Employment Bill

Lord Callanan Excerpts

Wednesday 6th April 2022 Lords Chamber

[Lord Hendy (Lab)]

My Lords, in the unavoidable absence overseas of my noble friend Lord Woodley, and at his request, I beg leave to ask the Question standing in his name on the Order Paper.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, the Government are committed to building a high-skilled, high-productivity, high-wage economy that delivers on our ambition to make the UK the best place in the world to work. We will do that by continuing to champion a flexible and dynamic labour market. As we build back better, we will continue to make it easier for people to both enter and remain in work.

[Lord Hendy (Lab)]

My noble friend Lord Woodley’s Question could not be more topical. Our employment laws failed utterly to protect the jobs, incomes and careers of 800 P&O seafarers, sacked without consultation or warning and marched off their ships by security guards. The Government’s proposals in response are set out in the all-Peers letter dated 31 March from the noble Baroness, Lady Vere. Not included is legislation to strengthen, and in particular enforce, employment rights to prevent repetition of such sacking by ambush. I ask the Minister: why not? Is it connected with the reports that the proposal for an employment Bill in the forthcoming Queen’s Speech was overruled last week by the Prime Minister?

[Lord Callanan (Con)]

The BEIS Secretary of State has formally commissioned the Insolvency Service to urgently undertake a thorough inquiry into the circumstances surrounding the recent redundancies made by P&O Ferries that the noble Lord referred to. We will not hesitate to take further action if we find evidence of wrongdoing. He will know that the Secretary of State for Transport has also committed to applying the national minimum wage to seafarers.

[Lord Forsyth of Drumlean (Con)]

My Lords, has my noble friend noticed the catastrophic reduction in the number of self-employed people in this country following the implementation of IR35? What has happened to out manifesto commitment that we would implement the recommendations of the Taylor report, which would have provided an opportunity for us to have an employment situation that would encourage the kind of high-tech investment and growth that the Government say they want?

[Lord Callanan (Con)]

I certainly know the problems that my noble friend is identifying with IR35 and will communicate them to HMRC and the Treasury.

[Lord Touhig (Lab)]

My Lords, if you are disabled you are 30% less likely to have a job than if you are able bodied. In London alone, there are 400,000 unemployed disabled people. In some London boroughs, just one in four disabled people has a job. What will the Government be doing, if they have no Bill, to address this crisis among people with disabilities?

[Lord Callanan (Con)]

We have an excellent record for job creation in this country, and our unemployment rates are much lower than many others on the European mainland, but I totally accept the point the noble Lord is making. We must all redouble our efforts to make sure that those who are disabled get the same opportunities to work as the rest of us do.

[Lord Razzall (LD)]

My Lords, will the Minister confirm that when the Bill eventually arrives, it will progress the so-called good work agenda, enabling workers with variable hours to request a more stable and predictable contract? I am sure the Minister is aware that the EU transparent and predictable working conditions directive will introduce similar rights on an EU-wide basis from August 2022. Will he confirm that the reason for delay in the Bill is not to avoid similarity with Europe on these issues?

[Lord Callanan (Con)]

Of course all EU employment directives were transposed into UK law, but they are a minimum standard in many circumstances. As the noble Lord will know, we go far beyond EU minimum standards and we should be proud of that.

[The Lord Bishop of Oxford]

My Lords, technology has intruded further into the world of work over the last five years. Many developments are helpful, but some are not. Almost 60% of workers now report some form of technological surveillance at work, often through so-called bossware, often introduced without consultation with unions and workers. How will the employment Bill eventually keep pace with this development, and will it introduce a statutory requirement on employers to consult and disclose the use of algorithmic and AI surveillance on employees, and protect workers from excessive surveillance by technology?

[Lord Callanan (Con)]

I am afraid that I cannot commit to any specific measures that might be in any future legislation that the right reverend Prelate will be aware of. I recognise the concerns he addressed; it is very important for employers to consult their workforce fully before introducing measures such as this.

[Baroness Blake of Leeds (Lab)]

My Lords, the 2019 Conservative manifesto stated that it would

“encourage flexible working and consult on making it the default unless employers have good reasons not to.”

On 9 February 2022, BEIS Minister Paul Scully reasserted the Government’s commitment

“to introducing new employment measures”—[Official Report, Commons, 9/2/22; col. 1059.]

covering a range of matters. It is now being reported in the Financial Times that the long-awaited employment Bill is not expected in the Queen’s Speech in May. I am sure that the Minister is aware of the excellent debate led by the noble Baroness, Lady Altmann, exposing the urgent need for flexibility to stem the rapidly increasing loss of older workers from the workplace, especially due to health reasons and caring responsibilities. If there is no employment Bill in the Queen’s Speech, does this mean that the Government no longer believe that employees deserve this right to request flexible working?

[Lord Callanan (Con)]

I cannot commit to any particular measures, as I said in response to an earlier question. However, we have a very good employment law framework in this country, as evidenced by our unemployment rate, which is less than half that of France—which has a much more rigid employment framework. Therefore, flexible working is a good thing in this country because we have lower unemployment. The best right anyone can have is to have a job. It is right that we do not change the employment law framework until we are sure that any changes will address the needs of businesses and workers in the post-Covid economy.

[Lord Balfe (Con)]

My Lords, the response from the Government on P&O has been excellent. It has also shown the need for an employment Bill. At the end of this Session, the pledge in the last Queen’s Speech will disappear. However, we need it in the new Queen’s Speech because, at this moment, many workers are applauding what the Government have done with P&O and are looking to them to honour the promise of the employment Bill made two years—it is more urgent now, not less. I ask the Minister to go back to his department and lobby hard for it to be in the Queen’s Speech.

[Lord Callanan (Con)]

I have heard what my noble friend has said, and I know the close interest which he takes in these matters and his close relationship with the trade unions. I will certainly take his message back to the department but, as he will be aware, I cannot predict what may or may not be in the Queen’s Speech.

[Baroness Blower (Lab)]

My Lords, the all-Peers letter to which my noble friend Lord Hendy has already made reference contains an excellent proposal to ask European ferry operators and unions to agree a common level of seafarer protection on European ferry routes. Will the Minister undertake to consider legislation to achieve such sector-wide collective bargaining at national level too—as was recently implemented in Spain and proposed in New Zealand?

[Lord Callanan (Con)]

Part of the problem with P&O is that the ferries were registered in another European country, so presumably it was applying European law in those circumstances. Clearly there is an issue with ferries, which by their very nature cross borders, and I know that the Secretary of State for Transport has announced nine measures, including minimum wage requirements for seafarers operating from British ports. He will want to take those issues forward as fast as he can.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, will the Minister not admit that this is not the only election promise which this Government have reneged on? They have reneged on the triple lock for pensioners, and now they have reneged on the national insurance rise. When can anyone ever believe what this Prime Minister says ever again?

[Lord Callanan (Con)]

I am sorry to hear that the noble Lord is disappointed with our progress on employment, but I am delighted to share with him the great news that unemployment was down again last month to 3.9%, one of the lowest rates in Europe. If we had adopted some of the proposals of the Opposition to have a rigid, inflexible labour market, unemployment would go up and many people would lose their jobs. Surely that would be a bad thing for workers’ rights.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, it is understandable that the Minister cannot give any commitment to what will be in the Bill when it comes. However, given that it was in the 2019 election manifesto and the Government were elected on the basis of delivering that promise, can the Minister give a commitment that they will in fact implement a Bill before this Government go out of office?

[Lord Callanan (Con)]

I can certainly give the noble Lord a commitment that we are going to attempt to take forward many of the measures that were outlined. There are a number of different vehicles that would enable us to do that, but we have to proceed carefully and cautiously. We do not want to damage the excellent, flexible labour market that we have in this country, which has delivered excellent results, including under the last Labour Government, who also decided not to change our flexible labour market.

Energy Storage Capacity

Lord Callanan Excerpts

Tuesday 5th April 2022 Lords Chamber

[Lord Oates]

To ask Her Majesty’s Government what plans they have, if any, to increase energy storage capacity in the United Kingdom.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, energy storage is an essential source of flexibility for net zero and for energy security. The Government are analysing whether further intervention is needed to support deployment of long-duration energy storage, including hydrogen storage, to help ensure a least-cost transition to net zero. The diversity of the UK’s gas supply is a strength of our approach to energy security, and GB gas storage tops up supply during periods of high demand.

[Lord Oates (LD)]

I thank the Minister for his response. He will be aware that due to the UK’s lack of long-term energy storage, we waste enough wind energy every year to power over 1 million homes. Does he recognise that long-term energy storage, alongside renewables, could end this waste and provide the most cost-effective solutions to decarbonising the grid? Can he tell the House why the revised energy policy statement was so unambitious on long-term storage, and when we will get some decisive action in this area?

[Lord Callanan (Con)]

The noble Lord is right to point out the importance of long-term storage. We are aware that long-duration electricity storage—for example, pumped hydro—can struggle to deploy because of the high capital costs and the lack of forecastable revenues. We are analysing responses to a consultation from last year on a call for evidence on facilitating further deployment of this type of storage. We already have a considerable amount, but he is right that we must do more.

[Lord Howell of Guildford (Con)]

My Lords, I am sure most noble Lords agree that more storage of gas and electricity, and more nuclear power and wind, are desirable in the long term. But, as none of these will have the slightest effect on energy prices now, which are causing suffering and real fear for millions of households, is it not a bit feeble to offer them as the only answer? The real and immediate answer is surely for the world to pump more oil and gas, which OPEC is perfectly capable of doing with its spare capacity. Should we not press further on that? Is it not unwise and despicable of OPEC to refuse to replace Russian gas and oil exports now?

[Lord Callanan (Con)]

I take slight issue with my noble friend, in that I do not think we are offering long-term energy storage as the solution to the current massive price spikes but as something we need to do in the longer term. As we have more intermittent forms of power, it is important to store the power we generate for times when its intermittency means power is lacking. My noble friend also made a point about the importance of ramping up our own production, particularly from the North Sea, to help with security of supply. Unfortunately, it will not affect price, but it will affect security of supply.

[Lord Wigley (PC)]

My Lords, the Minister will be aware of the outstanding pumped storage scheme at Dinorwig in Gwynedd, which has enabled the network system to meet capacity demands without the extra necessity to meet the peak. Is he aware that two of the four surge shafts are being taken out of commission now and may be out of commission for two or three years, for renovation and safety checks? In these circumstances, is any provision being made to meet the loss that is a consequence of this work? Are there plans for further pumped storage facilities side by side with the nuclear programme?

[Lord Callanan (Con)]

Indeed, I am aware of the excellent Dinorwig facility. I remember studying it when I was an engineering student many years ago and it is an incredible feat of engineering. The noble Lord can be reassured that the capacity market auction has already secured enough standby capacity market supplies, through to 2025-26. We are aware of the point about Dinorwig.

[Lord Lennie (Lab)]

My Lords, given that in the last year energy storage capacity increased to record levels, which is something the Government can be congratulated on, what are they doing to turn this into savings for hard-pressed consumers, who are already dealing with a cost of living crisis that is not of their making?

[Lord Callanan (Con)]

As I responded to my noble friend earlier, more storage is not the answer to high prices at the moment. It benefits the system in the longer term. Sadly, in energy policy, nothing happens in the near future and everything is long term. The noble Lord is aware of the £9.1 billion package of support that the Chancellor announced to try to mitigate the effect of high prices at the moment.

[Lord Fox (LD)]

My Lords, the success of offshore wind was driven by the contracts for difference structure that has caused private money to pour into the sector. The Government have recently passed the Nuclear Energy (Financing) Act, which looks at the RAB model. What models are they now looking at to finance storage because, without companies knowing how they will make money from building storage facilities, they will not build them. It is really important that the Government step forward now to explain how this will work financially. What are the plans to deliver a structure that will finance this?

[Lord Callanan (Con)]

The noble Lord is correct and, as I said earlier in response to the noble Lord, Lord Oates, we had a call for evidence last year and we will announce our analysis and the results of that shortly.

[Lord Lilley (Con)]

My Lords, could my noble friend confirm that the cost of providing storage for periods when the wind does not blow, which can last for days, will be astronomical? That is particularly true of batteries, since the cost of lithium is 10 times what it was a year ago. We will continue to need gas for quite a considerable while to provide that back-up. Will the Government implement the recommendations of the Dieter Helm report that, when bidding to go on the grid in future, intermittent suppliers should do so in conjunction with the back-up supplies that are needed when theirs are not available as the wind is not blowing?

[Lord Callanan (Con)]

My noble friend’s question deserves a long answer because it is a complicated subject. We need to differentiate between short-term storage, particularly from batteries and elsewhere, which is currently expensive—although prices are coming down—and longer-term storage provided by the likes of pump storage stations such as Dinorwig. That has been around for decades, and there are similar schemes in Scotland too. We need to do all these things. We need to get more offshore wind because it is a very cheap form of power, but it is intermittent, so we also need storage capacity to balance out that intermittency. As the noble Lord, Lord Fox, said, we also need more nuclear for baseload power.

[Baroness Wheatcroft (CB)]

My Lords, storage is a long-term solution, so can the Minister tell me whether Dungeness B, which was finally decommissioned only last year, might be brought back into service? Has the department examined the possibility of doing that as a short-term solution?

[Lord Callanan (Con)]

Of course we will want to ensure that the existing nuclear stations, of which Dungeness B is an excellent example, will continue into their lifespan as long as possible, but we will need to replace many of these ageing nuclear stations, which is why we recently passed the nuclear financing Act.

[Lord Grantchester (Lab)]

In a climate emergency it makes little sense to increase fossil fuel storage capacity. What steps are the Government taking to speed up battery storage as a vital first step to store renewable power?

[Lord Callanan (Con)]

We have some fossil fuel storage capacity, particularly for gas, and we have 90 days’ worth of oil storage capacity because of our IEA commitments. All these technologies are important, but we do not need to increase our gas storage capacity; we have tremendous security of supply from our suppliers in the North Sea, from Norway, from interconnectors with the continent, and from LNG storage. We are well supplied there, but we need to increase our battery storage as well as our pump storage, and we will.

[Baroness Foster of Oxton (Con)]

My Lords, I think we all agree in this House that we need to generate enough energy to store in the first place. I understand that the Secretary of State has called for a review of shale gas extraction. Can my noble friend the Minister assure this House that this will be carried out swiftly and by people who have certainly not opposed fracking in the past? If it goes forward, we should then anticipate the storage for shale gas along with the other storage requirements that we need.

[Lord Callanan (Con)]

My noble friend makes an important point. She is right that the Secretary of State has asked the British Geological Survey to carry out a review of fracking technologies to see whether it is possible to carry it out safely, without seismic events. We have always said that we will be led by the science on these policies.

[Baroness Bennett of Manor Castle (GP)]

My Lords, does the Minister agree with me that the other side of energy storage capacity, which is reducing the need for it, can be done by storing up demand and unleashing it when the capacity is available? With that in mind, I am not sure whether the Minister is aware of the industry report that said that we should be saving £12 billion a year by 2050 by demand-side management ensuring that heat pumps, household appliances and car chargers come on only when there is capacity in the grid. The report calls for common standards and for the demand-side response having the same language so that appliances and the grid talk to each other. What are the Government doing to ensure that that is ready and able to take its place to cut the demand for storage?

[Lord Callanan (Con)]

In general, I do agree with the noble Baroness, for a change. Demand-side management is important and is why we are rolling out smart meters and suppliers are increasingly offering variable tariffs—for instance, you can get your electric car charged when electricity is cheap during the night, et cetera, and, if consumers are willing, sell that power back into the grid again at times of high demand. A flexible system, providing the appropriate storage capacity, and demand-side management with the consent and acquiescence of consumers are all important, and we are looking at all these matters through our smart grid policy.

Boiler Upgrade Scheme (England and Wales) Regulations 2022

Lord Callanan Excerpts

Monday 4th April 2022 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Boiler Upgrade Scheme (England and Wales) Regulations 2022.

Relevant document: 32nd Report by the Secondary Legislation Scrutiny Committee. Special attention drawn to the instrument.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, these draft regulations were laid before the House on 25 February 2022, and the SLSC considered the regulations in its 32nd report.

The UK is the first major economy in the world to set a legally binding target to achieve net-zero greenhouse gas emissions by 2050. Between 1990 and 2019, our emissions decreased by 44%. We are continuing to advance sustainability through the Government’s Ten Point Plan for a Green Industrial Revolution, the Net Zero Strategy and, most relevant in this case, the Heat and Buildings Strategy.

Currently, the heating of our homes, buildings and industry is responsible for 21% of the UK’s greenhouse gas emissions. Decarbonisation of heat is recognised as one of the biggest challenges in meeting our climate targets, requiring virtually all heat and buildings to be decarbonised. The Government’s ambition is to phase out the installation of new natural gas boilers beyond 2035. Heat pumps are a proven, scalable option for decarbonising heat and will play a substantial role in any net-zero scenario.

A UK market with the capacity and capability to deploy at least 600,000 heat pumps per year by 2028 can keep us on track to get to net zero and set us up for further growth if required. However, the current UK market for low-carbon heat is relatively small; due to this, these technologies are largely unable to compete on a capital-cost basis with conventional heating options. Although the new-build market for low-carbon heat is expected to grow as a result of regulatory signals, such as the future homes standard, existing buildings face a specific set of challenges. Subsidy is required to mobilise this section of the market, bridge the cost gap between a fossil fuel system and low-carbon alternatives, and build the appropriate supply chains.

The low-carbon heat market has previously been supported by the domestic renewable heat incentive, which closed to new applicants on 31 March this year. The boiler upgrade scheme will follow on from this support, providing capital grants to support the installation of heat pumps and, in limited circumstances, biomass boilers in homes and small non-domestic buildings in England and Wales. The scheme has a budget of £450 million over three years, as confirmed at the 2021 spending review. Grants of £5,000 will be provided towards the installation and capital costs of air source heat pumps and biomass boilers, with grants of £6,000 for ground source heat pumps. Biomass boilers will be eligible only in rural properties not connected to the gas grid to minimise any impacts on air quality, in line with the Government’s clean air strategy. The grant model will provide an upfront discount to costs paid by the consumer, closing the gap between the cost of low-carbon heating and conventional boilers. In setting the grant levels, we have considered evidence on consumer willingness to pay, the current upfront capital cost of each technology and social research on domestic renewable heat incentive applications.

The application process will be led by the installer and comprise of two stages: applying for, and then redeeming, a voucher. This will allow for a simple consumer journey while maintaining certainty for installers as to availability of budget. This model is suited to ensuring market growth and enabling industry to deliver through the grant model at scale. To ensure consumer protection through the scheme, consent will be sought from the consumer ahead of any application being made on their behalf. All installers participating in the scheme must be certified by the microgeneration certification scheme or an equivalent, and must confirm membership of a consumer code. This ensures that consumers are covered by protection schemes governing the products and their performance, as well as the quality of the installation and the service they receive from the installer.

The scheme will provide financial support for up to 30,000 installations in year 1, contributing 2.6 megatonnes of CO₂ equivalent of carbon savings and supporting 2,100 direct full-time equivalent and 1,800 indirect full-time equivalent jobs per year over its lifetime. This supports the Government’s ambitions for levelling up, as we expect supply chains to be built and jobs to be supported in regions with higher demand outside London. With the growth in demand encouraged under the scheme and wider market developments, we expect to see cost reductions in the technologies over the three years. This instrument therefore sets out a provision to allow the Secretary of State to review grant levels and maintain the right to adjust them in response to any appropriate market changes. Eligible low-carbon heating systems that are commissioned on or after 1 April this year will be entitled to support under the scheme. From 11 April, installers will be able to open an account for the scheme with Ofgem. We expect these regulations to come into force and grant applications to open by 23 May.

In conclusion, the scheme established by this statutory instrument will increase the deployment of low-carbon heating technologies, making crucial progress towards our climate targets. We already have a strong homegrown renewable energy sector, but investing further in heat pumps will reduce our exposure to volatile prices and help to protect British consumers. In supporting this investment, we expect to grow the market for retrofit installations, put downward pressure on costs and continue to build the supply chain in preparation for the introduction of regulations and market-based approaches later in the decade. I commend these regulations to the Committee.

--- Later in debate ---

I sincerely hope that the scheme will be successful, as part of a wider toolkit, but the issue of flexibility, which was stressed by the noble Lord, Lord Carrington, is something that we need to focus on. I am certainly interested in being involved in the attempt to explore the possibility of hydrogen in future. I hope that, given the systems that people have in their properties, an alternative source of fuel could present a significant step in how we move this incredibly challenging agenda forward in a relatively short period of time.

[Lord Callanan (Con)]

I thank everybody who contributed to this short but excellent debate. There were some great contributions; I hope that I will be able to answer all the questions that were asked.

I start by re-emphasising what I said in my introduction: the decarbonisation of heat is a crucial challenge in meeting our climate targets, as heating our homes, businesses and industry is responsible for about a third of the UK’s greenhouse gas emissions. Although we have made progress—emissions from buildings fell by 20% between 1990 and 2017—we must go much further and faster to meet the net-zero target. Ultimately, net zero will mean gradually but completely moving away from burning fossil fuels for heating.

To address the point made by the noble Lord, Lord Carrington, we are clear that achieving net zero will require a range of technologies and solutions for buildings. There is no silver bullet, I am sorry to say. It is not a case of choosing whether electrification, hydrogen or heat networks are the answer. It will be a little bit of everything, possibly including some technologies that we are not even aware of yet. We should be flexible and adapt our approach depending on what our scientists deliver for us.

However, there is no question but that, whatever range of solutions is offered, heat pumps will play a substantial role in any net-zero scenario. It is therefore important that we build the market for them in the UK now. They are used quite substantially in other countries in Europe and across the world. Given the large quantities of gas that we have traditionally had, we have not concentrated as much on this technology in the UK, but it is important that we get the market moving.

This scheme is all about targeted support to grow the low-carbon heat supply chain to enable the introduction in the mid-2020s of regulatory and market-based measures that will further drive the transition to low-carbon heat in our homes and businesses. We have set an ambition to work with industry to reduce the cost of heat pumps, we hope by at least 25% to 50%, by 2025. This is ambitious but we have certainly seen some good signs from businesses in this area that we will be able to achieve it. Ideally, we want parity with current gas boilers by 2030; realistically, if we are to get mass market take-up, we must ensure that that is the case. This scheme is an important step in supporting those consumers who choose to make the switch earlier, as the noble Lord, Lord Vaux, has done. Investment in this element of the net-zero campaign will not only contribute to our carbon reduction targets but help to create high-quality jobs of the kind that the noble Baroness, Lady Blake, talked about. It will also boost our economic recovery in levelling up across the country and ensuring that we build back better.

I will take some of the points that noble Lords made. The noble Lords, Lord Jones and Lord Oates, rightly raised concerns about consumer protection and quality assurance under the scheme. This is something that we have carefully considered. To ensure that installations under the scheme are of a high quality, as I mentioned, all installers have to be certified by the MCS and members of a consumer code that ensures customers are protected by a Trading Standards Institute-approved code of practice. This ensures that property owners are covered by consumer protection schemes governing the products and their performance, as well as the quality of the installation and the service they receive from the installer. There is a proper insurance-backed warranty on top of that if any faults are identified or in the rare cases where installers go out of business.

The noble Lords, Lord Jones and Lord Oates, and the noble Baroness, Lady Blake, made some good points about the ability of the supply chain to deliver the scale of change required. There are currently more than 1,200 MCS-certified air source heat pump installation businesses, covering every region in the UK. Record numbers have been installed over the past year. We have had extensive discussions with businesses and industry, which have informed us that they are confident they have the capacity to comfortably meet demand for heat pump upskilling over the course of the scheme and in line with our targets.

The noble Lord, Lord Oates, prompted me on this issue. In September 2020, we launched the £6 million skills competition under the green homes grant scheme to provide training opportunities for energy efficiency and low-carbon heating supply chains. I am pleased to say that a number of the heat pump manufacturers offer their own training schemes; I have visited a couple of their training workshops. MCS itself has a conversion course and some of the big installers, whose names I do not need to mention for further advertising, are rapidly upskilling their workforces. They are often boiler engineers anyway; they just need conversion courses to be able to install heat pumps. There is a lot of work going on in skills and training, and we are working closely with the DfE to make sure that we take this forward.

The noble Lord, Lord Jones, asked what the Government are doing to support vulnerable and fuel-poor households. That is not part of this SI, obviously, but we are giving a lot of financial support through a range of schemes: £950 million in additional funding for the home upgrade grant in England; £394 million invested through the Welsh Government’s warm homes programme; £800 million to the social housing decarbonisation fund; and a £6.7 billion extension until 2026 for the energy company obligation and warm home discount schemes. All of them are helping to insulate, upgrade and retrofit the homes of those on low incomes throughout the United Kingdom.

The noble Lords, Lord Carrington and Lord Oates, and the noble Baroness, Lady Blake, rightly raised the scheme’s role in meeting the 600,000 heat pump installation target. Obviously, a bit of simple mathematics will demonstrate that this scheme will not meet the 600,000 installation target on its own. It is part of a wider package of policies that we are introducing to scale up heat pump deployment and support industry. I mentioned some of the other upgrade schemes that we have; of course, many of them are already supporting heat pump installations as well. Indeed, I visited Leeds to see some of the excellent work going on up there.

As costs come down, we expect other policies to kick in as well. The noble Lord, Lord Oates, mentioned this point: by 2026, we expect around 200,000 heat pumps a year to be going into new-build buildings following the introduction of the future homes standard. In that standard, we are specifying not that the installation has to be a heat pump—we are technology neutral—just that the overall design of the new property has to be low carbon. It could use alternative sources of low-carbon heating. That will come with the future homes standard.

Along with our consultation on wider heating policies, which will also contribute to the target, new regulations are proposed on buildings off the gas grid. We have also consulted on a market mechanism for gas boiler manufacturers; we are just about to respond to that consultation. Taking all these measures together—this scheme, the social housing decarbonisation fund, the home upgrade grant, the new future homes standard, et cetera—we are confident that we can get up to our 600,000 installations a year. However, I emphasise once again that I do not expect this scheme alone to deliver 600,000 installations a year. That would be mathematically impossible with the amount of money we have available.

Behaviour Change for Net Zero

Lord Callanan Excerpts

Thursday 31st March 2022 Lords Chamber

[Baroness Boycott]

To ask Her Majesty’s Government why they disbanded the Behaviour Change for Net Zero working group; and what they have replaced it with.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

The group was created to discuss potential policies and proposals to be included in the Net Zero Strategy. Given that the strategy was published last year, we are now focused on delivering its commitments and have well-established net-zero structures across government to do so.

[Baroness Boycott (CB)]

I thank the Minister for his reply, but in evidence given to the Environment and Climate Change Committee, on which I serve, Simon Baugh, the director of government communication, said that the Government considered that their Together for our Planet campaign launched in 2020 was a “success” and were now

“developing and testing a strategy for climate change communications”.

I had barely heard of the Together for our Planet campaign, even though I work in this area, and I guess that many noble Lords have not heard of it either. On what basis do the Government consider it a success? What are the new strategies and when will they be launched? Will it be this year?

[Lord Callanan (Con)]

The noble Baroness makes an important point. I think that the campaign was a success, but it is important that we take the public with us on this journey. We think that the better approach is to support people in making the green choices that we all want to see them make. We have a range of support measures across government to help them to do this.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, I am sure that the Minister agrees with me that we must invest at scale in renewable energy, going further and faster. If he does, will he set out for the House a bit more these new initiatives and ways forward? We have had the committee that has been disbanded, so what are these new initiatives that we need to know about?

[Lord Callanan (Con)]

As we said before, we already have considerable investment in renewables, and there will be a forthcoming energy security strategy in the near future, which will expand on some of those commitments. The noble Lord will be aware that we already have one of the largest offshore wind industries in the world, and extremely ambitious plans for scaling up offshore wind, hydrogen, solar and other forms of renewable energy. We want to continue that.

[Baroness Parminter (LD)]

My Lords, the Welsh are shortly to consult on a behaviour change engagement strategy, and the Scottish already have one. So what plans do our Government have to publish a behaviour change engagement strategy, so that everyone can understand the challenges that we face, and take their part in their role for the transition to net zero?

[Lord Callanan (Con)]

As I mentioned in earlier answers, we have a range of strategies in place to support people to make their green choices. We have the boiler upgrade scheme, which is launching next month with £450 million-worth of support over three years, to help people to make a green choice in their heating. We have the phase-out of petrol and diesel cars by 2030 to help people to make green choices in their transport. We have the jet-zero initiative, to help people to make green choices in flying and transportation. So we think the better approach, rather than trying to dictate people’s behaviour, is to support them to enable them to make green choices.

[Baroness Bennett of Manor Castle (GP)]

My Lords, late last year, the Centre for Research into Energy Demand Solutions, involving many prominent UK university academics, produced a report showing that the UK can halve its energy demand by 2050 and still improve the quality of life. That group suggested four possible approaches to government policy on energy demand reduction, ranging from ignore, to steer, to shift, to transform. How does the Minister classify the Government’s approach?

[Lord Callanan (Con)]

We have discussed in this House in many debates a number of the policies that we have to reduce energy demand. I know that the noble Baroness is a keen advocate of energy efficiency, and I agree with her on that. We have a programme of almost £7 billion-worth of expenditure over the next few years to enable energy efficiency improvements, including home upgrade grants, the local authority delivery scheme, the social housing decarbonisation fund, the public sector decarbonisation strategy, et cetera. They are all about decarbonisation and improving the efficiency of our energy usage, which is, of course, the best form of renewable.

[The Archbishop of Canterbury]

My Lords, like the Government, the Church of England has targets for reaching net-zero carbon, in our case by 2030. Churches across the Anglican Communion are deeply affected by climate change. For example, Madagascar recently had four cyclones in two months. We are working right across the communion on this question. This week, we have had a gathering of archbishops from across the communion representing more than 100 countries. Will the Minister set out the plans that the Government have to work further with faith communities, which have unique distribution and contacts, from the grass roots to the highest level, both nationally and internationally, and will he commend the work that they are already doing?

[Lord Callanan (Con)]

I thank the most reverend Primate for his question, and it is a pleasure to see so many of his colleagues in the gallery with us this morning. Achieving our net-zero targets will be a shared endeavour, requiring action from everyone in society. I very much welcome the 2030 net-zero target set by the Church, and I am following the Church’s consultation on its net-zero road map with interest. It mirrors our net-zero strategy, which delivers a comprehensive set of measures to support and capitalise on the UK’s transition to net zero by 2050. I would be very happy to meet with the most reverend Primate to discuss how we can build on that excellent work and how we can work together to enable our green future.

[Lord Forsyth of Drumlean (Con)]

My Lords, does the Minister accept that everything has changed as a result of the war in Ukraine and the huge increase in the cost of fossil fuels? Given our dependence on fossil fuels as we move away from them in the longer term, are not the Government to be congratulated on allowing further development of North Sea interests in order to enable security of supply and, most importantly of all, to protect the poorest people in this country so that they are actually able to meet their bills?

[Lord Callanan (Con)]

My noble friend makes a very important point. The Ukraine crisis has changed everything. What the crisis in the use of fossil fuels demonstrates is the need—ultimately, in the longer term—to use less of them and to move towards more renewable power, which I know my noble friend supports. However, in the meantime, for the transition, we will still need oil and gas, and my contention is that it is much better to achieve those supplies from our own domestic production, which is secure, pays UK taxes and employs UK workers.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, the Minister has very wisely said that new nuclear forms an important part of this strategy. Can he outline to the House what his strategy is going to be to persuade the Scottish Government that new nuclear stations should be established at places like Hunterston and Torness, where the communities are very willing to accept them?

[Lord Callanan (Con)]

The noble Lord makes an extremely important point. Nuclear will make a vital contribution to our low-carbon, net-zero future. It is very disappointing to see the Scottish Government rejecting an excellent technology that already works well in Scotland. However, if they continue to take this approach, I am sure that the rest of us in England and Wales will be very happy to help our Scottish friends out by continuing to supply clean, green, nuclear power for them.

[Lord Hope of Craighead (CB)]

My Lords, what are the Government doing to encourage the development of tidal power as an alternative source of energy?

[Lord Callanan (Con)]

The noble Lord makes a very good point. There are a number of schemes in operation already, and a number of research programmes that we fund to help tidal power. There are a number of different schemes, of course, including proposals for lagoon tidal power, which has proved to be quite expensive at the moment, but we continue to keep these matters under review. We have a constant, ongoing round of contracts for difference, which is our main mechanism of support, and we will, I am sure, look forward to supporting such schemes in the future.

[Lord Watts (Lab)]

My Lords, do the Government have any plans to insulate homes to a decent standard? We have some of the worst-insulated properties in Europe. When will the Government invest in that, to reduce our need for fuels of any sort?

--- Later in debate ---

[Lord Callanan (Con)]

The noble Lord makes an excellent point. Indeed, we are doing just that. I mentioned earlier that we have something like £7 billion-worth of support through some of the schemes I mentioned, including the social housing decarbonisation fund, the home upgrade grant and the local authority delivery scheme. All of those are focused on helping those on the lowest incomes in society to insulate their homes to reduce their energy bills.

[Baroness Sheehan (LD)]

My Lords, can I confirm that the Minister just said that the Government were not open to carrying out a consultation on behavioural change strategy with respect to climate change? If that is the case, it is really quite sad, because businesses are trying to lead the way, but they cannot reap the full benefit of their actions without a clear lead from government.

[Lord Callanan (Con)]

The Government are providing a clear lead. We were one of the first countries in the world to legislate for net zero; we have provided a number of different strategy documents, pointing the way, across a whole range of sectors, to how we can meet net zero, and we are working very closely with business. We are delighted to see that so many different international companies have signed up to our net- zero pledges. We will continue to work with them and continue to encourage people to make greener choices.

Exports: Support for Businesses

Lord Callanan Excerpts

Thursday 31st March 2022 Lords Chamber

[Baroness Ritchie of Downpatrick]

To ask Her Majesty’s Government what recent assessment they have made of the effectiveness of their support for businesses to increase exports.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, evidence shows that exporting businesses are 21% more productive and pay higher wages than non-exporters. Government support can help businesses to overcome exporting barriers. In February, 96% of export support service users would recommend it to other businesses and our 2018-19 export client survey indicates that 76% of those using DIT’s face-to-face export support were satisfied with its service. DIT is developing its strategy for monitoring and evaluation to assess the impact of the refreshed export strategy.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, I thank the Minister for his Answer, but contrary evidence exists that states that UK exports are underperforming in comparison to those of all advanced economies. In view of this, can he detail what additional support the Government will develop and provide for businesses that previously exported but have since stopped because of unpredictable obstacles and barriers?

--- Later in debate ---

[Lord Callanan (Con)]

We want to continue providing as much export support to businesses as possible. I do not think that the noble Baroness’s criticisms are valid. The latest ONS monthly data shows goods exports to the EU above the level that they were before the TCA was signed. EU exports have performed better than non-EU exports, but it is quite difficult to get a firm picture, as there are a lot of contrary statistics around. We of course want to provide all the support that we can to businesses.

[Lord Hannay of Chiswick (CB)]

My Lords, will the Minister explain to the House why the Government rejected the recommendation of your Lordships’ European Affairs Committee that the scheme for helping small and medium enterprises to deal with the problems of Brexit be revived and continued? Why was that decision taken and what was its rationale?

[Lord Callanan (Con)]

We are continuing to provide service to a range of businesses, including small businesses, with the export support service. I outlined in the Answer to the noble Baroness the general satisfaction level of businesses with those services.

[Lord Bassam of Brighton (Lab)]

My Lords, as ever the Minister tries to paint a rosy picture of how our exports are going but, as the noble Baroness, Lady Ritchie, said, UK exports are underperforming against the rest of the world. Exports across the world have bounced back strongly coming out of the pandemic, yet the UK is the only country tracked by the CPB where goods exports remain below the 2010 average. As a result, the UK has become a less trade-intensive economy. Those are the facts. With no evident plan—the Prime Minister’s comments yesterday rather suggested complacency—can the Minister tell the House what steps the Government are taking urgently to address this and other export-related issues?

[Lord Callanan (Con)]

We can trade statistics and I can give the noble Lord alternative statistics, but we are optimistic for our export service. We are providing good support to businesses. Businesses across the UK are continuing to export to EU member states and to non-EU member states. We continue to be optimistic for the service. We will provide support to businesses and I am confident that British business will bounce back.

[Lord Oates (LD)]

My Lords, has the Minister had a chance to read paragraph 1.16 of the OBR’s Economic and Fiscal Outlook? It states:

“With little evidence to suggest that we revise our assumption about the negative effect of Brexit on UK trade flows, we continue to forecast little growth in export and import volumes and a fall in the trade intensity of the economy over the medium term.”


Does he recognise how devastating a statement that is for a trading economy such as ours? Can he tell the House what the Government intend to do to address these highly damaging impacts of Brexit?

[Lord Callanan (Con)]

I have not had a chance to read the paragraph that the noble Lord refers to, but I know that there are a number of contrary statistics out at the moment and it is quite hard to disentangle the various impacts. Of course, the pandemic had a serious effect on all countries’ export performances, and many supply chains are still suffering. I will certainly take the opportunity to read the paragraph the noble Lord refers to.

[Viscount Waverley (CB)]

My Lords, I note the presentation of the Minister’s figures in his initial response, but is it not the case that the DIT calculates that for every £1 of government support, exporters get a £4 return? The Heseltine No Stone Unturned competitiveness report stated that a chamber-led approach would provide a 1:6 return. Why would the Government opt to use public finance for a lower ROI option when public finances are stretched?

[Lord Callanan (Con)]

I do not know the validity of those numbers. I will certainly speak to the department and find out whether that is the case, but I take the thrust of the noble Viscount’s question. The export support service acts as a single point of inquiry for businesses and traders. We have expanded the provisions that we are offering. Export Finance, of course, is world leading. We have trade ambassadors based in a whole range of our embassies around the world to help exporters to expand their potential.

[Lord Jones (Lab)]

My Lords, does the Minister acknowledge the huge contribution made by the British aerospace industry, still a great reservoir of skills and success and perhaps edging beyond £8 billion in its annual exports? What prospects are there for more research grants for this great industry, bearing in mind the exciting possibilities and potential of composites for ever more green flight? Lastly, he might consider a visit to Broughton in north-east Wales, where some 5,000 aerospace workers construct the wings for the successful, world-beating Airbus company. There he would see the consequences of investment, which means more and more British exports.

[Lord Callanan (Con)]

I totally endorse the noble Lord’s sentiments. The aerospace industry is hugely successful, including at the Airbus site that he referenced in Broughton in north Wales. A number of other companies across the UK are also providing excellent aerospace exports. Of course, we want to do everything that we possibly can to encourage them. The aerospace industry has had a particularly difficult time during the pandemic, with not many people flying anywhere.

[Lord Taylor of Holbeach (Con)]

My Lords, I am usually supportive of the Government, but I speak from my personal experience of involvement in a small horticultural business. Not only do we have difficulty in getting people to pick the daffodil flowers that are in bloom at present, but we also have other enormous problems. We used to be able to load lorries in the evenings; the flowers were shipped across overnight and were sold in the Dutch auctions before dawn the next day. That is now totally impossible. Through plant health regulations and customs requirements, we are no longer able to ship overnight to the Netherlands auctions. It may be just an indication, but these problems exist for a number of businesses.

[Lord Callanan (Con)]

I am obviously very sorry to hear of my noble friend’s experience. I will certainly take that back to the department to see what we can do to alleviate those difficulties. There is clearly some disruption at some ports, et cetera, and we are attempting to smooth the flows of paperwork and export requirements needed to trade with the EU at the moment. I know that a lot of colleagues across government are working to try to reduce those delays.

[Lord Fox (LD)]

My Lords, I am sure that the Minister will agree that businesses in areas such as conference organisation, music and theatre, which rely on people travelling from this country to countries in the European Union, are suffering great confusion and difficulty in moving their people to the right place in time. Having agreed with that, can the Minister tell your Lordships’ House what the Government are doing to smooth the path for what are mostly small and medium-sized businesses that rely on moving their people efficiently and friction-free across Europe?

[Lord Callanan (Con)]

I am of course aware—we have discussed this before—that there were difficulties for travelling musicians and others, which principally revolved around the different visa requirements of different EU member states, but I know that DCMS in particular has been heavily engaged in working with member states to work out exactly what the visa requirements are and to publish them on the UK government website to provide support to businesses that are struggling, exactly as the noble Lord says. I think that the situation is a lot easier than it was last year.

[Lord Flight (Con)]

My Lords, does the Department for International Trade research fully the demand potential for British products and services?

[Lord Callanan (Con)]

Indeed, a huge amount of work goes on to identify businesses that can export. The 2020 national survey informed us that something like one in seven have never exported but have the potential; their goods and services could be exported. They are very much our target audience for providing export services to help them to fulfil their potential.

Subsidy Control Bill

Lord Callanan Excerpts

3rd reading
Monday 28th March 2022 Lords Chamber

[Lord Ashton of Hyde (Con)]

My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Subsidy Control Bill, has consented to place her interest, so far as it is affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

For the benefit of noble Lords, I will first make a statement on legislative consent. As promised to the noble and learned Lord, Lord Hope, on Report and as I have sought to do throughout passage, I would like to update your Lordships’ House on the legislative consent process.

Your Lordships will understand that there remain differences of opinion between the devolved Administrations and the Government. This includes the Scottish and Welsh Governments’ retained in-principle objection to subsidy control being a reserved matter, and their objection to the inclusion of agriculture in the scope of the Bill. It is therefore with regret that I inform your Lordships that we have not been able to convince the devolved Administrations of the need for the UK Government to act in this key area. This is, of course, not the end of our engagement with the devolved Administrations. It is our intention to continue to work closely with them on the future regime, and accordingly our next steps will focus on agreements at working level to support the operation of the Act, including a memorandum of understanding in two parts.

I want to reassure noble Lords that it has never been our intention to proceed without consent in place. Our preferred approach throughout has always been to secure legislative consent Motions. I want to reassure the House that the Government remain fully committed to the Sewel convention and the associated practices for seeking consent. We will of course continue to seek legislative consent from the devolved legislatures when applicable.

[Lord Hope of Craighead (CB)]

I am grateful to the Minister for fulfilling his commitment and producing the report for which I asked. It is disappointing, but I am reassured by the latter part of his statement—that engagement with the devolved Administrations will continue. I very much hope that that will produce a more fruitful result than has been achieved so far.

[Lord Dodds of Duncairn (DUP)]

My Lords, could the Minister outline the position as far as the devolved Administration in Northern Ireland is concerned? He mentioned Scotland and Wales, but perhaps he could touch on what the situation is as far as any legislative consent from the Northern Ireland Assembly—before it was dissolved at the start of this week for the Assembly elections. He is aware—this was raised in Committee—of the grave concerns that there is there now a dual subsidy control system: the EU system in Northern Ireland and the GB system now applying to England, Scotland and Wales. This could, as he said in his own letter to the chair of the Protocol on Ireland/Northern Ireland Sub-Committee on 22 March, cause real problems and confusion for Northern Ireland.

[Lord Callanan (Con)]

I thank noble Lords for their contributions. In response to concerns of the noble Lord, Lord Dodds, of course I understand the points he is making. He will be aware that negotiations continue on the operation of the Northern Ireland protocol. The noble Lord and I have discussed this a number of times. The Northern Ireland Executive have not been able to respond formally to our request for a legislative consent Motion, given their current status. We will, of course, continue to work closely, as far as possible, with the Executive and with the officials. I will be certain to update the noble Lord when I am able to do so.

--- Later in debate ---

Moved by

[Lord Callanan]

That the Bill do now pass.

[Lord Callanan (Con)]

I am delighted to open the debate. I am grateful to all noble Lords who have participated in the many debates that we have had across Your Lordships’ House, to create a new domestic regime that will deliver on our international obligations but, crucially, will enable central government, the devolved Administrations and public authorities the length and breadth of the United Kingdom to deliver for their people and their communities.

It is my great pleasure to thank all those who have supported the progress of this Bill. First, I thank my noble friend Lady Bloomfield; it is always a great pleasure to work alongside her. I express my thanks for the considerable contributions that have been made on the Floor of this House in relation to this Bill. I thank, particularly, the Opposition—the noble Lord, Lord McNicol, and the noble Baroness, Lady Blake—for their constructive challenge and the discussions we have had on the Bill, most notably on the issue of transparency, where we have been able to move a lot in response to the concerns raised in particular by the Opposition. It is also worth paying tribute to noble Lord, Lord Fox, for his engagement, and to his Liberal Democrat colleagues for their role in improving this legislation, particularly with regard to devolved powers—and for his personal forbearance with me in my illness during the latter stages of Report. I thank the noble Lord, in particular, for bearing with me.

COP 26

Lord Callanan Excerpts

Monday 28th March 2022 Lords Chamber

[Baroness Blackstone]

To ask Her Majesty’s Government what progress they have made towards establishing the processes necessary to implement the ‘side deals’ made at COP26 on (1) coal, (2) methane, (3) forests, and (4) finance; and what discussions they have had with international partners about their implementation.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, we are implementing progress in a number of ways, including through, first, the Powering Past Coal Alliance, the COP26 Energy Transition Council and the Just Energy Transition Partnership with South Africa; secondly, the global methane pledge, working closely with the US and the EU; thirdly, the Glasgow leaders’ declaration on forests and land use; and, fourthly, the Glasgow Financial Alliance for Net Zero, whose work is being taken forward in dialogue with the Government, businesses and civil society organisations.

[Baroness Blackstone (Ind Lab)]

My Lords, I thank the Minister for his reply. A number of pledges for funding were made at COP 26 and, as I am sure he is fully aware, 141 countries signed up to the Glasgow declaration on forest and land use to halt land loss and deforestation by 2030. In these circumstances, are the Government taking steps to stop financial institutions operating in the UK funding businesses that are linked to deforestation? The due diligence processes proposed by the Government are of course very welcome, but could more be done to stop the flow of money going to harmful deforestation?

[Lord Callanan (Con)]

I thank the noble Baroness for her question. I am sure there is always more that can be done but we have made considerable strides in terms of green finances, as I am sure she is aware. We are working closely with the Glasgow Financial Alliance for Net Zero, now representing more than 450 financial firms with £130 trillion in assets, to make sure that private finance goes towards green policies.

[Lord Howell of Guildford (Con)]

My Lords, while all these deals are desirable—as are the main COP 26 aims, the net-zero aims and the Paris targets, if we can get anywhere near them—is not the real need now, the urgent deal, to restore some balance in all energy markets to avoid the kind of super volatility of prices, appalling inflation, considerable suffering for many households and the general economic disruption that we face now and which, if it persists, means that we will never get anywhere near the long-term aim of decarbonisation at all?

[Lord Callanan (Con)]

My noble friend makes a powerful point. We are seeing unprecedented turbulence in the energy markets, with massive rises in the prices of fossil fuels in particular. Ultimately, the best solution to high prices in fossil fuels is to use less of them, which is what we are trying to do.

[Baroness Blake of Leeds (Lab)]

My Lords, despite being a signatory to the Glasgow declaration on forests, Brazil shows no sign of respecting its Glasgow commitments. It recorded the most deforestation ever in the Amazon rainforest in the month of January 2022, with 430 square kilometres of forest destroyed. What actions do the Government think will be effective for signatories that fail to make progress, and what reporting is required?

[Lord Callanan (Con)]

Clearly, Brazil signed up to the declaration at COP 26 along with 140 other countries covering over 90% of the world’s forest. It is important for us to continue working with Brazil and countries representing some 75% of trade in agricultural commodities to try to move those countries’ trade towards more sustainable means.

[Baroness Sheehan (LD)]

My Lords, the IPCC estimates that spending on adaptation needs to reach $127 billion per year for developing countries by 2030, but at the moment adaptation spend accounts for just a fraction of that, and for just 4.8% of tracked climate finance. Do the Government accept that spending on adaptation and mitigation needs to be equal? If so, is that something which will be achieved during our year of the COP presidency?

[Lord Callanan (Con)]

Clearly, we are working with other like-minded countries to try to deliver the maximum resources possible for developing countries to help them to adapt to the effects. I am very proud of our contribution of £11.6 billion of international climate finance over this five-year period.

[Baroness Boycott (CB)]

My Lords, methane, which the Minister mentioned, is 80 times as potent as CO₂ in the near term and cutting it fast is crucial. Since the Industrial Revolution it has been responsible for 40% of heating, and a staggering 47% of it comes from agriculture. The good news—if there is good news—is that it dissipates quickly, in 12 years, so if we can have rapid reduction of methane, we can make a really big difference to the CO₂ in the atmosphere. There are two stumbling blocks. First, what are the Government doing, and is it enough? Secondly, public information is very low about the effect of methane. For instance, one-third of farmers say they do not understand it or know how to deal with it, so I ask the Government what they are doing about that.

--- Later in debate ---

[Lord Callanan (Con)]

We were one of the first countries to sign up to the methane pledge. Now over 110 countries have signed up to it, including 15 of the major emitters. We continue to explore policies to reduce methane and all greenhouse gas emissions as we strive to reach net zero.

[Baroness Rawlings (Con)]

My Lords, what assessment have the Government made of the effect of all the bombing in Ukraine on the COP 26 agreement and our net-zero aim?

[Lord Callanan (Con)]

My noble friend makes a powerful point—clearly, it will have a detrimental effect. We need to work with Ukraine to help it in the future to rebuild its nation and make sure that Putin does not succeed in his aim.

[Baroness Bennett of Manor Castle (GP)]

My Lords, going back to methane and the global pledge the Minister referred to, he may be aware of an article in Environmental Science & Technology on Wednesday. Stanford University researchers found using aerial data that New Mexico’s Permian Basin is leaking six times as much methane as the US Environmental Protection Agency has estimated. That global pledge was utterly focused on stopping leaks and flaring. Surely the amount of fugitive methane that fossil fuel operations create means that to keep under the 1.5 degrees warming target we have to end exploration and new production of oil and gas.

[Lord Callanan (Con)]

I have not seen the article to which the noble Baroness refers. It will probably come as a shock to her that I am not responsible for New Mexico; that is part of the United States’ commitment. All we can be responsible for are our own emissions and our own policies. We are striving to reduce our fossil fuel production and use in the UK, but it is a gradual phase-out. Rather than using imported LNG from the likes of the areas she mentioned, it makes more sense to use our own domestic production during that transition period.

[Lord Pearson of Rannoch (Non-Afl)]

My Lords, do the Government consult with any of the many serious scientists who say that net zero is a colossal mistake?

[Noble Lords]

Oh!

[Lord Callanan (Con)]

We consult with lots of scientists. Of course, there are always ongoing debates about these matters. Irrespective of the opinions of particular scientists, there is now a legal commitment, and it is the job of the Government to work towards what Parliament has legislated for.

[Baroness Hayman (CB)]

My Lords, I declare my interests as set out in the register and hope the Minister will keep listening to the IPCC and the overwhelming scientific advice on this issue. In an earlier reply, the Minister referred to GFANZ and the importance of financial flows into green projects. Does he agree with me that for those flows to be effective and genuinely go into green projects, we need an international green taxonomy that is respected? Can he give any more information on the working party on green taxonomy?

[Lord Callanan (Con)]

I agree with the noble Baroness; it is important that we get a green taxonomy right, and the products and services that will form part of it. We are working hard towards getting it finalised in the UK. I cannot give her a precise timescale at the moment, but we are determined to be a world leader in green finance.

[Baroness McIntosh of Pickering (Con)]

My Lords, can my noble friend tell us how much of the palm oil we import comes from the process of deforestation in countries such as Brazil? Should we not be aiming to reduce the amount of palm oil we import from these sources?

[Lord Callanan (Con)]

Deforestation is clearly a problem. I suspect most of the palm oil we import does not come from Brazil. It is more likely to be from Malaysia or Indonesia, as I think they are our largest sources. Obviously, it needs to be sustainable. Palm oil can be a very useful product—it can form foodstuffs and be part of a whole range of consumer goods, but we must make sure it comes from sustainable sources.

Nuclear Energy (Financing) Bill

Lord Callanan Excerpts

Report stage
Thursday 24th March 2022 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

I thank all noble Lords who have contributed to the debate. There was a certain element of déjà vu about it from the discussions in Committee. In particular, the noble Baroness, Lady Bennett, rehearsed her well-documented and faintly nonsensical views. She will be pleased to know that I will resist the temptation to tackle them again as we did in Committee, not least because it was done fairly expertly by my noble friends Lord Howell and Lord Trenchard, the noble Baroness, Lady Worthington, and the noble Viscount, Lord Hanworth, who made some very good points. If I would leave her with one word in response it would be “intermittency”, which is the key argument against her point.

Starting with Amendments 1 and 3, I remind noble Lords that designation is only one step in a rigorous process to ensure that a potential nuclear RAB project is sufficiently scrutinised, evaluated and subject to all relevant approvals prior to a final investment decision. As discussed in Committee, we have set out a transparent designation process which requires the Secretary of State, at the point of designation, to be of the opinion that designation is likely to result in value for money. This process requires the Secretary of State to draft reasons for designation and to consult on those reasons with consultees as set out in the Bill. Importantly, as my noble friend Lord Trenchard reminded us, they will include Ofgem, which, as per its principal objective to protect the interests of existing and future consumers, will ensure that consumer impacts are fully considered at the point of designation.

I reassure noble Lords that the Bill requires the final designation notice to be made publicly available. It will include the reasons for designation, which will incorporate details of the value-for-money assessment made to support the designation decision. We would expect that a value-for-money assessment at this stage would consider the potential impact of designation on consumers, using all relevant information available at the time.

However, as per my previous comment, designation is only one of a number of approvals that will mature our understanding of a project’s costs, alongside intensive negotiations. I feel therefore that Amendment 3, tabled by the noble Lords, Lord Oates and Lord Stunell, perhaps comes too prematurely in the overall process of approving a project to receive the benefit of the RAB funding model.

It is important that we retain our flexibility in how we negotiate with different project companies that are designated for the purposes of the RAB model. We can therefore commit that, at the point of directing a revenue collection counterparty to offer to enter into a revenue collection contract with a designated nuclear company, the Secretary of State will publish a value-for-money assessment of the project and its impact on consumers, along with all the appropriate documentation, save for information which the Secretary of State considers would be likely to prejudice someone’s commercial interests or would be contrary to the interests of national security. I can confirm that this would mean that value-for-money considerations would be published at two key points in the approval process: both when designating a project company in its final designation notice, as I outlined previously, and once the outcome of negotiations and market engagement have been reflected in project costs. I am not sure that even two value-for-money assessments would convince the Liberal Democrats of the value of this, but nevertheless I am prepared to give it a go.

On Amendment 10, I will begin by slightly correcting the figures used by the noble Lord, Lord McNicol. I value the noble Lord’s support for the principles of the Bill and Labour’s support for new nuclear. I think that the noble Lord used the figures of £1 to £2 per week for this model. Our estimate is closer to £1 per month. This will obviously depend on the negotiations, but it is not quite as drastic as the noble Lord implied.

I understand and share the desire from noble Lords to protect vulnerable consumers. Of course, we all want to do that. The Government agree on the importance of supporting low-income households, particularly at this time of high energy prices. I will remind noble Lords of the commitments which we have made to supporting households to meet the costs of energy bills. This includes the energy bills rebate scheme, worth a total of £9.1 billion and covering a £150 non-repayable rebate for households in England in council tax bands A to D, as well as an additional £144 million of discretionary funding for billing authorities to support households that are in need but do not meet the council tax criteria. This is in addition to the actions we are taking through the warm homes discount, cold weather payments and the household support fund, which the Chancellor announced yesterday will be doubled to £1 billion from April this year. All of these are aimed at providing immediate support for vulnerable households.

Over the longer term, we are helping to lower energy prices by supporting increases in energy efficiency through the energy company obligation, the sustainable warmth programme, the local authority delivery scheme and the home upgrade grant. I know that the noble Baroness, Lady Bennett, does not want to be reminded of this, but the Government are spending considerable funds, of up to £6.6 billion in this Parliament, on energy efficiency schemes. To that extent, I agree with the noble Baroness that energy efficiency is a good thing to do, and indeed we are doing it. Noble Lords will see from this programme that the Government take the support of low-income households at this time incredibly seriously. However, it is our strong view that this challenge is best tackled holistically.

On the specifics of Amendment 10, as my noble friend Lord Trenchard said, the RAB model charges suppliers rather than consumers. The amendment means that suppliers could be required to pay their full share of the RAB charges but not pass the cost down to consumers on universal credit. Suppliers would be very unlikely to meet those costs themselves. Instead, they would most likely spread the additional charge among other consumers who are not exempt, placing addition burden on, for example, low-income households and those who were not on benefits. The amendment would also create a substantial administrative burden, as suppliers would need to accurately identify and verify benefits recipients—information which could be difficult for them to access. Again, it is likely that they would choose to pass the administrative costs of this on to other consumers, including other vulnerable groups, such as pensioners.

I also have concerns about the compatibility of the amendment with a scheme which, if implemented, could last for many decades over the life of nuclear projects. For instance, the amendment specifically references universal credit and “any legacy benefits”, and it is likely that alternative benefits will be brought forward during this period. Referring to universal credit on the face of the Bill would result in updates to the legislation being needed whenever changes to the existing benefits system were made. I hope that noble Lords will accept that this would clearly be impractical.

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[Lord Oates (LD)]

My Lords, this group addresses the foreign ownership and transparency issues which we have just heard about, and it includes the amendment in my name and that my noble friend Lord Stunell, on transparency issues.

I very much support the compelling arguments made by the noble Lord, Lord Vaux, and I hope that the Minister will be able to address them. I was also pleased in Committee to support the amendment in the name of the noble Lord, Lord McNicol. He has brought back one that addresses the concerns that were raised in Committee, and he will certainly have the support of the Liberal Democrats. I think it fair to say that Peers on all sides of the House are concerned about the foreign ownership issue, so I hope the Minister can give us some comfort on this. However, if he cannot accept the amendment and if the noble Lord, Lord McNicol, chooses to divide the House, he will have our support.

Amendment 9, in my name and that of my noble friend Lord Stunell, deals with transparency. As drafted, Clause 13(2)(a) allows the Secretary of State to withhold any material which they believe would

“prejudice the commercial interests of any person”.

As I said in Committee, this is an enormously wide loophole which does not take any account of the degree of prejudice to the public interest of withholding that disclosure. Surely it is only proper in order to ensure effective public scrutiny that Ministers are not able to hide information behind claims of prejudice to commercial interests through wide loopholes such as this. These projects are being funded by the public and they have the right to know all relevant material, except in exceptional circumstances.

We already know how reluctant the Government and their agencies are to provide information on costs which is overwhelmingly in the public interest, but it goes wider than that. I note that in a reply to a Written Question from the noble Lord, Lord Alton, about meetings between Ministers and the China General Nuclear Power Group, the response was that no minutes were kept of that meeting. I am not clear whether that is within the Ministerial Code, but it goes to show that there is a reluctance to share information here.

The record of transparency in nuclear affairs is poor. This amendment would require the Secretary of State, if he withholds information, to make it clear that it was seriously prejudicial to commercial interest and to set out to Parliament his reasons for withholding it. I hope that the Minister can address those issues in his response.

[Lord Callanan (Con)]

My Lords, I thank all noble Lords for their contributions to the debates. As all the amendments in this group, tabled by the noble Lords, Lord McNicol, Lord Vaux, Lord Oates and Lord Stunell, are linked, I will address them together.

I start with those tabled by the noble Lord, Lord McNicol. As the noble Lord has described, the amendments seek to create an obligation for the Secretary of State to bring forward a list of foreign powers and entities that should not be allowed to invest in nuclear projects, and to use this as the basis for a new designation criteria under the Bill. I appreciate the sentiment behind the amendment but, as the noble Lord will understand, I cannot agree to it for a number of reasons. The amendment is too broad; it does not specify the range of companies that it could cover or the reasons that a foreign power or entity could be included on a list, and the excluded activities are extremely wide—all participation in all projects. This is an extremely broad-brush approach which could severely affect our ability to bring in finance and to deliver new nuclear projects. We would expect the amendment to have a chilling effect on investment, ultimately leading to a higher cost for consumers.

In addition, I am concerned about the further impacts of the amendment. In the noble Lord’s explanation of the amendment, he mentions that the list should act

“in a similar way to the Financial Action Task Force’s list of high-risk countries.”

However, the main focus of that list is to encourage enhanced due diligence in respect of these countries, rather than to provide an outright ban as this amendment seeks to do.

There is also an inconsistency between the amendment to Clause 2 and the proposed new insertion after Clause 3. While Clause 2 is targeted at preventing listed entities from having full or partial ownership of a nuclear company under the RAB model, the proposed new clause discusses barring entities’ involvement in the whole civil nuclear sector. If this wider approach were taken, it could limit our options for international co-operation on this sensitive issue, including obtaining technical advice.

By highlighting these problems, I do not suggest that I disagree with the sentiments behind the amendments. Indeed, as the noble Lord will know from the numerous discussions that I have had with him, the Government know that the protection of our national security must be the top priority. The Government already have strong oversight of foreign ownership in nuclear projects as a result of the NSI Act 2021, as the noble Lord, Lord Vaux, reminded us, which includes the ability to call in for assessment any qualifying acquisition if the Secretary of State reasonably suspects that it may give rise to national security concerns.

Importantly, certain acquisitions of entities operating in the civil nuclear sector require mandatory notification and clearance before the acquisition can be completed. This is set out in Schedule 4 to the notifiable acquisition regulations made under the Act, which specifically include entities which hold, or are in the process of applying for, a nuclear site licence or development consent under the Planning Act 2008 in relation to a nuclear reactor.

To provide an illustrative example, this means that if a new entity wanted to acquire over 25% of the shares in a nuclear project company, this would have to be notified to the Secretary of State and could not be completed until, or if, the Secretary of State agreed it. Indeed, the Secretary of State could require that the transaction was not progressed, assuming the relevant tests in the Act were satisfied. If the acquisition was completed without first being approved by the Secretary of State, or in breach of an order from the Secretary of State, it would be void and not legally effective.

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[Lord Oates (LD)]

My Lords, I am happy to give Amendment 11, in the name of the noble Lord, Lord McNicol, the support of these Benches. It is particularly important given the failures of the early cost recovery model in the United States. Whatever one’s view of nuclear energy, we really do not want to end up spending more than $20 billion, like they did, and getting no new nuclear plants at all. South Carolina in particular spent $9 billion before Westinghouse went bankrupt. If we are to go ahead with this, we certainly need to ensure that it delivers something at the end of it.

On Amendment 12, I will not go into the detailed debate about the taxonomy issue. The one thing I will say, in the context of the amendments from the noble Baroness, Lady Bennett of Manor Castle, is that whether or not nuclear is regarded as a sustainable means of producing energy, it is certainly not clean. It produces significant amounts of waste that have to be dealt with. Nearly 70 years after our first nuclear plant came online, there has been a scandalous failure to provide a permanent solution. We heard from the noble Viscount, Lord Trenchard, that discussions are ongoing about the geological disposal facility. I am sure we will hear more from the Minister on that. This has been going on for years and years and there is no permanent solution.

I note that the noble Baroness, Lady Bennett, is not going to move her amendments. We certainly discussed this in some detail in Committee so I will not dwell on it further, but the nuclear industry’s failure to take its responsibilities seriously in this way is notable. Indeed, until the Nuclear Decommissioning Authority was set up there was no national plan to deal with waste at all. It has done a great job trying to quantify the level of the situation—of course, we have seen bills and disposal costs go up and up year on year—but it is a really important point and I am grateful to the noble Baroness for bringing her amendments to the attention of the House.

[Lord Callanan (Con)]

I thank noble Lords for their contributions to what will hopefully be the final grouping on this Bill. I thank all the hardy souls who have lasted throughout the Committee and Report stages to get to this final stage.

Let me start with Amendment Neville—you can tell it is the final stage; the amendment of the noble Lord, Lord McNicol, is what I should have said. Why did I say that? In my mind, they sounded the same: Lord McNicol and Amendment 11.

Let me state to the noble Lord that I share his ambition to maximise the chances that a nuclear RAB project will commence or continue generation in the unlikely event of an insolvency, therefore preventing sunk consumer costs. It is for this very reason that we have introduced a special administration regime for nuclear RAB projects, with the aim of ensuring that consumers reap the benefits of the low-carbon electricity generated from a nuclear power station which they helped to build. In light of Amendment 11, I consider that it would be helpful to provide the noble Lord with a clear explanation as to the exit routes available to a special administrator under this legislation, and how these would not impinge on the ability to bring a nuclear power station under public control, if that is in the best interests of consumers and taxpayers.

Let me first reaffirm that special administration is a court-administered process and a nuclear administrator would be an officer of the court. It is the nuclear administrator, under the supervision of the court, who would be tasked with exploring all viable options for ensuring that the objectives of the administration are met. This is supported by the Secretary of State, who is able to provide funding and does have options for bringing the administration to an end in certain circumstances, as I will now explain.

The first route available to the administrator is that the company is rescued as a going concern. This is the preferred option for achieving the objective, save in certain circumstances, and would ensure that normal service was resumed and the plant would continue construction or generation. If this is the case and the objective can be achieved, then the Secretary of State, Ofgem or the administrator may then apply to the courts to end the special administration order.

Should this not be feasible, the administrator’s second option would be to seek to transfer the company’s assets and liabilities to a privately or publicly owned company or companies. This is called an energy transfer scheme and is provided for by Schedule 21 to the Energy Act 2004, as applied by Clause 33 of the Bill. While the Secretary of State must approve an energy transfer scheme, the court retains overall responsibility for the process as it appoints the time from which a scheme would take effect.

It is considered that, as the nuclear administrator will need to achieve the objective of the administration order as quickly and efficiently as possible, in practice this may mean that an energy transfer scheme is explored immediately if this is the most viable means to achieve the objective of the administration. This may be supported by the Secretary of State where, amongst other matters, it is in the public interest.

Should neither of the options I mentioned be possible or in the best interests of taxpayers or consumers, Section 40 of the Energy Act 2004 would establish the option of a nuclear transfer scheme. This is subject to approval from Her Majesty’s Treasury and is intended to deal with circumstances where, for example, during the plant’s operational phase, for reasons of public safety or to minimise the costs to the taxpayer, the Nuclear Decommissioning Authority is given responsibility for decommissioning the plant.

Gazprom Energy

Lord Callanan Excerpts

Thursday 24th March 2022 Lords Chamber

[Lord Oates]

To ask Her Majesty’s Government what plans they have (1) to withdraw Gazprom Energy’s licence to operate in the United Kingdom, or (2) to place Gazprom Energy into special administration.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, Gazprom Energy’s parent company has been sanctioned by the UK Government in relation to transferable securities. Our sanctions continue to put pressure on Russia to cease its war on Ukraine. As regards the retail arm in GB, Ofgem and BEIS will continue to work closely with all energy suppliers to ensure that customer supply remains uninterrupted, and we have tried and tested practices in place for situations where suppliers exit the market.

[Lord Oates (LD)]

I thank the Minister for his Answer, but can he explain to the House why it is that a subsidiary of Russian state-controlled Gazprom is continuing to operate in the United Kingdom one month after Russia’s brutal invasion of Ukraine, and when his own colleague in government, the Health Secretary, has been calling on NHS bodies to cancel contracts with the company, and local authorities and businesses are doing the same? Is it not time for the Government to stop dithering and take Gazprom Energy into administration now?

[Lord Callanan (Con)]

We keep these matters under constant review and the sanctions regime is constantly evolving. The noble Lord will be aware that the Foreign Secretary today sanctioned another 65 new bodies, and we have now sanctioned over 1,000 individuals and businesses since the invasion started.

[Lord McNicol of West Kilbride (Lab)]

Many local authorities, NHS trusts and other public bodies have gas supply contracts with Gazprom Energy. What support is Her Majesty’s Government giving to authorities and trusts that wish to break their contracts with Gazprom, and what consideration has the Government given to changing public procurement rules to allow that?

[Lord Callanan (Con)]

The noble Lord makes an important point. Gazprom Energy supplies about 20% of the UK business market, as he correctly observes, including many schools and hospitals, and so on. It would not be right for the Government to interfere in individual contractual decisions but for those that choose to break their contracts, the Crown Commercial Service stands by to support them in securing their next energy contract.

[Baroness Walmsley (LD)]

My Lords, is the Minister aware of a recent paper by the Energy and Climate Intelligence Unit which shows that our dependence on Russian gas could be quickly and permanently eliminated, not by more North Sea gas, which is expensive, not immediate, low impact and temporary, but by reducing gas demand by returning to our programme of insulating homes, installing heat pumps and expanding renewables? Of course, that would also reduce household bills, create jobs and provide us with energy security.

[Lord Callanan (Con)]

The noble Baroness posits those as two alternatives but in fact we are doing both. We will still need gas supplies during the transition, but we are spending some £6.6 billion over this Parliament on home insulation measures, and we have one of the largest programmes of renewables in the western world and one of the largest offshore wind sectors in the world. We are proposing to expand that to approximately 40 gigawatts by the end of this decade. None of this can happen quickly—it is a transition—but we will still need gas during that transition. My point is that it is better to get the gas that we will need during the transition from UK sources rather than relying on unstable parts of the world.

[Baroness Bennett of Manor Castle (GP)]

My Lords, following on from the noble Baroness’s question, which focused on domestic use of gas, I note that in August 2021, the Swedish firm HYBRIT made the first delivery of steel produced through green methods, without coal and without gas energy supplies. I note that Sheffield Forgemasters, for example, is a Gazprom client, and indeed, two-thirds of the energy supply for the Energy Intensive Users Group comes from Gazprom. Should not the Government be doing far more to help energy-intensive industries get away from fossil fuels?

[Lord Callanan (Con)]

We are—that is the answer to the noble Baroness’s question. We have the Industrial Energy Transformation Fund, and we are working with many of these difficult-to-decarbonise industries, such as steel, which of course plays a vital role in many of our deprived communities. We want to help them transition to clean forms of production such as hydrogen, so we are. I add that, even if gas is supplied by Gazprom UK, it is not Russian gas. Gazprom buys gas on the wholesale gas markets here, as many other retail suppliers do. We are dependent only by about 3% to 4% on gas supplies from Russia.

[Lord Cormack (Con)]

Can my noble friend assure the House that there will be no prodigal distribution of permissions for onshore wind farms?

[Lord Callanan (Con)]

I am not sure exactly what my noble friend means by that; there are very tight planning constraints on onshore wind farms. I am sure he will want to await any future announcements on energy policy which may be coming in the near future. However, we opened the contracts for difference round to onshore wind bids in the last round.

[Baroness Hayman (CB)]

My Lords, is it possible not to be profligate but sensible about onshore wind? At the moment we have a total moratorium on a source of domestic cheap power that has been imposed by the very strict planning restrictions. As the Minister is well aware—the House may not be—my Private Member’s Bill, the Onshore Wind Bill, would put this situation right and put applications for onshore developments into the same regime of planning applications as other renewables.

[Lord Callanan (Con)]

I was glad to debate the noble Baroness’s Bill last week. We are not ruling out onshore wind—it can make an important contribution. There are local planning considerations that are important to bear in mind. Many people object to fracking because of the imposition on local communities, and in many respects the same objections and arguments should apply to onshore wind as well. We need to take the public with us on this and ensure that there is public support for these turbines.

[Lord Sikka (Lab)]

My Lords, between 24 February and 3 March, 28 new companies and one new limited liability partnership were registered at Companies House for which the person with significant control claims to be a Russian national. What steps have the Government taken to ensure that these companies are not used for sanctions-busting, and will they take steps to put them into compulsory winding up?

[Lord Callanan (Con)]

I am not sure what point the noble Lord is trying to make here. We are not pursuing a war on the Russian people; many Russian individuals are just as opposed to this war as we are. We have a constantly evolving round of sanctions—the Foreign Secretary announced another 65 sanctioning proposals this morning—and some 1,000 individuals and businesses have been sanctioned. However, we have to be careful to differentiate between Russian state entities, those linked to Putin, and perfectly legitimate Russian individuals.

[Baroness Sheehan (LD)]

My Lords, the Government have said that Gazprom has been sanctioned and will no longer be able to issue debt or equity in the UK. Can the Minister say what that means? The British people want to be sure that no money from Gazprom is going to the Russian state to finance its vendetta against the Ukrainian people. Can the Minister categorically state that that is happening?

[Lord Callanan (Con)]

As I said, it is difficult for me at this stage to comment on individual cases. However, we keep the whole sanctioning regime under constant review and new rounds of sanctions are constantly announced. It is difficult in this case because of the large numbers of essential businesses, schools, hospitals, et cetera that have contracts with Gazprom UK, but we will keep these matters under review.

[Lord Oates (LD)]

Can the Minister tell the House how he squares his earlier answer that it is up to individuals, businesses and organisations to make decisions about whether they cancel their contracts with Gazprom with the instruction that his colleague the Health Secretary has given to NHS England that it must withdraw from contracts? With various organisations withdrawing from these contracts—local authorities, health authorities and businesses—is it not almost inevitable that Gazprom will collapse? Would it not make much more sense for the Government to get ahead of this and take Gazprom into special administration now?

[Lord Callanan (Con)]

Ofgem has a number of processes in place to deal with supplier collapses and we stand ready to put those into effect if they are required. However, these are individual commercial decisions. Local authorities, for instance, are individual legal entities and they have to take their own commercial contractual decisions, but we will support them as much as we possibly can in that process.

Subsidy Control Bill

Lord Callanan Excerpts

Lords Hansard - Part 2 & Report stage
Tuesday 22nd March 2022 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I will not detain the House too long. Before Committee, I talked all those who were interested through the work we have done to engage with the devolved Administrations and the commitment we gave to take on board many of their suggestions. I know that some Members have had sight of the draft memorandum of understanding that we are trying to agree with the devolved Administrations. There is a commitment from the Government to engage with them. I accept that they have a principled objection to the fact that subsidy control is a reserved matter, so of course they are not willing to provide LCMs on that basis. Having said that, and accepting that reservation, we are still talking to each other, officials are still liaising and we will still attempt to reach agreement with them on the MoU. We have taken and will take into consideration many of the suggestions they have made.

Amendment 64 from the noble and learned Lord, Lord Thomas of Cwmgiedd, would require the Secretary of State to seek the consent of the devolved Administrations before issuing guidance under Clause 79 or making regulations under Clauses 11, 33, 34 and 59. It would require the Secretary of State to wait for up to a month before issuing guidance or making regulations to obtain the consent of the DAs. Where the consent is not given, the Secretary of State will still be able to make the regulations or issue the guidance, but will have to publish a statement explaining the reasons for making the regulations or guidance without DA consent.

I realise that this is a contentious area but, as stated earlier, it is the settled will of Parliament that subsidy control is a reserved matter. In our view, it would not be appropriate for the UK Government to be required by legislation to undertake selective consultations with the DAs on guidance and regulations regarding reserved policy matters, which will affect all UK public authorities, before laying them in the UK Parliament.

Furthermore, as I stated in Committee, a formal consent mechanism would delay the issuing and updating of statutory guidance and regulations. It is important that the Government are able to update guidance quickly should circumstances change, for instance due to the development of new UK case law. Delaying changes would be unhelpful for public authorities and subsidy recipients alike. There is already a requirement in the Bill for the Secretary of State to consult such persons as they consider appropriate before issuing any further guidance—the DAs, of course, being appropriate in this case.

I hope noble Lords are reassured by these commitments. I have already set out that we will continue the extensive engagement we have had with the devolved Administrations in developing the policy for the new regime, including by sharing draft consultation documents on the definitions of subsidies and schemes of interest and of particular interest. It is right that the UK Government are not slowed down by the need to seek the formal consent of the devolved Administrations before issuing guidance.

Amendment 6 in the name of the noble and learned Lords, Lord Thomas and Lord Hope, the noble Lord, Lord Wigley, and the noble Baroness, Lady Randerson, would in effect allow the devolved Administrations to create streamlined subsidy schemes under Clause 10 by making a request of a UK government Minister. To respond directly to the description of this as “modest” by the noble and learned Lord, Lord Thomas, I am concerned that it would significantly affect the Government’s discretion to set out a wider strategy for developing streamlined routes, given the impossibility of refusing “a reasonable request”.

Streamlined subsidy schemes have an important role to play in supporting public authorities to deliver well-designed subsidies that address market failures and UK strategic priorities, while minimising risks of excessive distortion to competition, investment and trade. They are not subject to mandatory or voluntary referral to the subsidy advice unit under the provisions of Chapter 1 of Part 4 of the Bill.

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[Lord Fox (LD)]

I apologise to the Minister and thank him for giving way. I am struggling a little with why the Government want to hoard the right to create streamlined subsidies to central government. I can assume only that it is because it gives the Government the ability to parachute schemes into Scotland, Wales and Northern Ireland—which might not be seen by those devolved Administrations as something they would have—and, because they are streamlined schemes, they cannot be challenged. Is that the reason the Government are not prepared to let devolved authorities have streamlined subsidy schemes for themselves?

[Lord Callanan (Con)]

No, I think the noble Lord is being unfair; the operation of these schemes is entirely optional. We will consult the devolved Administrations closely before making any such schemes. I only just said that we will seek to involve DA officials and others in expert working groups for each of the routes we are developing.

[Lord Fox (LD)]

I am sorry to prolong this, but is the Minister now saying that, for a streamlined scheme that is presented by central government and could be taken up by, for example, organisations and companies in Scotland, the Scottish Government have the option of not allowing that to happen? That, I think, is what the Minister just said.

[Lord Callanan (Con)]

They could choose not to use the scheme if they wished, but it would be a UK-wide scheme. They would be consulted on the development and involved in the expert groups that put them together.

I will move on to Amendment 58, also tabled by the noble and learned Lord, Lord Thomas. This amendment sets out a new route for subsidies given in devolved primary legislation to be considered by the courts, by allowing the relevant law officer to refer the question of whether a Bill is compatible with the principles in Chapter 1 of Part 2 to the Supreme Court. It also removes the requirement for the promoter of the legislation to consider the subsidy control principles and other requirements, and the ability of the courts to consider whether the provisions of Parts 1 and 2 of Chapter 2 have been properly applied, thereby removing the ability of an interested party to challenge the subsidy in the general courts on that basis.

I am of course very grateful for the interest taken by the noble and learned Lord in this clause and for his engagement on it with me and my officials. I believe that both he and I share an objective to ensure that these provisions reflect our constitutional and legal institutions, as well as our obligations under international law. Schedule 3, as it stands in the Bill, accomplishes those objectives.

It is important that the subsidy control requirements apply to subsidies in devolved primary legislation, and that these subsidies are not immune from challenge by interested parties. This is both for consistency with other subsidies and to ensure compliance with our international obligations, particularly under the trade and co-operation agreement with the EU. However, it is also important that the unique constitutional status of the devolved legislatures is respected. That is why we have tailored the provisions in Schedule 3 specifically, and there is no mandatory referral to the subsidy advice unit for these subsidies.

I must therefore reject the amendment tabled by the noble and learned Lord for two reasons. First, it would not meet our international obligations under the TCA, which requires us to make available a route to challenge in a court or tribunal for interested parties, on grounds of compliance with the substantive subsidy control requirements. This amendment would, effectively, remove that route.

In response to the noble and learned Lord, Lord Hope, on the intention of paragraphs 6 and 7, it is those interested parties that may challenge, for example, another public authority or another business, as long as they meet the test set out in Clause 70. The promoter would normally be the government Minister, or the person making an amendment to the Bill, and this is defined in paragraph 2 of Schedule 3.

The second problem with the amendment is that it would have the effect of asking the Supreme Court to consider questions of fact. It is my understanding that the High Court or Court of Session is the appropriate forum to consider these questions in the first instance, followed by the relevant appeals court, and, as relevant, the Supreme Court as the ultimate arbiter for questions of law. Creating a route for the law officers to refer a question to the Supreme Court implies that any challenge to a subsidy in devolved primary legislation would be a constitutional question, as it is comparable to the route for referring devolution issues under the devolution settlements. While the Bill affects the exercise of responsibilities of all public authorities in the UK, I do not consider that this is a constitutional question.

[Lord Purvis of Tweed (LD)]

I have a point of clarification, because this aspect draws two areas together. Given that agriculture and fisheries are part of this legislation, and because agriculture and fisheries are unquestionably devolved competences, there will be subsidy schemes—let us say for Scotland, an agriculture or fisheries subsidies scheme. The Minister has indicated that there can be a UK-wide streamlined scheme which will cover agriculture and fisheries, so for the first time in the devolution period, there would theoretically be two parallel support schemes for agriculture and fisheries. But there is no capacity for the devolved Administration to challenge the UK-wide scheme, because the Government are indicating that this is a reserved area, even though support for agriculture and fisheries is fully devolved. Furthermore, there is not even a direct route to ask the Supreme Court to consider the competences on the division of this. How does the Minister see the benefit of two parallel schemes: one streamlined and unchallengeable, and another a devolved one on agriculture and fisheries?

[Lord Callanan (Con)]

I understand the point that the noble Lord is making, but the idea that the UK Government are going to want to set up a streamlined scheme covering agriculture and fisheries in Scotland, in parallel to an existing subsidy scheme that the Scottish Government are already pursuing, is extremely unlikely. A streamlined route can indeed be challenged in the Competition Appeal Tribunal, and we would not introduce such a scheme without consulting closely with the devolved Administrations in the first place. I understand the constitutional question that the noble Lord is positing, but I think this is very unlikely. As the noble Lord well knows, all existing schemes are automatically out of scope of this Bill anyway, so the existing subsidy regimes that the Scottish and Welsh Governments have can continue as they are.

[Lord Purvis of Tweed (LD)]

I do not think I said that there would be a streamlined scheme from the UK that would be uniquely for Scotland. I indicated that there would be a UK-wide streamlined scheme that would be for agriculture and fisheries within Scotland. As the Minister said, it would apply in England and in Northern Ireland as well. However, there would be, for the first time since devolution, two parallel subsidy schemes operating. While the Government can indicate that there would be consultation, there is no mechanism in this Bill for that dispute to be resolved, because the Secretary of State retains the decision-making power. That is why the support for these two schemes running in parallel is not equitable.

[Lord Callanan (Con)]

There is a difference in principle here. Subsidy control is a reserved matter. Under the memorandum of understanding, we have said that we will set up a mechanism that the Scottish Government can use to challenge schemes. Of course, any streamlined scheme would be approved by this Parliament anyway. In any practical political environment, there is no way that the UK Government will want to set up a parallel scheme to subsidise agriculture and fisheries, which are devolved competences, when the Scottish Government already have similar schemes in the same area.

As I have said, the devolved Administrations will of course continue, as they have always done, to make subsidies and subsidy schemes using the resources that they have. It is important to note that this Bill does not provide any resources for any schemes, and the court would need to look at the facts of the case on legality grounds in the light of the requirements of Schedule 3 to the Bill. This is, in my view, comparable to other circumstances in which devolved primary legislation is reviewed on legality grounds, such as the Human Rights Act or the United Kingdom Internal Market Act. Importantly, and in contrast to the review of the Competition Appeal Tribunal for other subsidies, the court could not consider common-law public law grounds alongside the requirements of the subsidy control grounds.

For all the reasons I have set out, I hope that the noble and Lord will not press his amendments.

[Lord Thomas of Cwmgiedd (CB)]

I am grateful to all noble Lords who have spoken in this debate and for the various points that have been made; I hope it is not discourteous if I try to summarise them without individual attribution.

Fundamentally, this union is not going to hold together unless there is an acceptance of equality of treatment, and this Bill drives a coach and horses through that. One illustration suffices: if this Parliament, for England, makes a subsidy scheme that infringes the subsidy control principles, then those overseas cannot challenge it, but they can challenge what is done in Wales, Scotland and Northern Ireland. That is not equality. A second, more vivid example of equality is the ability to make streamlined subsidy schemes. Part of the difficulty we face is that all of this is for future legislation, but we are now trespassing into the constitution.

What has emerged from the questions that the Minister has tried to answer is this: where are we going in areas of devolved competence? He says that no Government would want to do it, but we are a country governed by the rule of law, and the law ought to be clear as to the constitutional responsibilities of the Government of the United Kingdom and of England and the constitutional responsibilities and powers of the devolved nations. This has not been thought through, as is evident from the Minister’s reply. I do not criticise him, because we do not have the detail of the streamlined subsidy schemes so that we could see how this would work.

Thirdly, we are trespassing into dangerous constitutional areas. I am sure that many lawyers will not accept that, if the Government tried to make a streamlined subsidy scheme that infringed on devolved competence, it would be challenged, because that would be made under subordinate legislation and would not have the equivalent status of an Act of this Parliament. It is a great misfortune that we have not thought all of this through.

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Moved by

[Lord Callanan]

8: Clause 11, page 7, line 8, after “reference” insert “(among other things)”
Member’s explanatory statement
This amendment clarifies that the list in subsection (2) of what may be covered in regulations is intended to be non-exhaustive.

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Moved by

[Lord Callanan]

10: Clause 16, page 9, line 22, leave out from “if” to end of line 23 and insert “regulations made by the Secretary of State provide for the marketable risk country to be so treated.”
Member’s explanatory statement
This amendment provides that the power to provide that a country is not to be treated as a marketable risk country is exercised by making regulations, rather than by giving a direction.

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Moved by

[Lord Callanan]

14: Clause 18, page 10, line 24, at end insert—
“(4) The prohibition in subsection (1) does not apply if the public authority giving the subsidy is satisfied that the conditions in subsections (5) to (7) are met.(5) The condition in this subsection is that the effect of the subsidy is to reduce the social or economic disadvantages of the area that would benefit from the giving of the subsidy.(6) The condition in this subsection is that the giving of the subsidy results in an overall reduction in the social or economic disadvantages within the United Kingdom generally.(7) The condition in this subsection is that the subsidy is designed to bring about a change in the size, scope or nature of the existing economic activities referred to in subsection (1)(a).”Member’s explanatory statement
This amendment provides an exemption to the prohibition on relocation of activities by allowing subsidies that meet conditions on reducing social or economic disadvantage.

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Moved by

[Lord Callanan]

15: Clause 25, page 13, line 32, leave out subsections (4) to (6)
Member’s explanatory statement
This amendment removes the Treasury power to make regulations to alter the meaning of “deposit taker”.

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Moved by

[Lord Callanan]

16: Clause 26, page 14, line 14, leave out subsections (4) to (6)
Member’s explanatory statement
This amendment removes the Treasury power to make regulations to alter the meaning of “insurance company”.

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Moved by

[Lord Callanan]

17: Clause 27, page 14, line 40, leave out subsections (3) to (5)
Member’s explanatory statement
This amendment removes the Treasury power to make regulations to alter the meaning of “insurer”.

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Moved by

[Lord Callanan]

18: Clause 32, page 17, line 17, at end insert “, and
(c) the subsidy database is kept under review in such manner and at such intervals as the Secretary of State considers appropriate.”Member’s explanatory statement
This amendment adds a duty on the Secretary of State to keep the subsidy database under review.

[Lord Callanan (Con)]

My Lords, I rise to move the government amendments in my name, with more than a modicum of delight, on the transparency of the new subsidy control regime. I have listened carefully to the arguments made for lowering thresholds and shortening the upload deadlines and, of course, I recognise the strength of feeling in the House on this matter. As a result, and as we said we would, the Government have gone back to first principles and reviewed the evidence base, ensuring the correct balance between administrative burdens on the one hand and transparency on the other.

As I set out in my letter to your Lordships on 15 March, the Government have published an updated impact assessment on the Bill which, using newly available data, assesses exactly that balance and has informed our approach to these amendments.

I will summarise the effects of this group of amendments. First, we have introduced a single threshold of £100,000, which applies across the vast majority of subsidy types. This is a substantial reduction of 80% from the original threshold of £500,000. Secondly, we have dramatically shortened the upload deadlines, reducing this by half for non-tax subsidy awards, so that subsidies will be visible on the database far sooner. We have retained the deadline for individual subsidy awards given as tax measures at one year. This is because a tax declaration, which is necessary to calculate the subsidy award, can be amended for up to a year after the tax return is submitted. Reducing the deadline here would make the cost of uploading tax subsidy awards disproportionate to the value of transparency for them. Noble Lords have recognised in previous debates that tax subsidies are in a unique position. I hope the House also recognises that, where it has been possible to reduce upload deadlines, we have done so.

In addition, the Government have introduced powers to be able to further amend the thresholds and the upload deadlines. The Secretary of State can review the levels in due course and make further changes as suggested by the available evidence at the time. Such new evidence will come about through the subsidy advice unit’s experience of how the regime is operating and the reports that it makes. I commit that these levels will be reviewed following the publication of the first subsidy advice unit report on the operation of the regime. Importantly, these regulations are made by the affirmative procedure, so Parliament will have maximum opportunity to scrutinise any changes. I know that noble Lords will do so.

The third change is that we have introduced new obligations to require the upload of permitted modifications of a subsidy or scheme. Public authorities will now face the same obligations to upload even minor changes, with the same upload deadlines as for the original subsidy.

Fourthly, we have placed a duty on the Secretary of State to review the transparency database as he or she considers appropriate, thereby ensuring additional quality control. As I stated in Committee, the Government are now carrying out additional checks on the database and following up with public authorities where we find mistakes. This will of course continue. As public authorities become accustomed to the regime they will, naturally, become better at uploading accurate information first time.

Finally, we have introduced an amendment specifying that the Secretary of State may provide statutory guidance to public authorities on pre-action information requests; that is, the provision of information following a request about a subsidy decision to an interested party that is considering whether to ask the Competition Appeal Tribunal to review the subsidy.

It is expected that any such guidance will encourage public authorities to discuss potential disclosure requirements with the beneficiary before the subsidy is given. This will help concerns about the confidentiality or commercial sensitivity of information disclosed in response to a pre-action information request to be addressed without unduly delaying or preventing the provision of sufficient information to potential challengers.

The overall effect of Amendments 18, 19, 21 to 44, 59, 60 and 62 in my name, taken together, will mean that we have a highly transparent subsidy control regime—far more so than existed under the EU state aid rules. Interested parties will be able to see subsidies they can challenge as well as numerous subsidies which are not challengeable under subsidy control requirements but whose publication is nevertheless in the public interest.

The new impact assessment reflects that the cost of lowering the threshold across the different subsidy types to £100,000 would have an administrative cost of £1.6 million over 10 years. This is not negligible, but the administrative costs of lowering the threshold further would be even greater. For example, a threshold of £25,000 per award would lead to a cost of just under £8 million, and a threshold as low as £500 per award—as was suggested by previous amendments—would be almost double that figure at just over £14 million. This has informed the Government’s decision on where to draw the most appropriate balance.

On the effects of shortening the upload deadlines, the impact assessment highlighted how there are unlikely to be significant cost burdens in reducing the upload deadline for non-tax subsidies from six to three months. However, lowering it below three months would have associated costs, as public authorities need to prioritise the gathering, checking and uploading of necessary information over other tasks they have. These costs will vary between public authorities.

The impact assessment also indicates that there would be disproportionate costs in relation to the uploading of tax subsidies to a shorter timeframe because of their unique nature, so the upload limits for tax subsidies in the Bill remain at 12 months, as I outlined earlier.

Before I conclude, I will address Amendment 20 from the noble Lord, Lord McNicol, which seeks to require the cumulation of subsidy awards within a scheme for the purposes of transparency. I recognise that this amendment would not represent a major change and I hope I can take from that that he is supportive of the package of changes the Government have made on transparency. None the less, my view is that it is seeking to solve a problem that does not really exist, creating an unnecessary administrative burden for public authorities.

I would first like to be very clear that the transparency obligation thresholds apply to subsidies, not payments. If a single subsidy to one enterprise for one purpose has been divided into multiple instalments, it remains as one subsidy and would need to be uploaded to the database if its total value was over £100,000. Any public authority trying to avoid the transparency requirements in this way would already be in breach of its obligations regardless of this amendment. I will ensure that this is reflected in the guidance so that public authorities are absolutely clear on this point.

I can see three possibilities for an enterprise to receive multiple awards under £100,000 for the same scheme, and none of them would justify the amendment. The first is entirely legitimate and they are simply separate subsidies. Perhaps different branches of the same business receive high-street regeneration subsidies for different towns in the same local authority. It is worth noting that some schemes will be made by a different public authority from the one giving the subsidy. For example, streamlined subsidy schemes are made by the UK Government but will be used by other public authorities, so the same enterprise could receive a subsidy under one scheme but from two different public authorities. I cannot see that this is a particular problem. In any case, the scheme itself will be on the database and subject to challenge in the CAT as provided for in the Bill.

The second possibility is that the public authority is trying to circumvent the transparency requirements simply to avoid the burden of having to upload its entirely legitimate subsidies, and is giving two separate subsidies under the scheme when it might have otherwise just given one. We can probably rule that out. There is no incentive for a public authority to do that: uploading an award on the transparency database will be a far more straightforward task than trying to parcel out a single subsidy into two different subsidies of £99,000 or less.

The third possibility is that the public authority is trying to game the transparency requirements to evade scrutiny because it believes that the subsidy is not compliant with the terms of the scheme and would be challenged if it came to light. Again, I find it hard to imagine that this is a tactic that any public authority in the UK would be so blatant as to deploy, and it would not be in compliance with the Bill requirements in any event. Should the subsidy lead to significant harms, it is highly likely to become apparent through other means, whether that is the recipient’s accounts, a press release, or other transparency mechanisms such as the local government transparency guidelines. A series of £99,000 awards would perhaps start to look suspicious when they came to light, which they inevitably would.

Overall, the requirement to cumulate awards within schemes for the purposes of transparency is a disproportionate response to a problem that I do not believe will arise in practice. It would add an unnecessary administrative burden to legitimate subsidies in the first category, and I cannot see that it would make much difference to the hypothetical nefarious public authority in the third category, since its attempts to game the system would probably breach the subsidy control requirements.

Therefore, I hope the noble Lord will not move his Amendment 20 and will agree to support, along with the rest of your Lordships’ House, my extensive package of transparency amendments. I beg to move.

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[Lord McNicol of West Kilbride (Lab)]

My Lords, this group of concessions, as the Minister has outlined, is significant because of both the number of amendments and, more importantly, their text and practical effect. We are grateful to the Minister and the Bill team for their engagement on these issues over many weeks now; our discussions have been very useful, and although we have not achieved everything we wanted, as the noble Lord, Lord Fox, said, the new subsidy control scheme will be far more transparent than the Bill initially proposed. There are 31 amendments in this large group, 30 from the Government and one from me. I still think mine is a good amendment but I understand the Minister’s points, which we will come on to in a second.

The main issue is that we remain somewhat unconvinced of the Government’s argument in relation to the £100,0000 threshold. Given that many public authorities already have to publish details of spending at much lower levels—in many cases, it is £500 for local authorities—the £14 million cost quoted by the Minister to take the transparency threshold down from £100,000 to £500 would be well spent because that transparency would then sit across the whole of the subsidy controls and subsidies issued. However, an 80% reduction, coupled with the universal requirements across different subsidy types, is a clear step in the right direction.

To be fair, the noble Lord, Lord Fox, has already stolen a lot of my thunder in relation to Amendment 20. The points he made were absolutely spot on so I will not repeat them; I look forward to the Minister’s response. I tabled Amendment 20 in an attempt to deal with the potential for public authorities to award multiple payments that fall under the £100,000 disclosure threshold. As the Minister outlined in his opening remarks, there are a number of possible reasons why a subsidy may be given at that level. The noble Lord, Lord Fox, is right: it is the final one of those three points, about a nefarious reason why an individual in a local authority would encourage a local authority to give multiple awards under the reporting threshold. A fundamental question still sits there: how will we and, more importantly, businesses and organisations that are or could be affected by a subsidy, challenge it if we have no sight of it?

We would be delighted if the Minister accepted this amendment but he explained in his opening remarks why he will not. If the Government are not willing to accept it, can the Minister outline any other safeguards that could be brought in to check this possible kind of behaviour? He did not touch on safeguards in outlining the three points; his response was that the Government do not expect this to happen or do not believe that it could happen. I hope that the Minister can also confirm, because this is important, that the ministerial delegated powers to amend the transparency thresholds will not be used before—I would prefer that they were not used at all, but especially before—the CMA and other interested parties are able to see the new system in operation. We appreciate that any future increases are subject to a cap but it would make a mockery of the process and the concession package if any of the thresholds were increased before the new system was up and running and had been tested and checked by the CMA.

One area not subject to amendments today but which we see as incredibly important is the process around MFA subsidies. At present, beneficiaries in receipt of MFA subsidies must maintain paper records, which not only increases the bureaucracy involved but goes against the grain of the general transition to paperless record-keeping. We do not believe that moving this system to a digital process would require any amendments to primary legislation, so can the Minister commit today to looking at the available options for digitising the MFA process, either as part of the department’s existing subsidy database workstream or as a stand-alone project?

I will touch on one final point about the move on upload from six months to three months. Again, I fully support this. The sooner this information is uploaded on to the database, the better for all, but we still have concerns about the right to appeal against a subsidy that a business or an organisation could be affected by. That is limited to one month; the Minister and the department have not moved that to six weeks or two months. I have some concern that we could have gone a bit further. With the reduction from six months to three months, we could have increased the ability for someone—or an organisation—adversely affected by a subsidy awarded to a competitor to challenge this by giving them a little more time. I understand the Minister’s argument about wanting the subsidy to be in place, agreed and unchallengeable, before the business will spend it, because it then has certainty. None the less, we could have given a bit more time to those who could possibly be adversely affected by it to make a challenge. With that, I again thank the Minister for the 30 amendments—it is just a shame that he could not go one more and make it 31.

[Lord Callanan (Con)]

I thank the noble Lords, Lord Fox and Lord McNicol, for their relatively supportive comments. I can provide much of the reassurance for which both noble Lords are looking.

I can certainly reassure the noble Lord, Lord Fox, that the Government will continue to keep both the thresholds and the upload deadlines under review. We will carefully consider new evidence as it arises, most notably from the CMA’s regular reporting on the operation of the regime. As part of this package of transparency measures, the Government have taken the power to be able to amend these limits, as I said, via affirmative regulations. We will certainly want to see how the new regime beds in and operates in practice before we look at any changes. Of course, they are by affirmative resolutions, so I have no doubt that the noble Lord would take me to task if we did this too early.

I can also confirm to the noble Lord, Lord Fox, that subsidies given under subsidy schemes of more than £100,000 must be uploaded on to the database within three months for non-taxed subsidies, and within 12 months for taxed subsidies.

I turn to the point of the noble Lord, Lord McNicol, about how these nefarious subsidies would be discovered. If this nefarious activity is going on, it is clearly already not in compliance with the Bill and can be challenged—so there is no need to add more rules with which the public authority is then not going to comply. We believe that these subsidies will become apparent because they will lead to distortion and harms on the market.

I turn now to the question of safeguards raised by the noble Lord, Lord McNicol. The key safeguards for the regime as a whole are the existence of the Competition Appeal Tribunal enforcement process, the CMA’s regular monitoring reports and the ongoing responsibilities of my department for the successful operation of the scheme. We will carefully see how the system operates in practice and, as I said, keep the levels under review.

I turn now to the noble Lord’s point about cumulation. Cumulation is essential for the minimum financial assistance to ensure compliance with our international obligations. The Bill sets out a straightforward way for public authorities and enterprises to clarify whether the cumulative threshold has been reached. However, this process is not necessary for in-scheme subsidies. The MFA process set out in Clause 37 can be done simply and easily as part of the normal communications between a public authority and a recipient before any subsidy is given—for example, through forms, emails and tick boxes. We are committed to making this regime as straightforward as possible to ensure that funding reaches beneficiaries as smoothly as possibly, while balancing the need for transparency. Preventing misused cumulation of awards within a scheme for transparency is disproportionate, but we will also keep the operation of that under review and will seek to make it as unburdensome as possible for the various public authorities.

With that, I commend my amendments and ask that they be supported by the House.

Amendment 18 agreed.

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Moved by

[Lord Callanan]

19: Clause 33, page 17, line 28, leave out “£500,000” and insert “£100,000”
Member’s explanatory statement
This amendment reduces the threshold for the exemption from the requirement to upload to the subsidy database from £500,000 to £100,000.

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Moved by

[Lord Callanan]

21: Clause 33, page 17, line 31, after “given” insert “as a subsidy”
Member’s explanatory statement
This amendment ensures that the one year deadline for uploading to the subsidy database only applies to tax subsidies.

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Moved by

[Lord Callanan]

31: Clause 36, page 19, line 28, at end insert—
“(3A) In subsection (1), the reference to the subsidy control requirements does not include the requirements as to transparency in Chapter 3 of Part 2 except in relation to the giving of a subsidy as minimal financial assistance if the amount of the subsidy is no more than £100,000.”Member’s explanatory statement
This amendment removes the exemption from the transparency requirements in relation to minimal financial assistance, in respect of each individual subsidy which exceeds £100,000.

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Moved by

[Lord Callanan]

32: Clause 38, page 21, line 8, at end insert—
“(3A) In subsection (1), the reference to the subsidy control requirements does not include the requirements as to transparency in Chapter 3 of Part 2 except in relation to the giving of a subsidy as SPEI assistance if the amount of the subsidy is no more than £100,000.”Member’s explanatory statement
This amendment removes the exemption from the transparency requirements in relation to services of public economic interest assistance, in respect of each individual subsidy which exceeds £100,000.

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Moved by

[Lord Callanan]

33: Clause 41, page 23, line 13, leave out from “requirements” to end of line 30 and insert “as to transparency in Chapter 3 of Part 2 do not apply to a subsidy given to a SPEI enterprise for the purpose of the provision of SPEI services, where the subsidy is no more than £100,000.”
Member’s explanatory statement
This amendment removes the exemptions from the transparency requirements for SPEI subsidies over £100,000.

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Moved by

[Lord Callanan]

35: Clause 42, page 23, line 39, leave out “(a)”
Member’s explanatory statement
This amendment is consequential on the amendment in the Minister's name at page 23, line 13.

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Moved by

[Lord Callanan]

45: Clause 47, page 26, line 26, at end insert “, and
(b) be laid before Parliament.”Member’s explanatory statement
This amendment provides that a financial stability direction is to be laid before Parliament.

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[Lord McNicol of West Kilbride (Lab)]

My Lords, as we move to the final group it seems that Covid has claimed yet another victim in the noble Lord, Lord Lamont, who is unable to move his amendment. It is a shame that we get to this important group so late in the evening. If we had been here earlier, I am sure that the will of the House on Amendment 55 in the name of the noble and learned Lord, Lord Thomas of Cwmgiedd, would have been tested. At this late hour, I guess that is not going to happen. It is a shame because this group of amendments tabled by the noble Lord, Lord Lamont, the noble and learned Lord, Lord Thomas, and me are important in how the subsidy control scheme and processes will work. I am sure that those amendments would have brought more sense to the Bill, as did the amendments on transparency. I am grateful to the noble Lord, Lord Fox, for speaking to Amendments 47 and 50 on behalf of the noble Lord, Lord Lamont, and to the noble and learned Lord, Lord Thomas of Cwmgiedd, for speaking so ably to his Amendment 55.

I have tabled two amendments in this group. They both bring us back to earlier debates on the functioning of the challenge process. We continue to be concerned by the prohibition on challenges to individual subsidies made under a scheme. The threshold for successfully challenging a scheme is likely to be substantially higher than that attached to the challenge of an individual subsidy, and the Government’s refusal to move on this area suggests a determination to close the door, or at least to push it back a bit, on the ability legitimately to challenge any subsidies. I apologise for bringing up these issues on the previous group. I was getting a bit ahead of myself there.

We also do not understand why the Government have refused to move on the CAT application deadline. As I said earlier, many organisations will lack the capacity to constantly check the subsidy database to monitor the subsidies received by their competitors. This is a particular challenge for SMEs, which are unlikely to have in-house expertise on these matters but are arguably most susceptible to the impact of any economic distortions caused by a subsidy award.

The Government continue to insist that a six- or eight-week application window to bring a challenge under CAT would be an unacceptable length. From our Benches, we fundamentally disagree. An extended period would give those businesses and organisations possibly affected adversely by a subsidy more time to understand and analyse what was happening. However, with the disclosure deadline for non-tax incentives having been halved from six months to three, doubling the time for submitting a challenge to the CAT would not take us further than what was in the original wording of the Bill.

Having promised businesses, particularly SMEs, time and again that Brexit would mean the slashing of red tape, the Government continue to subject businesses to unacceptable burdens. The new subsidy control system may cut red tape in some respects, but it also imposes unacceptably high barriers in cases where a party feels wronged. We know from discussions between Committee and Report that the Government believe that affected enterprises would have alternative means of legal redress and I look forward to the Minister outlining them in his response to this group of amendments.

However, the fact remains that the entire enforcement side of this new regime does not seem up to scratch. We await the CMA’s initial report and I very much hope I will be proven wrong, but the Government will need to be prepared to revisit some of these matters if it transpires that their chosen approach is failing to ensure fairness, transparency and access to justice.

To finish on this, and to use the words that have come through on this debate, I have a modicum of comfort and delight that we are now completing the Report stage of this Bill.

[Lord Callanan (Con)]

I thank all those who have contributed to the debate. It has been a good discussion, both tonight and in the previous discussions we have had on the regime as a whole and the subsidy advice unit. I particularly enjoyed the contribution from the spokesman for my noble friend Lord Lamont. This is a trend that should perhaps continue on other subjects on which my noble friend feels strongly.

[Lord Fox (LD)]

Have I been fired as the Minister’s speechwriter?

[Lord Callanan (Con)]

If the noble Lord is going to write my speeches, he might as well write them for my noble friend Lord Lamont, as well. The answer to the question of my noble friend Lord Lamont, through his spokesman, is the Green Book and Managing Public Money guidelines; I suspect as an ex-Chancellor he knows that very well indeed—probably better than we do.

Government Amendments 52 and 53 to Clause 65 have been tabled to address your Lordships’ concerns regarding the frequency of the CMA’s monitoring reports under Clause 65. Instead of mandating a report within five years of the implementation of the regime, the amendments require an initial report after only three years, subsequently followed up by a further report after another three years. Subsequent reporting will then revert to a five-year cycle.

I hope noble Lords will agree that the publication of these two initial reports will be sufficient to keep Parliament and the public informed of how the new subsidy control regime is functioning, and to assist in setting best practice going forward. As a result of these changes, I have also tabled two consequential amendments to clarify how these new initial reports will interact with other provisions in the Bill. These are Amendments 54 and 63.