Levelling-up and Regeneration Bill

Baroness Hayman Excerpts

Report stage
Monday 18th September 2023 Lords Chamber

Moved by

[Baroness Hayman]

282K: After Clause 226, insert the following new Clause—
“Onshore wind development(1) In section 15(2) of the Planning Act 2008 (generating stations) omit paragraph (aa).(2) In the Town and Country Planning (Development Management Procedure) (England) Order 2015 (S.I. 2015/595) omit Part 2 (pre-application consultation).(3) Within six months of the passing of this Act, the Secretary of State must revise and republish all relevant national planning guidance—(a) to reflect the reinstatement of onshore wind in the Planning Act 2008 under subsection (1), and(b) to ensure parity with other renewable and low carbon development, including but not limited to, removing restrictions on onshore wind energy development in the National Planning Policy Framework and the energy National Policy Statements.”Member’s explanatory statement
This amendment intends to reinstate onshore wind development into the planning system for the purposes of meeting the United Kingdom’s carbon account target under section 1 of the Climate Change Act 2008, and providing a level playing field in planning terms for onshore wind development compared with other forms of development.

--- Later in debate ---

[Baroness Hayman (CB)]

My Lords, in 2015 David Cameron’s Government dealt a hammer blow to the development of onshore wind power in England. They imposed an effective moratorium on new turbines and the renewal of old ones, cutting off this country’s supply of cheap, clean energy. My Amendment 282K seeks to reverse that damaging and irrational ban and create a level playing field for onshore wind compared with other renewable and low-carbon energy developments by reverting to the pre-2015 moratorium. I am grateful for the support of the noble Lords, Lord Deben and Lord Teverson, and the noble Baroness, Lady Hayman of Ullock.

Removing planning barriers to onshore wind would not only help us achieve our net-zero targets; it would reduce bills, create jobs, boost the economy and increase energy security. The Government have at last acknowledged the need for action in this area and taken some baby steps aimed at easing planning barriers. I of course welcome the changes, particularly those enabling repowering and life-extension of existing sites, and I agree that community views and benefits are important factors. However, what has been done is simply not adequate to meet the scale of the challenge—a challenge that has been highlighted in numerous reports.

The potential for onshore wind is substantial. Industry evidence shows that doubling onshore wind capacity in the UK by 2030 could reduce consumer bills by £16.3 billion, boost the economy by £45 billion a year and help create 27,000 skilled jobs. However, even with the Government’s proposed changes, we will still have a far more onerous and complex planning process for onshore wind projects compared with other renewables, and therefore major practical constraints to uptake.

As I have said, this problem has been repeatedly brought to public attention. In April, the National Infrastructure Commission’s Infrastructure Progress Review emphasised that

“the uncertainty around building onshore wind … in England has undercut the government’s commitment to deploy renewable generation”.

The CCC’s 2023 progress report highlighted that the Government do not have a target for onshore wind capacity, even though it is a valuable part of the energy mix and a “required outcome” to achieve decarbonisation of the power sector by 2035. The Skidmore review asked specifically for a task force to support onshore wind.

Industry has made it clear that government measures are inadequate. To quote RenewableUK, they

“do not go far enough”

and, as a result, will not encourage

“investment into new onshore wind at the scale needed”.

There is still ambiguity in the new wording of the National Planning Policy Framework, which maintains uncertainty, and, given the high capital costs of developments like this, the investment risk remains high and developers will inevitably be cautious.

Ironically, politicians’ nervousness about, and sometimes antipathy to, backing onshore wind is not shared by the public. The Government’s recent community benefits consultation shows that 79% of people support the use of onshore wind, and earlier this month YouGov polling for the ECIU showed that 76% of the public said they would support new onshore wind in their own localities.

I urge the Government to accept this amendment and create a level playing field for onshore wind. At the very least, I hope the Minister will recognise the need for clarity on the terminology used in the NPPF, and for a date for the publishing of the outcome of the developing local partnerships in England consultation. Most of all, given the widespread scepticism about their proposals working, we need a commitment that the Government will review and publish the impact of the changes proposed to see whether they do, in fact, lead to an increase in planning permissions, or whether—as I suspect, and I hope the House will agree—more needs to be done to allow onshore wind to play its part in levelling up, reducing bills, creating sustainable industry and jobs, and supplying the cheap, clean renewable energy that we need so badly. I beg to move.

[Lord Teverson (LD)]

I congratulate the noble Baroness, Lady Hayman, on bringing forward this amendment, and on her fight for rationality in decarbonisation within the United Kingdom.

When I get up in the morning in Cornwall, I look out of my window—quite often before I go running or whatever—and I can see some 30 wind turbines from my house. One is about just under a kilometre away, and from it I can see which way the wind is blowing and how strong it is. Most of all, what it genuinely portrays to me is a living countryside that is economically sustainable and which is part of the economic mix. That to me, down in the far south-west, is really important. People understand that, just as the noble Baroness has described.

For me, there is an irony in government policy at the moment. Many Members here will recall, as distantly as 10 days ago, the results of round 5 of the contracts for difference for renewable energy. There were two results that were particularly interesting. One of them, which was given a lot of publicity, was that onshore wind had absolutely no take-up—a real disaster for the decarbonisation programme that the Government want to put forward.

The area that was less talked about was the fact that, as part of this contracts for difference round, 1.5 gigawatts of onshore wind was actually agreed and promoted by the Government. However, none of that has come to England; it has all gone to Scotland and Wales. Because of the crazy planning system we have at the moment, England was excluded. I would like to understand from the Minister the rationale for that.

The other important aspect of the contracts for difference round was that the strike price was around 50p per megawatt hour. That is a really low-cost renewable energy that we as a nation whose households have high energy bills really need. That is why these Benches strongly support this proposal—because it would lead to unequivocally moving back to a planning system where there is equal opportunity for onshore wind. It would also mean that the programme for decarbonisation at a low cost for British households could go ahead. We support the amendment.

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[Earl Howe (Con)]

My Lords, the debates that we have had on this subject are a reminder of the importance of onshore wind in meeting our net-zero and carbon budget ambitions. This amendment asks that we change national planning policy on onshore wind to bring forward more onshore wind installations in England. I am pleased to say that the Government have now done this.

Updated policy, which took effect from 5 September, paves the way for more onshore wind projects to come online. It does so, first, by broadening the ways that suitable sites can be identified and, secondly, by ensuring that local councils look at the views of the whole community rather than a small minority when considering a planning application. I know that the noble Baroness, Lady Hayman, is concerned that this does not go far enough but we believe that it is an important and positive change. I fear I really must reject the term “baby steps”. We are committed to increasing the deployment of onshore wind energy and I can assure her that we will keep progress under review, taking into account not only feedback from stakeholders of whatever kind but available data on the schemes themselves, such as those published by the Renewable Energy Planning Database.

The amendment would also remove the requirement for applicants to carry out mandatory pre-application consultation with those communities affected by development. I understand the argument that this requirement does not apply to most other schemes. However, we think that effective engagement is particularly important in this case, given the strength of feeling which onshore wind proposals can generate, and the opportunities which positive engagement can provide for improving understanding and identifying opportunities to address potential impacts on the local area.

I do not like to sound a negative note on an issue like this but, should this amendment pass, it would for a period also create a policy gap for onshore wind. The foundation of the nationally significant infrastructure projects planning process is national policy statements, through which projects are examined against the national need case. Neither the current nor the draft renewable energy national policy statement covers onshore wind, due to it being consented through other routes.

I say again that the Government consider that onshore wind has an important role to play in achieving net-zero targets and we will continue to promote and incentivise deployment across the UK. I am sympathetic to the intentions behind this amendment but I ask the noble Baroness to reflect, before deciding whether to divide the House, that this is an area where we are taking action, as I know she welcomes, and it is important that we give our policy changes the opportunity to work. As local decision-makers are now able to take a more balanced approach to onshore wind applications, and as we will keep progress under review, I hope that I have provided sufficient reassurance for her to feel able to withdraw her amendment.

[Baroness Hayman (CB)]

My Lords, I am extremely grateful to the Minister for his very considered view this evening and for the time that he and the noble Baroness, Lady Scott of Bybrook, spent discussing this issue with me. I am afraid that I simply cannot accept his argument that what the Government have done is sufficient for the scale of the need. The scepticism that has greeted the Government’s proposals across the industry is such that I think it is really important that the other place has the chance to think again on this issue; they never really thought in terms of wind on the Energy Bill. It is important that they do soi in relation to this Bill, and I wish to test the opinion of the House.

House Of Lords: Appointments System

Baroness Hayman Excerpts

Wednesday 19th July 2023 Lords Chamber

[Lord True (Con)]

My Lords, my noble friend makes a very important point. I certainly will pass on that message, as indeed others that I have referred to. I think the whole House looks with the most enormous admiration and respect at—and gains tremendously from the presence of—those who have the kind of lived experience that my noble friend refers to.

[Baroness Hayman (CB)]

My Lords, the Leader said that the Government would take note of the report. Would he go rather further and look at it? It is cogent and carefully argued. If there is not time for legislation, there is time and opportunity for the Prime Minister to take action on issues that the public object to—not the work that this House does, but the size of the House and the method of appointment. The Prime Minister could limit the number of appointments and he could say that the Appointments Commission should look at the suitability and ability to contribute of Members who are nominated by the political parties, as it does for those who are nominated to the Cross Benches.

[Lord True (Con)]

My Lords, on the size of the House, since January 2022 it has in fact grown by four—plus seven net Conservatives and plus three net Labour. I understand that many noble Lords are agitated about the size of the House. However, I sometimes wish that the House would concentrate on extolling the great and good things that your Lordships do every day and the challenge that your Lordships give to the Government to improve legislation, and not concentrate so much on running down the House. I am not accusing the noble Baroness of that, but the reality is that we have just had in this House one of the most contested pieces of legislation, where 417 Peers voted.

COP 27

Baroness Hayman Excerpts

Tuesday 15th November 2022 Lords Chamber

[Baroness Hayman (CB)]

My Lords, I declare my interest as co-chair of Peers for the Planet. The Minister said that he could not comment in detail on onshore wind because of potential budgetary considerations. I am not sure that his reticence is necessary. The issue here is a planning one, not a budgetary one. There is currently a moratorium on new onshore wind and the replacement of existing onshore wind. The not-much-missed growth Statement said that the Government would lift the moratorium and bring in normal planning considerations for new onshore developments. We have now heard that that is in doubt. Given the need for more renewable energy in future, is it in doubt or will the statement that we will revert to proper planning procedures be maintained?

My other question is global. Many of the vulnerable countries to which the noble Lord referred are very indebted countries, and as well as trying to meet the costs of adaptation and sustainable energy, they are meeting the costs of debt repayment. The ex-President of the Maldives put forward the suggestion of a debt swap so that, in future, those debts could be used for sustainable projects in developing countries. Would the Minister give me an answer on that?

[Lord True (Con)]

My Lords, I am sorry if noble Lords thought that I was being too reticent by not straying into some areas. We have a wide-ranging Statement about to be made, and I would not want the House to draw any conclusion from what I say or do not say. What your Lordships must understand is that this is a difficult time. There has been a lot of criticism of this Government’s commitment to renewables, but I underline that we have achieved a fourfold increase in renewable use since 2011. Renewables now make up 40% of our electricity supply—something that, in 2010, Mr Ed Miliband said was a pie-in-the-sky idea. That pie has come down from the sky, but we do need to make it larger and I will listen to the point that the noble Baroness made.

On wind, more than £1 billion of government investment is already boosting our offshore wind sector, and major port and manufacturing infrastructure, and safeguarding many jobs. The Hornsea wind farm—it is offshore, I concede—has lately come onstream, and it is one of the largest that exists. As to debt, I cannot be specific about that, but I will take away and pass on what the noble Baroness said. We are obviously conscious that there are specific nations with specific problems; for example, some of the small islands are nations that we are particularly concerned to address in a specific way.

Health and Care Bill

Baroness Hayman Excerpts

Lords Hansard _ Part 1 & Report stage
Wednesday 16th March 2022 Lords Chamber

[Baroness Fox of Buckley (Non-Afl)]

My Lords, the noble Lord, Lord Forsyth, made the accusation that lots of the amendments to the Bill of the noble Baroness, Lady Meacher, were a sort of Machiavellian plot to subvert the democratic process. I want to point out that I had tabled one of those amendments, about mental health, partly because I thought that that was our job here, that when a Bill was before Parliament, we followed it through—to every Bill that I have followed through here, there have been myriad, endless amendments. I thought that our role was to scrutinise proposed laws, to debate the merits and demerits and so on. I was therefore disappointed that there was no Committee stage of that Private Member’s Bill. So I do not accept the suggestion that those who put down amendments did so somehow to avoid debate; in fact, it was the opposite.

My general view on the problems of parliamentary and democratic process was best summed up by the noble and learned Baroness, Lady Butler-Sloss. I also feel queasy that there is a kind of subverting of the parliamentary process by an amendment on assisted dying or assisted suicide being put down on the Health and Care Bill. It is totally inappropriate. It is hijacking a Bill. Whatever else assisted dying and assisted suicide is, it does not contribute to improving anyone’s health. It requires ending a life; it is not a healthcare matter, and it will require a major change in the criminal law, so this is the wrong Bill.

However, I have every sympathy with the noble Lord, Lord Forsyth, and feel his frustration. I feel all the time that there are lots of laws I want to change; there are lots of things I want to change about the country; there are lots of times when I feel as though the public think one thing and the Government ignore them. What one therefore needs to do is to lobby the Government—the noble Lord probably has closer access to them than a lot of us—or, as maybe I would do, to organise a demonstration or a protest, unless the Government had got away with banning that by the time we got there. In other words, in a democracy, there are lots of frustrations that need to be expressed if you want to change the law. Using our position as unelected legislators to add an amendment to an inappropriate Bill seems to be completely wrong on a matter of such huge importance.

[Baroness Hayman (CB)]

My Lords, I am glad to have the opportunity to follow the noble Baroness, Lady Fox, because it is important to recognise that she is quite right. We should be able to debate all the amendments that Members wish to debate, in both Houses, on a Bill of this sort—a Bill which, as the noble Baroness, Lady Campbell of Surbiton, said, addresses one of the most fundamental social issues facing society.

However, I disagree that this amendment is nothing to do with health. The last days, weeks and months of your life, the healthcare that you receive, and the options open to you are part of the healthcare provided throughout the NHS and elsewhere. So I believe that it is appropriate to discuss this here.

It is a novel procedure. It is not a procedure that mandates the Government to support the draft Bill that would be brought in. The amendment is precisely designed not to do that but to ensure that a proper and full debate is held. I normally follow the noble Lord, Lord Cormack, closely and often agree with him, but I do not accept that we are imposing something on the other House by passing an amendment to a Bill which is going to have lots of amendments made to it and will go to the other place, where those amendments will be debated and accepted or not accepted.

Most of all, I support this amendment because it is now nearly 20 years since I served on the Select Committee on the Joffe Bill. There have been numerous attempts since then to resolve this most important issue. They have all run into the sand one way or another. Our legislature has not found itself able to produce a result that satisfies everyone that there has been full debate and resolution found to how we should go ahead as a society. In that time, 20 other jurisdictions have managed that task, because they have found a way of providing adequate time so to do. For those reasons, I support this amendment.

[Baroness Greengross (CB)]

My Lords, I want to add my support particularly for what my noble friend Lady Hayman has just said. This has gone on for a long time. I have been involved in it throughout my time as a Member of this House and I do not intend to repeat what I have said before. I want just to say that the amendment in the name of the noble Lord, Lord Forsyth, offers a useful way forward so that assisted dying is given time in both Houses to be debated properly. It must be given serious consideration. Whether one is for or against changing the law on assisted dying, we all surely agree that this is a very serious issue worthy of serious scrutiny and debate. It is unacceptable that, once again, my noble friend Lady Meacher’s Private Member’s Bill risks being lost, due not to lack of support but to not enough time being allowed to take the Bill through all its stages.

Assisted dying is very much related to health and care, and it is appropriate that this amendment should be included as part of this Bill.

Official Development Assistance

Baroness Hayman Excerpts

Thursday 24th June 2021 Grand Committee

[Baroness Hayman (CB) [V]]

My Lords, I declare my interests regarding malaria and neglected tropical diseases, as set out in the register. The UK has led globally in these two areas in the fight against death and disease and has been extremely successful in saving hundreds of thousands—indeed, millions—of children’s lives and preventing disease and disability. Yet the cuts that have been made have damaged programmes for both.

The cut to the UK flagship programme for NTDs, Ascend, will mean putting a stop to 151 million scheduled treatments this year, and the malaria programme in Nigeria, funded by the UK and SuNMaP 2, will now end two and half years early and will mean a huge deficit in the fight against malaria in Nigeria, one of the countries with the highest prevalence. Cuts to UKRI will take away the capacity in our academic institutions which have in the past provided the basis for the work that has been so successful in the vaccine development against Covid.

I hope that the Government will recognise that it is counterproductive both to their reputation and future capacity to fight disease and pandemics to cut spending in these areas. I further hope that, when the Global Fund replenishment comes up, they will make good these cuts and ensure that we have these basic health provisions that help not only us but the whole world.

House of Lords: Remote Participation and Hybrid Sittings

Baroness Hayman Excerpts

Thursday 20th May 2021 Lords Chamber

[Baroness Hayman (CB)]

My Lords, I am grateful to the Leader of the House and her colleagues around the House for arranging today’s debate. It is a privilege to be the first of around 80 Back-Bench speakers contributing to the debate on the Motions before the House. We can already hear that there will be strong and divergent views expressed today. I do not want in my contribution to set out my own personal prescription for the way forward for the House. What is important is that this is part of a process in which people listen to each other.

I very much support the recommendations by the Constitution Committee that any draft proposals that it or the Commission or the Procedure Committee make for change should go out to consultation before any firm recommendations are put to the House for decision. I would add my own prescription that provision should be made for review, so that we go step by step with the changes. In our considerations, I suggest that we follow the prescription from Albert Einstein, which we were reminded about in the House earlier this week. He said that if given an hour to solve a problem, he would spend 55 minutes looking at the problem and only five minutes looking at the solution.

I hope that we can find common ground—and it has emerged from speeches already today. The essential problem we have collectively to solve is how we ensure that the Lords functions at the highest standards and as effectively as it can in its essential tasks of scrutinising and improving legislation, utilising the expertise and experience of its Members through committee work, and, above all, and centrally, holding the Government to account.

That ability has been degraded and our capacity to fulfil our role has been downplayed. The ways in which this has happened have already been spoken about, and they are set out in the report of this House’s Constitution Committee and in the Government’s response to the House of Commons Procedure Committee report, which included the words

“the quality of debate and scrutiny has undoubtedly suffered … scrutiny of Government has been less effective with fewer opportunities for interventions; debates have been reduced to a succession of pre-prepared speeches read out one after the other; MPs have had fewer opportunities for collegiate cooperation to hold government to account … there has been less spontaneity and flexibility and backbenchers have had reduced access to ministers.”

All that is true and is of great concern. It is the problem we need to put right, but the challenge is to do so: to remedy the deficiencies, but not to assume that we can go back.

The noble Lord, Lord Cormack, said that we should beware of “the comfortable way”—the comfort of working from home, the ease of contributing remotely. I agree with him about that, but there is a comfortable way of thinking that the status quo ante is what we need and that there are no challenges at all. As others have said, we were not doing our job perfectly before Covid, and we need to look very carefully to see whether there are things that we can learn, or imagine, from remote and digital working that could, in future, enhance the performance of the House as a whole. I have to say to the noble Earl, Lord Howe, that while I agreed with a great deal of what he said, I thought his list of possible things that might, perhaps, a little bit, be considered for doing things better in the future was slightly minimalist. I think there is real opportunity to do better and to talk about the sorts of things that the noble Baroness, Lady McIntosh, mentioned, in terms of self-regulation.

I am unashamedly a sentimentalist about Parliament. I have been much happier this week, participating here, than remotely. Politics is a people business, but we live in a world that is ever more digital and changing and we need to find a way forward that understands both those truths.

Financial Services Bill

Baroness Hayman Excerpts

Report stage
Wednesday 24th March 2021 Lords Chamber

[Lord Oates (LD)]

My Lords, I declare my interest as the chairman of the advisory committee of Weber Shandwick UK. Amendment 3 is in my name and the names of the noble Baronesses, Lady Hayman, Lady Jones of Whitchurch and Lady Altmann. I thank all the organisations who provided me with briefing, in particular Finance Watch for its helpful advice and recommendations.

Before I speak to Amendment 3, I also want to express support for other amendments in this group, particularly Amendments 22 and 23 in the name of the noble Baroness, Lady Hayman, which deal respectively with climate risk reporting and the appointment of a senior FCA manager responsible for climate change. I have been pleased to put my name to both.

In Committee we had an excellent and productive debate about the impact of climate risk on the financial system and the wider economy. I am grateful to the Minister for his careful consideration of the arguments, and to noble friends and colleagues across the House for the excellent cross-party co-operation we have achieved on these issues. I thank the Minister for listening to the arguments on the need for the FCA and PRA to have regard to the UK’s 2050 net zero obligations and for introducing government amendments to achieve this end. That is a great step forward.

If we are effectively to respond to the existential threat climate change poses to our financial system—indeed, to our whole human society—finance will be critical in allocating the huge amounts of capital required to decarbonise the global economy. Today, however, finance is the principal enabler of climate change by financing the global warming-accelerating activities of the fossil fuel industries at an artificially low cost as a result of the inadequate pricing of climate risk within the financial system.

As long as capital adequacy risk weights are inconsistently applied within the capital requirement rules so that fossil fuel activities are under-risked, capital will flow towards them because the equity that has to be held on the bank’s balance sheet will be less than it should be and the return on equity consequently better than it should be. As a result, capital which could be better employed in the new technologies we will need to counter climate change will continue to be misallocated to the old industries that drive it.

Amendment 3 attempts to address this problem by requiring the PRA to complete a review of capital adequacy risk weightings in relation to existing and new fossil fuel investments within six months of the Bill being passed. That review would aim to ensure that risk weights for fossil fuel investments adequately take into account the impact of global warming-accelerating activities on financial stability, in particular as a result of climate change-related disruption to the economy.

This amendment is an attempt to meet the concerns of the Minister over my more direct amendment in Committee, which called for specific risk weights to be applied to fossil fuel investments in line with the existing capital adequacy rules of the capital requirement regulations, or CRR. The amendment in Committee required the application of a 150% risk weight to existing fossil fuel investment, in line with Article 128 of the CRR. That requires such a risk weight to be applied to

“items associated with particular high risk”,

for example, hedge funds or investments in immovable property.

It is clearly hard to argue that fossil fuel investments are less risky than either immovable property or hedge funds investments, given the likelihood of fossil fuel assets becoming partially or wholly stranded. The logic of CRR is, therefore, that such investments must be included under Article 128. That they are not indicates that the regulatory system is struggling to respond to the complex and interrelated risks posed by climate change to the financial system.

The original amendment also proposed that, for new fossil exploration and production, the risk weight should be applied such that investment in these activities would have to be backed by 100% equity on the lender’s balance sheet. Such a risk weight is merited by the fact that new fossil fuel investments are likely to become entirely stranded and that exploitation of new fossil fuel investments would push us far beyond the level of two degrees of warming that the Intergovernmental Panel on Climate Change warns us would have enormous and unpredictable consequences for human society, not to mention the banks and the financial system as a whole. It is right in those circumstances that the resulting loss of capital should be effectively ring-fenced so that the problem is confined to the bank equity holders and not allowed to spread to depositors and the wider financial system—adding a financial crisis to a climate crisis.

It is fair to say that the Minister and a minority of other Peers were resistant to the direct approach to risk weights I proposed. The Minister was concerned, as was the noble Baroness, Lady Noakes, that we were seeking to use prudential regulation to achieve policy objectives that they felt were better pursued elsewhere. The noble Baroness stressed that the system of prudential regulation should be about the

“risk to the capital of the banks and the resilience of the financial system as whole.”—[Official Report, 1/3/21; col. GC 244.]

To this, I can say only that I agree; that is the precise purpose of the amendments that my noble friends and colleagues across the House and I have been pursuing.

Last week, the deputy governor for prudential regulation and CEO of the PRA Sam Woods stated in a speech to the Association of British Insurers that

“it is a fundamental pillar of the prudential regime that it be risk-based: disregarding the risk in individual investments is a recipe for an under-capitalized financial system that would not be a robust or sustainable source of investment.”

I agree with the deputy governor, just as I agree with the Minister. My only difficulty is that the disregarding of risk in individual investments, which the deputy governor warns us against, is exactly what is happening in respect of fossil fuel investment because prudential regulation has not worked out how to adequately assess the impacts of climate change on the financial system.

The scale of the problem was highlighted by Mark Carney in his “Breaking the Tragedy of the Horizon” speech some years ago. He said:

“Take, for example, the IPCC’s estimate of a carbon budget that would likely limit global temperature rises to 2 degrees above pre-industrial levels. That budget amounts to between 1/5th and 1/3rd world’s proven reserves of oil, gas and coal. If that estimate is even approximately correct it would render the vast majority of reserves “stranded”—oil, gas and coal that will be literally unburnable without expensive carbon capture technology, which itself alters fossil fuel economics. The exposure of UK investors, including insurance companies, to these shifts is potentially huge.”


Is anyone seriously suggesting that these risks are currently being properly taken into account in the capital adequacy risk weights? If they were, it is inconceivable that existing fossil fuel investments would not be ranked under Article 128 of CRR as items associated with particular high risk. Of course, investments in new fossil fuel exploitation pose not only micro-prudential risks to banks arising from stranded assets, but the huge macro-prudential risks due to the acceleration of climate change which they will cause.

The Minister sought to assure us in the debate in Committee that the regulators have these matters under control. He prayed in aid, as did the noble Baroness, Lady Noakes, the climate scenario tests that the Bank will be conducting later in the year. These are no doubt worthwhile exercises and it is good to see that the Bank is setting the international pace. But these scenario tests will not fix the issue.

Although the Governor of the Bank implicitly recognises the role that capital adequacy requirements need to play in addressing climate-associated risks when he says that supervisory expectations will require firms to assess how climate risks could impact their businesses and to review whether additional capital needs to be held against this, he also states that, in relation to climate scenario tests, the Bank will not use them to size firms’ capital buffers. The reason the Bank is reluctant to do so is the difficulty of using such tests to measure hard-to-quantify future risk. So we have a dangerous scenario when regulators say that they cannot act until they can adequately measure risk, and on the other hand that the risk is too difficult to measure. The route through this is to apply the existing capital adequacy risk weights in an internally consistent manner, as proposed by the amendment that we put at Committee.

Although I stand by that position because I believe it is the only logically coherent and feasible way of dealing with risk in respect of fossil fuel activities, I have listened to the Minister’s arguments and those of the noble Baroness, and consequently I have put forward this revised amendment to require the PRA instead to conduct a review of the issue of risk weights and climate change and report back to the House. This will provide an opportunity to consider carefully the issues raised and also to inform the debate on risk weights at international level. I hope the Minister will see merit in this proposal.

I made it clear in Committee, and I stress again on Report, that neither my amendment then, nor the revised version before your Lordships today, is driven by any animus against the fossil fuel industries—quite the contrary. I have a huge respect for the people working in those industries and a huge determination that there should be a just transition for those employees as we decarbonise our economy. We will be able to achieve that much more easily if the financial system shepherds an orderly transition away from fossil fuel industries through the appropriate application of risk in the system.

I understand the reluctance of the Government to intervene in prudential regulation, but Ministers cannot abdicate responsibility. They must not cling to the idea that the technicians have got this under control, because it is an illusion—and it is an illusion that will have disastrous consequences if it is not corrected. When the system of prudential regulation is so evidently failing in its primary task of managing and controlling risk in the financial system, at least in respect of climate risks, there is an obligation to act. So I am hopeful that, having listened to the arguments during the debate, the Minister will accept the case for the review and provide sufficient assurance that this will be taken forward in a timely manner. However, if he is not able to do so, I give notice of my intention to test the opinion of the House. I beg to move.

[Baroness Hayman (CB) [V]]

My Lords, I remind the House of my interests as co-chair of Peers for the Planet. I have Amendments 22 and 23 in this group and will speak also to the government amendments and Amendment 44, from the noble Baroness, Lady Bennett. I have added my name to Amendment 3, to which the noble Lord, Lord Oates, has just spoken so powerfully.

Before I speak to any of the amendments, I will thank colleagues, the noble Lord, Lord Oates, and the noble Baronesses, Lady Jones, Lady Altmann and Lady Bennett, who have added their names to my amendments. I thank very particularly the Minister and his team for their very approachable actions in relation to discussions since Committee. They have been engaged in a sensitive and constructive way, and the noble Earl, as we have come to expect, has always been extremely courteous, endlessly patient and generous with his time. I think we have made real progress because of that.

Financial Services Bill

Baroness Hayman Excerpts

Committee stage
Monday 1st March 2021 Grand Committee

[Baroness Hayman (CB) [V]]

My Lords, it is always fascinating to follow the noble Baroness, Lady Noakes. I certainly do not have her level of expertise in financial institutions but, listening to her, I worried that the phrase that the noble Lord, Lord Oates, used about the battle between urgency and complacency was actually rather relevant. We have a very short period of time in which to change the dynamics of what is happening to our world through climate change. I am sure that these amendments could be better drafted, and we may need her technical knowledge and experience to help us find the correct levers to do what Amendments 28, 31 and 32 set out to do, but, frankly, we cannot afford simply to say that this will not work. We have to find ways that will work, which is why I am interested in, and listened carefully to, the powerful and compelling case made by the noble Lord, Lord Oates, in introducing these amendments.

We have to find a way in which to make explicit and transparent the risks contained in continuing investment in existing fossil fuel projects or new ones, and that funding new fossil fuel projects is essentially of the highest risk and should be funded out of equity if it is to go ahead. The risks relate not only to continuing investment contributing to climate change, which itself creates systemic risk through increasing emissions, but to the certainty of these assets becoming stranded, as the noble Lord, Lord Oates, said. That is not in the long term—we are talking about the reasonably predictable future.

A recent report by Finance Watch, Breaking the Climate-finance Doom Loop, highlighted that to limit warming to 1.5 degrees we can emit only a further 500 gigatonnes of CO₂. There are currently fossil fuel reserves which, if all were extracted, would emit 3,000 gigatonnes. If we are to have any hope to meet what are not just the aspirations of what the noble Baroness calls the “green lobby” but are actually our national and international treaty obligations, we have to change. Despite the fine words that have been spoken since Paris, $2.7 trillion in funding has been provided since that agreement to the oil and gas industry, with UK banks contributing significantly.

Financial institutions are in the process of quantifying climate-related financial risks, but it is widely recognised that this will take considerable time. Rather than waiting until the middle of the decade when we have made progress in quantifying the risks via the TCFD and climate-related financial risk disclosures, we could start to make changes to the existing capital requirements regulation now, to reflect what we all know are risky investments, even if we do not know the exact quantified risk. Prudential regulations are designed for just such a situation, to regulate markets and ensure long-term stability.

We have to make it very clear what the risks are, because there is danger of interpretation of risk from the transition from brown to green being considered in the light of it being a sudden cut-off of one and a change to the other, so that people avoid any change. We need a measured and adjusted transition. To do that, we need to be aware of risks on all levels.

Finally, I will say a word or two on taxonomy: how we actually define green and brown. In previous Committee debates, the noble Earl the Minister said

“we need to be able to define what we mean by ‘green’.”—[Official Report, 24/2/21; col. GC 225.]

He commented that it will take time to analyse the risks and produce the taxonomy. It is important that we recognise that that taxonomy needs to include a definition of what is a brown asset as well as what is green. We need to look at how we drive investment away from brown, as well as directing it to green.

The New Economics Foundation recently wrote to the Chancellor, saying that

“limiting the taxonomy to green activities will not necessarily encourage a move away from financing activities that undermine climate goals. We equally need the taxonomy to classify carbon-intensive and other unsustainable activities. Importantly, the taxonomy design should not be decided behind closed doors. There must be transparency and public consultation to ensure that a wide range of expertise and perspectives from across civil society and academia feed into the UK’s Green Technical Advisory Group.”

It would be very good to understand government thinking on this issue and on the timing of the work of the green technical advisory group, and I hope that the noble Earl will comment on this when he winds up or, if that is not possible, write to me in the future.

[Lord Sharpe of Epsom (Con)]

My Lords, I refer to my interests in the register. It is a pleasure to follow the noble Baroness, Lady Hayman, and my noble friend Lady Noakes, who spoke eloquently on the capital requirements. I was planning to do the same, but she has said much of what I was planning to say, so I shall confine myself to a brief question about Amendment 31.

Amendment 31 refers to

“existing fossil fuel production and exploitation.”

I wonder whether all the possible consequences have been considered. The noble Lord, Lord Oates, spoke eloquently on mining, and I, too, claim mining ancestors: my great-grandfather was a coal miner in Seaton Burn in Northumberland. The noble Lord also mentioned stranded and abandoned communities. I wonder whether the amendment, as drafted, would also apply to companies that are actively engaged in the complex process of decommissioning existing facilities, particularly those in the North Sea. In many cases, those are the same companies that are involved in exploitation and exploration. Again, my noble friend Lady Noakes spoke very eloquently about hypothecation when it comes to lending to some of these types of companies. With that in mind, were the potential regional effects of rationing capital to these businesses considered, because that is the likely net effect of the amendments? I suppose that that would have particular reference to and relevance in Scotland.

I am sure we all hope for a world free from fossil fuels, but I am 100% confident that, regrettably, we will need them for a while yet—although it is probably worth stating that they have other uses apart from just being burned. As my noble friend Lady Noakes also pointed out, it is fair to say that financial institutions have a refined—no pun intended—approach to assessing fossil fuel-related risk and are perfectly capable of valuing stranded assets. The proof of that is to be found in the valuation of companies such as BP and Royal Dutch. If, as the amendments imply, we would prefer no lending at all to fossil fuel companies—which is a perfectly legitimate point of view—should we not just say that and agitate for a multinational agreement to that effect, perhaps at COP 26, rather than introduce it via the back door through amendments such as these?

Financial Services Bill

Baroness Hayman Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Wednesday 24th February 2021 Grand Committee

I hope that the Government are listening and will work with Peers on all sides of the House during the remaining stages of the Bill to ensure that we address these vital issues effectively. I beg to move.

[Baroness Hayman (CB) [V]]

My Lords, I declare my interests as set out in the register. It is a pleasure to follow the noble Lord, Lord Oates, who, both at Second Reading and today, has argued passionately and cogently about the need to remedy the absence from the Bill of any reference to the risks and opportunities that climate change presents to the financial services industry. I have tabled Amendments 14, 35, 75, 76 and 98 and added my name to Amendments 11, 12, 23, 48 and 89 in the names of the noble Lord, Lord Oates, and the noble Baroness, Lady Jones of Whitchurch.

As the noble Lord, Lord Oates, said, all the amendments in this group seek to put a climate change lens on the provisions of the Bill. There are various approaches, but the amendments focus, as he said, on ensuring that the regulators take into account climate-related risks when they are making the new rules and regulations proposed in the Bill. They seek to address the remit of the regulators and thus ensure that climate risk is considered at a systemic level.

The increase in firms reporting on such risks at an individual level is both necessary and welcome; however, there is a widely recognised and existential threat to our entire financial system from climate change. Last year, the Governor of the Bank of England, Andrew Bailey, said:

“Compared to the financial crisis and the pandemic, the risks from climate change are even bigger and more complex to manage.”


We need to ensure that those with the responsibility for financial stability at a macro level are assessing and reporting systemic climate risk as a core function.

On numerous occasions, the Government have recognised the integral role of our financial services industry in driving the change to a green economy, with an urgent focus on aligning investment with the objectives of the Paris Agreement and the Climate Change Act. Our amendments would put that into reality. The Chancellor spoke on 9 November about

“putting the full weight of private sector innovation, expertise and capital behind the critical global effort to tackle climate change and protect the environment”.—[Official Report, Commons, 9/11/20; col. 621.]

Yet, as has been said, this crucial piece of financial industry legislation remains totally silent, hence the importance of our debate on this group of amendments and the urgency, in this year of COP26 when our own domestic performance will be integral to the success of our global leadership, of making progress before the Bill leaves this House.

Turning to individual amendments, I have tabled Amendment 14, which, as the noble Lord, Lord Oates, says, addresses the same issues as his Amendments 11 and 12, but in a slightly less detailed way. The intention of Amendments 14 and 35 is to ensure that the FCA makes new prudential regulations for investment firms and that, before the PRA makes any new rules in relation to the capital requirements regulations, these regulators must have regard to the likely effect of those rules on the UK meeting its net-zero commitments. “Having regard” is an important issue and one to which, when this was debated in the other place, I sensed that the Government were not completely antagonistic, but took rather a St Augustine view—being happy to be made green, “but not yet”.

I see no reason whatever for awaiting the consultation on this issue, especially because when one reads the consultation document, apart from a few words in the foreword by the Minister, there is no reference to climate change and no request for views on it. Given the importance of the issue, this is something on which we should be making progress straightaway.

I am grateful for the support of the noble Lord, Lord Oates, and the noble Baronesses, Lady Altmann and Lady Bennett, for Amendment 75, which focuses on the current remit and governance provisions of the regulator. It proposes amending Schedule 1ZA to the Financial Services and Markets Act 2000, which deals with the constitution of the governing body of the FCA, and provides for the appointment of a board member with direct responsibility for climate change issues. This would enable a focused and strategic approach to be taken to climate change across the sector at the highest level of the regulator.

Essentially, the amendment requires the regulators to do what they have asked of the sector itself, because those are the same provisions that they now require financial institutions to comply with, and they replicate the senior management regime, which requires those institutions to appoint a board member responsible for identifying and managing financial risk from climate change, and reporting on it.

As part of the process to embed climate risk and the net-zero transition into investment and supervisory decisions, institutions are asked to

“embed the consideration of the financial risks from climate change in their governance arrangements”

and

“demonstrate an understanding of the distinctive elements of the financial risk from climate change and a sufficiently long-term view of the financial risks that can arise, beyond standard business planning horizons.”

That long-term view is particularly important, and there is no reason for the FCA not to take on this responsibility. The Bank of England itself has appointed an executive sponsor for climate-related risks, who is responsible for recommending to the governors the Bank’s strategy for addressing the risks that climate change poses to its objectives, and overseeing the implementation of that strategy. So I hope that, when he winds up, the Minister will be able to respond positively to this very limited but still important amendment.

Amendment 76 deals with the need to ensure that the regular mandatory reporting mechanisms for a sector-wide climate risk assessment provide for FSMA to be amended; the need for the PRA to provide a regular report on how it has evaluated exposure to climate risk; and the impacts that it would have on the stability of the United Kingdom financial system. That could form part of the annual reporting that the regulators are required to provide to the Treasury, and to Parliament via the Treasury Select Committee.

The amendment also provides that, as part of the reporting process, the PRA must seek advice from the climate change committee. It is important that we join the dots between the different bits of government, and ensure that a statutory body such as the climate change committee is integrated into the advice received by regulators and those responsible for economic stability.

My final amendment in this group is Amendment 98, which seeks to amend the Financial Services and Markets Act to insert a new FCA climate-related financial risk objective. While the regulators are moving forward with approaches necessary to address climate-related financial risks, such as through the UK Climate Financial Risk Forum, their statutory remit does not currently include a duty to consider the impact of climate change on the stability of the financial sector overall.

The theme running through this group of amendments is to seek to embed climate risk and the net-zero obligation into the financial system. This is one critical step towards doing that, by ensuring that they are embedded within the scope and remit of the regulators at every level.

Covid-19

Baroness Hayman Excerpts

Wednesday 23rd September 2020 Lords Chamber

[Baroness Evans of Bowes Park (Con)]

The noble Baroness is right about how incredibly important it is that we get messaging right. We are in a very complicated situation and everyone is doing their best. She is also right about concerns over mental health; for those with severe needs or in crisis, all NHS mental health providers have established 24/7 mental health crisis lines, and PHE has published its surveillance tracker to monitor the impacts of Covid-19 on the population’s mental health. These are proactive steps to help ensure that our response to the effects of the pandemic is shaped by emerging data. I am sure work such as that will help feed in as we think about messaging now and going forward.

[Baroness Hayman (CB) [V]]

My Lords, during the Statement yesterday the Prime Minister spoke of Parliament’s ability to

“take forward its business in a covid-secure way”.—[Official Report, Commons, 22/9/20; col. 798.]

Does the noble Baroness the Leader of the House recognise that there are grave concerns about how we are taking that business forward and the quality and effectiveness of current debate and scrutiny? As the noble Lord, Lord Newby, said, particularly concerning is the retrospective and often totally irrelevant nature of our scrutiny of statutory instruments which have been in force for weeks or months before they are ever considered in the House. In her response to the noble Lord, the noble Baroness did not seem to recognise that there was a problem. I urge her to read the words of the noble and learned Baroness, Lady Hale, and of her noble friend Lord Forsyth in the debate last Friday, and reconsider.

[Baroness Evans of Bowes Park (Con)]

I am sorry if the noble Baroness did not think I gave due weight to that response. As I have said, we are very concerned to ensure we have scrutiny. We have ensured that each SI has undergone full scrutiny, in line with the parent Act, and worked around the appropriate parliamentary procedures. At this point I also thank the House authorities for all the work they have done to help us ensure we are a Covid-secure workplace. I hope noble Lords, while finding it frustrating, will continue to appreciate that we are working in a hybrid way and doing remote voting in an attempt to make sure that as many noble Lords as possible can continue the important work we do in this House in scrutinising legislation.