesses, rather than reducing them.

    By imposing increasingly onerous building regulations in Wales, the Welsh Government is increasing the cost to house-builders of constructing the starter homes so many families desperately need.

    And putting up the price of those homes, so that more people will struggle to get onto the property ladder.

    There are examples of development costs increasing by 20 per cent as a result of the way BREEAM standards are imposed in Wales – seriously damaging the industry.

    And the Welsh Government is pressing ahead with the so-called ‘Conservatory Tax’.

    This will require Welsh homeowners to carry out extra work to the rest of their property when, for example, they add a conservatory, an extension or convert a loft into living space.

    This is a measure that we considered, but rejected, in England.

    Research showed it would harm the economy by discouraging nearly 40 per cent of households from undertaking home improvements in the first place.

    The ‘Conservatory Tax’ is a straightforward tax on Welsh builders and homeowners.

    It will deter people from improving their homes and damage the construction industry.

    I urge the Welsh Government to abandon it.

    Welsh builders are increasingly despairing, too, over the draconian way building regulations are imposed in Wales.

    Redrow have estimated that, as a consequence of Welsh Government requirements for the sustainable building code, and for all new homes to be fitted with sprinklers, the cost of building a typical house in Wales will be £13,000 more than in England by 2016.

    So it is no wonder that Persimmon have pulled out of investing in the south Wales Valleys, citing heavier regulation in Wales as a major factor in their decision.

    Planning and localism

    Yes, planning is key to economic growth.

    Do it well and the economy is likely to prosper; do it badly and it will be damaged.

    And planning decisions shape our localities and affect our communities profoundly.

    It is therefore surely right that local communities should be given as much power as possible to make those decisions.

    We at Westminster have reformed planning, so that it can help deliver the homes and infrastructure that people want and need; by working with, not against, local communities.

    Our reforms and the locally-led planning process are delivering real results and speeding up the system.

    We believe that Local Planning Authorities are best placed to make decisions that affect their areas – drawing up clear local plans that meet local development needs and reflect local people’s views.

    And the National Planning Policy Framework in England is just that – a framework – within which local authorities are empowered to make the best decisions for their local needs.

    We made a commitment to give people more power over development in their areas.

    And the Localism Act has done just that.

    It has introduced new powers for people to make neighbourhood plans; giving communities the power to set the priorities for local development and reducing interference from central government.

    But the Localism Act largely doesn’t apply in Wales.

    The reforms to the planning system and the building regulations that we have carried out in England haven’t been adopted in Wales.

    And this has contributed to the decline in house building and the reduced availability of homes of which I have spoken.

    Wales is now at a tipping point.

    So the Welsh Government have to make a decision.

    Do they want a Wales that is over-regulated, centrally driven, increasingly uncompetitive and economically sclerotic?

    Or do they want a Wales in which lower, smarter regulation frees up businesses and communities, and creates more prosperity?

    Conclusion

    As a Government, we are strong supporters of devolution and the opportunities it provides to advance the cause of localism.

    But devolution should not be an end in itself.

    It should not be a case of accruing increasing powers to a few individuals in Cardiff Bay.

    It should, rather, be a stream of power that becomes a mighty river, flowing down to every community, large and small, the length and breadth of Wales.

    And ultimately, it should flow to every household, every individual in Wales, making them more in control of their own surroundings and lives.

    Real devolution is about decisions being made at the right level, by people who understand local issues, for the benefit of local communities.

    I, and my colleagues at Westminster, are committed to that kind of devolution.

    I want to see that same commitment from the Welsh Government.

    More powers being decentralised from Cardiff Bay to decision-makers in local authorities across our country.

    That is what we are doing in England.

    And that is what should be happening in Wales.

    In short, we believe in strong, empowered, local government.

    We believe in you.

    Because you are the ones best placed to make decisions for your communities, your towns and villages, the people you represent.

    Because you understand, better than anyone, their needs, their concerns, their priorities

    You do fantastic, valuable work.

    And we want to do all we can to enable and empower you to do it better.

    Thank you.

  • David Jones – Speech at CBI Wales

    davidjones

    Below is the text of the speech made by David Jones, the Secretary of State for Wales, at the CBI Wales event on 7th March 2014.

    I am delighted to be here in north Wales.

    Only last week I was hosting a delegation from the Indonesian Embassy to showcase what the region has to offer to inward investors.

    One of the visits we undertook was to Airbus where the delegation was greatly impressed by their fantastic operations at Broughton.

    What impresses me about Airbus is their commitment to developing their workforce – including almost 400 apprentices – which is the largest engineering apprenticeships scheme in Wales.

    I encourage you all to look at their model for apprenticeships and the opportunities that you can provide to young people in Wales to create a skilled workforce for the future.

    As we look to help businesses to develop apprenticeship programmes we are also investing in our infrastructure to build a stronger economy.

    Last year we introduced a National Infrastructure Plan.

    The National Infrastructure Plan brings together the Government’s infrastructure priorities across different sectors and identifies the top 40 projects considered crucial for economic growth.

    It includes a forward-looking pipeline of investment worth over £375billion, ensuring that we are investing a greater share of our nation’s wealth in infrastructure than the whole period of the last Government.

    This forward plan includes key projects in Wales.

    We are investing in rolling out superfast broadband to homes and businesses across Wales.

    The UK Government has announced further funds to Wales to build on this scheme, taking the total investment in Wales to £69million;

    We are also investing in improving mobile broadband and telephony services across Wales.

    Recognising the importance of a modern transport network, we are making the most significant investment in Wales’ rail infrastructure for decades with the electrification of the rail network in south Wales.

    As the first north Wales Secretary of State for Wales for 40 years I have been clear that this is just the start of large scale rail investment in Wales.

    The planned high speed network coming down the tracks to Crewe provides an exciting opportunity for the region.

    I have been supporting the case for electrification of the north Wales main line, which would allow;

    More efficient connections with the high speed network and shorter journey times into Wales vital for attracting inward investment; even closer integration across north Wales and into major cities in England.

    We must strengthen the existing economic success of north Wales to ensure it continues to expand and attract new business ventures.

    Financing key infrastructure projects is of course a prominent issue.

    I am pleased to welcome Louise Minford from Infrastructure UK to talk about the UK Guarantees scheme.

    This is a Government initiative aimed at boosting infrastructure investment.

    You may be aware that the Government has committed to working up a guarantee for Hitachi’s investment in the Wylfa Newydd power station by the end of 2016.

    I believe this investment is vital for the region and presents great opportunities for local business.

    The UK Guarantees Scheme aims to kick start critical infrastructure projects that may have stalled because of adverse credit conditions.

    Up to £40 billion in guarantees is available to do this.

    In light of the Scheme’s extension to December 2016, Infrastructure UK is eager to encourage a wide range of projects to apply.

    I hope to see the UK Guarantees Scheme utilised in many more defining projects in Wales and I encourage you all to speak to Louise about ideas that you may have.

  • Robert Goodwill – 2014 Speech on HS2

    robertgoodwill

    Below is the text of the speech made by Robert Goodwill, the Parliamentary Under Secretary of State for Transport, in the House of Commons on 28th April 2014.

    This debate has highlighted, not only the need for HS2, but also the importance of getting it right.

    This is a scheme that will play a vital role in creating the necessary conditions for economic growth.

    But that doesn’t mean we should press ahead unchecked.

    We must be clear about the impacts.

    And we must act responsibly in addressing those impacts.

    By providing appropriate mitigation for any adverse environmental consequences.

    And fair compensation for those affected by the new railway.

    Let me summarise how we are responding to these crucial issues.

    Firstly, there is the question of cost.

    Let me say that we have been clear about cost.

    It is a considerable investment, but it is spread over 10 years.

    Delivering benefits over decades.

    Perhaps even centuries.

    This is a project that will stand the test of time.

    And it is not at the expense of other investment.

    It is alongside high levels of investment in roads, in the existing rail network, and in local transport schemes.

    This is one part of a rounded transport strategy.

    It is, of course, incumbent on us to ensure this scheme sticks to its schedule and budget.

    So that tax payers get value for money.

    And they will.

    To assist us, we have recently appointed leading experts Sir David Higgins and Simon Kirby to lead the delivery and construction of the scheme.

    Following his recent review, Sir David Higgins confirmed that the scheme is on track for construction to begin in 2017.

    Secondly, is the question of how we are addressing the impacts on the environment.

    Unfortunately, it is not possible to construct a project like this without having some impacts on the environment.

    However, since the very beginning, identifying those impacts and developing proposals for appropriate mitigation have been key priorities.

    We have carried out environmental assessments.

    And we have proposed mitigation measures.

    We are committed to no net loss of biodiversity.

    We are replacing habitats for wildlife.

    We are generally tunnelling under, rather than travelling through, the Chilterns area of outstanding natural beauty.

    We are integrating the railway in to the landscape, hiding much of it from view.

    We are incorporating natural and man-made barriers to reduce noise and vibration.

    And we have set binding commitments to control the impacts of construction.

    On all this, we have consulted extensively. We have taken on board suggestions for improving the scheme.

    And, prior to the Easter recess, the House has received an independent report, summarising consultation responses, to inform its decision tonight (28 April 2014).

    Thirdly, let me turn to the measures to support those whose property may be affected.

    People living near the proposed route are understandably worried.

    They deserve generous assistance.

    And they will receive it.

    We have already helped over a hundred households under the current exceptional hardship scheme.

    We have now launched an express purchase scheme for land safeguarded for Phase One – helping owner-occupiers sell quickly and with less fuss, regardless of whether their property is needed for HS2. They get the full unblighted open market value of their property, plus 10%, plus reasonable moving costs – including stamp duty.

    Later this year we will launch an enhanced need to sell scheme to help owner-occupiers who need to sell their property, but cannot because of HS2 – there is no distance test to pass.

    We will also launch a voluntary purchase scheme – giving owner-occupiers in rural areas up to 120 metres from the line the choice to sell their property and receive its full un-blighted market value. We will also consult on offering them a new choice of a cash alternative.

    And we will consult on new home owner payments, for owner-occupiers in rural areas between 120 metres and 300 metres from the line, to help share more of the expected economic benefits of HS2 with rural homeowners –not just helping those who want to move, but also those who need to stay in their homes.

    We appreciate that, for some, no amount of money or help will be enough.

    And we don’t pretend that these proposals will satisfy everyone.

    But we believe they are fair and represent the best possible balance between properly helping people and providing value for money for the tax payer.

    Tonight the House faces a great decision, one of national importance that will profoundly affect the way our economy develops for generations.

    The House must be satisfied of the need for HS2.

    And it must be satisfied that the appropriate measures are in place to deliver this scheme in a sustainable way – both economically and environmentally.

    HS2 will help drive this country forward.

    It will create new capacity and enable better use of existing transport corridors.

    It will join up our cities and strengthen our economy.

    And as a result, it will help open up opportunities, currently held back by lack of investment.

    And, along the way, it will be subject to careful, detailed scrutiny.

    Tonight’s vote is an important step in taking HS2 forward.

    And I urge Rt Hon and Hon members to support this bill for Phase One.

  • Robert Goodwill – 2014 Speech to British Parking Association

    robertgoodwill

    Below is the text of the speech made by Robert Goodwill, the Parliamentary Under Secretary of State for Transport, to the British Parking Association Parking Summit on 27th February 2014.

    Good morning, I am grateful to Helen for her thoughtful introduction to today’s (27 February 2014) discussion.

    As any learner driver will tell you – parking is complex.

    We ask parking and traffic management to deliver a number of objectives in parallel and managing those competing demands on our roads will never be simple.

    Recognition for the sector

    The UK has more motor vehicles per mile than France, Germany or even the densely populated Netherlands.

    And traffic on our roads is forecast to increase.

    That’s why we are investing £24 billion in the strategic road network in this Parliament and the next.

    And by 2021 we will be spending £3 billion each year on improvements and maintenance.

    This is the most significant upgrade of our roads ever.

    And it is also why parking and traffic management has an absolutely vital role to play.

    Effective management enables people, goods and services to get to where they are needed.

    And it is essential for a growing economy.

    Over the past few years we have seen great strides taken by the parking industry.

    Innovations like the John Heasman Bursary have helped increase the evidence available to inform improved traffic management.

    And at the same time the industry has become increasingly skilled and more professional.

    Now more than 90% of local authorities have taken over the civil enforcement of their parking services.

    This has improved compliance, reduced congestion, freed up the police and – most importantly – made our roads safer.

    But where effective parking management breaks down – like in Aberystwyth as well as in my own constituency in Scarborough – it causes real problems.

    So we can all learn and improve on what we do – including the government.

    Sharing experiences, information and knowledge is essential.

    That’s why I was very grateful the British Parking Association have organised today’s (27 February 2014) summit.

    Consultation

    The reason why we are all here today (27 February 2014) is the Transport Select Committee’s recent inquiry into local parking enforcement and the government’s recent wide-ranging parking consultation.

    As you will expect, we have received a very large number of responses to the consultation.

    Let me reassure you that, despite what some press reports claim, we have not already reached a decision.

    I will be looking at all the responses to the consultation carefully.

    We will not be taking any hasty decisions.

    Because, what is very clear, is that parking matters to us all.

    So – together – we need to get it right.

    The Select Committee inquiry and our consultation have been prompted by three big issues for parking and traffic management.

    The first, is the challenges facing our high streets.

    The second, is the potential for the deployment and use of new technologies that can improve the use of our roads.

    But recognition that, in some cases, these cause the public concern.

    Finally, the third is the widespread belief among motorists that councils view parking enforcement primarily as an opportunity to raise revenue.

    I’d like briefly to discuss each of these this morning to set out why they are important and I would like to hear all your thoughts on the possible next steps.

    High streets

    Our high streets are essential to our national life.

    High streets bring people together and they’re at the heart of our daily life and economy.

    For example, in London over half of the jobs in the capital are spread across just 600 high streets.

    And two-thirds of Londoners live within a 5 minute walk of their local high street.

    But our high streets have been in long-term decline.

    Despite recent encouraging economic news, vacancy rates remain stubbornly high.

    Almost 14% of shops were empty in December – that’s more than 50,000 stores.

    And that’s prompted debate about what can be done to help high streets compete with out of town and online retail.

    Ensuring convenient and safe parking is available at a reasonable cost is part of the answer.

    And I would like to take this opportunity to thank the British Parking Association for the advice you have been providing to the Portas review pilot towns.

    And, many areas, do need to improve.

    During her review Mary Portas found that in many areas – to use her words – “parking has been run-down, in an inconvenient place, and most significantly really expensive.”

    And the recent Association of Town and City Management and BPA survey found that some mid-range areas were charging 18% more for parking than larger and more popular retail locations.

    So the question is, if you are a local business or resident, what more is needed to get your local council to improve parking provision in your local area?

    In the consultation we suggested one way this could be achieved could be by allowing local residents and firms to be able to petition the council to initiate a review of parking policy in their area.

    This might be a request to lower charges.

    But it equally might be a review to see if additional spaces could be provided or for better street lighting to improve safety.

    New technology

    The second issue is the potential for new technologies to help manage our roads far more effectively.

    The introduction of GPS-based systems, new sensor technologies and the increasing integration with smart-phones can revolutionise parking.

    Better and more efficient parking services can be delivered in real-time, bringing benefits to high streets and road users throughout the UK.

    However the capabilities of these new technologies also bring with them an increased responsibility to ensure that parking is enforced fairly and proportionately.

    I firmly believe that most involved in the parking industry, from local authorities to private-sector service providers aim to do just that.

    However, the use of CCTV, in particular, causes public concern.

    The department’s guidance already states that CCTV cameras should only be used where parking enforcement is difficult or sensitive and enforcement by a civil enforcement officer is not practical.

    Because cameras can be more contentious than boots on the ground.

    The Select Committee found that residents’ permits and blue badges may not always be visible.

    And the Select Committee also found that in some areas cameras are being used ‘as a matter of routine’ for on-street parking violations.

    So our consultation asked what options there are to address these concerns and I’d like to hear your thoughts this morning.

    Public concern

    Finally, there is a real problem with the public’s view of local authorities’ approach to parking and traffic enforcement.

    In the words of the Transport Select Committee, there is a “deeply rooted public perception that local authorities view parking enforcement as a cash cow”.

    From 1997/98 to 2010/11, net surpluses from parking rose from £223 million to £512 million.

    Net income from local authority parking services is expected to rise from £601 million in 2012/13 to £635 million in 2013/14 – an increase of 5.6%.

    I know that headline figure reflects parking charges as well as penalties, but I am determined that public confidence in enforcement should not be undermined.

    We have been very clear that the ring fence on surpluses will remain.

    Fines for those who break the rules will only be used to improve the roads or environment for those that play by the rules.

    But the Transport Select Committee also asked whether the current system is as fair as it could be for those who inadvertently make a mistake.

    First, they asked whether the independent traffic adjudicators should be able to allow an appeal where they determine a Council has ignored statutory guidance.

    Second, does the current system act as a disincentive for someone to appeal?

    There is a legititmate concern that discounts on prompt payments following appeal would result in every charge being appealed.

    So, following the Committee’s recommendation, we have asked whether the introduction of a 25% discount for motorists who pay within 7 days of losing an appeal would be worthwhile.

    Third, the committee recommended that the statutory guidance should stipulate a grace period after the expiry of paid for time.

    As the BPA’s response to the consultation states, in practice, most local authorities do this already.

    So I would like your views as to whether mandating a grace period might reassure the public that they can expect a consistent approach no matter where they park?

    Conclusion

    In conclusion, I believe that the majority of local authorities and parking providers are doing excellent work.

    You are providing well designed, fair and proportionate parking services.

    The challenge now is to deliver equally high standards across the parking sector as a whole.

    That means preventing examples of poor management or bad practice that are so prominent in the media.

    I know many of you will have responded to the recent consultation.

    I understand just how important these issues are.

    So I will be listening carefully to the views generated by the consultation, as well as the outcome of today’s summit.

    Because parking and traffic management is important.

    It’s important to the public.

    It’s important for our communities.

    And it’s vital for the health of our economy.

    Thank you for listening.

    I look forward to our discussion.

  • Robert Goodwill – 2014 Speech on Road Investment

    robertgoodwill

    Below is the text of the speech made by Robert Goodwill, the Transport Minister, on 10th February 2014.

    I’m delighted to have been invited to attend this morning’s workshop.

    Ahead of last year’s Spending Review you challenged us to take bold steps to increase investment and make a long term commitment to capital infrastructure.

    This morning has been about how we can best deliver the record investment in our road network that we announced last year.

    I’d like to say a few words this morning about why we are investing in Britain’s roads, why, to be successful, we need to do things differently and why we want to work in partnership with you to make that happen.

    I read an account of a parliamentary debate on the state of Britain’s roads recently.

    It didn’t make for a comfortable bedtime story.

    Honourable members were complaining to the minister that despite record increases in the traffic on the roads, investment simply hadn’t kept pace.

    What was even worse was the government’s dire project management.

    Stop-start spending meant works got off the ground but were endlessly delayed and then scaled back.

    As projects stalled, costs increased and any improvements that did happen took years longer than projected.

    One honourable member described the situation as “pathetic”.

    Another was so irate that he proposed an amendment to the bill.

    The amendment would give the transport minister automatic access to borrowing for road improvements – without needing Treasury approval.

    The year was 1949.

    And the debate was on the Special Roads Act that paved the way for Britain’s motorway network.

    So while the motorways were eventually built over the next 50 years or so many fundamental problems have remained.

    Today, the road network is even more essential to the UK’s economy.

    Poor quality roads increase fuel consumption, increase delays, mean more emissions and act as a brake on growth.

    But while over the last 50 years the volume of traffic in this country has risen dramatically, investment in the road network did not keep pace.

    The UK now has more vehicles per kilometre of road than France, Germany or even the densely packed Netherlands.

    Historically, road maintenance and repair have also been the first victims of short-term financial planning.

    Investment in the road network has gone up and down faster than Bradley Wiggins through the Yorkshire Dales.

    Short-termism that created uncertainty for the industry, delays to major projects and resulted in significant cost over runs.

    To correct a legacy of historic underinvestment, we are putting record amounts into improving Britain’s transport network.

    Modernising our roads, rail, air and local transport to help keep Britain moving.

    In total, £24 billion will be invested in the strategic road network in this Parliament and the next and by 2021 we will be spending £3 billion each year on improvements and maintenance.

    This is the most significant upgrade of our roads ever.

    In total, creating around 30,000 new jobs.

    Creating a safer, more sustainable, road network.

    But it is not just about announcing the investment and identifying schemes that are needed.

    As you have heard today (10 February 2014), we are determined to learn the lesson of history and change just how we deliver these improvements to our road network.

    First, as John Dowie said, we are changing the way we fund road improvements and maintenance.

    I know stop-start investment has been a problem for you in the past.

    That’s why we have set out long-term, guaranteed plans to 2021.

    The new road investment strategy will be backed by legislation that will oblige government to fund the schemes it has announced.

    We are absolutely committed to putting the legislation in place before the end of this Parliament.

    And we are equally committed to publishing the first roads investment strategy at the same time.

    Many of you will know how certain investment in rail is thanks to the High level output specification.

    By April 2015, road investment will be on the same long-term footing that will enable you – like the rail industry – to have the security to take commercial decisions today.

    We are committed to making these changes now, locking in funding for the long-term, so you have the certainty you need to invest.

    Second, as Graham Dalton covered, we are changing the way the Highways Agency operates.

    Responses to the consultation on the changes we’ve proposed to the Highways Agency have been broadly positive.

    But they have also raised a number of very important issues I want us to get right.

    We’ll be publishing our formal response in the near future, but in the meantime the headline is; the Highways Agency will become even more commercially focussed

    That means it will be a better partner for you to work with, be more accountable to road users and get better value for money for the taxpayer.

    What we need to do now is get on and make a difference on the ground.

    I was pleased to hear so many practical suggestions this morning’s (10 February 2014) breakout groups for how we can do things faster, cheaper and better.

    We have set out long-term plans to give you the confidence you need to invest and grow today.

    Otherwise, given the scale of the investment we are making, capacity is going to become a problem.

    For example, opening a new aggregates quarry can take years of careful negotiation.

    And it takes around three years to train an apprentice civil engineer.

    So we need you to start to scale up over the coming months.

    Invest in the equipment you need and create new jobs.

    Or we risk the kind of bottlenecks that have in the past created delays and undermined public confidence.

    That means taking on more apprentices and more graduates.

    We also have to get the message out to young people taking their GCSEs and even younger that there are high quality jobs available in one of the world’s fastest moving, most dynamic industries.

    I’d like to hear what your plans are to begin to scale up.

    We will help unblock obstacles where we can and I want to help you bang the drum for new apprentices and graduates.

    So, in conclusion, we are making a historic and sustained investment in Britain’s road infrastructure.

    Because it is good for road users, good for the economy and good for the country.

    We are also transforming the way that investment will be delivered.

    Putting a full stop to stop-start.

    We are investing for the long-term.

    A commitment that will be backed up in legislation by next year.

    We want to work in partnership with you to get the best value for money for the taxpayer.

    That means, in return, we need you to invest today in ensuring you have the equipment and the staff with the skills needed, to keep Britain moving tomorrow.

    Thank you.

  • Lord Freud – 2014 Speech on Transforming Welfare

    lordfreud

    Below is the text of the speech made by Lord Freud, the Work and Pensions Minister, on 27th January 2014 at the Capita Welfare Reform Conference in London.

    Thank you…..I am very pleased to be here.

    I would like to use my time this morning to reflect on the past 4 years, and in particular how different the welfare landscape is now compared to 2010.

    In short, it is very different. And the change has been long overdue.

    We are introducing the most fundamental reforms to the welfare and pensions systems for more than 60 years.

    These are structural changes designed to reward work, encourage responsibility and help those who need it most.

    And we are already starting to see the impacts of these reforms.

    When I started looking at the benefits system in 2007 the employment level stood at 29 million, and there were 3.4 million people on inactive benefits.

    These figures stood at a similar level when I became a Minister in 2010 [employment = 29m – inactivity = 3.3m]

    Today, the picture looks quite different.

    Not only, as many of you will have seen last week, have employment levels hit a record high, rising to 30.2 million.

    But we now have 2.95 million people on inactive benefits – a drop of nearly 400,000 in the last few years.

    There are a number of factors driving these figures, but I believe one of them is the impact of the structural changes we are introducing to the welfare system.

    When I wrote my report in 2007 it was clear that we had a system that was discouraging work, and that had written off large numbers of people as ‘incapable’.

    It was a system designed around the lowest common denominator, that took away people’s control of their own lives, rather than empowering them:

    – it penalised you if you wanted to work more than 16 hours a week

    – it said to people with illnesses and disabilities that we didn’t think they were capable of anything, rather than looking at what they could do

    – and for some people it meant that when you earned any money, you lost almost all of it in benefit withdrawals

    We know that work is good for you, it gives you a purpose, it has huge health benefits and – most importantly – it puts you in control of your life.

    Yet we were saying to some people that they would have more money if they stayed on benefits.

    We had a system that was actually pushing people away from being in control of their lives.

    So we started changing this, bringing in measures to help people find the right kind and level of activity for them, and designing a benefits system that didn’t assume people were incapable.

    Because, as so many people delivering services tell us, the real barrier is how people see or think of themselves.

    If they haven’t worked, if they have always been given a lot of help by others and not given the means and support to help themselves, then it is unlikely they will be able to take control of their own lives.

    Salutogenesis

    Behind this idea of giving back control is a theory I find really interesting, from the work of Aaron Antonovsky.

    He argued that a purpose in life – what he called coherence – was crucial to understanding human health and well-being.

    Whether we can overcome setbacks such as losing one’s job, or dealing with an illness, or whether they overwhelm us is, for Antonovsky, a function of whether these stresses violate an individual’s sense of coherence.

    He says life should be comprehensible, manageable and have meaning.

    Essentially that people can manage changes if they understand them, they have the skills and ability to manage their affairs and finally that they themselves have a purpose in life.

    If people know why things happen to them, and they have the support and ability to manage their lives, they have a fighting chance of being able to maintain their well-being.

    So we need to ensure that we support people’s lives by empowering them.

    The longer someone is out of work, the less likely their life is to have an overarching sense of purpose or meaning. The less help people receive at vulnerable moments, the more likely they are to fall through the cracks.

    And when you see well-being in these terms, then the Department for Work and Pensions becomes almost as relevant for people’s long term well-being as the Department of Health.

    Helping people get into work gives them a purpose and meaning to life that may have been lacking.

    This benefits society as a whole – work gives people a sense of pride, lifts them out of poverty and provides a model for younger generations to look up to.

    Universal Credit

    So we need a more responsive benefit system that empowers people. It should reward them for going into work and increasing their hours, not push them away from it.

    And that is where Universal Credit comes in.

    The idea behind Universal Credit is to create a much simpler and more flexible system that makes work pay…

    …ensuring claimants are better off in work than on benefits…

    … clearly showing how increasing hours increases earnings…

    …while continuing to provide support for those who need it most.

    And by having one flexible benefit with better earnings disregards it allows people who face bigger challenges – such as lone parents or people with disabilities – to take part in the economic life of the country and take control of their own lives.

    By spring, Universal Credit will be live in 10 areas. From this summer we will progressively start to take claims for Universal Credit from couples and, in the autumn, from families too.

    And our plans are for Universal Credit to roll out completely across the country during 2016, with new claims to all existing benefits that make up Universal Credit being shut down during this time.

    From there we will move existing claimants of the current benefits over to Universal Credit, and we expect the vast majority of these to be on the new benefit by 2016 and 2017.

    Early indications suggest that Universal Credit is starting to have the impact we are looking for.

    We are already seeing that Universal Credit claimants are spending twice as long per week looking for work…

    …are applying for more jobs per week…

    …and are more confident about finding work in the next 3 months than comparable JSA claimants.

    And 70% understand that they will be better off for each additional hour in work.

    But while we expect that many people will be able to handle these changes well, we must ensure that help is there for those who can’t, or need support at first.

    Local support service framework

    That’s why I’ve been working incredibly closely with local authorities to develop the Local Support Services Framework.

    This framework will do 2 vital things:

    First, it will ensure people are supported to make the transition to Universal Credit by helping them adjust to some new aspects of the way they claim benefits.

    And second, it will provide longer term support to the small number of people who find it more difficult to make this transition and need to gradually progress towards independence.

    This is not simply about providing service lines for people, it is about supporting them to get the tools and skills they need to take control of their own lives.

    A lot of hard work has already been done to develop this framework.

    In December 2013 we published, in partnership with local government, an updated trialling plan. This sets out how we will work together over the course of the next year to test exactly what works in the delivery of Local Support Services.

    That testing will build on the excellent learning that has already been done through the LA led pilots.

    Just 2 weeks ago I held a very insightful workshop with all of the LA led pilot teams.

    From Lewisham’s innovative triage process…

    …to Bath and North East Somerset’s all-encompassing one-stop-shop…

    …and a whole host of other examples, we are gathering some really important learning that will play a major role in the development of the Local Support Services Framework.

    Direct payments

    We have also been testing support for people through the Direct Payment Demonstration Projects, another crucial part of our efforts to give people control over their lives.

    It used to be assumed that people weren’t capable of paying their own rent. And of course this made it even more daunting to move into work and manage their finances themselves.

    The demonstration projects enlightened us in a number of ways. We discovered that of course a huge number of people are perfectly capable of managing their money. Across the different areas, the average successful rent collection rate stood at 94%.

    And as a result more than half of the organisations involved have decided to leave their tenants on direct payment after the pilots ended.

    And because the projects mean gradually increasing personal responsibility, they have also brought to light wider social problems as a result of the closer engagement with tenants.

    There’s one particular instance that really sticks with me.

    There was a family that was living in appalling conditions because the father was a lone parent of 4 children and struggling to cope with a heroin addiction – the benefit system had taken care of all their payments but isolated them.

    Because of the projects, and the increased intervention that followed, the relevant authorities were able to step in and provide the appropriate support.

    So for some people Direct Payments have proved a useful mechanism for highlighting where they need support.

    But for those people who could be moving towards work, getting used to direct payments is crucial in preparing claimants for a seamless transition, and allows landlords an opportunity to increase their rent collection from this group of claimants in a phased and managed way.

    I know there have been concerns about will happen when there are missed payments, or where a household isnt coping. So I’ll just describe the safety net we have here.

    After 1 month of missed payment we can review the payment process and the claimant’s payment history.

    And after 2 months we guarantee to move rent payment back to managed payments.

    And these can be cumulative, so its not just about missing a whole month, but can be about a cumulative failure to pay rent.

    So, we’ve learned a lot from the demonstration projects.

    Indeed, I think they have been so valuable that I am keen that local authorities think about moving people on to direct payments earlier – so that we are supporting people to manage their own finances before they move onto Universal Credit.

    Conclusion

    Of course, Universal Credit is far from the only welfare change that we are introducing at the moment.

    There are many others that are proving equally crucial in delivering the structural changes needed to drive down inactivity…

    …but I’m afraid I do not have time to touch on them all in detail this morning.

    Suffice to say that there is still much more work to be done.

    I know many of you work in the organisations supporting these changes, and that it is not always easy.

    But I think we should all be encouraged by the fact that we are starting to see some positive results.

    Whether it be the record employment figures, rapid reductions in inactivity, or the positive feedback we are already getting from Universal Credit claimants, I believe these reforms are starting to work…

    …and that we are…

    …at last…

    …starting to give people control back over their own lives.

    I thank you for your support in making that a reality, and look forward to continuing this crucial work together in the years to come.

  • Paul Fisher – 2014 Speech on Inflation and Interest Rates

    Below is the text of the speech made by Paul Fisher, a member of the Monetary Policy Committee, in London on 23rd January 2014.

    This morning I would like to discuss some of the important issues currently influencing the setting of monetary and financial policy by the Bank of England. Those policies may have a direct bearing on pension funds; most obviously you might think via the yields on financial assets but perhaps more importantly via the stability of the real economy.

    Developments in inflation 

    First of all I want to note the importance the Monetary Policy Committee (MPC) attaches to CPI inflation being close to its target of 2%. Indeed it is currently at exactly its target of two point zero per cent for the first time since April 2006! (Although it did drop below 2% for a time in 2007 and 2009). Although we can’t expect inflation to be exactly 2.0% very often (just four times since it was announced as the target variable in December 2003), inflation has been above target for most of the past six years. Both the extent of the overshoot and its persistence were greater than the MPC initially expected. The pain of that experience of high inflation over the past few years should remind us all why the UK attaches so much importance to keeping inflationary pressure under control and why we have an inflation target.

    Inflation is costly in all sorts of ways. It can destroy real incomes, for example by acting as a hidden tax, and destroy wealth through a misallocation of resources. Those on fixed nominal incomes or who depend on savings income may be badly affected whereas it can inflate away the debts of others. And it generates a variety of other economic costs and distortions as changes in the general level of prices start to dominate the information contained in relative or ‘real’ prices. Many of these costs are pernicious by being implicit; for example in businesses having to change price lists, or consumers having to spend more time looking for real value.

    The MPC could have set a tighter monetary policy to try and limit the rise in inflation. Why didn’t we? First, because we were pretty sure that the factors driving inflation higher were going to cause changes in the price level rather than being consistent with, say, excess demand generating persistently higher inflation. We expected inflation to fall back, once those changes had passed through. And, second, to prevent even a temporary rise in inflation consequent to those price level shifts, the MPC would have had to try to depress the economy even further, by consciously pushing down on output, employment and nominal wage growth – so real wage growth would have been weaker, not stronger – at a time when the economy was already very weak. So, despite the costs of the inflation which were experienced, the costs of the policy needed to counteract it would have been even greater in this specific circumstance of one-off shocks and left the UK economy in a much worse position now.

    I want to stress that these calculations would not lead to the same conclusion were inflation being driven by pressure arising from excess demand or if inflation had led to expectations of above-target inflation in the medium-term. In those circumstances, where inflation would be more persistent and hence much more costly, the benefits of bringing inflation back to target would outweigh the short-run costs of doing so. The recognition of these different short-run trade-offs, depending on the forces driving inflation, lie right behind the specification of the Remit we have been given by the Government.

    The fact that inflation has now returned to target confirms to me that we were broadly correct in our underlying assessment that the factors pushing up on inflation would be temporary, although the near-term path for inflation hasn’t always been what we expected. It is very difficult to anticipate the precise trajectory of prices and we have certainly learned more about the dynamics of inflation during this difficult period: the effects of the 25% depreciation in the sterling effective exchange rate between mid-2007 and early 2009 were larger and longer-lasting than we anticipated for example. But tightening policy in response would have been a major mistake: a tighter policy then and we could now be facing the threat of deflation and depression, rather than inflation around target and the prospect of real recovery.

    The MPC’s policy has been to keep short-term interest rates low, by setting Bank Rate at 0.5%, and to stimulate the economy through asset purchases and latterly through forward guidance. Although asset purchases work through several channels, I want to spend a little time on their contribution to depressing longer-term interest rates. Low interest rates – at all maturities – have been necessary to help stimulate spending and so help set the conditions for a recovery in the economy. But for many investors, such a policy generates low financial returns which are difficult to cope with. Pension funds, for example, need relatively long-term, low credit risk investments – such as gilts – and those have been generating lower than normal returns for some years. In fact, the search for yield has tended to depress all financial returns. But I want to reflect on the relationship between rates of return and the real economy. As a general proposition, one cannot expect to earn high risk-adjusted real returns from financial investments if the underlying real economy is not growing. For example, it is business profitability which drives equity dividends and prices.

    The real ‘risk-free’ interest rate is also associated with real growth. Slow economic growth and low financial yields have been a feature of most of the developed world in recent years because of the global nature of the recessionary forces at work. Once a recovery in the UK economy has been firmly established then one would naturally expect real financial returns to be higher, and the real policy rate (i.e. Bank Rate minus expected inflation) can start to normalise.

    We can express this thought in a different way. Would it have helped financial investors to have had higher nominal interest rates over the past few years? If that had meant a deeper recession, deflation and an even longer-lasting malaise in the economy, then very few UK-based medium-term investors would have been better off as demand and activity would have dropped off further, credit risk crystallised and a range of credit investments went bad. Those with longer term investment horizons – such as everyone in this room should have – will appreciate that the best outcome for UK monetary policy is for it to be set at the right level to lay the foundations for a stable economy.

    In that regard, we should bear in mind that the economy will always be subject to unforeseen shocks which tend to push it away from stability for a period of time. The job of the MPC is to react to those shocks by bringing inflation back to target and, subject to that primary objective, in a manner which helps sustain output and employment.

    As well as inflation back around target, we have also seen a resurgence in growth over the past year. It was difficult to explain the suddenness of the change in sentiment which accompanied the recovery during 2013 but growth in itself should not be regarded as surprising. It is the near stagnation from 2010-12 which was harder to understand. We have been stimulating the economy with historically extreme levels of monetary policy for a long time and a variety of headwinds (including the problems in the euro area, a tightening of credit conditions, the drag on activity from fiscal consolidation, and a squeeze in household real incomes resulting from the fall in productivity and higher energy and commodity prices) have all contributed to limit the effect of that stimulus. What seems to have happened in 2013 is that at least some of those headwinds were perceived to have diminished, allowing the policy stimulus to come through and the resulting growth has generated the renewed consumer and business confidence which reinforces demand.

    We are very conscious that the headwinds have not gone away: much of Europe and some other parts of the world continue to struggle for sustained growth; fiscal consolidation in the UK (and elsewhere) is likely to continue for a while to come; and the financial sector still needs some rebuilding. Indeed, the official production and construction data released earlier this month were rather disappointing, reminding us that strong growth from here on is by no means guaranteed. But to varying degrees perhaps the very worst of the storms may be behind us. Just a tailing off in some of their negative impacts may have been sufficient to allow the economy to start growing again.

    Interest rates and forward guidance 

    So why aren’t we moving to tighten policy straight away, why did we issue forward guidance around monetary policy? The answer is in the levels of output and employment, not their growth rates. After nearly 6 years since the start of the crisis, the level of output in the economy is still 2% below its peak in 2008. A conservative extrapolation of the pre-crisis trend would suggest that UK output is some 15-20% below where it would have been expected to be by this time in the absence of the crisis. It seems unlikely that we will recover much of that gap and in any case the calculation is getting less precise and less relevant.

    Eventually, economic historians may work out what happened to potential output and we should establish a new reference point. As things stand today, it is difficult to know precisely where the new sustainable growth path of the economy lies (especially as data for the past few years are still likely to undergo significant revision by the ONS). But with unemployment still elevated, and diminishing signs of inflationary pressure in both goods and labour markets, we can be reasonably confident that the economy needs to grow strongly for some time to come, to regain a stable and sustainable medium-term trajectory.

    The challenge for the MPC is to assess when inflationary pressures will be building and thus when we need to start withdrawing stimulus, so that once we have eliminated slack in the economy, monetary policy is consistent with stable, sustainable growth and hence stable inflation around the target (subject of course to the other forces acting on the economy at the time). That’s an extremely optimistic expectation of what policy can achieve, so let me put it slightly differently. The realistic challenge for the MPC is to avoid a big mistake either by choking off the recovery too soon, leaving the economy in a quagmire, or by allowing inflationary pressures to build excessively, requiring a sharp tightening in interest rates (and the potential for another recession) to bring inflation back under control.

    Forward guidance is a policy framework designed, amongst other things, to help avoid big mistakes. We can encourage and probe growth in the economy by committing not to tighten policy until the economy has used up more of its spare capacity. On one view the policy is simple – we must give the economy plenty of time to establish the recovery before we start to raise interest rates or unwind asset purchases. At another level, some critical judgements are going to be needed because the timing is inevitably uncertain. Given those uncertainties, forward guidance delivers a framework within which the MPC can explore the scope for economic expansion without putting price and financial stability at risk. That guidance should help to give confidence to businesses and households and help to support demand growth. By reducing uncertainty about our reaction function, guidance should also have helped to counteract the pressure in financial markets to price in the chance of a rapid increase in Bank Rate.

    We chose unemployment as the threshold indicator not because it was ideal – far from it – but because other indicators were all less attractive. Of course, no sooner had we announced a policy linked to the unemployment rate than it began to fall unusually precipitously. But what is there not to like about sharply falling unemployment? After all, getting the economy back to a medium-term path quickly, allowing policy to normalise, would be a good thing? Right?

    Well, falling unemployment is undoubtedly a good thing for the individuals who are back in work and on many other social counts. It could only be a purveyor of the dismal science who found rapidly falling unemployment disappointing! Yet, in order to see rising living standards on average, it is crucial to see rising output per head (i.e. rising productivity) – which ultimately drives real national income per head and hence how well off we are as a country. So we need to see rising employment accompanied by even faster growth in output.

    The implied productivity performance of the UK economy has, in fact, remained poor – according to the official statistics, output simply doesn’t appear to be growing fast enough to support the employment growth recorded as well as generate the rapidly rising real incomes one would like to see. Something has to give. I hope that it will be that output grows faster – either through upwards revisions to recent growth rates or faster growth in future. If, on the other hand, the UK economy uses up all its spare capacity, without having had a substantial rise in real national income, then we should all be disappointed.

    The weakness in productivity growth has been well documented, but a convincing explanation remains elusive. There are many plausible explanations of factors which could have contributed to the weakness, but each explains only a small part of the whole puzzle. I don’t have time to get into that debate today, but we do offer a variety of candidate explanations in recent Inflation Reports.

    One better feature of the current situation is that price pressures seem to be subsiding, not growing. Despite good rates of employment growth, there is no sign of nominal wages over-reacting to general tightness in the labour market. Other price pressures also appear to be easing somewhat. Month by month there have been a series of small downside surprises in the inflation rate as oil prices have been relatively stable; the effects of administered and officially regulated prices now seem to be a bit less than previously expected; inflation expectations remain well anchored and the exchange rate has been rising which may help keep a lid on imported costs for a while (but importantly, at the cost of less balanced growth which is a separate problem). Taking the inflationary news together, it would appear that we have a favourable situation in which to explore how much more capacity the economy has, before inflationary pressures begin to build.

    Another positive factor supporting our probing strategy is the emergence of macro-prudential policy. Monetary policy has a difficult challenge ahead, as I have outlined. It will help enormously if financial policies can help deal with, or at least mitigate the risks from, some of the imbalances that are arising in the economy while the MPC aims to restore medium-term stability in the economy as a whole. The housing market is an example of where monetary and macro-prudential policies can helpfully interact and the November 2013 Financial Stability Report sets out some of the policy measures that are underway or could be called on if necessary.

     

    Funding for Lending Scheme 

    One decision that has been implemented is in relation to the Funding for Lending Scheme (the FLS). The FLS contributed to a substantial fall in bank funding costs after it was launched in July 2012. This fed through to a significant improvement in household credit conditions. Rates on new household lending have fallen markedly since mid-2012, with falls of more than 100 basis points in some representative mortgage rates. Both gross secured lending and repayments have picked up strongly. And the number of approvals for house purchase has risen significantly, indicating higher mortgage lending in future. The Scheme has probably been one of the driving influences behind the resurgence of business and consumer confidence – although there are many other factors behind the sort of swing we have seen.

    Partly because of its own success, there is no longer a need for the FLS to provide broad support to household lending. It is not the case that net lending for mortgages by UK banks is, as yet, excessive. Indeed, the annual rate of growth in the stock of secured lending to individuals was under 1% in November 2013. But sharply rising house prices are a potential source of instability and we should not risk adding policy oil to that particular fire. Credit conditions for smaller businesses have also improved, but to a lesser extent, and lending to businesses overall remains muted. The FLS extension will therefore provide continued substantial support for lending to businesses, with incentives in the scheme skewed heavily towards lending to small and medium-sized enterprises (SMEs). As the MPC noted in the minutes of its December 2013 meeting, the changes to the FLS provided support to the MPC’s policy guidance by reducing the risk of triggering the financial stability knockout.

     

    Conclusion 

    Yesterday, the Labour Force Survey headline unemployment rate for the three months to November was published at 7.1%, after another large fall. But even if the 7% unemployment rate threshold were to be reached in the near future, I see no immediate need for a tightening of policy. The MPC has been clear all along, that upon reaching the 7% threshold we will have to consider what the medium-term pressures on the economy are and make an appropriate judgement about the direction and pace of policy, and any further guidance that we may choose to issue in future. It is probably best to think about that in the context of our medium-term inflation projections published in the Inflation Report.

    Overall, the macroeconomic outlook is much more comfortable than it was – but we still have much to do and much to concern us. There is no room for complacency. Can the UK keep growing at the sort of rate consistent with recovery if our key European export markets remain so sluggish? How much more adjustment is needed in the financial sector and in the fiscal position? Have households sufficiently rebuilt their balance sheets to be able to withstand a normalisation of policy? Many of these considerations argue against being hasty in tightening monetary policy. But the inflation target remains our primary objective and we will have to be careful not to allow pressures to build up from excess demand. It would be a relief, probably for both you as investors and for us as policy makers, to get back to more normal policy conditions, but my own judgement is that we are still some way off the point where it is appropriate to start raising Bank Rate and that when it is time, it would be appropriate to do so only gradually.

  • Michael Fallon – 2014 Speech at Eurelectric Dinner

    michaelfallon

    Below is the text of the speech made by Michael Fallon, the Energy Minister, on 2nd June 2014.

    Introduction

    It is a pleasure to be speaking at an event that is focusing on a key challenge facing Europe.

    This is a crucial time for EU energy policy. Recent events have brought into focus the importance for all our citizens of energy security. In gatherings such as this there is often very fashionable talk of the so-called trilemma that posits security, affordability, and decarbonisation at opposite points of the triangle. This is false geometry. Without secure, affordable energy we will not be able to move to a more sustainable, lower carbon energy future.

    A Common approach

    The Rome G7 Energy communique set out with welcome clarity what we need to do as a Union and as countries to strengthen energy security – more home-grown energy, reducing energy demand, diversifying supplies and supply routes, and building the missing internal energy infrastructure and integrated markets so energy in all forms can flow smoothly and freely.

    It is vital that we use this momentum to inform decisions that are needed on our objectives for 2030. By acting now we can give investors the certainty they need to commit the enormous sums of money required to modernise and reinforce the EU’s energy infrastructure over the next decade.

    This evening I want to focus on the priorities the UK sees for the EU –

    First, taking full advantage of the benefits that a single EU market in energy has to offer.

    Second, we need to maximise home grown energy sources and diversify supplies.

    Third, the 2030 package needs to be a driver of competitiveness that benefits consumers and industry and allows member states to determine their own energy mix and to decarbonise at the pace best suited to their economic situation.

    Single market

    A well-functioning and integrated internal energy market in electricity and gas will be a critical part of ensuring security of our energy supplies and in keeping energy costs down.

    By opening up and integrating markets across national boundaries, we can increase competition, access the cheapest energy and reduce the level of back-up generation needed.

    The benefits of a single market are clear and undisputed. So, we must ask what we need to do to achieve them.

    The European Council has already agreed that the internal energy market should be completed by 2014. This is something the UK strongly supports.

    This means full and effective implementation of the Third Package in every Member State. It also means agreeing on key technical rules aimed at removing the remaining barriers to cross-border trade.

    On top of that, Europe need much more investment in interconnection to better link markets.

    If we can seize the opportunity we can deliver a more resilient and competitive energy market.

    Home grown sources

    To deliver these benefits we need diverse sources of energy. We have an abundance of energy resources that it can, and must take advantage of.

    That means that exploiting the full use of all energy technologies, from shale gas to renewables, from nuclear to shale. We should not any longer be ideological about energy.

    Renewables play, and will continue to play, an important role both in the European energy system and here in the UK. Through the Levy Control Framework this government has set out support through to 2020; with many countries making retroactive changes and reducing their subsidies, our move is unparalleled.

    In addition to renewables, new nuclear is critical for the future. The UK has already attracted significant levels of investment into the new nuclear build programme. We reached agreement with EDF on the key terms of a proposed investment contract for the Hinkley Point C nuclear power station. We are now working closely with the European Commission on the Hinkley state aid investigation.

    Given the continuing need for gas, we cannot afford to ignore the potential for domestic less sources. The development of shale gas in Europe could reduce our reliance on imports, could place downward pressure on energy prices and it could support the move away from high carbon fuels.

    So we are very pleased that the Commission responded to calls from the UK and other Member States to adopt a proportionate approach on the regulation of shale. We are conducting a study with Poland on the impact of shale for our countries and the whole EU which I hope will inform the new Commission and the new Parliament on the need to incentivise exploration, rather than bureaucratise.

    Diversify sources

    We will, of course, continue to need to import energy into Europe for the foreseeable future. Diversification of routes and sources of gas supply to the EU is an important element of the EU’s energy security policy. In that context I was delighted to hear – earlier this year – of the Final Investment Decision for the development of the Shah Deniz II gas field in Azerbaijan. This means that the Southern Corridor bringing Caspian Gas via the Trans-Adriatic pipeline to Europe is a significant step closer.

    The Southern Corridor itself will help to improve Europe’s competitiveness, by providing consumers and industry with a new gas import route and supply source, increasing the continent’s energy security, bringing more competition our market.

    2030 Framework

    What we saw in the European Elections was voters reacting against a European Union that they consider to be heading in the wrong direction. We need an approach that recognises far more sharply that Europe should concentrate on what matters, on growth and jobs.

    And it is that message which must be reflected in the framework for 2030 – 2030 must be a driver for competitiveness and resilience that secures investment in a diverse and low carbon technology base.

    Signing up to yet more targets, irrespective of the impact on consumers and business, would be, in our view, deeply irresponsible. That is why we support greenhouse gas emissions reduction target without a binding renewables target.

    As I said, Member States must be free to choose the least cost pathway that they determine as appropriate.

    And in cutting emissions Members states too must retain the flexibility to take action at their own pace – to go no slower and no faster than other European countries if they so wish.

    Conclusion

    In conclusion, I would like to share three thoughts.

    The importance of energy to our way of life means that keeping it secure is not an option- It’s an imperative.

    Secondly, energy is not limited to national borders. Our energy security challenges are best addressed together.

    Thirdly, we can only speculate on and not predict the future. Costs of technologies change, as do national circumstances. We need to be ambitious in our objectives, but we must be flexible in how we meet these.

    So I think this Convention comes at a crucial time. The next few weeks and months will be important in setting the future direction of the EU energy and climate policy; we, the UK, will play a full role to ensure ambitious climate targets, enhanced energy security and above all strenghten EU competitiveness.

    Thank you.

  • Michael Fallon – 2014 Speech on Middle East and North Africa Energy

    michaelfallon

    Below is the text of the speech made by Michael Fallon, the Energy Minister, at Chatham House in London on 27th January 2014.

    Good morning. It’s a pleasure to be here with you all today. I’d like to thank Chatham House for providing this forum. The focus of today’s discussions – the future of oil and gas supplies from the Middle East and North Africa – is certainly of critical importance to us all.

    Future role of oil and gas in meeting global energy demand

    The world will continue to rely on oil and gas for the foreseeable future, making the security of competitively priced oil and gas supplies of vital importance to the world’s economy.

    Oil and gas consumption is expected to rise significantly for some time, even as we move towards a low carbon economy. In particular demand for transport fuel is projected to continue to grow outside the OECD, while gas is increasingly replacing coal as a fuel for power generation around the world.

    The latest predictions from the IEA are that that under its central scenario the world will be consuming over 100 million barrels of oil a day in 2035, up from 89 million barrels a day in 2012.

    However over the same time the IEA expects that conventional crude oil output from existing fields is set to fall by around 40 million barrels per day by 2035. This means that new sources of oil will need to be developed to make up the difference.

    The development of unconventional oil will clearly have an important role in the coming years. And the same is true for gas – with unconventional gas expected to account for almost 50% of the increase in global gas production to 2035. Further work is required on how to safely and sustainably exploit these resources.

    But this is not the whole answer. Indeed, the IEA emphasises the Middle East as being at the centre of the longer term oil outlook. Even with projections that domestic consumption in the region will increase significantly, exports from the region will continue to be integral to global supply.

    This requires huge investment in production – an estimated $660bn per year will need to be invested in existing and new oil and gas fields to meet global demand. British companies are well placed to make this investment and are already active in many places around the world, including the Gulf. BP and Shell, for example, are already present in Iraq, while Shell is a partner in the Qatargas 4 LNG and Pearl GTL projects in Qatar.

    The IEA highlights Iraq – with its huge oil reserves – as the country that could be the single largest contributor to global production growth. That requires investment now, in infrastructure, sustainable water management, and the strong legal and financial frameworks that investors need.

    The IEA also projects increasing gas production from the Middle East and North Africa from both conventional and unconventional sources. When I visited Qatar in November, I was struck at how important Qatar is and will continue to be as a gas supplier to the wider MENA region and beyond. Qatar is of course a significant supplier of LNG to the UK. I also met the Algerian energy Minister last year, and was interested to learn more about the potential scale of Algeria’s unconventional gas resources. Of course there remain uncertainties as to the extent to which these resources will prove to be economically recoverable. In global gas markets, MENA gas producers are likely to be faced with growing competition from new sources of LNG from suppliers in the US, Canada, Australia and East Africa.

    International Cooperation

    I mentioned the significant investment required. Key to supporting this is helping to ensure that we have well-functioning oil and gas markets. This is a shared challenge, which transcends national boundaries, and we value international collaboration on this agenda.

    We saw in 2008 how damaging severe price fluctuations can be, when a mid-year spike of $145/barrel was followed by a fall to $30/barrel by year end.

    These swings severely damaged the confidence of consumers and producers alike: the price rise led to consumers sharply reducing demand for oil and goods and services in the wider economy; and the price drop created major challenges and uncertainties for many producing countries, both in terms of meeting the wider needs of their populations and in deciding the investment needed for future production.

    When the world met in Jeddah and London that year to discuss how to avoid such sharp fluctuations happening in the future, the central conclusion that emerged was the need to improve the functioning of the global oil market. Participants agreed that delivering such reform required significant improvement in the dialogue between consuming and producing countries facilitated by the International Energy Forum.

    This led to the re-launch of the IEF in 2011. Since then the Forum has done important work with the IEA, OPEC and others to improve market transparency through the development of Joint Organisation Data Initiative, it has investigated the links between physical and financial oil markets and has worked to improve energy outlook data.

    Maintaining this dialogue and work is essential if we are to ensure the world economy has the secure and competitively priced energy supplies it needs. In a period of relative price stability such as we have recently had, it would be all too easy for complacency to set in and for the world to downgrade the importance of such discussions. We should not, and I look forward to the IEF Ministerial meeting this May.

    The UK also supports international efforts aimed at removing inefficient fossil fuel subsidies. The IEA estimates that $544bn was spent globally on consumption subsidies in 2012. The G20 and APEC have committed to action on this issue, and I would encourage all those with such subsidies to consider their long term impact.

    A well-functioning and integrated European energy market in electricity and gas will be a critical part of ensuring security of our energy supplies and keeping energy costs down.

    The European Council has already agreed that the internal energy market should be completed by 2014. This is something the UK strongly supports. This means full and effective implementation of the Third Package of energy legislation in every Member State.

    We will need to effectively implement rules to allow energy to flow properly across markets. And Europe will need significant investment in interconnection to better link markets together.

    And international efforts are – of course – crucial to facilitating the shift to low carbon energy. I welcome the role being taken by many countries in the Middle East and North Africa to support this transition, for example the World Future Energy Summit hosted by the UAE last week.

    The draft 2030 package the European Commission adopted last week will set the long term perspective on this low carbon shift for the EU, and I welcome both the ambitious approach to a greenhouse gas emissions target of 40% for the EU but hopefully going higher in the case of a global deal, but also the acceptance by the Commission on the need for Member States to decarbonise in the most flexible and cost-effective way for each of them, moving away from binding national technology specific targets.

    UK energy policy

    I’d like to turn now to reflect on UK energy policy. We are seeking to achieve three key aims – energy security, emissions reduction to meet our ambitious climate changes targets, and maintaining affordability for consumers.

    The North Sea continues to be hugely important for the UK. We are determined to maximise production of these oil and gas reserves and are currently conducting a review – the Wood Review – to ensure our regulatory regime is as business friendly as possible.

    Unconventional oil and gas is an exciting prospect for us, and we have recently announced changes to our tax regime which will make the UK the most attractive location for investment in shale gas.

    And we are working hard to put the policies in place to enable the shift to a low carbon energy system. We are committed to reducing our greenhouse gas emissions by 80% by 2050. Our energy policies include a number of flagship programmes to achieve this, including our far-reaching Electricity Market Reforms, the ambitious energy efficiency programme through the Green Deal.

    Nevertheless, UK import dependency for oil and gas is set to rise over coming years.

    We became a net importer of oil in 2005. In 2012 our oil import dependence increased to 36%, and is expected to rise to 47% by 2020.

    For gas, we became a net importer in 2004; and in 2012 our gas import dependency stood at 50% – with Qatar one of our key suppliers. By 2020 imports are likely to rise to 58% and it is clear that gas will remain an important element of our energy mix for decades to come.

    And as we increasingly look to international markets for our energy supplies, we also welcome the interest from international investors in the UK energy sector.

    It is estimated that replacing and upgrading our electricity infrastructure alone will require up to £110 billion of capital investment between now and 2020. I recognise that policy certainty is key to this – and the Energy Act and our electricity market reforms deliver this.

    I have been delighted to see investments in the UK energy sector ramping up. For example I welcome Masdar’s investment of £500m in the London Array, the world’s largest offshore wind farm. And the decision of the Abu Dhabi National Energy Company to lead in the development of the Morrone field in the North Sea.

    Conclusion

    Perhaps I can end by noting that common challenges face us all. We need to ensure that energy markets can provide the supplies consumers need at affordable prices while providing the necessary long term incentives for producers and investors. Achieving this is no mean feat, but dialogue and cooperation has a central role to play.

    Thank you.