Grand Committee

Monday 20th March 2023 Grand Committee

Monday 20 March 2023

Arrangement of Business

Monday 20th March 2023 Grand Committee

Announcement

15:45

[The Deputy Chairman of Committees (Lord Geddes) (Con)]

My Lords, as is customary before opening the Grand Committee, I must advise your Lordships that, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Medical Devices and Blood Safety and Quality (Fees Amendment) Regulations 2023

Monday 20th March 2023 Grand Committee

Motion to Approve

15:45

Moved by

[Lord Markham]

That the Grand Committee do consider the Medical Devices and Blood Safety and Quality (Fees Amendment) Regulations 2023

[The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord Markham) (Con)]

I am grateful to be here today to debate these important regulations. Before I turn to the detail of the statutory instrument before us today, I would be grateful for the opportunity to highlight the vital role that the Medicines and Healthcare products Regulatory Agency—the MHRA—plays in safeguarding our public health. The MHRA’s work to regulate medicines, medical devices and blood components for transfusion ensures that the healthcare products used across the UK are safe and effective. It charges fees to recover the costs of providing a direct service for regulatory work; these fees are set in statute and, as such, legislative change is required to amend them.

We have seen throughout the Covid-19 pandemic and beyond the innovative and agile regulator that the MHRA can be. It must therefore have a sustainable financial footing; this is particularly vital as it strives to achieve its vision of being a world class regulator, embracing the opportunities of EU exit and keeping patient safety and access to healthcare products at the heart of regulation without adding additional burden on to the taxpayer or the Exchequer.

This instrument updates the fees that the MHRA charges in relation to its activities regulating medical devices and blood components for transfusion. Its fees have been updated several times in the past to ensure that they remain appropriate, as is standard practice for government bodies that charge fees. However, to provide certainty and stability to the sector throughout the EU exit transition period and the Covid-19 pandemic, the MHRA has not updated its fees since the financial year 2017-18 for medical devices and financial year 2010-11 for blood components for transfusion.

Additionally, a recent change in the legal status of the agency has made the need for full cost recovery more acute. The MHRA previously operated as a government trading fund, which gave it the ability to retain and rely on cash reserves to better manage areas of under-recovery, notwithstanding the fact that fees should fully cover costs. However, since April 2022, following the review by the Office for National Statistics, the MHRA was reclassified from a trading fund to a market regulatory agency. As a result, the MHRA is no longer able to retain cash reserves.

Full cost recovery for the MHRA’s services has become essential to ensure the future financial sustainability of the agency. The SI therefore introduces amendments which fall into three categories. First, there is a 10% indexation increase on all fees. The indexation is linked to staff costs, which have risen in line with the wider Civil Service pay award by 10% since the last substantial MHRA fee increases in 2016. Staff costs account for over half of the MHRA’s total expenditure and therefore have a substantial impact on cost of fees charged. Secondly, there is a further uplift for a specific number of activities that were identified as significantly under-recovering via their fees to ensure cost recovery. Thirdly, there is the introduction of some new fees for services that require cost recovery since the last fee changes in 2018 for medical devices. The SI also introduces two new optional services related to clinical investigation of medical devices which industry may wish to use. These new services relate to obtaining expert regulatory advice or statistical reviews from the MHRA in relation to clinical investigation of a medical device.

The MHRA is obliged to recover the costs of its regulatory activities in accordance with the Treasury’s managing public money guidelines. The amendments that this SI will introduce to the fees for the MHRA’s regulatory work on medical devices and blood components are necessary to ensure that the MHRA recovers its costs associated with delivering these services. It is appropriate that the regulated bear the cost of regulation and that the MHRA does not profit from fees at the expense of industry.

The full cost-recovery approach ensures that the MHRA does not make a loss which would fall on UK taxpayers and patients to subsidise. The MHRA is committed to regularly reviewing its fees and ensuring that these remain fair and reasonable and continue to reflect the true cost of providing regulatory services. The MHRA is also committed to delivering a reliable service and publishes performance targets that are reported against in its annual report and accounts, which are laid before Parliament.

The fees updates are important to ensure that the MHRA has the resources it needs to deliver reliable services. The fees updates will, in turn, contribute to operating modernised systems and processes, recruitment and retention of skilled staff and keeping pace with technological advancements.

To summarise, with this instrument, we have the opportunity to ensure that the MHRA has the financial security it needs to support the delivery of a responsive and efficient regulatory service for the protection of patients and improvement of public health across the UK.

[Lord Jones (Lab)]

My Lords, I thank the Minister for his concern and his introduction on the very important matter of blood. Much detail is given by the department in the papers that we have, particularly in the Explanatory Memorandum. Clearly, a lot of work has gone into producing what we have before us.

Currently, a lengthy inquiry by a learned judge and his board is drawing to a close. It regards how, a generation ago, contaminated blood was given to unsuspecting patients, resulting in great distress—and worse—for not only the patients affected but their families. I think the learned chair will report soon; the Minister might confirm that.

My basic question is: can the Minister say what sort of people are involved in the receipt of these fees? One presumes that they are medical professionals or ancillaries who perhaps deal with the details of making available what is required. Can he give examples of the status, titles and work of those who receive the fees? He might agree that, on the face of it, the fee rise is steep.

Clearly, time has gone by, so I intend my interjection to be very brief, but I think I have raised a pertinent question. I rise in this Committee fairly often because I believe that many important regulations come to us, but debates are thinly attended. In many cases, what we consider in our debates here would be better taken on the Floor of your Lordships’ House. That is an opinion, but what we are debating now is very important, and I look forward to the Minister’s reply.

[Lord Allan of Hallam (LD)]

My Lords, we echo the Minister’s comments in praise of the agency for the valuable work that it does in the United Kingdom. Of course, we also want to make sure that it is effectively funded for that work, but we have a few questions on the instrument before us.

First, if we look through the Explanatory Memorandum, the Minister has already explained the item referred to in Paragraph 7.6, that

“the Office for National Statistics reclassified the MHRA from a Trading Fund to a Market Regulatory Agency”,

and said that this affected the way in which it can use cash reserves. In exchanges with the Minister prior to the Committee we talked about the fact that we do nerdy regulation in here. I am curious to know whether any more detail might be made available in writing or otherwise about the way in which that classification or reclassification can take place and the effect that it has, as clearly it may be relevant to other agencies in this space. Understanding what it means to move from being a trading fund to a market regulatory agency is quite important for our work more generally.

Specifically on the cost increases, paragraph 10.2 tells us that there was “a general acceptance” of the need for increased fees in the responses, noting that people said that there was an understanding of the need for an increase in the fees but that they expected to see corresponding consistency in the service that they were given. Again, I hope that the Minister can come back to that later and talk about the assurances that the industry is looking for with regard to the service. However, if we look in detail at the consultation responses, we see that they were not uniformly positive. If we look at the category 1 increases, which was the simple 10% indexation, it was 61% for and 39% against. However, if we look at category 2, where there are some cost-based increases—they are significant and we will touch on those—it was 56% against to 44% for, so clearly, people were more uncomfortable with that. When we come to the third category of new fees, opinion was just in favour but was more balanced: 55% for and 45% against. Importantly, the consultees were then asked whether they thought there would be some impact of the new fees structure on particular kinds of businesses, and 89% said yes and only 11% said no, so a significant number of the consultees felt that in particular small and medium-sized enterprises might be disproportionately affected. We should not gloss over that. I know that officials are trying to summarise things when they produce an Explanatory Memorandum but if you summarise, sometimes you lose these important nuances where there was a much more mixed picture in the response to the proposals.

Paragraph 12.1 of the Explanatory Memorandum tells us that the anticipated costs that will fall on businesses, charities and voluntary bodies will be £1.9 million per year, which is echoed in paragraph 25 of the impact assessment, where it says that these costs will fall on businesses. Of course, the direct costs do, but those businesses will in turn have to pass those costs on to someone, and in most cases the eventual purchasers will be NHS bodies. Therefore again, at one level, it will fall on the business; I do not think that the businesses will simply absorb that cost, and there will be an impact on the taxpayer which does not necessarily come out. I hope that the Government will look at that and at whether, perhaps by increasing the regulatory costs, perhaps for good reasons, we end up increasing the cost base of the equipment. The noble Baroness, Lady Merron, and I were just in the Chamber talking to a Question about the cost pressures on medical equipment and devices and the need to replace significant amounts of outdated equipment with more modern equipment. In many cases, that more modern equipment will go through this approvals process, which will add on cost, so we need to be mindful of that cost base impact.

That brings me to my last point, which was about the impact of the new costs—again, we should not lose sight of them. We get the detailed figures in the annex to the instrument, which is extremely helpful. However, certainly for medical devices, if we look at the status quo ante and the status quo post the adoption of the regulations—these are my rough calculations and I am sure that the people who advise the Minister will be able to do it in more detail—there are costs potentially of £40,000 or of that order under the current regime for somebody to get a new medical device through the designation process, the audit process, and so on. In many cases, those costs are increasing three or fourfold, so you are talking about somebody potentially having to find £150,000 and numbers north of that now to get a medical device through the process.

16:00

That is quite a significant cost base. For the large multinationals, it may be a drop in the ocean, but for the small and medium-sized enterprises which the Government want to encourage in the medtech space those kinds of numbers could make a significant difference. The concern is that we do not create barriers to entry, so that a small medtech provider which has developed an innovative product and wants to get it through the approvals process and made available does not find that fee level a significant deterrent. In some cases, they can make a device available outside the approval process if it does not require that kind of designation. In other cases, the designation is essential, and, without it, the device cannot be used in a healthcare setting. That is the other element that I hope the Government will keep an eye on. Those are my two questions about monitoring. It is a theme we always come back to when we look at statutory instruments—we talk about them here—but it is important to understand the effect they will have down the track, perhaps in a year’s time. The first of those two critical questions is whether we have seen a significant increase in the cost that the taxpayer ends up paying for medical devices and blood components that could be traced directly back to the increases in approval costs. Secondly, has there been an impact on the market, in particular on small and medium-sized businesses—there is important feedback to consider—such that some of them are saying, “I would have got my device approved, but now when I look at a fee that is running into six figures, that feels like too much of a hurdle, and therefore I am going to stay out of the market”?

With those questions, including the nerdier questions on the designation of agencies, I hope that the Minister will be able to clarify some of those points. In principle, we do not oppose the idea that there needs to be a properly funded approval process—and I hope that it is one that works consistently and to a high quality.

[Baroness Merron (Lab)]

My Lords, I thank the Minister for introducing the SI and the important provisions within it. As my noble friend Lord Jones said, it is an important SI, and we acknowledge the role that the MHRA plays and the need to increase the fees that it charges for regulating medicines and related products.

I appreciate that the Minister said that the MHRA has not increased its fees to this extent since 2016-17, which was in an effort to provide the industry with certainty and stability through the EU exit period and the challenges of the pandemic.

The noble Lord, Lord Allan, asked some questions the responses to which I would also be interested to hear. The consultation process was important, and I am glad that it took place and has guided the SI and its provisions, because the views of relevant stakeholders are key in making sure that we get things in the right place.

There is a clear acknowledgement from noble Lords that the MHRA needs to be financially stable, because it needs to be able to deliver regulatory services that protect and improve patient safety with high-quality, safe, effective and innovative medical products. I certainly welcome the greater clarity that the SI provides on the increased costs of providing quality care in our health services. However, I have a question for the Minister specifically on the SI. Where the increased costs of the fee simply cannot be absorbed by the NHS, which is already facing the worst of crises, could the Minister outline how the Government will ensure that the increase will be accommodated without affecting the stability of NHS finances and without impacting patient care? In other words, how will it be done?

I will make some more general points about the work of the MHRA. Innovative companies in this field often say that a key block to their progress—a key block to getting their work through the MHRA—is the speed, or the lack of speed, with which it can be processed. Can the Minister indicate how he will ensure that the MHRA stays up to speed with the latest advances and is able to process them as quickly as possible?

It would also be helpful to know how the department scrutinises and assesses the work of the MHRA. For example, what is the formal matrix for success and the speed at which it processes new devices? How well does the MHRA communicate with other organisations in the sector? What engagement does the department have with the MHRA, both to hold it to account and to improve its practices?

In drawing my more general points to a close, I note and welcome the recent announcement of the extra £10 million of funding for the MHRA. Can the Minister outline the blocks to quick approval to which this money will be targeted? How will the impact of this additional money be measured, and is it sufficient to deliver the service we need to ensure that UK patients have faster access to the most cutting-edge medical products in the world? As part of the additional money, the Chancellor announced last week that treatments already approved by “trusted” regulators internationally would be nearly automatically approved. Which countries are counted as “trusted”? Has an impact assessment been carried out for this change and, if so, can it be published?

We are always looking forward and looking to make further strides in patient safety, it is certainly my opinion that this statutory instrument takes us further along this route, and we welcome it.

[Lord Markham (Con)]

I thank noble Lords for their contributions today and, as ever, will try to reply and follow up in writing where necessary. I shall try to take them in order, for ease. The noble Lord, Lord Jones, asked who is working on the bloods, for want of a better word. We have qualified professionals who are working to WHO standards, such as phlebotomists. Related to this was the question of who is in receipt of these fees. It is twofold. Obviously, a lot of fees go to fund MHRA itself, but a lot of the cost base is when it is hiring in subject-matter experts. In that case, they get the fees.

The general point raised by all noble Lords was the basis of this. As I said, it is a cost-recovery model. There are swings and roundabouts there, but it has tried to ensure that where there are bigger increases, it is only because that is the legitimate cost, but on average it comes to about 12% to 13%. I think that we would all accept that, for something that has not increased since 2016-17, that is reasonable. It is quite a bit behind inflation. That notwithstanding, I am very alive to the impact on SMEs, having been, as I said, in a similar space myself in the past. There are easements and waivers that can be applied, if that is the case.

To the general point about how we are trying to keep up with the speed of advances in the industry, it is very much the understanding that the industry is providing a service. Of course, safety must always be paramount, but it is a service to bring in innovation and attract new people into the sector. It has a transformation programme to ensure speedy replies—but I was pleased to hear that it is also looking to introduce a consulting service to help companies get into the field. That will be different from the regulatory side—obviously, we need a Chinese wall between the two. But it is recognised, especially for a small company, which does not have a regulatory team in place, that being guided and hand-held through the process, and having someone to tell them that this is what they need to do to get in, is very important. That is something that it is committed to doing.

As for holding the MHRA to account, to be candid, I see that very much as my job. That is obviously for officials as well, but I have the brief for the ALBs, and I set up regular meetings with them. As I said, I am very much alive to the fact that that is needed to make sure that it really is serving the industry properly. Part of holding it to account is about making sure that it is providing a decent service level. That is something that I will look for it to carry on doing. Consultation is useful as a formal process, but it should always talk to its customers and get that sort of feedback.

I have to fess up that I probably cannot answer some of the nerdy questions right now, particularly on the reclassification of the agency. I will have to phone a friend or get my colleagues to reply on that point. Likewise, I think we would all agree that the extra £10 million is welcome in this space. How the MHRA will go about that distribution and how it will measure that effectiveness is something I will follow up in the detailed letter that I will send.

Similarly, on which countries are counted as “trusted”, my understanding is that often the MHRA looks at the processes that are in place—again, I will come back in detail on this. Rather than a country being trusted, per se, it is more about the scrutiny process that it undertook. Obviously a regulator would be accepted as good in a place, but again, I have some personal experience. If you can see that the CDC or the FDA has gone through a very similar process, does it really make sense to do that all again? Clearly, it is felt that I have not quite answered the question—but I mentioned the waivers.

At this point, I hope I have covered most of the questions that I can right now, but I will follow up in detail. I appreciate that noble Lords are generally supportive of what we are trying to do here, and that we all agree that the MHRA has an important part to play and that the cost recovery is a reasonable approach, particularly with some of the price increases in recent years. As I said, I will happily follow up in writing. On that, I commend the regulations to the Committee.

Motion agreed.

Special Immigration Appeals Commission (Procedure) (Amendment) Rules 2023

Monday 20th March 2023 Grand Committee

Motion to Approve

16:14

Moved by

[Lord Murray of Blidworth]

That the Grand Committee do consider the Special Immigration Appeals Commission (Procedure) (Amendment) Rules 2023

Relevant document: 30th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Home Office (Lord Murray of Blidworth) (Con)]

My Lords, I am very pleased to be able to present these draft rules, which deal with two vitally important issues, to the Committee. I will first touch on the provisions in relation to deprivation of citizenship in this instrument.

Keeping the public safe is a top priority for the Government. Deprivation of citizenship, where it is conducive to the public good, is reserved for those who pose a threat to the UK or whose conduct involves very high harm. It is key to our ability to preserve the UK’s national security. The Committee will recall that the deprivation measures in the Nationality and Borders Act attracted much considered and thorough debate. This House and the other place agreed that, in cases where the Secretary of State intends to make a deprivation order on the grounds that it is conducive to the public good without giving notice, an application must be made to the Special Immigration Appeals Commission, or SIAC, which will consider the Secretary of State’s reasons not to give notice.

In November 2022, we took a first step towards implementation of this process by amending the Special Immigration Appeals Commission Act 1997, giving the Lord Chancellor powers to amend procedure rules in relation to these applications. We now intend to make the required amendments to the Special Immigration Appeals Commission (Procedure) Rules 2003, which is the purpose of this instrument.

This instrument sets out a clear framework for the Special Immigration Appeals Commission and the Secretary of State when dealing with such applications. It makes clear the information an application is required to contain and makes provision for the Secretary of State to vary or withdraw an application. It confirms the Secretary of State as the single party to proceedings and makes provision to appeal a determination of the Special Immigration Appeals Commission where necessary. The instrument also sets out that the commission must give a determination within 14 days of receipt of an application or its variation. This reflects the fact that the Secretary of State may have to act quickly in the interests of national security. The instrument is the final stage in implementing the safeguards relating to Section 10 of the Nationality and Borders Act 2022, which were agreed in the passage of that Act.

Turning to credibility statements, Sections 19 and 22 of the 2022 Act create additional behaviours that should result in an asylum or human rights claimant’s credibility being damaged. These includes a requirement for decision-makers to consider the late provision of evidence in response to an evidence notice or a priority removal notice, without good reasons, as behaviour that should be damaging to a claimant’s credibility.

As part of this suite of measures being introduced to encourage the timely provision of evidence in support of asylum and human rights claims, Sections 19 and 22 of the 2022 Act also establish a requirement for both the Special Immigration Appeals Commission (Procedure) Rules and the asylum and immigration chamber procedure rules to secure that when judges dispose of asylum and human rights decisions, and where credibility issues arise, they must include in their decisions a statement on how they have taken account of all potential credibility-damaging behaviours when reaching those decisions. These changes to the Special Immigration Appeals Commission (Procedure) Rules effectively secure in rules what judges are already required to do, according to the current case law.

The instrument and the creation of new procedure rules, however, make it abundantly clear what judges are required to do. This will assist in making sure that there is clear and efficient decision-making. I commend these rules to the Committee.

[Baroness Hamwee (LD)]

My Lords, I hope that the Committee and the Deputy Chairman of Committees will understand that my sitting down today is not a sign of any disrespect to any Member or to the Committee. I thank the Minister for his introduction to this instrument. I do not think he will be surprised to know that I am not thanking him for the instrument itself, and very much not for the Nationality and Borders Act.

Those of us who find difficulty with proceedings in any number of areas, particularly when they are closed, are generally assured by the Government that we should not worry because there is judicial oversight. I cannot recall whether this was so in the case of Section 10 of the Nationality and Borders Act, but the instrument points up the hollowness of such an argument. As the Minister explained, Section 10 provides that the Secretary of State does not have to give notice of deprivation of citizenship in certain circumstances, and, if she

“reasonably considers it necessary, in the interests of”

certain matters,

“that notice … should not be given.”

That is in new Section 40(5A)(b) of the 1981 Act, which includes

“the relationship between the United Kingdom and another country”.

I understand the Minister to have included that in his list of high harms. It is quite easy to think of examples of what might be necessary so as not to annoy another state, which I think would come within the relationship between the UK and another state. Can the Minister tell the Committee whether he expects this power to be used very narrowly, and confirm that proportionality will apply?

We are reliant on the commission to assess the reasonableness of the view of the Secretary of State but even the commission does not have a free hand. Under Section 25E in the new Part 4A,

“The Commission must determine the application on paper without a hearing”.


My second question is: why is it “must” and not “may”? If we are to have any confidence in the process as a whole, should we not trust the commission to decide for itself whether determination on paper is appropriate? Can the Minister explain this? Can he explain to the Committee what will happen if the commission, having seen the paper application, has questions of the Secretary of State and wants to hear from counsel on her behalf?

I admit that I have no experience in this, other than debates in your Lordships’ House over the years and briefings from professionals and others involved in the process, but it seems that it is all too easy for such an application to become completely formulaic. Once there is a formula which is considered to pass the not “obviously flawed” threshold or test, that will go to the commission without, apparently, its being able to say, “Yes, but”. The “obviously flawed” test is in the new Schedule 4A. Is it beyond the bounds of possibility that the Home Secretary herself could want a hearing? We will never know because there is no one to ask. We are not even getting that close to the territory of closed hearings and special advocates here.

I find it difficult to understand what role this appeal court would be left with. We will know next to nothing—probably nothing—about the use of these powers. Paragraph 14 of the Explanatory Memorandum tells us:

“As the Home Secretary decides each case personally and due to the very low number of cases expected to be affected by these provisions, no specific monitoring or review of these measures will be undertaken.”


In this situation, reporting is almost a synonym for monitoring. Can the Minister at least give an assurance that there will be reporting? I cannot see that it could be very difficult. What harm would be caused? I do not think that I need to spell out why a report in the public domain is desirable and essential. So often we are told, not only by Home Office Ministers but from the Dispatch Box, that there is no need for a review of a provision in primary legislation, because there is an automatic, periodic review of all legislation that the Government put through. However, no review of the measures means no review of Section 10. In our view, there should be reporting, not just of numbers but, for instance, of whether men or women are affected by deprivation orders, and, importantly, whether each individual has, or is considered to have, dual nationality. Indeed, can the Minister confirm—I appreciate that it is a bit beyond this instrument—whether the powers will be used only in the cases of individuals who are citizens of another state? Does the appetite for secrecy really mean that the state is protecting us?

I have been doing my best to avoid reference to an ongoing case, and I do not seek to draw the Minister into it—I know that he will not be drawn in—but it is justifiable to ask about the cohort of women known to be in a camp in Syria, who are held there because of their IS connections. Can one really say of them that their whereabouts are unknown? They are not going anywhere; they are known to be in the camp, although they cannot contact lawyers. For reasons the Grand Committee will understand, given his widely reported comments last month regarding a case before SIAC, have the Government consulted the current Independent Reviewer of Terrorism Legislation? This is about legislation; Jonathan Hall is independent.

I have referred to judicial oversight. What I take from the instrument is that oversight of the process can be no more than minimal, and therefore oversight of the process is eliminated.

[Lord Coaker (Lab)]

My Lords, I thank the noble Baroness, Lady Hamwee, for her remarks; I agree with much of what she said.

I will confine myself to dealing with the SI before us, notwithstanding what many of us thought about the Nationality and Borders Act. As the Minister told us in his helpful introduction, the SI makes two required amendments to the Special Immigration Appeals Commission after the introduction of the Nationality and Borders Act. They are two amendments which many of us sought to introduce. We all support keeping our nation safe, but as a democracy, even in circumstances of national security, safeguards need to be built in. We all agree that citizenship is a privilege and a right, but in depriving someone of their citizenship, some checks are needed, to say the least. We therefore welcome the changes to the process, although I may have comments about how we actually got here.

The amendment requiring the Secretary of State to make an application to SIAC when making an order to deprive someone of their citizenship is important and welcome. That application must include an explanation as to why it is necessary for that order to be made without providing notice to the individual, and SIAC will then be required to determine whether the Secretary of State’s view is “obviously flawed”.

I have some questions for the Minister. What does “obviously flawed” mean? Can he give an example of what is meant by that? Can the Minister say who can advise the Minister that such a deprivation of citizenship is necessary? Is it only the Home Secretary who can apply to SIAC, or can the Foreign Secretary, for instance, do it? I think that I know the answer, but, as I mentioned to the Minister outside the Grand Committee, it is sometimes necessary to put those things on the record. As the noble Baroness, Lady Hamwee, referred to, are such applications made public in any way, either when they are made, or during or after any SIAC determination?

16:30

Can the Minister also confirm that the only way for anyone to provide any evidence or papers to that body is not in person or by video but only on paper? Can he confirm whether legal aid is available to such individuals, and will any provision of the National Security Bill change any of that? Does any individual have a right of appeal or do all have a right of appeal, and if they do, who is the right of appeal to?

Can the Minister comment—I think the noble Baroness, Lady Hamwee, made this point—on how SIAC was given 14 days to make a determination? What account was taken of the complexity of some of the potential cases and the gravity of the decision? No answer was given when I read the Hansard of the debate in the other place, so how was that timeframe of 14 days agreed, why was it regarded as appropriate, and what criteria were used to say that it was the right length?

Can the Minister also explain why in Rule 25B(3), which relates to the information laid out in Rule 25B(2), if you do not know any of that information, you do not have to provide it? Included in that list of information to be provided is the person’s nationality or nationalities, but according to Rule 25B(3) you do not have to provide that in any application. How can you have a hearing to deprive someone of their citizenship if you do not know what it is? I gave the Minister warning of that question. There may be a simple answer to it that has completely evaded me, but if so, it would be quite useful for us to understand what that means.

Under Rule 15, Rule 47 is amended, and we have the amendment before us. That refers to Section 22 of the Nationality and Borders Act—in other words, the late provision of information. In Section 22(4), a PRN recipient’s credibility is damaged if material is provided late—as I understand it, that is replicated in the SI. However, also in that amendment, a provision says that if there is good reason for that late provision, that can be taken into account and not be used to damage the credibility of the person who is appearing before the commission or giving evidence. Does that “for good reason” still apply to the SIAC? In other words, if you have a very good reason for not being able to get something to the commission, your credibility is not damaged if you have a good reason. That is in the Nationality and Borders Act 2022; does it apply to these processes?

Notwithstanding those questions, we support the amendments that have been made—as the noble Baroness, Lady Hamwee, said, we might not be particularly pleased with how we got here but they are safeguards that were put into the Bill on amendment and they are now being taken forward with this SI. Some important points of clarification and detail are needed, in answer both to the questions from the noble Baroness, Lady Hamwee, and to some of mine. However, as far as it goes, we welcome the two amendments in the SI.

[Lord Murray of Blidworth (Con)]

My Lords, I am grateful for those two considered contributions. I obviously appreciate the strength of feeling about deprivation of citizenship, but perhaps the Committee will bear with me if I repeat what I said earlier: maintaining our national security is the priority for the Government. It is vitally important that we are still able to take deprivation action, even if we do not know where a person is, to protect the public and keep our country safe. This instrument brings us closer to being able to do that, but let me explain the type of case we envisaged being covered by the new process of referral to the Special Immigration Appeals Commission.

Imagine someone who has been spying for another country against the UK and is now living at an unknown address in that other country; or the head of an organised crime group whose current whereabouts are known only through a police informant, and to use the address would put the life of that informant at risk; or a supporter of Daesh who has committed terrorist attacks and is hiding in the mountains of Syria. Such people pose a direct threat to the safety and security of the UK, and it simply cannot be right that our hands are tied because we cannot take away their British citizenship without giving them notice of the decision. Of course, depriving a person of the privilege of being British is a very significant thing to do. That is why the Nationality and Borders Act 2022 provides for judicial oversight of such decisions.

I will now take the opportunity briefly to address the additional points raised. I turn first to the points raised by the noble Baroness, Lady Hamwee. I was asked initially to confirm whether the powers would be used in a narrow and proportionate way. That is certainly my understanding. The application of deprivation powers is clearly a serious use of state power and will be done only in cases which warrant that significant step. I was then asked about reporting. I imagine that the reference there was to reporting statistics in relation to deprivation. Some statistics are certainly provided but, for obvious national security reasons, detailed statistics cannot be. The Government take very seriously their obligations to keep these matters under review.

I was asked specifically whether the Independent Reviewer of Terrorism Legislation was consulted in respect of this measure. I am afraid I do not have the answer to that question to hand. I imagine that there has been some engagement with this legislation, but I will of course find out and write to the noble Baroness in respect of that question.

I turn to the questions raised by the noble Lord, Lord Coaker. His first was on whether, in the rules, the phrase “Secretary of State” referred to the Secretary of State for the Home Department. I think that phrase is subject generally to the definition in the Interpretation Act: that it applies to any of His Majesty’s principal Secretaries of State. But in practical terms, I certainly understand that the power will be exercised by the Secretary of State for the Home Department.

I was then asked as to the extent to which the existence of the proceedings should be made public. The view is taken that these proceedings are generally, for reasons of national security, best done in a closed environment and, we would suggest, best done on the papers. In the circumstances of an application to commence proceedings without giving notice, the Home Office is the only party to proceedings and, given that this is about the administrative process of giving notice, it is unnecessary to have an open hearing with several judges. The individual will not be aware of the deprivation decision at this point and will not be in a position to give legal direction. The Special Immigration Appeals Commission will determine whether the Secretary of State’s decision not to give notice is “obviously flawed”, in line with judicial review principles. I hope that answers the next question which the noble Lord asked me, which was, “What is obviously flawed?”. It is something that would be upset on judicial review for being unlawful in the public law sense, so when it would be unreasonable or unlawful.

I was asked whether legal aid will be available. Obviously, in the case of no notification, it is hard to envisage a situation, given the lack of co-operation of the other party, where legal aid would be appropriate. But certainly, in principle, in relation to deprivation proceedings, legal aid is available and there are no plans to alter that.

As to the right of appeal, obviously, SIAC itself is an appellate body, in that one is appealing against or challenging a decision of the Secretary of State. Further appeals under SIAC are possible under the procedure rules; indeed, we have seen in various recent cases the involvement of the Court of Appeal.

I was asked about the time for making a determination described in Regulation 7, at new paragraph 25E of the rules, the provision that

“The Commission must determine the application no later than 14 days after”


receipt of the application. That period was agreed with the chair of the Special Immigration Appeals Commission, as it was suggested that it was an appropriate time for the chair to consider that application, balanced against the potential urgency. Of course, the only question the chair is considering there is whether it is appropriate for notice to be served—that is, whether the Secretary of State’s application should succeed.

I turn to the question from the noble Lord, Lord Coaker, in respect of Rule 25B set out in Regulation 7 and, in particular, the question of the meaning of Rule 25B(3). If the Secretary of State has the information listed, it must be provided, but if the Secretary of State does not have it, the Secretary of State does not have to provide it, and that does not prevent an application going ahead. Ultimately, the Special Immigration Appeals Commission will decide whether it has sufficient information to decide the application. Clearly, if it decides that it does not have adequate information, it will refuse the application.

[Lord Coaker (Lab)]

If I understood the Minister correctly, he just said that if the Secretary of State does not know the information, the Secretary of State does not have to provide it to SIAC, but the Secretary of State is applying to SIAC for a deprivation of citizenship. How can you deprive it if you do not know what it is?

[Lord Murray of Blidworth (Con)]

This is the application process to proceed without serving notice. The Secretary of State may know, for example, the person’s name, the person’s nationality or nationalities and the relevant Home Office reference, but not the person’s correct date of birth. As I understand the operation of sub-paragraph (3), that means that the absence of that one particular, given that the Secretary of State does not know it, does not invalidate the application.

[Lord Coaker (Lab)]

I was not asking about date of birth, was I? I was asking about where the Secretary of State does not know the nationality. I appreciate the case where you do not know all of the name, and so on—but it seems to me pretty key, if you are starting the process to deprive someone of citizenship but you do not know what their nationality is.

[Lord Murray of Blidworth (Con)]

It is clearly right—this comes back to another question I was going to deal with in a moment—that the power can be exercised only in cases of persons entitled to more than one nationality. The question is whether the department knows of an entitlement to British nationality and an entitlement to another nationality. If there are other potential nationality entitlements, it may be that, if those are not known, their absence from the application will not of itself invalidate the application. That is, as I understand it, the intent of that sub-paragraph.

[Lord Coaker (Lab)]

I do not want to dance on the head of a pin, but now the Minister has got into the potential for denying potential nationalities, and I would say that that is fraught with difficulties. I will leave it there—but it is an interesting point about the need for clarity. The Home Office not knowing what someone’s nationality is and being able to miss that out from a SIAC appeal as the basis of a process leading to, at some point, depriving someone of nationality or citizenship, seems a bit much.

16:45

[Lord Murray of Blidworth (Con)]

I can certainly write to the noble Lord about it, but the short point is this: if SIAC is concerned, on the balance of probabilities, that somebody has only British citizenship and not another, it will not make an order of deprivation. I hope that, to some extent, answers his question.

[Lord Coaker (Lab)]

I think the Minister is saying that it is perfectly open to SIAC to reject that application on the basis that the Government do not know what they are doing with respect to that nationality and that they should come back at a future date when they have done a bit more work on it.

[Lord Murray of Blidworth (Con)]

Indeed, as with any court.

In respect of the noble Lord’s question on Rule 47 as to credibility, the question being whether a claimant’s good reasons for responding late to a priority removal notice would be taken into account in cases that go to SIAC, the answer is yes.

To pick up one point from the noble Baroness, Lady Hamwee, on the use against dual citizens, it is right and clear in the statutory regime that an order using a deprivation power cannot be made that would have the effect of rendering a person stateless, hence the need for two nationalities, except that there is a very limited provision in Section 40(4A) of the Act, but that power has not been used to date. In any event, deprivation on conducive grounds is used sparingly and against those who pose a serious threat to the UK. It is correct that the conducive power is limited so that it can be applied only to those who are dual citizens or where there are reasonable grounds for believing that the person can become a national of another country. Parliament chose to enact the power on that basis to avoid the prospect of leaving individuals stateless, which would be contrary to the UK’s commitments under the 1961 statelessness convention.

[Baroness Hamwee (LD)]

If the Minister is coming to his closing paragraph to urge this instrument, then I am afraid that I have a number of questions to remind him of. However, I am glad to hear what he said about dual nationality. I was concerned because I thought he used the phrase “potential nationalities”. I do not know how one can potentially be a national of a particular country.

I will run through some points that I do not think he has been able to pick up. I raised the proportionality point in connection with Section 40(5A)(b)(iv), which is when the Secretary of State considers it necessary in the interest of the relationship between the UK and another country. I hope the Minister can confirm that there will be proportionality in that, rather than the general point he made.

I do not think the Minister answered the question on “must” deal with the matter on the papers rather than “may”, nor my question on whether the commission can call for more information and can even ask to hear from the Secretary of State.

The Minister referred to paragraph 14 of the Explanatory Memorandum. He might need to take this away, but to repeat, we are told by this that, because there is expected to be a “very low number” of cases,

“no specific monitoring or review … will be undertaken”.

My question was about reporting and the Minister answered on reporting in a general way. I would be glad to hear that there will be specific reporting on these deprivation without notice applications.

[Lord Murray of Blidworth (Con)]

In relation to Rule 25E, the noble Baroness is quite right. It is imperative that the commission determines the application on paper and without a hearing. As I elucidated a moment ago, that process is deliberately framed so that it can be resolved quickly because of the national security issues implicit in a deprivation decision. I am afraid that it is a “must” for a reason, and not a “may”. Clearly, SIAC, like any court, is able to make a decision on the information available to it and, if it feels that it lacks information, it is entirely open to it to ask for further information from the party appearing before it. I hope that that answers the question.

On the dual nationality point, the word “potential” is significant. The question in the statute is whether a person is eligible for citizenship of another country. That gives rise to the power to deprive under Section 40(4A), which is the power that I mentioned, which has yet to be deployed to date. As to reporting, I hear the noble Baroness’s question and I shall find out further detail and write to her in respect of it. I hope that I have therefore addressed the questions posed.

I want to be absolutely clear that the power to deprive an individual of citizenship has been possible for over a century. Section 10 of the Nationality and Borders Act does not change the reasons for which a person can be deprived of their citizenship, nor does it remove a person’s right of appeal. It is simply about the mechanics of how a deprivation decision is conveyed to the individual concerned and recognises that, in certain exceptional circumstances, it may not be possible to give notice.

The Home Office will always try to serve any deprivation notice at the point of a decision, including providing information about the person’s statutory appeal rights. Where that is not possible, and the person later makes contact with the Home Office, they will be issued with a decision notice and an explanation of their appeal rights. Section 10 of the Nationality and Borders Act clarifies that the timescales for lodging an appeal in these cases starts from when they are given the notice of the deprivation decision and not when the decision was first made.

In conclusion, this instrument is in the final stage of implementing the safeguards, as noble Lords noted, which will hold the Government to account in relation to decisions to deprive a person of citizenship without first giving them notice. It will also ensure that the Special Immigration Appeals Commission is required to include credibility statements in any relevant decisions that it makes that dispose of asylum and human rights claims. I commend the regulations to the Committee.

Motion agreed.

Electricity Supplier Obligations (Green Excluded Electricity) (Amendment) Regulations 2023

Monday 20th March 2023 Grand Committee

Motion to Approve

16:54

Moved by

[Lord Callanan]

That the Grand Committee do consider the Electricity Supplier Obligations (Green Excluded Electricity) (Amendment) Regulations 2023

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, these regulations, and the Electricity Supplier (Excluded Electricity) (Amendment) Regulations 2023, were laid on 8 and 20 February 2023 respectively, and were recently debated in the other place.

The purpose of the Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2023 is to improve the operation of the EII exemption scheme. This will ensure that access to the scheme for existing recipients is not negatively impacted by the effects of the Covid-19 pandemic, and that new applications can benefit from the scheme earlier than would otherwise be possible.

The purpose of the Electricity Supplier Obligations (Green Excluded Electricity) (Amendment) Regulations 2023 is to ensure that electricity suppliers in Great Britain contribute to CfD scheme costs more in proportion to their market share, regardless of whether they source electricity from the EU or the UK.

I acknowledge the Joint Committee on Statutory Instruments, the Secondary Legislation Scrutiny Committee and the other place, all of which have provided helpful reviews of these regulations.

These statutory instruments amend the Electricity Supplier Obligations (Amendment & Excluded Electricity) Regulations 2015 and the Contracts for Difference (Electricity Supplier Obligations) Regulations 2014.

The Electricity Supplier Obligations (Amendment & Excluded Electricity) Regulations 2015 provide for a scheme that helps to mitigate the risk of carbon leakage by exempting eligible businesses from a proportion of the costs of funding renewable electricity and minimise the risk of companies or production moving to overseas territories with less robust net-zero targets. These are costs associated with funding the renewables obligation, the contracts for difference and the small-scale feed-in tariff schemes. The costs associated with these schemes are passed on by electricity suppliers through their electricity bills. They have a particularly high impact on foundation industries such as steel, paper, chemicals and cement, which are critical to many infrastructure projects and provide well-paid, highly skilled jobs across the United Kingdom. As foundation industries, these businesses are critical in the development of new projects, including offshore wind, and therefore play an important role in the transition to net zero.

The exemption also provides relief for new and emerging industries, such as battery manufacturers—critical to electric vehicles—and manufacturers of semi-conductors, which are of key importance to the UK high-tech economy. They provide jobs not only directly but indirectly, such as in the aerospace and automotive sectors. They employ people from Cornwall to Kent and from Grangemouth to south Wales.

The original legislation was put in place in 2017 and since then over 320 businesses have benefited from the exemption. Businesses which applied in 2017 are now due to be reassessed under the regulations; they will need to be reassessed this year using the last three years of data. For these businesses, this will include the 2020 and 2021 trading periods. This new instrument makes amendments that will allow businesses to exclude data from that period, which, of course, does not reflect the normal course of their business, thereby preventing an unintended consequence from the Covid pandemic’s effect on industry.

This instrument also allows companies applying for an exemption to apply for relief with one quarter of financial data, rather than two. This will help and encourage businesses and start-ups to apply for relief.

The sectors eligible for the existing exemption scheme employ around 400,000 workers and account for more than a quarter of total UK exports. Many are located in areas of economic disadvantage and provide good, high-paid jobs. In the UK, our electricity prices for medium and large industrial users were the highest among the EU countries in 2021. Clearly, electricity costs have a significant impact on the competitiveness of such enterprises. The industries affected operate mainly in international markets, so higher electricity prices place them at a competitive disadvantage, resulting in the risk of carbon leakage, whereby companies choose to move their production to countries with less ambitious climate policies.

17:00

Existing legislation covering energy-intensive industries allows eligible businesses to receive an indirect exemption of up to 85% of the costs of funding renewable electricity schemes. Where an eligible business applies successfully for the exemption, its electricity supplier receives a reduction in the costs, which, in practice, it passes on to the eligible business. That approach mitigates the costs of the renewable electricity schemes, supports industrial competitiveness and provides certainty for businesses. The costs of the exemption are distributed to all other electricity users.

I turn to the contracts for difference scheme, which is the Government’s flagship renewable electricity support scheme. It is designed to offer long-term price stabilisation to new low-carbon generators, and to incentivise investment by giving greater certainty of revenues to electricity generators by reducing their exposure to volatile wholesale prices. This scheme has been very successful in driving the substantial deployment of renewables at scale in Great Britain while rapidly reducing the costs to electricity consumers. Payments to electricity generators supported by the CfD scheme are funded through a compulsory levy on electricity suppliers in Great Britain, known as the supplier obligation. Individual suppliers contribute to the costs of the schemes in proportion to their share of the British electricity sales market.

Electricity suppliers may currently apply to seek a partial green excluded electricity exemption from their supplier obligation to make contracts for difference payments. That is through the importing of renewable electricity generated in an EU member state and supplied to customers in Great Britain. Now we have left the EU, the aim of the change is to address that distortion by removing the exemption.

The proposed excluded electricity regulations amend the existing legislation to improve access to the EII exemption for new companies, by reducing the period for which financial data must be provided on initial application from two financial quarters to one. They also allow companies which are reapplying for eligibility to provide three years of data over the last five years and to exclude data from, for example, 2020 and 2021 from their application to account for the impact of the Covid-19 pandemic.

The green excluded electricity amendment of the CfD regulations will remove the availability to electricity suppliers in Great Britain of a partial CfD scheme cost exemption. The exemption currently allows electricity suppliers to reduce their liability to pay CfD scheme costs to the extent that they import green electricity from the EU. That results in suppliers’ cost obligation being proportionally further away from their market share. Now we have left the EU, that is no longer appropriate. Moreover, the removal of the exemption means that all electricity supplied by a supplier, no matter where it was produced, will have the supplier obligation applied to it in the same way.

In conclusion, the Government, in consultation with industry, have seen a clear rationale for the amendments to the regulations to improve the operation of the EII exemption scheme, and, through removing the green excluded electricity exemption, to bring a closer alignment between a GB electricity supplier’s market share and its proportion of the contracts for difference scheme costs. The green excluded electricity amendment also delivers part of the Government’s priority to address the UK legislative legacy of being a member of the EU. The exemption will continue to apply in respect of electricity supplied up to 31 March 2023. I commend the regulations to the Committee.

[Baroness McIntosh of Pickering (Con)]

My Lords, I assume that we will take both SIs together. I thank my noble friend for bringing forward these two regulations, with which I broadly agree. I will limit my remarks to the Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations.

I listened carefully to what my noble friend said. He said that the costs arising from the scheme will be distributed to all other users. Does that mean all other users, both domestic—that is, households—as well as industrial? If that is the case, is this part of the charge on standing charges? I will put down a marker—and I hope my noble friend will agree with me—that it seems very unfair that at this time of household stress and cost of living constraints, standing charges are the one element of a bill that we are not able to control. As individual householders we can control the unit charge, but we cannot control the standing charge. Therefore, if this is being spread across all users, both domestic and industrial, as my noble friend indicated, it seems a little unfair that this will be or is already an additional cost on the standing charge. Would it be possible at some stage to have a general debate on what constitutes the standing charges? I realise that that is not the purpose of today’s debate, but that would be very helpful indeed. My question is, what is the impact of this measure, with which I am in broad agreement, on household bills?

I absolutely accept that the EII plays a useful role, covering high electricity-using businesses such as, we are told, in the very helpful paragraph from the Secondary Legislation Scrutiny Committee report on this, energy-intensive users in sectors such as

“steel, paper, plastics, chemicals, cement and glass.”

Cement and ceramics are often overlooked, despite being high-energy users. That paragraph also says that the charge covers potential market failures:

“the Energy Intensive Industries … Exemption Scheme”—

to which my noble friend refers—

“offers an exemption for eligible companies to receive a discount from their electricity costs to address high energy costs and potential market failures.”

Another question that arises from this is: in the event of a market failure relating to an industrial user in this category—I am sure that a number may be teetering on the edge—is it left to the others in this category to pick up the costs of that failure, or is it once again a charge to all users, domestic and industrial?

My two final points are, first, that no impact assessment was done, which possibly might have been useful. Secondly, paragraph 10.8 of the Explanatory Memorandum states:

“This consultation ran for 5 weeks and closed on the 16 September 2022.”


That seems a short period to run a consultation which covers the holiday period. Was there any particular reason for that, or had the department taken other soundings before it launched the formal consultation? However, with those few queries, I support the two regulations before us this afternoon.

[Baroness Sheehan (LD)]

My Lords, I thank the Minister for his introduction of the SIs. I will take the Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2023 first and then the other one second. I can broadly support this SI, but I have a few points that I want to raise.

The Explanatory Memorandum explains that the proposals were made in the review of the scheme to provide relief to energy-intensive industries for a proportion of

“the indirect costs of funding renewable electricity policies”.

However, it makes no mention of the responses to the consultation. I am afraid that I have been unable to find a government response on these proposals. My first question to the Minister is: is that response in the public domain and, if so, where can I find it? Also, how many consultees responded on questions 3 and 4, which cover the proposals in this regulation? What was the distribution of views and what alternative proposals were made? Did any consultees highlight risks or unintended consequences? It would have been useful to have seen responses on that.

As trading data will be unaudited, what independent checks will be carried out on that data to ensure that gross value added is not being under-reported or energy costs overstated to meet the eligibility criteria of at least 20% of the GVA being from electricity costs? When will the Government respond to the other proposals in the review?

I will close with a thought on a more strategic outlook that the Government could take. Rather than piecemeal subsidies, a possible longer term and more comprehensive solution to carbon leakage would be the carbon border adjustment mechanism, whereby high-emissions industries migrate to the parts of the world with the lowest effective price on carbon. A CBAM would allow tariffs to be charged on imported goods in proportion to the difference between their emissions and those for the corresponding goods made at home. Ministers reported in May 2022 that they would consult on such a mechanism by the end of last year. That time has come and gone, so I wonder whether the Minister could provide an update to the Committee on when we might have that consultation. There are rumours that it might be due to start in the next month or two. Can the Minister confirm that or say no to it?

I turn to the Electricity Supplier Obligations (Green Excluded Electricity) (Amendment) Regulations 2023. The Minister mentioned briefly, and it was laid out clearly in the Explanatory Memorandum, why the UK’s departure from the EU means that the UK Government are no longer required to make provision to exempt certified green imported electricity from EU member states from the electricity supplier obligations—that is, as the Minister explained, from payments which are used to support feed-in tariffs and contracts for difference. This instrument will remove the green excluded electricity exemption from the contracts for difference scheme so that the electricity from renewable sources that is imported to Great Britain from an EU member state, and is currently exempt from the contracts for difference reconciliation scheme, will no longer be exempt.

The Explanatory Memorandum tells us that the current

“exemption benefits licensed electricity suppliers in Great Britain who import renewable electricity from EU member States”.

That is clear so there is an incentive to import green electricity, as things stand, which is a good thing. Can the Minister confirm that the proposed abolition of the exemption means that the energy supplier obligation reconciliation payments will have to go up, as a result of losing this benefit? That is the logical conclusion of the statement in the EM. Removing the exemption will put in place an incentive instead for energy suppliers to move away from green energy imports from the EU, and I wonder whether that is the Government’s intention.

17:15

I see the Minister shaking his head, but the EM states that the current exemption “benefits licensed electricity suppliers”, so I do not see how getting rid of it will also be to their benefit. Further clarification on that would be greatly appreciated, because the outcome, whether intended or not, has the potential consequence to be the reduction of green energy supply to GB consumers.

The consultation response from the Government says at pages 7 to 8 that the removal

“provides financial incentives to those suppliers who import renewable electricity from EU trading partners.”

However, it is not clear that the abolition of the exemption provides any incentive for suppliers to import renewable electricity over any other kind. In fact, it does quite the reverse. Perhaps the Minister could explain that statement in the Government’s response and offer an example to make it clearer to me, to whom it is just not clear, how this might be the case. It would be great to have that on the record. Lastly on this, what assurances have Ministers obtained from Ofgem or elsewhere of the harm to green specialist suppliers, which provide an important element of consumer choice and have often led the way, and which bigger suppliers have subsequently followed? The last thing we want is to dampen their enthusiasm.

Again, the Explanatory Memorandum states that the removal of the green excluded electricity exemption “addresses a distortion”—the Minister also himself used the word “distortion”—

“where the costs of the”

contracts for difference

“scheme, borne by UK suppliers, are not evenly distributed in relation to an energy supplier’s market share.”

I am not sure about that. To me, it does not make sense that that will be the case, because the whole raison d’être of the contracts for difference scheme is to allow incentives for the generation of green electricity. It is there to distort the market. It should not matter to our Government where that renewable energy has been generated. Climate change is a global issue. We benefit from the manufacture of goods all over the globe. Surely we want those goods to be less carbon intensive, wherever they may be produced, so we should be encouraging the global rollout of renewable energy, and the proposed abolition of the GEE will have the opposite effect. We may have to disagree on that, but if the Minister has an example, I should really appreciate it.

The Explanatory Memorandum says that

“The withdrawal of the UK from the EU means that the UK is no longer legally required to maintain the GEE exemption.”

I agree that that is indeed the legal case. However, there is also a moral imperative and a common sense one. Is it not the case that this abolition of the GEE from energy supplier obligation calculations will make it harder for us to realise our statutory net-zero targets—which are more important than ever in light of the IPCC report today?

[Lord Lennie (Lab)]

My Lords, I thank the Minister for his thorough explanation of the regulations and the noble Baronesses, Lady McIntosh and Lady Hamwee, for their contributions and questions, which the Minister will no doubt deal with when he comes back.

I will take the reverse order from the Minister: I will deal first with the green amendment and then with the energy intensive amendment. Contracts for difference are the main way in which the Government support low-carbon electricity generation projects. While we were in the EU, a supplier could seek a reduction in their liability proportion in the levy by offsetting low-carbon electricity generated in the EU area. The UK is no longer under an obligation to offset any low-carbon electricity generated in the EU area. Following industry consultation—I do not know how thorough it was, or how much there was—removing the green excluded electricity was determined to be the fairest way of proceeding following our exit from the EU. As I understand it, the supplier obligation applies to all licensed suppliers of electricity to pay for the contracts for difference.

The statutory instrument is relatively straightforward: it removes something that was implemented when contracts for difference first became the major instrument of the development of renewals in the UK. It looks to close a potential loophole in state aid regulations. Suppliers importing electricity from Europe should not have that supplier obligation applied to them and the electricity they are bringing in from European sources. As we no longer have responsibilities over state aid, it is no longer appropriate to continue with the arrangement that was dependent on the state aid loophole. In the past, suppliers had to provide proof of power coming in to claim that there was no money to pay, as it were, for that energy coming in. Now the opposite is the case: suppliers will have to provide evidence of what is coming in as a renewable source, via the interconnector, from Europe to ensure that they pay. Can the Minister say why any company would now produce evidence of green energy imports through the interconnector in order to pay? Nothing in the regulations requires that evidence is given so that payment is made, and there is nothing about enforcement action or penalties against bodies which do not provide information to enable future payments to be made.

Also, there is no inversion in place for the relationship between the strike price and the reference price. As I understand it, that means that, instead of normal procedure as far as the contracts for difference in this country are concerned, the supplier does not get a payment from the Government in respect of the strike price. As the reference price is currently above the strike price, the supplier has to pay back into the Low Carbon Contracts Company. The company then has a reasonable obligation to pay back that money to suppliers. So I ask the Minister: are companies now obligated under the SI to pay money into the LCCC for contracts for difference which were pre-exempted, and also to get money from the LCCC when the general strike price is inverted against the reference price?

The energy intensive industry exemption, as the Minister said, provides relief to around 320 electricity-intensive companies in the UK. It launched in 2017, and it needs to be reassessed this year under the scheme’s rules. Following consultation, the Government decided to implement two minor changes to the operation of the scheme. The amendments to the scheme are designed to improve accessibility to the EII scheme and to account for the Covid-19 pandemic period. First, it will allow companies applying under the exemption from the indirect costs of funding contracts for difference, the renewables obligation and the small-scale feed-in tariffs to be able to feed in three of the previous five years for assessment, as the Minister said, in order to account for possible lower trading and electricity usage during the 2020 and 2021 pandemic years. Secondly, it will allow new companies to apply with only one quarter of trading rather than two, as was the case previously.

Labour does not oppose those sensible changes which take account of what happened during the Covid period. Companies will be judged against their present performance rather than that of previous years. It is likely that companies previously exempted from the scheme can now be brought into it. Does the Minister agree with that? Could he comment on the observation made in the other place that the mining of hard coal is on the eligibility list? Given the environmental effects of that industry, it seems at least curious as to why it may be included under the EII scheme.

[Lord Callanan (Con)]

I thank all noble Lords for their valuable contributions to the debate. The electricity-intensive industries exemption provides relief for key foundation industries, including companies operating in the steel, paper, chemicals, cement and glass sectors. The scheme also supports emerging sectors ,such as battery manufacturers and companies making semiconductors. The companies this scheme supports are located all over the UK and provide high-paid, good-quality jobs both directly and in the supply chain.

These EII regulations are necessary to improve the operation of the current excluded electricity scheme. They will make it easier for start-ups and new businesses to apply. They will also allow businesses to account for the impact of Covid-19 when reapplying for relief. We will update and publish our guidance on the GOV.UK website to ensure that businesses are aware of these proposed changes, and proactively engage with stakeholders to ensure that they are too.

Following the consultation in spring 2023, we will come forward with our proposals on the recently announced British industry supercharger, which aims to roll out further support to important manufacturing businesses. This will be through exempting firms from certain costs arising from renewable energy obligations, as well as the GB capacity market costs, while also exploring reductions on network charges, which are the costs that industrial users pay for their supply of electricity.

The proposed removal of the green excluded electricity exemptions from the CfD scheme means that a supplier in Great Britain will pay a proportion of the contract for difference scheme cost that is closer to their market share. It will remove a condition placed on the British scheme by the European Commission and ensure that the supplier obligation is applied to GB suppliers in accordance with their market share.

We are proposing these legislative amendments following a public consultation. It generated 28 responses from a cross-section of the energy industry, representative bodies, brokers and other concerned parties, with the policy proposals receiving wide support.

I will move on to the specific questions raised. My noble friend Lady McIntosh asked about redistribution costs, the impact of standing charges, impact assessment and the consultation period. I say to her that, for the EII exemption scheme, any increase in the bills of non-eligible consumers arising from these changes is likely to be extremely minimal. For this reason, it was felt that a new impact assessment was not required. The redistributed cost applies only to the policy cost element of an electricity bill and does not impact or increase the current standing charge.

The noble Baroness, Lady Sheehan, asked a number of questions about consultation responses, the number of consultees and the distribution of comment, and about the carbon border adjustment mechanism. The Government’s response to the consultation will be published shortly and it will set out further detail on the distribution of comments received. I can tell the noble Baroness that, in total, there were 64 responses to the EII exemption consultation, including from electricity suppliers, currently eligible businesses and other organisations.

Regarding the distribution of comments, there was significant support for the amendments proposed under this SI, as they improve access to the schemes and ensure that firms are not disadvantaged by the impact of the Covid pandemic. The scheme continues to have a robust process both for initial applications by EIIs and for the required reassessment that an EII needs to go through to continue to receive the exemption. This includes an assessment of the company’s accounts, its electricity bills and any other supporting evidence. As officials are in regular dialogue with firms in the energy-intensive sectors it was felt that, given the relatively minor and technical nature of the changes, five weeks represented a sufficient consultation period. As stated, we will publish our formal response shortly.

The noble Baroness, Lady Sheehan, also asked about a carbon border adjustment mechanism. I agree that this could represent an easier solution to the problem of carbon leakage, but I am sure she will accept that it is more of a long-term change. The EU is also looking at it on a longer timescale. We will shortly publish a consultation on a potential CBAM, but I am sure the noble Baroness will realise that there are lots of potential implications of such a mechanism.

17:30

Further, with regard to the noble Baroness’s comments about the potential for incentivising EU imports, she made the point that the effect of removing the GEE will incentivise suppliers to no longer import from the EU. But it is not the case that the abolition of the GEE will make it harder for us to meet our net-zero obligations, because those suppliers who use the exemption will have to pay a scheme cost proportion that is much closer to their GB market share. Although this is an increase in costs to them it is, in the grand scheme of things, considered very minor. There are in fact more suppliers who will benefit from the change than not—again, though, the overall effect is relatively minor.

The overall costs to industry remain the same, as supplier obligation costs remain unaffected. There is unlikely to be any impact, positive or negative, on consumer bills as a result of the change, because the suppliers that use the green excluded energy exemption evidence their purchase using EU-derived guarantees of origin. These certificates can be, and often are, purchased separately from the electricity that they represent because, for government accounting purposes, all imported electricity counts as zero carbon, even if it was in fact not generated that way. It is obviously impossible to tell.

The effect of these regulations is that all electricity supplied by suppliers in the UK will be treated equally for the purposes of the supplier obligation, regardless of where it was generated. They remove the way that a supplier’s market share, and therefore the proportion of the scheme costs that it is liable for, is calculated. Once the amendments come into force, Great Britain suppliers will no longer be able to discount imported renewable electricity from their market share.

The noble Lord, Lord Lennie, asked about companies providing evidence on the electricity bought through an interconnector. The contracts for difference scheme offers extremely good value for money to consumers and continues to help deliver lower prices. The impact will depend on the outcome of the competitive auction process and, subsequently, on wholesale market prices. In fact in 2022, the CfD generators paid a net total of £357.5 million back to the Low Carbon Contracts Company, because of course the strike price was way below the actual market price of electricity. That demonstrates how good and effective the CfD scheme actually is. Many other countries across Europe and the world are seeking to emulate the scheme because it has been so successful.

The regulations further currently provide that eligible imported electricity will not be considered chargeable supply for the purpose of calculating each supplier’s underlying liability for CfD payments. Suppliers have to submit evidence of eligible imports to the Low Carbon Contracts Company within six months of the end of the quarter in which the electricity was supplied. The LCCC then determines the amount of electricity that qualifies as green excluded electricity, according to criteria set out in the regulations, and takes this into account when calculating a supplier’s reconciliation payments.

Once these amended regulations come into force, suppliers will no longer be required to provide evidence of imported electricity. Only data on electricity demand obtained by EMR Settlement Ltd from the GB balancing mechanism will be used to calculate suppliers’ liability for CfD payments, or alternatively, CfD refunds in the event of net generator payments back into the scheme. EMR Settlement is a wholly owned subsidiary of Elexon Ltd and provides settlement services—the collection and distribution of payments from and to suppliers and CfD generators, on behalf of the Low Carbon Contracts Company.

The noble Lord, Lord Lennie, also asked about previously excluded sectors. In fact, there will be no change to the current list of eligible business sectors or companies under this amendment, with only those companies which meet the current criteria being eligible to apply for and receive the exemption.

In response to the noble Lord’s question about the inclusion of the mining of hard coal as an eligible sector, that sector meets the criteria as being both highly electricity and trade intensive. This means that its electricity costs make up a significant percentage of its operating costs and it is, of course, subject to a significant degree of international competition—as a result the same arguments apply that I outlined earlier in relation to carbon leakage.

Our net-zero strategy makes it clear that unabated coal has no part to play in our future power generation, which is why we are planning to phase out coal completely from our electricity supply by 2024. Coal’s share of our electricity supply has already declined significantly in recent years, from almost 40% in 2012 to less than 2% in 2021. For similar reasons, coal mining in the UK has itself been in long-term decline, reflecting domestic demand, and in fact only a handful of operational mines remain in the UK.

I hope I have provided sufficient reassurance to noble Lords, and I commend these draft regulations to the Committee.

Motion agreed.

Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2023

Monday 20th March 2023 Grand Committee

Motion to Approve

17:36

Moved by

[Lord Callanan]

That the Grand Committee do consider the Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2023.

Relevant document: 32nd Report from the Secondary Legislation Scrutiny Committee

Motion agreed.

Criminal Justice Act 2003 (Home Detention Curfew) Order 2023

Monday 20th March 2023 Grand Committee

Motion to Approve

17:37

Moved by

[Lord Bellamy]

That the Grand Committee do consider the Criminal Justice Act 2003 (Home Detention Curfew) Order 2023.

Relevant document: 30th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Bellamy) (Con)]

My Lords, I beg to move. As your Lordships will know, the home detention curfew—or HDC—scheme allows certain prisoners to be released from prison early and kept on an electronically-tagged curfew in their home. The scheme was first established some 20 years ago. The statutory instrument before us extends the permitted maximum HDC by 45 days—around six weeks—from 135 days to 180 days. I will say a little more about the effect of that in a moment.

In parallel with the statutory change, which extends the HDC period, the Government are at the same time introducing non-statutory policy changes to exclude certain kinds of offenders from the scope of HDC. As your Lordships know, in statutory terms, certain offenders are totally excluded from HDC—for example, when they are sentenced to more than four years or are registered sex offenders, terrorists, or others. Other kinds of offenders are presumed unsuitable under the relevant HMPPS policy framework, including, for example, foreign national offenders liable to deportation, those convicted of possession of an offensive weapon, possession of firearms, and so on.

Following the discussions that took place in connection with the passing of the Police, Crime, Sentencing and Courts Act 2022, to which the noble Baronesses, Lady Brinton and Lady Newlove, and the noble Lord, Lord Ponsonby, made important contributions, further offences are now being added to the “presumed unsuitable list” to coincide with the coming into force of the statutory instrument on 6 June. These are offences relating, for example, to stalking; harassment; the breach of a non-molestation or similar order; controlling or coercive behaviour in an intimate or family relationship contrary to the Domestic Abuse Act 2021; and non-fatal strangulation and suffocation. In other words, offenders guilty of those offences will be presumed not suitable for HDC, unless the prison governor concerned is persuaded of exceptional circumstances.

In addition, since April 2022, it has been mandatory for information to be gathered from police and children’s services about domestic abuse or safeguarding risks. It is only after that information has been gathered and a full risk assessment made that an offender may be released on HDC. While the HDC period is being extended, these parallel measures protect the public—in particular, from potential abusers.

The net effect of these measures, in parallel, is that fewer offenders are likely to be eligible for HDC, whereas those who are eligible may be on HDC for up to six weeks longer. In practice, the net increase of prisoners out on HDC is expected to be about 300 up from the current figure, which is about 1,850. I should add that, in practice, because of the requirement to serve a minimum of a quarter of any prison sentence, this statutory change affects those serving between 18 months and four years, with those serving between two and four years eligible for the maximum period of 180 days.

In addition to these developments, technology in this area continues to improve. GPS now allows the monitoring of offenders away from home, which also enables certain types of offender, such as those known as acquisitive offenders, to be targeted. If one is wandering away to do some shoplifting, the GPS can follow one, as it were. It also now permits alcohol monitoring, so alcohol monitoring tags have been rolled out across England and Wales. This technology development is supporting the policy.

HDC has been used successfully for 20 years to better manage the transition of eligible offenders from prison back into the community, and the changes I have outlined continue along that path. The other place has just approved the statutory instrument this afternoon, and I commend the instrument to the Committee.

[Lord Ponsonby of Shulbrede (Lab)]

I thank the Minister for that introduction, and we support the SI. As the Minister said, the current maximum period that an eligible offender may spend in the community on home detention curfew is 135 days, and this is being increased to 180 days through the order. He gave an example and talked about the improvement in the technology for those who are on HDC. Are all prisoners on home detention curfew on some form of electronic monitoring, or are some deemed to have no monitoring necessary?

The Minister also spoke about the greater use of GPS monitoring, rather than just home curfew monitoring, and alcohol monitoring. Would he care to speculate on what other forms of technological improvement we might see in the next few years? I have been involved, on and off, in giving tags to people on bail, and so on, and I have seen the technology used and abused over the years. It is interesting how the technology has developed and how the courts and prison system is learning to work with it appropriately. I should appreciate it if the Minister would speculate a little on how that might change in future.

The MoJ states that the purpose of running the home detention curfew is to ensure that offenders have a smooth transition back into the community from custody. We agree with that, and we support the scheme as a whole. However, we say that there is limited evidence to support the claim about reoffending statistics. The draft Explanatory Memorandum points to research published in 2011 that shows that offenders released on home detention curfew

“were no more likely to engage in criminal behaviour”.

That is a rather lukewarm endorsement of the policy—even though we do support it. The Ministry has said that it will publish internal evaluations on the expansion of the scheme in 2024. Given the lack of clear supportive evidence for the effectiveness of the scheme, despite the length of time it has been running, will the Government ensure that robust evaluations are made as soon as possible?

17:45

The Minister spoke about the changes to the suitability criteria planned for the HDC policy framework. He read out a list of offences which would be presumed as unsuitable for home detention curfew, which, broadly speaking, were in the domestic violence framework, if I can put it like that. I will ask about stalking specifically, because I do not think that the Minister mentioned it. Should stalking be included in the “presumed unsuitable” category?

As the Minister said in his conclusion, the net effect of the scheme means that there will be fewer prisoners eligible for home detention curfew, but those who are eligible will be out for longer—and we support that broad principle. I look forward to the Minister’s answers to the questions I have raised.

[Lord Bellamy (Con)]

My Lords, I thank the noble Lord, Lord Ponsonby, for his remarks and questions, and I shall deal with them as far as I can.

I understand that all prisoners on HDC are on some form of electronic monitoring, and some have a kind of location monitoring in addition to help them, so that one knows more precisely where they are exactly and what they are up to, if I may put it like that.

I am reluctant to speculate today on exactly how far this scheme will develop, and I am sure that the Government will be very interested in drawing on the experience of the noble Lord himself and others on how it works out. He referred to the “use and abuse” of the systems. Of course, every time one invents new technology, someone tries to find some way around it or some way of defeating it, so we will need to work that through. However, the general direction of travel is that the technology is improving all the time and we will learn by experience how to use it in an appropriate way to achieve the mutual objectives of helping prisoners back into the community.

On the “no more likely” point of the general efficacy of home detention curfews, the Government’s position is that they work and that they help people to make the transition from prison to the community. It is certainly the Government’s position that the improvements in technology that I have mentioned—the location and alcohol monitoring—will reinforce it, so that is how it will evolve. We have committed to make an internal evaluation in 2024, and we probably have to wait a little bit of time until we see how it goes, so that we can properly evaluate the new extension we are talking about. We will certainly make that evaluation, which will be further information on which policy decisions can be taken.

On the noble Lord’s question about suitability criteria, if I did not mention stalking, I should have done so—it is at the top of the list. The scheme offers a very important protection for the public and for people particularly concerned with stalking and the stalking risk, as it were.

I have endeavoured to answer the questions of the noble Lord as best I can, and I therefore commend the instrument to the Grand Committee.

Motion agreed.

Judicial Pensions (Fee-Paid Judges) (Amendment) Regulations 2023

Monday 20th March 2023 Grand Committee

Motion to Approve

17:49

Moved by

[Lord Bellamy]

That the Grand Committee do consider the Judicial Pensions (Fee-Paid Judges) (Amendment) Regulations 2023.

[The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Bellamy) (Con)]

My Lords, the statutory instrument before us today amends the Judicial Pensions (Fee-Paid Judges) Regulations 2017, which established the fee-paid judicial pension scheme 2017. The statutory instrument was approved in the other place on 21 February.

At present, the fee-paid judicial pension scheme provides only for eligible fee-paid judicial service on or after 7 April 2000. The main purpose of the statutory instrument is to provide pension benefits for certain eligible fee-paid service before 7 April 2000. The situation arises as a result of three cases.

The first was O’Brien 1 in 2013, when it was decided that fee-paid judges were workers and therefore eligible for pension benefits that mirrored those of salaried judges under the then judicial pension scheme. That was from 7 April 2000, the date when the relevant EU regulation was transposed into UK law. It led to the 2017 regulations.

In 2018, in O’Brien 2, the European Court of Justice found that eligible fee-paid judicial service prior to 7 April 2000 should also be taken into account for the purposes of calculating pension benefits. If one was already a judge on 7 April 2000, service before that date should count towards the pension.

In 2019, in the Miller case, the UK Supreme Court found that the time limit for fee-paid pension entitlement claims runs from the date on which the judge retired from judicial service rather than the date on which they left the fee-paid office concerned. You had until your ultimate retirement date to make the relevant claim.

Although we now have a new judicial pension scheme, these regulations ensure that the judgments I have just referred to are fully implemented and that the judges concerned get pension benefits in respect of their historical fee-paid judicial service.

The detail of the regulations is, if I may say so, impenetrably complex, as a result of different pension arrangements over the years. There was a different arrangement in force between 1981 and 1995, and then again between 1995 and a later date. These regulations deal with the pre-1995 provisions as well as the post-1995 situation. They make certain changes or additions to eligible offices and provide for a way of dealing with small amounts; one can commute to have a lump-sum payment, if there is just a small pension entitlement; they provide for the purchase of additional benefits; they apply to various techniques for reconciling various amounts outstanding; and they correct certain minor errors. These are very detailed matters indeed, but the essential purpose is to make sure that the pensions to which those judges are entitled are enshrined in the statutory instrument.

There was a consultation in 2020, and the responses received were broadly supportive. Officials have been in close touch with the devolved Administrations in Scotland, Northern Ireland and Wales, which have been kept apprised of developments, and, as I said, there has been close consultation with the judges affected.

In closing, I will make two points. Questions have been raised as to whether these regulations are affected by the retained EU law Bill currently before Parliament. On the assumption that the Bill becomes law, the regulations provide for already acquired pension rights, and I can confirm that they will not be sunsetted or otherwise adversely affected as a result of that Bill. Assuming that in due course it becomes an Act of Parliament, the relevant rights will be preserved.

Lastly, I point out, in case anyone has ever glanced at my CV, that I have no personal claim under any of these regulations.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, the cavalry has just arrived in the form of my noble friend Lord Davies of Brixton, who is a pensions expert. Unfortunately, he will not say anything on the SI, which I will take as a level of endorsement of it. He is nodding his head—jolly good.

As the Minister said, the SI amends the judicial pensions regulations 2017, which established the fee-paid judicial pension scheme and provide pension benefits for eligible fee-paid judicial service from 7 April 2000 to 31 March 2022. It mirrors the pension benefits for salaried judges under the Judicial Pensions and Retirement Act 1993.

As the Minister set out, the SI amends the 2017 regulations, as required by O’Brien 2 litigation. In several ways, it is very complex. The Labour Party supports the SI. In essence, its purpose is to ensure that the work of fee-paid and salaried judges is undertaken and remunerated in the same way, and that that is recognised in their pensions.

I thank the Minister in particular for being very clear about the retained EU law Bill. I was indeed going to ask about that, and he could not have been clearer in saying that the Government will not put any sunset clauses in and will expect to retain all the provisions under this SI after the retained EU law Bill is passed.

I will go no further than that, because the Minister has answered the questions I was going to ask. As I said, the Labour Party is happy to support this statutory instrument.

[Lord Bellamy (Con)]

My Lords, in those circumstances, I commend the instrument to the Committee.

Motion agreed.

Committee adjourned at 5.58 pm.