Interview: Stephen Lovegrove

Globalisation, the economic crisis, and the complexities of coalition government are making life difficult across Whitehall – but the Department of Energy and Climate Change has been dealt a particularly tricky hand. Whilst the political salience of its brief has grown rapidly, the debates around energy have become more polarised – and the deadlines it faces allow little room for manoeuvre. Gordon Brown, in creating DECC from elements of the business and environment departments in 2008, did overcome the structural obstacles that had long put the Whitehall officials handling energy production and climate change at loggerheads. But like Tony Blair before him, Brown deferred big decisions on replacing ageing energy infrastructure; the coalition knows it must act now to renew our generation and distribution systems.

Those decisions have become ever more controversial as fast-rising energy bills and strengthening indications of climate change entrench people’s positions on both sides of the energy debate; and whilst the brief is no longer split between two departments, there are still plenty of different views in government on how energy should be produced and delivered. DECC’s policies must consider “affordability for the consumer, security of supply and reducing emissions; and all of those things are sometimes in tension,” notes permanent secretary Stephen Lovegrove. “We have a suite of policies that strike the balance between them.”

Although he doesn’t say so, producing those policies has been a painful experience for the department. The previous permanent secretary Moira Wallace resigned last summer, just as the Commons’ Energy and Climate Change Committee published a report alleging that ongoing rows with the Treasury had rendered DECC’s flagship Energy Bill “unworkable”. The appointment of right-wing Tory John Hayes as a junior minister in last autumn’s reshuffle led to a series of damaging ‘rift’ stories, with Hayes and Lib Dem secretary of state Edward Davey apparently split over onshore wind power. Even Lovegrove’s own appointment was controversial: he won the job after David Cameron vetoed the selection panel’s first choice, Climate Change Committee chief executive David Kennedy.

Set alongside high-profile U-turns such as the retreat on the micro-renewables ‘feed-in tariff’ subsidy, these divisions over policy and implementation have damaged confidence amongst the investors who, by DECC’s reckoning, will have to pour £110bn into energy infrastructure over the next 10 years. “We are very alive to the need to create market investor confidence,” comments Lovegrove. “It isn’t the case that this department has the financial resources to do all the things that are going to be required in the energy space”.

Battles behind, tasks ahead
Lovegrove, who moved to DECC 10 weeks ago after a nine-year stint at the business department’s Shareholder Executive, is philosophical about the battering the department has taken over the last year. Energy policy covers “huge issues, and it’s entirely understandable – particularly at a time when an awful lot of our energy infrastructure is going to have to be replaced – that there are quite a lot of discussions about the right way of doing it,” he says. “It would be surprising and rather depressing if people weren’t passionately engaged in trying to get to the right answer on that.”

He might be less philosophical if those debates were still at their height – but late last year DECC and the Treasury hammered out an agreement on the Energy Bill, and Lovegrove has arrived to find the department armed with an agreed set of policies. “We have ended up with a unified government position on the route that everybody wishes to take,” he says. “And I think everybody’s right behind that.”

Much of the delivery work remains to be done, though – and as it rolls policies out, DECC will attract criticism from both ends of the political spectrum; from climate change activists and sceptics; from renewables firms and established energy providers. In some ways, this last divide is the most awkward of all, for both kinds of business are key to economic growth: ‘green’ industries are among the fastest-growing in Britain, but established power companies are being asked to make huge investments – and neither they nor energy consumers relish the prospect of subsidising energy efficiency and renewables.

Some green energy firms fear that governments will always listen more closely to established, status quo industries than the nascent businesses of tomorrow; but Lovegrove is clear that this tendency is “a danger that we need to guard against very carefully. I think it’s incredibly important that the range of voices – some of them disruptive to the status quo – are heard, and heard properly.”

The new perm sec has some experience in such matters. At the Shareholder Executive, he recalls, he established “Vince’s business bank, which was in many ways designed to make sure that the new, challenger banks are getting a fair shake; and that government is doing everything it can to overcome some of the structural and funding difficulties they face – because the system as a whole is going to be a hell of a lot better with more challengers, more disruptors within it. I think that’s the case here too.”

Hymnsheets now identical
Not all disruptors are helpful, of course – and Lovegrove surely must be pleased that Hayes has just been moved to the Cabinet Office. He’s not admitting it, though: “The way in which you deploy the onshore wind part of the energy equation is a perfectly healthy part of internal debate,” he says, pointing to a “tendency to play up what are completely legitimate discussions into great fractures seen through the lens of the coalition – which I really don’t recognise.”

Lovegrove does accept that it’s “quite important” for ministers to be seen to follow the same line on departmental policies: “Obviously there is some advantage in there being a departmentally coherent view, inside which there can be some play for different shades of opinion; and I think that was probably what was happening in the onshore wind debate,” he says.

Strategically, the forging of a common policy with the Treasury is probably more important than Hayes’ departure. “We have the basis of a settlement and a vision for energy provision in the future, and our stance with regard to climate change and reducing emissions – which will mean that there is a framework for people to go forward together,” says Lovegrove. “There may be divisions or dissensions or debates, but I don’t know where they’ll be coming from; I can’t see any right on the horizon.

“We have the normal relationship with our friends at the Treasury,” he adds, with a laugh, “but I don’t think we’re any different in that regard from any other department.”

Let’s do it
At this point, then, “the direction is set – and set correctly. What I want to do is allow the department to be the best it can in implementing those policies.” And to achieve that, Lovegrove says, DECC will be improving its prioritisation; its governance; and its communications.

On prioritisation, he wants to ensure that “our resourcing model is flexible enough to have the right people, with the right skills, doing the right kind of jobs, at the right time – and I think there’s quite a lot of work we can do on that.” It sounds as if DECC, like the education department – and the environment and culture departments before it – will shift away from standing teams towards a flexible, project-based model.

The bigger challenge, though, lies in communications. “I slightly have the sense that at the moment the devil has all the best tunes in terms of energy stories,” suggests Lovegrove: on gas supplies, infrastructural resilience and climate change, he wants to challenge myths by presenting policies “in a proactive and sensible way” and making “sure that our own scientific efforts and analysis are out there and being taken seriously”. On climate change, in particular, he believes that there’s a need to “tell the story that a lot of the science is not in question. There is a very broad scientific consensus in this area, and the voices off to the side are minority voices.”

The department might also save itself some future communications challenges if it gave itself a bit more room for manoeuvre on policy aims. After all, as Lovegrove points out, DECC is implementing some policies that have never been tried anywhere before – “so is our crystal ball going to be sufficiently accurate to make sure that we know exactly how all these things are going to play out? No!”

The department, he argues, should “think quite carefully about the fact that there is a range of uncertainty in this”. If a private business faced a similar situation, says Lovegrove, it would probably “judge success to be hitting a number within a range, and try to edge towards the top”, rather than setting a single, cliff-edge target. “Absolute precision is a chimera,” he adds; if DECC was more realistic about its ability to predict outcomes, “we could probably save ourselves quite a lot of grief”.

Yes, skills again
Another key field in which the department will need to develop its capabilities is the hoary old chestnut of skills – particularly commercial skills in marketing, law, energy economics, project management and contract negotiation. Some can be recruited, says Lovegrove, but he’s certain that others will have to be bought in from consultants.

DECC is a “smallish department seeking to make very, very large differences to the energy landscape,” he explains. “That means the design of very complicated market-facing frameworks; and if a proportionate expenditure on a lawyer or a banker or a market consultant allows us to do that job better, then we should do that. It would be better to carry all of that capacity within the department, but practically that’s not going to be possible, so we are definitely going to be using advisers.”

Having said that, he adds, “I’ve been two different kinds of adviser: I was a management consultant, and a banker. So I’m well aware of the tricks that might be played!” DECC won’t be using consultants to do work it could handle itself, he says, and it will be an “incredibly intelligent customer” in achieving value for money and deciding the nature and scope of work that is outsourced.

On the key point, though, he’s quite clear: as the West Coast Mainline episode demonstrated, “when you’re dealing with large companies that are deploying armies of highly-paid advisers, you’re not doing the taxpayer any great favours unless you’re confident that you can meet them on their own ground.”

Other capabilities can be hired in by making use of an innovation set out in the Civil Service Reform Plan: outsourcing policymaking work. DECC is set to be the second department – after the Cabinet Office – to outsource pieces of policymaking, with Lovegrove describing the initiative as a way to “draw in expertise from a very broad range of different places.” (See news)

As DECC develops its commercial capabilities, it will have the advantage that its new chief has a strong track record in private business – and, at the Shareholder Executive, in managing the government’s own business operations. “One of the reasons I’m here is to try and shine a bit of light on those slightly more commercial skills,” he says, adding with a grin: “I’m now probably close to a fully-naturalised civil service citizen, but I am an ex-investment banker!”

On people and priorities
Indeed, when the Commons Liaison Committee asked the PM about his veto of Kennedy’s appointment late last year, Cameron replied that the “most important thing” required by DECC was “commercial experience and the ability to do deals”: his implication was that, as DECC wrestles with a host of difficult market interactions – most obviously the fraught negotiations over the plans for a new generation of nuclear power stations – Lovegrove’s business savvy trumped Kennedy’s strong track record in climate change work. So is Lovegrove’s own lack of experience in climate change a weakness? “Nobody’s perfect!” he laughs. “But I don’t think it is. I’m not an energy or climate change expert: there are experts within the department who do terrifically good work. My job as permanent secretary is not to second guess what they’re doing, but to enable a structure and an organisation that allows them to do their best and most effective work – and that goes just as much for the climate change part of the organisation as it does
for all its other parts. It would be a problem if I didn’t prioritise the climate change area as much as the other parts of the department, but that is not happening and it will never happen.”

Lovegrove is keen to dispel any suspicions that he’ll be prioritising short-term economic growth or energy costs over climate change issues – but nor will he be focusing mainly on environmental concerns, as some believe Kennedy would have done. Asked whether it’s important for the DECC chief to be passionate about climate change, he replies that “it’s important to be passionate about doing your job and the mission of the department. And that mission is to reduce emissions; to keep bills down; and to ensure that the country has safe and secure power sources. I am very passionate about doing all of those things, and about getting the department into a shape and a place where it can do all of those things. And that’s probably as much passion as I can cope with!”

Rather than the specifics of climate change issues, Lovegrove’s passion is for the challenges of government. Asked why he took the DECC job instead of returning to private business, he answers that “the most enjoyable part of my career has been the part in the public sector. The problems that you have to deal with; the kind of questions you wrestle with; the range of different perspectives you have to take into account – they’re all much more challenging and fulfilling than those in the private sector. And this is a fantastic job to be asked to do”.

He doesn’t rule out a return to the private sector at some point, but it sounds like he’s in no hurry to go back: these days Stephen Lovegrove is, as he says, close to being a fully-naturalised civil servant.

That doesn’t make him a policy wonk, though: an inveterate deal-broker with commercial nous, Lovegrove has arrived at DECC – whose brief arouses equal passions among politicians, environmentalists, businesspeople and householders – just as the task facing its permanent secretary shifts from policymaking to delivery; and that suits him just fine. Is he relieved to find that the policy blocks are already in place? “Yes, I’m glad that’s been the case,” he replies, with another chuckle. “It means that we can concentrate on implementation, and that’s what my task is: to help the department and the people within it to implement policy as effectively as possible.”