Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)
My Lords, no votes are anticipated so the Bell really should not ring, but if it does, noble Lords know the drill already, so let us kick off.
I call the noble Baroness, Lady Smith of Malvern—sorry, I see it is the noble Baroness, Lady Blake of Leeds.
Higher Education (Fee Limits and Fee Limit Condition) (England) (Amendment) Regulations 2026
Baroness Blake of Leeds
That the Grand Committee do consider the Higher Education (Fee Limits and Fee Limit Condition) (England) (Amendment) Regulations 2026.
Relevant document: 51st Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)
Baroness in Waiting/Government Whip (Baroness Blake of Leeds) (Lab)
My Lords, unfortunately, my noble friend Lady Smith is unwell, so I shall speak to the draft Higher Education (Fee Limits and Fee Limit Condition) (England) (Amendment) Regulations 2026. To begin with, I should take this opportunity to explain that within the Explanatory Note there was a discrepancy, in that the percentage increase for 2026-27 was stated as 2.7%, whereas it should be 2.71%, and the percentage increase for 2027-28 was stated as 2.8%, whereas it should be 2.68%. I can reassure Members that a correction slip has been arranged.
I thank the Secondary Legislation Scrutiny Committee for its scrutiny of the draft regulations. This statutory instrument, which was laid in draft on 5 February, will increase the limits on tuition fees that higher education providers can charge students studying undergraduate courses at approved fee cap providers in the 2026-27 and 2027-28 academic years. The SI preserves the fee limits for lower-fee foundation years at 2025-26 levels for 2026-27 and 2027-28. A separate SI making changes to maximum fee loans and student support for the 2026-27 academic year was laid before the House on 12 February.
As many Members have previously acknowledged in this House, our higher education sector is one of our country’s most valuable strategic assets, one that we should feel proud of and endeavour to protect, so that future generations of students can continue to benefit from it. Our higher education sector is admired across the globe. International students from all over the world choose to study here, making an enormous contribution to the sector, to the economy and to society as a whole. Our universities are home to world-leading research across a broad range of sectors including clean energy, digital technologies and life sciences.
The Government have set out a clear vision for the future of the sector in the Post-16 Education and Skills White Paper—a vision for a sector that drives economic growth, delivers a world-leading, high-quality experience for all students, provides national capability and increases the UK’s international standing, while also delivering regional impact for everyone who lives in this country.
There have been countless examples heard in this House about how providers are anchors in their communities, helping to break down barriers to opportunity, supporting local businesses, strengthening social cohesion and delivering important local jobs as well as outreach. Higher education providers transform the lives of the students who attend them, not only by enabling them to boost their incomes and progress in a career that they choose, but by enriching their lives through new experiences and allowing them to develop life skills, grow their networks and experience new perspectives.
However, this House has spoken at length about the challenges the sector faces. A growing number of providers are facing financial challenges. Analysis from the Office for Students from November 2025 suggests that, without mitigating action, 45% of providers could face a deficit in 2025-26. Indeed, English providers are contending with a number of financial pressures, one of which is the £1.7 billion aggregate loss on domestic teaching and the need for providers to draw on other income to cover it. Such challenges have been unaddressed for far too long, and seven years of frozen tuition fees plus overly optimistic strategic and financial planning and potential issues with governance have contributed to the financial challenge facing providers.
The Government took the immediate action needed and responded by increasing fee caps for the 2025-26 academic year and by also making reforms to the Office for Students. But the Government must go further to ensure that our higher education sector is put on a secure footing, to allow it to face the challenges of the next decade and to ensure that all students receive the world-class education they deserve. Government and the sector have a shared interest in fully realising the benefits of higher education for students, taxpayers, the economy and wider society. Government has a responsibility to ensure that the higher education sector is suitably funded, and the sector has a responsibility to ensure that it delivers the best value for students and maximises its contribution to our economy and society.
This SI is intended to put our higher education sector on a more secure footing and provide greater certainty over future funding, so the sector can focus on delivering quality provision. It will mean that, for the 2026-27 academic year, from 1 August 2026 onwards, tuition fee limits for undergraduate courses will increase by 2.71%, and for the 2027-28 academic year, from 1 August 2027 onwards, by a further 2.68%, in line with forecast inflation, based on the RPIX inflation measure. This means, for example, an increase from £9,535 to £9,790 for a standard full-time undergraduate course in 2026-27, and an increase to £10,050 in 2027-28.
Increasing fees for the next two academic years will mean that providers have greater certainty and can focus on delivering the Government’s ambition for a more specialised and more efficient sector that is better aligned with the needs of the economy. This will provide long-term certainty over future funding for the sector. We will then legislate, when parliamentary time allows, to increase tuition fee caps automatically for future academic years. These annual increases in fees, linked to inflation, will balance the need to give the sector stability with fairness to students and taxpayers.
I understand that this may raise concern about the affordability of higher education for students, but the Government are committed to ensuring that higher education is open to all who have the ability and desire to pursue it. The student finance system removes upfront financial barriers and provides additional support to those with the greatest needs, so that higher education is open to all. The Government are already making improvements to the student finance system that we inherited. To help students from disadvantaged backgrounds progress and excel in higher education, the Government are reintroducing targeted, means-tested maintenance grants of up to £1,000 per year, from academic year 2028-29. The Government have also committed to future-proof our maintenance support offer by increasing loans for living costs with forecast inflation every academic year from 2026-27 onwards.
The OfS has consulted on its future approach to quality. It will continue to hold providers to account for the outcomes that they achieve for their students, and this Government will ensure that only high-performing providers are able to charge the top rate of fees. Eligible students can continue to apply for upfront fee loans to meet the full cost of their tuition.
It is also important to remember that student loans come with a range of unique protections designed to support borrowers throughout the lifetime of the loan. Unlike commercial loans, student loan repayments are calculated solely on a borrower’s earnings, not on the amount borrowed or the rate of interest applied. Any outstanding balance, including interest, is cancelled at the end of the loan term, with no detriment to the borrower, and student debt is never passed on to family members or descendants.
The Government’s ambition is to have a more sustainable, more specialised and more efficient sector, which aligns with the needs of the economy. It is vital that higher education continues to contribute to closing the gap between people from disadvantaged backgrounds and their peers. The Government want to recognise each provider’s unique contribution and encourage them to capitalise on their comparative advantage. The Government are not going to force this specialisation; it is clear that the diversity of the sector is a strength, but each provider needs to be clear on its distinctive role in the system and move away from a one-size-fits-all approach. Each provider needs to be well run, collaborating with others to deliver the best value for students, and to operate as efficiently as possible.
In December, the Government announced reforms to the research excellence framework—the REF—to ensure that it better supports curiosity driven research, government missions, industrial strategy priorities, innovation and commercialisation. It will also reduce administrative burden and encourage greater collaboration and specialisation across universities. At the same time, the Government will protect and grow quality related research funding and redirect some UKRI funding toward areas of strategic national importance, while addressing sustainability challenges in the sector.
To conclude, this SI will put our higher education sector on a more secure footing, enabling it to continue to deliver the world-class higher education that current students and those in future generations deserve. I beg to move.
Lord Mohammed of Tinsley (LD)
My Lords, as we heard from the Minister, the purpose of this statutory instrument is an increase in tuition fee limits, indexed to inflation. The Minister has presented this as a technical adjustment that is necessary to maintain financial stability in our higher education sector. However, we must be clear: there is nothing merely technical about increasing the cost of accessing education. This is a decision with profound consequences for students, social mobility and the very character of our universities.
We recognise the genuine financial pressures facing higher education institutions. Years of frozen fees, rising costs and uncertainty over overseas students have created a challenging environment. Universities must be properly funded if they are to continue delivering world-class teaching and research. However, this instrument places the burden of that funding disproportionately on students, many of whom are already carrying significant debt and facing difficulties during this economic downturn. Our position is clear: we cannot support a policy that increases fees without wider, fairer reforms of higher education funding. Simply uprating fees by inflation risks entrenching a system that is already failing too many. It does nothing to address the long-term sustainability of the sector, nor does it tackle the inequalities faced by students from disadvantaged backgrounds.
Moreover, this approach lacks ambition. Many will ask, “Where is the comprehensive strategy for higher education? Where is the consideration of alternative funding models, maintenance support and lifelong learning?” Piecemeal adjustments such as this do not meet the scale of the challenge before us. There is a question of timing and fairness. At a moment when students and graduates are grappling with the cost of living, and when young people are questioning the value and affordability of higher education, this Committee should be wary of endorsing measures that risk further deteriorating participation.
In that spirit, I ask the Minister three questions. First, what assessment has been made of the impact of these increased fee limits on the participation of students from lower-income backgrounds? Secondly, can the Minister set out whether the Government intend to bring forward a comprehensive review of higher education funding—and, if so, when—rather than continuing with the incremental adjustments? Thirdly, what consideration has been given to increasing maintenance support alongside these fees changes to ensure that students are squeezed no further by the cost of living?
We must not accept a false choice between underfunded universities and overburdened students. By the way, I should declare my interest, as I have done on several occasions previously: my daughter is in the first year of her degree at Sheffield Hallam University, so she may well be impacted by this change.
The Earl of Effingham (Con)
My Lords, like the noble Lord, Lord Mohammed, I would like to register my interest: my daughter is a first-year student. These changes will probably not impact me because she pays and has a student loan, but, just for the record, I have a daughter who is at university and has a student loan.
I welcome the opportunity to speak to these higher education regulations, which His Majesty’s loyal Opposition oppose. These regulations will once again push tuition fees higher for students. The noble Lord, Lord Mohammed, quite correctly said that they will have profound consequences for students. Under this SI, the maximum fee cap will rise to £9,790 in 2027 and exceed £10,000 the following year. This comes despite repeated promises from both the Secretary of State for Education and the Prime Minister that graduates would pay less under this Government. That is simply not the case. Fees were already raised last September for the first time in eight years, and repayment thresholds have been frozen. As many noble Lords understand, this is effectively a tax rise on graduates.
Baroness Blake of Leeds (Lab)
My Lords, I will respond to the comments of both noble Lords together, since they raised similar, although not identical, themes. I thank them both for contributing to today’s debate. Of course, this is an exceptionally topical subject, on which there have been three OQs recently in as many weeks, so it has been much highlighted.
I reiterate the importance of the SI for putting our higher education sector on a secure footing and providing greater certainty over future funding. Obviously, we have heard many views today and previously about the importance of the sector, not only for students themselves but for economic growth, world-leading research and the contribution that it makes to communities. I do not want to dwell on this, but I have to wonder at the comments of the noble Earl, Lord Effingham, given the lack of action from the previous Government, when it was clear that the higher education sector was heading into very difficult circumstances yet there was no sense of commitment.
I emphasise that running through all our work on this is fairness and sustainability. There needs to be fairness to all students who apply, by making sure that access is open to all—a point which perhaps both noble Lords did not emphasise enough. To too great an extent in the past, family wealth and ability to pay were hugely determinative in whether young people went to university. This Government have made the commitment that we will make sure that quality education is open to all.
On that issue of quality, which both noble Lords raised, I again emphasise that the UK higher education sector is a world-leading sector in our economy that creates opportunities and supports local communities. But, as both noble Lords rightly said, we have to make sure that we root out any low-quality provision wherever it may exist. That is why the Office for Students has driven forward significant regulatory reform in recent years, strengthening its regulatory tools, holding higher education providers to account for the quality of their provision and investigating where there are risks to the students’ best interests.
We are determined to ensure that higher education providers go further in giving their students the best course, making sure that they work individually but with links to employment outcomes and to our industrial strategy, by ensuring that student destinations are a factor in considering providers’ performance. Sir David Behan’s independent review highlighted that, and we are working through the recommendations in supporting institutions to implement a more integrated quality system through the teaching excellence framework. The aim is for a regulatory approach that combines tackling poor quality with a greater focus on driving continuous improvement for all registered providers.
To answer the noble Lord’s concerns, that approach will be proportionate and will reward the highest-quality provision. That was clearly laid out in our Post-16 Education and Skills White Paper. In the future, the Government plan to make fee uplifts conditional on providers achieving a high-quality threshold through the OfS’s new quality regime.
I am also delighted to emphasise that the Government are bringing back maintenance grants and, through maintenance loans, helping undergraduates from the most disadvantaged backgrounds to progress and excel in higher education. The Government will future-proof the maintenance loan offer by increasing loans for living costs in line with forecast inflation every academic year from 2026-27 onwards. I hope that addresses the concerns.
We are ensuring that students from the lowest income families receive the largest year-on-year cash increases in support and providing students with long-term financial certainty on the financial support they receive while studying. Maximum loans will rise by 2.71% across 2026-27. In addition, vulnerable groups of students who are eligible for benefits—such as lone parents, some disabled students and care leavers—are all exceptionally important and we must make sure that we support them. I am delighted that many local authorities, as well as universities and other institutions, are looking at how they can further support disadvantaged students.
The noble Earl, Lord Effingham, raised the issue of repayments. I reassure him that, when it comes to students repaying their loans, their monthly repayments will not increase because of the changes to the fees or maintenance support. Student finance works very differently from standard consumer lending. Repayments are determined solely by a borrower’s income rather than the total amount borrowed or the interest that accrues. Those earning below the repayment threshold will make no payments at all. At the end of the repayment period, any outstanding balance—including any accumulated interest, which I mentioned earlier—will be cancelled in full.
We have to be realistic: we inherited a terrible fiscal situation and some of the decisions we are making are tough but necessary to protect both taxpayers and students. On the question about the review, there is a continuous review into student finance to ensure that it remains fair, sustainable and supportive of students from all backgrounds. I know there is a lot of interest in this area at the moment, so I reassure noble Lords that these matters are constantly under review. I cannot be more specific about where we may go.
I think we have agreement across the Grand Committee that the higher education sector is one of the country’s most valuable strategic assets. We need to protect it on behalf of the institutions themselves, while making sure that future generations of students can continue to benefit from it. The system of course has financial challenges but, despite that, the number of students from disadvantaged backgrounds has not diminished as was feared. That is due, I think, to the extensive work in engaging with them to make sure that they feel that the courses on offer are for them. We know that seven years of frozen fees have contributed to a significant real-terms decline in providers’ incomes. I hope that that addresses the noble Earl’s concerns.
The Government and the sector have a shared interest in fully realising the benefits. The Government have already taken decisive action to boost income, as I have outlined. We of course need to do more. We need to keep reviewing this and making sure that stability runs through this very important sector. However, to be absolutely clear again, the Government continue significantly to subsidise the HE system. In addition to the subsidised fee loans provided to students last year, the Government also provide support to world-leading research. That is why this statutory instrument will increase, for a further two years, the limits on tuition fees that higher education providers can charge students studying undergraduate courses. With those comments, I commend the regulations to the Grand Committee and hope to get approval from other noble Lords.
Further Education (Initial Teacher Training) Regulations 2026
(1 day, 16 hours ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Blake of Leeds
That the Grand Committee do consider the Further Education (Initial Teacher Training) Regulations 2026.
Relevant document: 50th Report from the Secondary Legislation Scrutiny Committee
Baroness in Waiting/Government Whip (Baroness Blake of Leeds) (Lab)
My Lords, I thank the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments for their scrutiny of this instrument. These draft regulations were laid in Parliament on 22 January 2026.
As noble Lords will be aware, the quality of teaching is critical to securing the best outcomes for pupils, learners and students in all parts of our education system, from early years right through to adult education. In October last year, the post-16 education White Paper set out an ambitious vision for the future of our skills system in England. The further education sector is the driving engine of that vision. We must ensure that high-quality teaching is hard-wired into our colleges and training providers.
We are taking decisive steps now to improve and secure the quality of teacher training for the FE sector. Ensuring that there is an accessible, attractive and high-quality training offer for new teachers will help improve the recruitment and retention of teachers in the FE sector, contributing to the Government’s commitment to recruit an additional 6,500 teachers for our schools and colleges. It will also send a clear message about our focus on securing high and rising standards of teaching in our colleges.
This instrument marks an important step towards creating a regulated system of teacher training for FE, covering the full range of providers delivering relevant courses across the sector and based on clear, evidence-based quality standards. It dovetails with the focus on quality that comes with the new Ofsted inspection framework for initial teacher education, which will now encompass significantly more FE teacher training providers than it previously did.
For many years, successive Governments have focused efforts on securing standards of teacher training for our primary and secondary schools—with considerable success—but, until recently, that focus had not been extended to how well our FE teachers are being prepared. There is excellent practice in parts of the system, and regulation must not constrain or discourage innovation and excellence. However, there is too much inconsistency across the sector, and some deeply concerning examples of poor practice in FE teacher training have emerged in recent years. Trainees have not always been guaranteed a high-quality training experience that prepares them to be great FE teachers, and employers have not always been assured that teacher training courses are equipping new teachers with the skills and knowledge they will need.
The regulatory system created by these regulations will place new requirements on all providers of specified FE teacher training courses in England. This includes universities, colleges, training providers and any other organisations delivering such courses. These providers will be required: to have regard to guidance issued by the Secretary of State on the curriculum content of FE teacher training programmes; to have regard to guidance on delivery standards for FE teacher training courses; to register with the Department for Education as a provider of FE teacher training courses; and to submit regular data and information to the Department for Education relating to any specified FE teacher training courses provided.
These measures are proportionate but significant in their intended impact. For the first time, we, employers and potential new teachers will have clear sight of what teacher training provision is being offered, where and by whom. Such transparency is a key ingredient of a quality-focused system. That focus will be enhanced further by requiring all providers of specified courses to have regard to clear, evidence-based standards on course delivery and curriculum content.
DfE officials have worked closely, over a sustained period of time, with stakeholders from the FE provider and teacher training sectors. There is widespread consensus that the approach we are pursuing will deliver a clear, positive dividend in driving up standards, while ensuring that providers continue to have the flexibility they need to exercise their own professional and expert judgment.
These measures have been shaped by public consultation, a formal call for evidence and sustained engagement with professionals from across the sector. I record my thanks to all those who have contributed their time and expertise to the process.
Particular thanks are due to the expert group convened by the Department for Education, chaired by Anna Dawe OBE, principal of Wigan and Leigh College, one of the first technical excellence colleges, which has played a pivotal role in advising on the evidence for high-quality content in FE teacher training. I beg to move.
Lord Addington (LD)
My Lords, as the noble Baroness, Lady Blake, has just said, this statutory instrument is probably well overdue. It is something that we have not looked at, because Governments of whatever colour or combination really just did not get around to it. So, I congratulate the current Government on having taken this first step.
Being as fair as I possibly can be, they are starting on a process that may not get the standards we want consistently for something like a decade. There are existing staff structures going through and there is the institution of training. Every standard will take time to bed in and normalise, and it will take time to find out where it has have worked and where it has not. This is not so much a criticism as an observation of what is obvious. It will take time.
Having said that, I do not have any objection to the SI, but it would be interesting to hear some of the things that will be needed to speed up the process of guaranteeing the quality. One is continuing professional development and how we are going to bring up the standards of those teachers already in place, who may be below the standard of what we would want. What is going to be done to intervene to do that? This will vary across the board.
We are dealing with a huge number of students here, every bit as wide as the school system. Their degree of success or failure has probably meant they have ended up in the further education system. Let us face it: as both the previous and current Government have said, even with improved career information and guidance, people are ending up there because they have not succeeded or have not been perceived to be succeeding to the highest level. How are we getting through to these students who may not have succeeded very well?
This brings me on to the subject—which I am sure the noble Baroness would have been disappointed if I had not raised—of special education needs. The new White Paper talks of early identification. The fact that it is being said that this needs to be improved means that people going through this system stand a very good chance of not having their needs identified or having the support structures there. It is a historical problem, and this Government just happen to have been brave enough to hit the wave and go through with it. So, what will they do to improve that structure to get these students through?
A high percentage of people on level 1 or 2 courses will almost certainly have special educational needs. What are we doing to identify these and make sure their teacher has the access to both the knowledge and in some cases the technology—I remind the Grand Committee of my interest with Microlink—so they use the right stuff and identify the right assistive technology to get their students through? Recognising there is a problem and not giving them more of the same is very important for these groups, because they have failed with more of the same already—so you need to work smarter to deliver.
Making sure that is done will mean we stand a better chance of getting people who are in the training phase of their lives, getting ready to go out and earn a living, to actually benefit from this. It would be normal to expect those providing this training to be able to identify whether people can do this. It also means that other support provided in adult life to enable people to do this can be identified through jobcentres et cetera. Whatever people are doing out there, it has to be identified, and they need to be accessed.
We are dealing with a historical problem here; it has been recognised by the previous Government, and we have started taking steps, but what is going to be done? In other words, we thank the Government for this, but what are we going to do to bring the rest of the staff up to the standard? When it comes to special educational needs provision, what are you going to do to identify those on the margin in particular, who are failing—often just failing—because they are not getting that little bit of help?
Baroness Garden of Frognal (LD)
My Lords, further to what my noble friend has just said, can I say that there used to be a very highly regarded City & Guilds qualification for teachers in further education, which virtually all of them held? Of course, teachers in FE are nearly always also practitioners, so they spend time actually doing the thing that they are teaching about. It is really important that that is reviewed as well.
I agree with what the Government are doing, but the biggest worry about FE is with the scale of pay. FE teachers are paid considerably below schoolteachers; they often have a bigger burden to bear—they have a very wide variety of students of different ages, and they get landed with things like the resits for GCSE maths and English, which is just iniquitous. What are the Government doing to address the pay of FE teachers, who are fundamental if we want to upgrade the skills of the country?
The Earl of Effingham (Con)
My Lords, His Majesty’s loyal Opposition agree that all initial teacher training courses should set and achieve the highest possible standards so that every learner benefits from high-quality teaching. There is no disagreement across this Committee about the importance of well-trained teachers in further education. The sector plays a crucial role in equipping people with the skills that they need to succeed and thrive, and the quality of teaching is central to that mission.
The Government’s own assessment makes clear why action is needed. The current system has led to inconsistency in provision, and Ofsted has expressed serious concerns about the quality of some courses. That is not acceptable for trainee teachers, employers or students. In that context, introducing a clearer framework for initial teacher training in further education is a reasonable step. Establishing expectations around course content and delivery and requiring providers to meet them should help to drive greater consistency across the sector.
However, there are important questions about how this framework will operate in practice. Its success will depend heavily on effective oversight and enforcement. The Government have made it clear that compliance will be monitored primarily through Ofsted inspections, yet they also acknowledge that this will place additional demands on the system, with further resourcing decisions deferred to future fiscal events. So it should be fair and reasonable to ask how the Government will ensure that Ofsted is provided with the adequate funding that it needs to carry out this role properly. Without sufficient resource, there is a real risk that these new standards will exist on paper but not be consistently upheld in practice.
More broadly, your Lordships’ House will note that the Government have left open the possibility of further intervention in future, including tighter controls over the provider market. That underlines the importance of getting this right now and ensuring that the system is both robust and workable from day one.
In conclusion, we support the principle that initial teacher training in further education must be of the highest quality. However, the Government must ensure that the necessary resources and oversight are in place so that these reforms can be meaningful in practice.
Baroness Blake of Leeds (Lab)
My Lords, I thank the noble Lords and noble Baroness for their contributions to this important discussion. I personally had the benefit of attending an FE college and, from a very early age, I recognised the extremely important contribution that FE makes to our rich landscape of educational provision.
I will try to pick up the main points made across the discussion. This Government are absolutely focused on improving the quality of teaching across the whole education system. This is an important turning point for FE teacher training. We have to be honest—— I hope noble Lords will recognise this from previous years in government—that it has been the Cinderella of the teacher training system for too long. We have to emphasise the Government’s commitment to promoting high and rising standards in teaching, recognising that there are examples of exceptionally good practice. We need to make sure that that excellence is protected and that trainee teachers and their employers have full confidence in the training they receive.
Lord Addington (LD)
Actually, there is quite a lot of good practice and basic support in virtually all further education institutions. For things such as information capture, there is a standard for everywhere. It can be used in a few ways; for example, lectures and so on can be taped and transcribed into any digital or written format you like. Have the Government looked at using this more roundly in colleges—especially those colleges that also provide higher education—as an extra way of supporting people who have problems with, for instance, note-taking? Dyslexic and dyspraxic people would be the classic example of that.
Baroness Blake of Leeds (Lab)
We are always grateful for the noble Lord’s insight into these areas, but we know that FE colleges are incredibly inclusive. We must, as I think the noble Lord is suggesting, look out for good practice and make sure that, where we see it, it is replicated and becomes the norm. That is the exact point: we have patchy provision. We want to make sure that, wherever young people go to study, there is a good standard right across the piece. We also want to make sure that the transition between different stages is smoother and information exchange between the different settings much more user-friendly. We collect data, but I do not think we use it effectively enough to assist teachers in making sure that their students get off to the flying start they need.
In her comments on pay, the noble Baroness, Lady Garden of Frognal, in fairness, highlights an important area. The latest data show that the average salary for FE college teachers increased by 6.1% in 2023-24, compared to 2022-23, but the Association of Colleges and the Sixth Form Colleges Association recommended a 4% increase for FE teachers in 2025-26. Actual pay awards are decided in colleges in line with local circumstances. In May 2025, the department announced a further investment of £190 million for colleges and other 16-to-19 providers, in addition to the £400 million of extra funding that we are planning to spend on 16-to-19 education. A significant amount of funding is going in and we want to make sure that these issues are addressed.
On the Ofsted comments, mentioned by the noble Earl, Lord Effingham, the Secretary of State recently wrote to the chief inspector confirming that funding will be made available in the year 2026-27, to ensure that Ofsted can have an impact in the first year of the new four-year inspection cycles. Future funding will, of course, be subject to fiscal events.
I have tried to gather information from, and respond to the information given in, the comments made and the questions asked. I hope noble Lords will feel reassured that every aspect has been addressed with extreme seriousness, recognising just how important the FE sector is and how important it is for learners to feel supported in every setting, responding particularly to their needs. The proposed measures enjoy wide support from across the FE and teacher training sectors and have been developed in close collaboration with leading experts and representatives from those sectors. I commend the regulations to the Committee.
Data (Use and Access) Act 2025 (Consequential Amendments and Transitional Provision) Regulations 2026
Lord Leong
That the Grand Committee do consider the Data (Use and Access) Act 2025 (Consequential Amendments and Transitional Provision) Regulations 2026.
Lord in Waiting/Government Whip (Lord Leong) (Lab)
My Lords, these regulations were laid before the House in draft on 2 February. They make consequential amendments to references to the Information Commissioner and their office—the ICO—across the statute book. They reflect the reforms to the regulator’s governance structure introduced by the Data (Use and Access) Act 2025.
Specifically, that Act abolishes the office of the Information Commissioner, which is a corporation sole, and transfers its functions to a new body corporate—the Information Commission—led by a chair and a chief executive, as well as other executive and non-executive members with collective decision-making responsibilities. This will increase diversity and resilience at the very top of the organisation, so that the Information Commission can function effectively with integrity and independence. It will also bring the commission in line with how other regulators, such as Ofcom, are governed.
These regulations prepare the statute book in anticipation of the transfer of functions from the ICO to the new Information Commission later in spring this year. They will ensure that the statute book is coherent, consistent and provides full legal clarity to support the transition from the ICO to the Information Commission. The regulations also make amendments to the title of the regulator across relevant Scottish, Welsh and Northern Irish legislation, on which devolved Governments were consulted.
In addition, Regulation 3 contains a transitional provision that provides for the Information Commissioner to retain their existing pension arrangements for the duration of their tenure as first chair of the Information Commission, a role that the Information Commissioner assumed on commencement of Schedule 14 to its parent Act on 20 August 2025, under paragraph 2(2) of that schedule.
Finally, the regulations also contain three minor and technical amendments to the Data Protection Act 2018, in consequence of Sections 67 and 91 of the Data (Use and Access) Act. These changes are intended to signpost references correctly and to reflect numbering changes, and do not have substantive legal effect. The consequential amendments, alongside the transitional provision and other minor and technical amendments contained in these regulations, will facilitate the smooth governance transition from the Information Commissioner’s Office to the new regulator, the Information Commission. I beg to move.
Lord Clement-Jones (LD)
My Lords, I thank the Minister for his introduction. Of course, we recognise that this instrument is a technical necessity. It ensures that the statute book remains coherent as we transition from the Office of the Information Commissioner to the new Information Commission. Obviously, not to agree these regulations would be to invite legal ambiguity across hundreds of pieces of legislation, from the Public Records Act to the UK GDPR.
However, accepting the technicality of this SI does not mean that we on these Benches have moved past our deep-seated reservations regarding the original Data (Use and Access) Act 2025. The Liberal Democrats argued throughout the passage of the original Bill that the governance upgrade that the Government describe is in reality a threat to regulatory independence. By replacing a singular independent Information Commissioner with a commission, the members of which are largely appointed by the Secretary of State, the Government have increased the risk of political interference. We remain concerned that the Act has weakened the rights of citizens, as we debated during the passage of the Act, and specifically we regret the reduced independence, with the new structure allowing the Secretary of State to have a greater hand in the commission’s strategic priorities.
Viscount Camrose (Con)
My Lords, I too thank the Minister for introducing these regulations. I note that he is having a spectacularly busy day. Clearly, these regulations are essentially technical in nature, as the noble Lord, Lord Clement-Jones, said, but they play an important role in ensuring that the statute book remains coherent following the passage of the Data (Use and Access) Act 2025.
That Act, as a partial continuation of the itself much-debated DPDI Bill, made a great many important changes, not least a significant structural change to the United Kingdom’s data protection regulator, replacing the previous officeholder model with the new corporate body of the Information Commission. The purpose of these regulations is therefore straightforward. They update references across the statute book so that legislation refers to the new body rather than the former Information Commissioner’s Office.
These are consequential amendments that are technical but necessary to provide legal clarity and continuity. We on this side recognise the importance of maintaining a regulatory framework that is both clear and workable. Data protection and digital regulation now sit at the heart of our modern economic and civic lives. In an increasingly digitised world, the institutions responsible for overseeing that framework must be capable of responding to fast and far-reaching technological developments while maintaining public trust.
The creation of the Information Commission as a board-led body is intended to support that objective by strengthening governance and resilience at the top of the organisation. Needless to say, structural reform is a necessary but not a sufficient condition for the regulator’s effectiveness. The commission’s responsibilities will continue to expand as new technologies and new risks emerge. It is therefore at least as important that it has the strategic clarity and operational capacity required to discharge its functions effectively. Will the Minister explain how the Government propose to ensure, today and in future, that the commission is able to balance two objectives, both vital to the United Kingdom: protecting individuals’ rights and privacy; and enabling innovation and economic growth in our digital economy?
It seems to me that without a principles-based adaptive approach, we are going to enjoy a great many repeats of this debate, in one way or another, as the Government of the day, of whatever flavour, struggle to keep up with emerging technologies. I look forward to the Minister’s response to the points raised by myself and by the noble Lord, Lord Clement-Jones.
Lord Leong (Lab)
My Lords, first, I am really grateful to the noble Lord, Lord Clement-Jones, and the noble Viscount, Lord Camrose, for their contributions. The Government are committed to the integrity of the new data protection regulator, the Information Commission. Having regulatory powers and responsibilities shared across an independent board, rather than vested in one individual as is currently happening under the Information Commissioner, will ensure diversity and resilience in the decision-making process.
As I have outlined, the Information Commission needs modern, effective governance structures in place to enable it to perform as a dynamic regulator and sustain its well-established international reputation. This ties in with the question that the noble Lord, Lord Clement-Jones, asked earlier about independence. These regulations, in line with the governance structures established by the Data (Use and Access) Act 2025, lay the foundations to achieve this. As I mentioned, the new governance structures model will safeguard the Information Commission’s independence. It is important that the regulator continues to operate independently, and the Government believe that having its responsibilities spread across a board with executive and non-executive directors will ensure greater independence and integrity. The new governance models will create greater clarity and certainty, allow for the appropriate public appointment processes by the Government and are commonplace for UK regulators.
The noble Lord also asked about the transfer of functions from the current ICO to the Information Commission. The Government are currently concluding the public appointments process for the Information Commission’s non-executive directors. DSIT is also working closely with the ICO to ensure operational readiness and a smooth transfer of all functions from the Information Commissioner’s Office to the Information Commission. A separate instrument containing commencement and transitional provisions will bring Sections 118 and 119 of the Data (Use and Access) Act into force, abolishing the Information Commissioner’s Office and transferring all regulatory and other functions from the ICO to the new Information Commission. This is due to occur later in spring—I cannot be clearer than that, I am afraid—and I am happy to keep the House informed on progress in this area.
Lord Clement-Jones (LD)
My Lords, I am sorry to interrupt the Minister, but there must be a planning date. If any private business were transforming itself, it would have a target date of April the 5th or 6th, or whatever it might be, but there seems to be no certainty here, and therefore the Minister does not even know when this statutory instrument will actually become live. It is important that it becomes live, I am assuming, on the same day that the transfer of functions takes place.
Lord Leong (Lab)
I said earlier that the appointment process is currently taking place. The current Information Commissioner will be chair, and the current CEO will be interim CEO until the new Information Commission is set up. The composition of the governing board—the executive and non-executive directors—is currently in process; we have appointed some, but not everybody. We have to get that first before we can decide on the date that everything is rolled over. That is the situation we are in.
Regarding devolved Administrations, the power to make consequential amendments conferred on the Secretary of State by Section 139 of the DUA Act, under which this instrument is being made, does not require the consent of the devolved Administrations. Nevertheless, in line with usual practice, the department has consulted with the Northern Irish, Scottish and Welsh devolved Administrations on the changes to legislation within their competence, and they are content with the approach taken in the instrument. Additionally, the Minister for Digital Government and Data has written to the relevant devolved Ministers to inform them of the nature and scope of the changes made to devolved legislation at the time of laying this regulation.
On the point made by the noble Viscount, Lord Camrose, about the functions of innovation and growth, I will have to come back to him on that.
We look forward to being able to announce in due course the conclusion of the appointments process, as I mentioned earlier, for the non-executive members of the Information Commission board. The board will provide independent oversight alongside constructive scrutiny and challenge to the complex, wide-ranging and important regulatory work of the Information Commission.
Renewables Obligation (Amendment) Order 2026
(1 day, 16 hours ago)
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Lord Whitehead
That the Grand Committee do consider the Renewables Obligation (Amendment) Order 2026.
Relevant document: 52nd Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, the renewables obligation scheme has incentivised UK renewable electricity generation through a system of tradeable certificates called renewable obligation certificates. Three separate but complementary renewables obligation schemes cover the UK: the RO and the renewables obligation Scotland—ROS—were introduced in 2002, and the Northern Ireland renewables obligation —NIRO—was introduced in 2005. The UK Government are responsible for RO legislation in England and Wales. The Scottish Government and the Northern Ireland Executive are responsible for the legislation of their respective schemes. Ofgem administers all schemes across the UK. The scheme is now closed to new applications—indeed, it was closed in 2017—but existing sites continue to receive support until the scheme ends in 2037. The scheme has been instrumental in taking a nascent renewable energy sector to where it is today, with the scheme supporting around 30% of total UK electricity generation.
Electricity suppliers are required each year to present a set number of renewables obligation certificates to Ofgem reflecting the amount of electricity they supply. Where a supplier does not present enough certificates, it must instead pay a buy-out price for each missing certificate. Those buy-out payments are then recycled back to suppliers that have complied, which supports the overall value of certificates and ensures the scheme operates in a fair and predictable way.
Earl Russell (LD)
My Lords, I thank the Minister for his introduction. I begin by recognising that this draft Renewables Obligation (Amendment) Order 2026 makes a specific and, on the face of it, sensible change in the way the renewables obligation is updated over time. By moving from RPI to CPI calculations for inflation, it should slow the growth of RO costs and in turn ease some of the pressures on energy bills paid by households and businesses. As the Minister said, during a new energy crisis when far too many families and households are living in fuel poverty and we are seeing rapid rises in our energy costs, we remain acutely conscious that many are watching every pound being spent on their energy bills. This SI, if everything goes to plan, as the Minister said, would save £1.9 billion over the next 11 years.
We therefore welcome the measures, as they are designed to reduce the cost of energy. However, bringing down bills cannot be separated from maintaining the pace of the clean energy transition and maintaining market confidence and those who finance it. As the Minister said, the RO has been instrumental in building our capacity, particularly for mid-scale onshore wind and solar. Many have made investment decisions years ago based on an understood indexing regime. Can the Minister tell us what assessment has been made of the impact on projects that have had financing assumptions predicated on RPI? How many generators are judged to face material changes to their expected revenues as a result? What modelling has been done to check whether these measures could have a disproportionate impact on those at the smaller end of the generating scale?
There is also, for us, the question of overall approach. From the Government’s point of view, this is a small, important, but technical, pragmatic and consumer-focused change. But, for many in the industry, this is yet another incremental tweak to the legacy schemes. I note that, of the 257 responses to the consultation, most did not support either option put forward, citing a preferred option not to change the system at all, based on concerns around investor confidence, minimal consumer benefit and a need—from their point of view—for financial stability and predictability. Do the Government accept that this kind of piecemeal pattern risks the possibility of further eroding investor confidence? That would not be because any one of the individual changes is huge on its own but because it creates a sense that the rules for existing long-term investments are constantly up for potential revision.
As the Minister said, the impact is £1.9 billion. The measures will curtail the existing revenue for RO generators—reductions of around 1% for the financial year 2026-27, which will rise to 5% by the financial year 2030-31. As we know, these are large-scale, long-term investment decisions, so even relatively minor changes can have, over a prolonged period, quite large and sustained impacts on what were expected revenue returns and investment decisions. The Explanatory Memorandum says that, overall, the department does not expect that there will be a disruptive effect on small generators. What does that mean in practice? How confident is the Minister in that statement? Also, how will this be monitored going forward? I note that there is no statutory review clause here, so how will any unintended impacts or consequences of the SI, once it is passed, be monitored? Furthermore, if there are unintended consequences, would there be a willingness by the Government to look again at these changes, particularly if they happen to impact the smaller schemes?
More generally, is it the Government’s intention, over time, to mitigate remaining RO schemes into contracts for difference-type frameworks? Instead of having this piecemeal approach, is there a more fundamental plan, as part of this framework, to reduce bills? I welcome those measures, but is it not time that there was an overall plan for this, rather than looking at individual orders one by one? Is there not a better way of doing this, agreeing it with the investors and the market, so we can both reduce the cost for bill payers and maintain the investor confidence on which we depend to secure future investment? We generally welcome what is here, although we have a few questions about it. We do not oppose this SI in any way, but we want a bit of clarity on those points.
Lord Moynihan (Con)
My Lords, I am delighted to stand before the Committee in agreement with the noble Earl, Lord Russell, on this occasion. If I may, I will build on some of the questions he asked. Before I do, I declare my interest as the chairman of Acteon, which is a global specialist subsea services company providing integrated seabed-to-surface engineering solutions for the worldwide offshore energy sector, including oil and gas and wind energy.
During the consultation exercise for this order, almost half—48%—of respondents expressed a preference for not going ahead with either option. Many respondents raised concerns about the wide-reaching, longer-term impacts that these changes could have on investor confidence and regulatory stability. What does the Minister believe will be the effect on investor confidence in this sector?
Many argued that indexation changes could raise risk premia and depress valuations, and that they would likely increase the cost of capital on new investments, which could deter future investment and, ultimately, have an impact on consumers. Does the Minister agree with this? If not, why not? Most respondents felt that both of the options proposed by the Government would represent a breach of legitimate expectations based on prior commitments from the Government. Some believed that the proposals could attract legal challenge. Does the Minister consider legal challenge likely? If not, why not?
Some respondents warned that the estimated consumer bill savings from switching to CPI would be modest or otherwise offset elsewhere by increases to the cost of capital of future projects, and few agreed that the switch to CPI is necessary at all. The UK law firm Burges Salmon said:
“A switch to CPI or a temporary freeze to tariff/buy out levels will therefore unnerve everyone involved. Many investors have modeled returns based on RPI-linked revenues over the full support term. Any switch (whether Option 1 or 2) will therefore undoubtedly result in slower growth of support income which may, in turn, impact projected equity returns and dividends and trigger a downward adjustment in NAV estimations of affected ProjectCos”—
that is, net asset values. It went on to say:
“In addition, projects financed with RPI-linked debt may face a mismatch between the generating asset projected revenues and debt liabilities. Coupled with uncertainty around the introduction of an FPC scheme”—
that is, the fixed price certificates scheme—
“it is clear that the threat of sizable and costly changes to renewable support schemes being implemented is increasingly real and one which the industry may fight hard to resist whether by way of legal challenge or robust responses to the various consultation papers”.
What is the Minister’s response to Burges Salmon?
That firm was not alone. Commercial law firm Travers Smith wrote:
“Although many, including generators, investors and financing parties with interests in existing assets benefitting from these subsidies will be relieved that the more drastic ‘freeze-and-realign’ option (i.e. ‘Option 2’) was not taken, the immediate shift to CPI indexation is nonetheless expected to be a blow to confidence and cause headaches across the sector, with investors seeking to protect valuations and dividend capacity against erosion of RPI linked cash flows, and lenders scrutinising headroom and covenant resilience in the context of the risk of refinancing. The timing—as Government seeks to encourage a ramp-up in investment as part of its Clean Power by 2030 plan—is unfortunate”.
I was going to conclude on this point, but the Minister could not resist the opportunity to refer to the current global crisis and the need to “accelerate to homegrown energy” as his solution—that is, accelerate to intermittent power when what we need is, in essence, firm power.
As we know, three-quarters of our wind and solar power is generated through renewable obligation subsidies. This means that, every time electricity is generated, suppliers get the wholesale price, plus higher subsidies than in all other OECD countries outside China—subsidies that signal the direction of future energy prices for consumers. Every time the wind blows, some wind farms get up to three times the market price of electricity. If wholesale prices are £80 per megawatt-hour—they were roughly at that level before the crisis—wind farms are getting two renewables obligation certificates on top of that, at about £70 each. This means that they have been getting £220 per megawatt-hour, which is almost three times the market price for electricity.
As was evident to those noble Lords who were fortunate enough to see the Secretary of State on Sky News this weekend, he used the word “incredible” in most of the sentences that he spoke. Is it not incredible that the Government continue to say that gas is the problem? In the last week, the price of gas, which generates our electricity, has been high, at around £120 per megawatt-hour. But is it not incredible that the renewables on the scheme will always get more than the gas price? Right now, there are wind farms getting up to, as I mentioned, £270 per megawatt-hour because they get whatever the wholesale price is plus the subsidies on top.
Lord Whitehead (Lab)
First, I thank noble Lords for their valuable contributions to this debate. The Government have listened carefully to the concerns expressed, particularly in relation to investor confidence, which I will come back to in a moment, to policy stability and to the long-term credibility of the UK’s renewable support schemes.
In considering the valuable and detailed contributions from noble Lords, I must say one thing to start with. The noble Lord, Lord Moynihan, is tempting me into a widespread debate about energy changes, energy prices and so on, but I kindly suggest that that is not the subject of our discussion this afternoon. The points that he makes are certainly ones that need replying to, and I hope that replies are being undertaken—but of course we are undertaking those replies at a time of energy crisis, and indeed a period of great volatility and uncertainty. That perhaps underlines why it is a better idea for the long term to have homegrown sources of energy that are not volatile and which can actually inform what is happening in the domestic market without inevitable consequences on the international market. The move towards renewables and low-carbon energy sourced from within the UK is a very effective way of doing that in the long term.
Lord Moynihan (Con)
I absolutely do not want to start a debate this afternoon, because we will unquestionably have plenty of opportunities in the future to cover this ground, but there is nothing more secure, in terms of our security of supply, nothing that creates more firm power, than our natural gas in the UKCS, which is much cheaper and far less polluting than importing gas from Qatar or liquefied natural gas from the United States. That reserve is critical, and if there is one lesson that comes out of this crisis, it is that we should maximise that reserve for our own country, for our own people, in exactly the same way as the Norwegians are doing at the moment for their people—unless the Minister thinks that the Norwegians are hopelessly wrong and should have shut in their basin, which he may wish to say. I think that our differences on this subject are worthy of future debate, but I think it is important to place them on the record.
Lord Whitehead (Lab)
I thank the noble Lord for placing that on the record. The Norwegian basin, of course, is far less mature than the UK basin, and indeed the Norwegian system works on substantially the same basis of international pricing as the UK system as far as gas is concerned.
The noble Lord has used the word “incredible” on several occasions. It was incredible, over the years, how much gas we were exporting from UK fields, even at a time when it was absolutely necessary to have the maximum supplies bought and used in the UK. Indeed, even during the Ukraine invasion crisis, there were still substantial exports on to the international market of gas that had come into the UK in the first instance. It is also the case, of course, that as far as marginal cost pricing is concerned, gas still makes the market over 65% of the time, so the whole market is still informed by international gas prices and international gas market-making in a way that is inimical to the stable, homegrown future energy that we need to import so that those positions are no longer taken.
Lord Moynihan (Con)
To place it firmly on the record, Norway and ourselves share the same basin in the northern North Sea, delineated by a median line. Geology does not recognise a median line, which is why in 1990 we were, broadly speaking, producing about 2 million barrels a day each, and in 2010 we were, broadly speaking, producing about 4 million barrels a day each. Today, we have gone right down to 400,000 barrels, and the Government are driving it down lower, while the Norwegians are going north of 4 million barrels.
My second point is that yes, the Minister is absolutely right that the Norwegians are exporting it to the international market. They do that because they can satisfy their domestic demand from hydroelectricity. As a result of that, however, they have managed to set up a sovereign wealth fund that assists their healthcare and their social security. The money they are earning is fundamentally important to the success of their economy. If we had done the same thing, we would have been in a far stronger financial position and would be able to take significant tax receipts to the Treasury to assist us with the many other challenges that the Government face.
Lord Whitehead (Lab)
The noble Lord is exactly right about a sovereign wealth fund, and it is our joint regret that the UK did not pursue that path many years ago. However, that is not the fault of the current Labour Government, as those actions were taken many years ago. He is right to point out that we would be in a much better position had that path been taken, but we did not take that path. We are where we are and we need to move on from that in terms of homegrown energy of a different form.
I am anxious to make progress with the business in hand, and I am pleased to see the overall welcome for these measures from both sides of the House. I will very briefly deal with one or two concerns that were raised. For example, on the concern about the effect of these measures on investor confidence, the future investment is of course not going to be carried out through the renewables obligation. As I mentioned, the renewables obligation is a sunset measure: indeed, it closed to new entrants in 2017. We are therefore talking about the remaining years of this measure, not the years in front of us of future and present measures, which we are undertaking in order to expand and stabilise the renewables and low-carbon world. Investor confidence will, therefore, be determined by how those measures are working.
In any event, the path that was taken to not freeze the RO, but to relate it to CPI rather than RPI, actually continues to allow RO to grow, albeit at a slightly lower indexed case. Therefore, in terms of the returns that those historic companies thought they were getting as far as the RO is concerned, there is not a great deal of difference—especially since we are so far past the point at which new entrants were accepted to the scheme.
As for legal challenges, we have been very scrupulous in making sure that we have received full advice, and that we are well entitled to make these changes. It is difficult to see how a legal challenge on the basis of not liking the changes very much might succeed, as opposed to a legal challenge on the basis of making the changes in the first place.
The noble Earl, Lord Russell, asked whether there could be a more comprehensive measure as far as future ROs are concerned, and this is something I have been quite interested in doing myself. It would involve trying to move RO recipients on to a CfD contract, which can be done in various ways. I suggest that if we did that forcibly, it would probably result in a legal challenge, but there are other ways of making the change.
Electricity Supplier Payments (Amendment) Regulations 2026
(1 day, 16 hours ago)
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Lord Whitehead
That the Grand Committee do consider the Electricity Supplier Payments (Amendment) Regulations 2026.
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, you have got me again. These draft regulations were laid before the House on 2 February 2026. I trust that since they are very technical in their nature and very modest in their effect, they will be agreed, because they are an essential element of making sure that our supplier payments and supplier collection work well for the future; they are an integral part of how the system works, so I hope that they will meet with general agreement.
This statutory instrument amends regulations concerning the levies used to fund the operational cost budgets for the Low Carbon Contracts Company and the Electricity Settlements Company. Before I proceed, I apologise to the Committee for the enormous number of acronyms that will no doubt emerge during this debate and in my speech. Let me start with the LCCC and the ESC, which I have already explained.
The LCCC administers the contracts for difference scheme on behalf of the Government under the Energy Act 2013. Under that Act, the LCCC also administers schemes modelled on the contracts for difference, including the dispatchable power agreement, the DPA, and the low-carbon dispatchable contracts for difference, or LCD contracts for difference. The LCCC also acts as the revenue collection counterparty for the regulated asset base for new nuclear under the Nuclear Energy (Financing) Act 2022.
It is anticipated, subject to future policy decisions and the will of Parliament, that the LCCC will conduct additional work to support government energy objectives under the Energy Act 2013. This includes work on a new scheme supporting the deployment of large-scale power bioenergy with carbon capture and storage electricity generators, work relating to DESNZ’s proposals to support nuclear generation, and work relating to DESNZ’s proposals to potentially support landfill gas generation.
The ESC administers the capacity market scheme. Those schemes will incentivise the significant investment required in our energy infrastructure to keep costs affordable for consumers and help to deliver our clean power mission, while keeping our energy supply secure.
Contracts for difference—CfDs—provide long-term price stabilisation to low-carbon generators, allowing investment to come forward at a lower cost of capital and therefore at a lower cost for consumers. AR7, the most recent CfD auction and the seventh to date, secured a record 14.7 gigawatts of new clean energy capacity across Great Britain, making it the largest round ever delivered. It brought forward a diverse range of renewable technologies while delivering a good deal for bill payers. The LCCC is currently signing 197 CfDs with projects that were successful in this auction.
Dispatchable power agreements—DPAs—under the Energy Act 2013 are agreements modelled on CfDs. They have been designed to instil confidence among investors in power carbon capture and storage projects and incentivise the availability of low-carbon, non-weather dependent dispatchable generation capacity. The LCCC signed its first DPA on 19 November 2024 for the Net Zero Teesside Power project. This pioneering project in the north-east aims to build the world’s first commercial-scale gas-fired power station with carbon capture and storage.
Over the next three years, the LCCC is expected to sign additional DPAs, which will drive the private sector investment required to bring forward further power carbon capture and storage projects by the mid-2030s. The LCCC will be the counterparty for these DPAs, as it was originally for CfDs, and funds have been included within the budgets to support this role.
The LCCC also signed its first low-carbon dispatchable CfD—LCD CfD—with Drax Power Ltd on 4 November 2025. This agreement will ensure that Drax generates electricity when needed between 2027 and 2031, thus bolstering our energy security. It is also a good agreement for consumers, saving them around £6 per year on their household bills compared to previous arrangements.
The Government also agreed heads of terms with EP Lynemouth Ltd on 6 February 2026 for an additional LCD CfD. If a full contract is concluded in the following month, this will further bolster our energy security by ensuring that Lynemouth continues to generate when needed between 2027 and 2031. Funds have been included in the budgets to support the LCCC’s role as the intended counterparty for this LCD CfD, as well as its role as counterparty for the existing contract with Drax Power Ltd.
The revenue collection contract with Sizewell C Ltd, the first project to use the regulated asset base—RAB—model for new nuclear, became effective on 4 November 2025, and funds have been included in the budget to cover the LCCC’s operational costs as a revenue collection counterparty for the RAB. As noble Lords can see, this all amounts to a large amount of additional work and activity for the LCCC, which is important in terms of this particular SI.
Turning to the ESC, the capacity market is tried and tested and is the most cost-effective way of ensuring that we have the electricity capacity we need now and in the future. It provides all forms of capacity and the right incentives to be on the system, delivering capacity when needed by increasing generation or by turning down electricity demand in return for guaranteed payments. The capacity auctions held to date have secured the capacity we need to meet the forecast peak demand out to 2028-29. A T-1 auction is currently ongoing and a T-4 auction will take place next week, securing most of the capacity we need out to 2029-30. In both the CfD and capacity market schemes, participants bid for support via a competitive auction that ensures that costs for consumers are minimised.
In the DPA, agreements are allocated through a process involving competitive assessment, followed by shortlisting then a final stage of bilateral negotiations between project developers and DESNZ. In the LCD CfD, contracts are agreed following a structured negotiation process between DESNZ and the generator. This process ensures that only those contracts are signed that offer value for money for consumers and include strict sustainability criteria.
Revenue collection contracts under the RAB model are agreed through a structured process involving DESNZ, Ofgem and the LCCC. These contracts provide a stable, regulated revenue stream to projects during construction and operation. In turn, we expect the RAB to lower the cost of financing for nuclear, one of the biggest drivers of new project costs, resulting in better value for money to consumers.
The LCCC and ESC’s effective administration of the CfD, the capacity market and other schemes to date has demonstrated their ability to deliver such schemes at least cost to consumers. It is in part for this reason that the LCCC has been working with DESNZ and other departments to develop new schemes for incentivising deployment of more low-carbon technologies. For example, the LCCC has supported DESNZ in the development of incentives for bioenergy with carbon capture and storage. Although this has not been confirmed, contracts for such projects could potentially be entered into following a process established under the Energy Act 2013. Were DESNZ to move forward with this option, the LCCC would need to undertake activity to prepare for acting as the counterparty in the next three years. Consequently, funds have been included within the budget for this purpose.
The LCCC and ESC are mindful of the need to deliver value for money, as their guiding principle is to maintain investor confidence in the schemes they deliver while minimising costs to consumers. They have taken a number of actions to date to reduce costs, such as bringing expertise in-house rather than relying on more expensive outside consultants. It is because of actions like that that CfD operational costs per contract are expected to fall by 27.3% per CfD across the budget period, despite the growing size of the CfD portfolio. It is a similar narrative for the ESC, which expects the number of capacity market electricity meters to exceed 1.2 million over the budget period, a 450% increase on current meter numbers. It estimates that costs per meter will fall by 23% over 2025-26 to 2028-29. The operational cost budgets for both companies were subject to consultation, which gave stakeholders the opportunity to scrutinise and test the key assumptions in the budgets and, importantly, ensure that they represent value for money. Subsequently, the budgets remain unchanged.
In conclusion, to summarise this rather detailed and technical narrative, the LCCC has done a great job in managing as the counterparty for taking money in for contracts, giving money out and balancing between the two—and, indeed, when it runs a surplus it gives it back to the companies that are paying the money back in. Its activities have changed very substantially over the years, and the levy that goes into those companies has not changed since 2022. Therefore, it is right that the levy coming into the LCCC and the ESC for the expanded work that they do is reviewed, which is what the Government have done, to make sure that the LCCC can cover its costs for the relevant financial years up to 2029-30.
I assure the Committee that the Government are also mindful of the uncertainties involved in setting a budget for the next three years, such as world events impacting energy demand and policy decisions on new schemes that have not yet been taken. Consequently, DESNZ will keep the companies’ budgets under careful review throughout the budget period to ensure that costs to consumers are minimised. I commend these draft regulations to the Committee.
Lord Fuller (Con)
My Lords, there is a reason why UK energy prices are some of the most expensive in the world. We are starting from a high base and we are increasingly vulnerable. At the moment, our gas prices are six times higher than you might find on an ex-NOLA basis: that is, exported from New Orleans. We are more expensive than the rest of Europe, apart from Germany, which has its own particular industrial problems, and we are increasingly vulnerable because we are trying to run our 24-hour-a-day, 365-day-a-year economy on energy sources that do not work at night or when the wind does not blow. I understand that, and I am not against using renewable energy—we need to have an energy mix—but the way we are going at the moment is to put too many eggs in the renewables basket.
With this statutory instrument, the name is on the tin: it is all about nuclear energy, but the speech that the Minister gave was not really about nuclear at all, but about the mission creep that has led to us having the world’s most expensive industry, whereby we are deindustrialising. Only today, what a shame that the Huntsman Group has announced that the Wilton facility, that last vestige of ICI at Billingham, could be closed. How ironic it is that the obituary of Sir Ronald Hampel, the architect of ICI, was in the Times this week: he must be turning in his grave.
This debate has all been about carbon capture and storage. I did not realise it was going to be, I thought it was about nuclear, but there we are. Carbon capture and storage is expensive, technically challenging and hard to implement. It does not work, it is the most expensive way of doing it and it is unproven. If it were proven, it would be eligible to be discounted against CBAM, but it is not. One of the main things by which this Government want to take carbon reduction on board—they are parroting and trumpeting carbon capture and storage—is ineligible for the headline carbon reduction process. Can noble Lords not see the incompatibility here?
What we have heard so far in this debate, and I know it is early days, is that—
Earl Russell (LD)
This is not a debate. This is an SI about the mechanism for contracts for difference. It is not a debate on energy policy.
Lord Fuller (Con)
I thank the noble Earl, but he will forgive me for having made an introduction, and now I come immediately to the substance, because what we have heard, and it came from the Minister’s mouth, is that this is all about investor confidence. This is about subsidy farming; this is about underwriting the most emitting power station in Britain, Drax, which is responsible for the desecration of huge tracts of forestry on the other side of the world, the shipping costs associated with getting it and its transport to that power station, as if it is somehow renewable. That is a fantasy.
What these regulations underpin is a false economic market that says, “No matter how high the gas price is”, and, my goodness, gas prices are high now, “we’re going to bid up the costs of renewables in an unearned income”. This is financial engineering. We are kidding ourselves that we are doing this for low carbon. We are creating a false market in unproductive assets such as carbon capture and storage. When we invest in carbon capture and storage, and I use the word “invest” advisedly, we are not investing in productive assets that will generate an economic return; we are just burying money, money that we need.
I do not deny that, as a result of this regulation, the authorities—forgive me, there are so many acronyms, I cannot remember them all, the LCCC and so forth—have to be paid for. However, this debate has exposed that it is not just about paying for the authorities, it is about financing a mission creep into all sorts of areas that collectively and cumulatively are driving the cost of our energy. Householders are paying more and industry is paying more—and, candidly, industry is now voting with its feet to go to other parts of the world because it cannot afford all this.
At some stage, we need to draw a line. I am grateful that the Minister has used the word “crisis” to describe the circumstances currently being visited on the Middle East and, by extension, on our own economy. When the facts change, you need to alter your position, and when it comes to this panoply of extra burdens on industry—not least contracts for difference—we need to have a fresh look, because the definition of insanity is doing the same thing over and over again and expecting the outcome to change. This nation cannot afford it, and neither can our industry or our householders. Clearly, we are going to note this statutory instrument, but at some stage the music needs to stop.
Baroness Redfern (Con)
My Lords, it is a pleasure to follow my noble friend and to have the opportunity to speak to this statutory instrument. I support and welcome the update levies to fund operational costs of low carbon and nuclear energy schemes. However, it is the wider context that is my concern: the continued high prices of electricity, which are among the highest in the world for our heavy industry—such as steel, which is truly disadvantaged when having to compete worldwide. Our high-energy intensive industries—not only steel, chemicals and ceramics, which are the industrial base of the UK—are, therefore, left inadequately supported.
We all know that lower electricity costs directly help to retain manufacturing reinvestment and jobs, and support the supply chains, so it is disappointing to see manufacturing jobs moving abroad in the past 12 months. For high-energy intensive industries to compete on a level playing field, confidence must be targeted, building that elusive confidence and bringing the precious private investment into the heavy sector. The Government know they have to develop and go further with serious long-term plans, and possibly introduce a two-way contract for difference to provide a competitive wholesale electricity price to support and restore our British industrial competitiveness for the next decade.
Finally, the Government must support further—rather than undermine—the UK’s wider industrial strategy and growth emissions. I look forward to the Minister’s reply.
Earl Russell (LD)
My Lords, the draft Electricity Supplier Payments (Amendment) Regulations make technical but necessary changes to the levies that electricity suppliers pay to fund three of the UK’s key energy schemes: the contracts for difference—CfD—scheme, the capacity market and the nuclear regulated asset base, or RAB model.
There is a sense of gravity on these Benches in that we fully recognise the role that CfDs have played, since they were introduced by the Liberal Democrats a long time ago, in helping to fund and secure funding for our energy transition. We recognise that these are necessary updates, and we welcome what the Minister has said to introduce these amendments. We welcome the measures that are being taken to ensure that efficiency savings are gained. Therefore, we fully support this SI.
Lord Moynihan (Con)
My Lords, I am very grateful to my noble friends Lady Redfern and Lord Fuller for their contributions. They bring a great deal of expertise to this Committee from a lifetime outside London in places where industries’ success has depended on low energy prices. For them to give up their time and dedicate it to the work of this Committee is commendable, and I associate myself with everything that both of them said.
That helps me in one way because it means that I can be short on this occasion. I will make just make four points. First, Drax has been raised. There are still major issues with Drax, as the Minister knows. Billions have been spent in public subsidies on it. As I recall, it was axed from the S&P green bond index because it clearly did not add to the net-zero objectives of either this Government or the previous one. Indeed, the burning of pellets releases CO2 immediately and does not achieve anything except for carbon debt. That undermines our net-zero goals, not least because the pellets come from the west of Canada; they are brought right the way across Canada and must then be transported to the United Kingdom by boat. The sooner we grasp the nettle and stop biomass burning, the better. In fact, it is unfair even to call it biomass: it is a CO2 pellet-driven wrong solution for Drax. Today, it has contributed a significant amount of electricity generated into the grid—not much less than comes from solar energy in the UK at the present time.
However, these are technical changes—this has been made very clear—and we on these Benches will not oppose them. I would just say three things. One is that the heart of this is, in fact, nuclear energy; look at the introduction and the rest of the statutory instrument. On the nuclear energy policy question, I welcome the fact that the Government have committed to implementing the recommendations of the Fingleton review in order to make nuclear power much cheaper. That is really important; we need to make it affordable, and it needs to be quicker and easier to build. We look forward to receiving the relevant legislation—even if I anticipate that, on that particular Bill, it will be colleagues from the left of the Labour Party and the Green Party who will give the Minister a lot of airtime because there is no doubt that the environmental impact is going to light the red touchpaper of the Labour left and the Green Party, which the Secretary of State has done so much to court.
Secondly, this Government cancelled the previous Government’s full-system cost analysis of the energy system. This statutory instrument highlights that such an analysis is important and would help all of us in this Committee—indeed, all of us in the House—to understand the cost of energy. I ask the Minister to consider reintroducing it, certainly before any further legislation comes before the House.
Finally—I was not going to make this point but I think it is important—I echo the comments made by my noble friends. The Government have not fulfilled their pledge to cut energy bills by £300. Pushing the costs on to tax bills is simply sleight of hand. The truth is that the Secretary of State’s made-up promise to cut bills by £300 has become, understandably, a national embarrassment for the Government, so they have turned to the already-struggling taxpayer for a bailout of £7 billion.
With all that said, I promised to be brief and make only a few comments on this instrument. These are technical changes, and we on this side will not oppose them, but it has been exceptionally helpful for the Committee to hear the comments made by my noble friends and the noble Earl, Lord Russell; I look forward to hearing the Minister respond to them.
Lord Whitehead (Lab)
I thank noble Lords for, as I have said on previous occasions, their valuable, extensive and wide-ranging contributions to the debate. I am similarly tempted to follow the wide-ranging comments that have been made—some of which I agree with and a lot of which I do not—but I do not think that this is the place to undertake that particular debate.
As noble Lords have reflected on, this SI is, in essence, about a practical and straightforward measure to ensure that the body that administers the working of the CfDs and an increasing amount of further contracts—acting as the counterparty and the proper regulatory body to make sure that there is value in all directions from the money that is collected—simply has the wherewithal to make sure that it can do that job. As I have said, the levels of that wherewithal were set in 2022 and have not been revised since then. They really need to be revised so that we are not in a position where the taxpayer has to come in and bail out the LCCC or similar bodies, come 2028-29, if they do not have sufficient funds to administer the contracts in the way they should.
Tertiary Education and Research (Wales) Act 2022 (Consequential Amendments) Order 2026
Lord in Waiting/Government Whip (Lord Katz) (Lab)
My Lords, this draft order was laid before the House on 2 February and is needed following the passage of the Senedd’s Tertiary Education and Research (Wales) Act 2022. The Act provides a new statutory framework for what is now known as tertiary education and research in Wales, which encompasses higher education, further education and training, apprenticeships, sixth forms, and adult community learning. The Act established the Commission for Tertiary Education and Research in Wales to regulate and fund the sector; I will refer to this body as the commission.
The Act provides the commission and Welsh Ministers with powers to fund the tertiary education sector in Wales. It repeals corresponding functions that were previously in place, including powers in the Learning and Skills Act 2000. Various pieces of UK legislation therefore currently reflect the previous system, in which the Welsh Ministers regulated and funded the sector through powers that are now being repealed.
The amendments in the order ensure that UK legislation is updated by making amendments that account for the changes introduced by the Senedd’s 2022 Act. It mainly does that by removing any references to the repealed powers and replacing them with references to the corresponding powers in the 2022 Act. These consequential amendments ensure that the legislation being amended will continue to operate in largely the same way as it does now, but with the commission integrated into the legislative framework.
Article 2 of the order updates the list of exemptions in the Value Added Tax Act 1994. It ensures that education and vocational training provision funded through powers in the 2022 Act will be an exempt supply for the purpose of value added tax. The order also amends the Income Tax (Earnings and Pensions) Act 2003. This Act makes provision about the tax treatment derived from shares in research institution spin-out companies. Article 3 of this order ensures that the definition of “research institution” in that Act includes any university or other educational institution receiving funding under powers in the 2022 Act.
Section 113 of the Higher Education and Research Act 2017 allows educational regulators across the UK to work jointly, where doing so would make delivery more efficient or effective. Article 4 of the order amends this provision to enable Welsh Ministers to exercise functions in the 2022 Act jointly with other public authorities, including the Office for Students and UK Research and Innovation.
As noble Lords may be aware, some charities are exempt from registering with the Charity Commission. The compliance of these charities with the relevant laws is instead overseen by their principal regulator. Article 5 of the order amends the Charities Act 2011 (Principal Regulators of Exempt Charities) Regulations 2013, to designate the Commission for Tertiary Education and Research as the principal regulator for specific charities in Wales. This reflects the fact that the commission will now be responsible for regulating further education and training in Wales under the 2022 Act, whereas previously Welsh Ministers were responsible. Article 5 also ensures that existing restrictions on principal charity regulators relating to the onward sharing of HMRC information are applied to the commission.
Article 6 of the order amends the Seafarers’ Wages Regulations 2024. The amendment ensures that the apprenticeship rate for seafarers can apply to those carrying out apprenticeships funded by the commission under powers in the 2022 Act.
The amendments to UK legislation in this draft order fall outside the legislative competence of the Senedd, as they relate to reserved matters such as tax, charities and employment. Taken together, these amendments ensure that existing legislation will continue to operate as intended by taking account of the changes made by the 2022 Act. The order needs to be in force by 1 April, to coincide with the Welsh Government’s commencement plan for the 2022 Act.
I welcome the continued implementation of the Senedd’s Tertiary Education and Research (Wales) Act and the positive impact that the commission is already making in Wales. This draft order will make the consequential amendments necessary to keep UK legislation up to date in light of the new legislative framework for tertiary education in Wales introduced by the 2022 Act. I beg to move.
Baroness Humphreys (LD)
My Lords, it is a pleasure to speak in the debate on this SI, which I hope is the final stage of the formation of the Commission for Tertiary Education and Research in Wales. As the draft Explanatory Memorandum to this SI explains, this consequential amendment order is made under Section 150 of the Government of Wales Act 2006, which allows the Secretary of State to make provision in consequence of Acts of Senedd Cymru. In this case, the SI makes permission in consequence of the Tertiary Education and Research (Wales) Act 2022 and of two other orders that followed the 2022 Act.
The 2022 Act brought forward welcome changes to the tertiary education sector in Wales by bringing together the higher education and research sector, the further education sector and the training sector under the umbrella of the newly created Commission for Tertiary Education and Research. As the Minister has already explained, the commission has the responsibility for funding and regulating the tertiary education sector in Wales. The 2022 Act provided a list of provisions in existing education legislation that were to be repealed. This 2026 order seeks to replace references to the repealed legislation when they appear in pieces of UK legislation. The 2026 order also takes account of the new functions of Welsh Ministers and the commission.
I was especially pleased to see that an amendment has been included that addresses the situation regarding seafarers’ wages. The amendment ensures that the apprenticeship rate can apply to seafarers carrying out apprenticeships that are provided or funded by the commission. We welcome this added incentive for young seafarers to follow their desired careers.
On these Benches, we welcome the clarity that the order provides about the powers of Welsh Ministers. As Liberal Democrats, we support the principles of devolution and believe that decisions affecting Wales should be made by democratic Welsh institutions. The SI simply implements changes to UK legislation required by legislation passed by the Senedd, and we therefore support the instrument wholeheartedly.
The Earl of Effingham (Con)
My Lords, this is a technical but necessary instrument made under the Government of Wales Act 2006, ensuring that the statute book reflects the reforms introduced by the Tertiary Education and Research (Wales) Act 2022. That Act abolished the Higher Education Funding Council for Wales and created the new Commission for Tertiary Education and Research—Medr—which became operational in August 2025. The commission now brings together responsibility for higher education, further education, apprenticeships, sixth forms, adult learning and research under a single strategic body.
The order does not revisit that policy decision; it simply updates legislation so that it continues to function properly following the creation of Medr. It transfers certain funding powers to Welsh Ministers or the commission, updates definitions relating to research institutions, enables joint exercise of functions, confirms the commission as the principal regulator of exempt FE charities and makes related amendments to reflect the new governance structure. Both the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments have considered the order and raised no concerns.
Lord Katz (Lab)
I thank the noble Earl and the noble Baroness for their valuable contributions to our short and focused debate. I appreciate the comments from the noble Baroness, Lady Humphreys, who welcomed the SI and supported how it helps to embody and enact further the devolution settlement within Wales, specifically for education.
I also thank the noble Earl, Lord Effingham, for his comments. He asked about the process of developing the commission. I can confirm that the transition has been smooth. He will be aware that the commission has undertaken a series of consultations to ensure the steps it takes to implement the 2022 Act fully are informed by the views and experience of the tertiary education sector and other partners. We take that very seriously.
The commission has made substantial progress in its role as the national steward for raising standards, delivering for learners of all ages, and improving institutional collaboration and co-ordination. It is worth noting that this has included supporting over 1,000 employees facing an uncertain future at the Port Talbot steelworks to develop new skills through an innovative programme of local learning. It is important that the order allows the full transition to the commission and the switching-on of its powers, but it is not the case that the commission has not been up and running, active and delivering good for the tertiary education sector in Wales.
Having said that, it is worth noting that the Welsh Government have taken a phased approach, which is probably the right approach, to bringing the 2022 Act into force, to ensure a smooth transition from previous arrangements and to prevent disruptions for providers and learners. As I said, the next phase of implementation will take place on 1 April, when a number of the new functions will come into force. That is why we are debating the order today, pending which we will formally move the Motion to approve the order in a few days’ time in the Chamber, to make sure that it can come into force to coincide with the Welsh Government’s commencement timetable for these powers. I hope that that satisfies the noble Earl’s question on the transition.
The order provides for a number of changes to UK law, including amendments to tax, charities and employment legislation, that are necessary following the Senedd’s Tertiary Education and Research (Wales) Act 2022. I offer my thanks for the productive manner in which the UK and Welsh Governments have worked in preparing the order, and I commend it to the Grand Committee.