Pollution Prevention and Control (Fees) (Miscellaneous Amendments) Regulations 2021

Lord Callanan Excerpts

Tuesday 8th June 2021 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Pollution Prevention and Control (Fees) (Miscellaneous Amendments) Regulations 2021.

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

My Lords, I beg to move that these regulations, which were laid before the House on 21 April 2021, be approved. I will refer to them as the fees regulations.

As the environmental regulator of the offshore oil and gas industry, which I shall refer to as the offshore industry, BEIS’s Offshore Petroleum Regulator for Environment and Decommissioning, OPRED, recoups the cost of its regulatory functions from the industry, rather than the taxpayer footing the bill. OPRED’s role is to minimise the impact of the offshore industry on the environment by, for example, controlling air emissions and discharges to sea and minimising disturbance over the lifecycle of operations, from seismic surveys through to post-decommissioning monitoring. Regulatory activities for which OPRED can recover costs are covered in two ways: within a suite of regulations that are covered by the fees regulations and by four fees schemes that are not, because they do not require legislative change and will be amended administratively.

OPRED’s annual fees income is on average £6.2 million, which is recovered from around 130 companies. These are billed quarterly. OPRED recovers its costs via fees based on hourly rates. The fees regulations will increase the hourly rates used to calculate fees payable by the offshore industry. The fees relate to the provision of regulatory functions for the environmental management of offshore operations. Currently, the fees that OPRED charges for providing its regulatory services are based on hourly rates of £190 for environmental specialists and £101 for non-specialists. Environmental specialists are qualified technical staff who carry out the legislative functions of the Secretary of State and non-specialists are administrative staff who support them.

The current hourly rates have been in place since April 2020. OPRED has reviewed the cost base and concluded that the existing hourly rates need to be increased to fully recover the costs of providing specific regulatory services. The fees regulations will therefore amend the charging provisions by increasing the hourly rates for environmental specialists and non-specialists to £197 and £108 respectively. As the increases relate to cost recovery, they do not represent monetary changes linked to inflation.

OPRED’s fees are determined by adding together the recorded number of hours worked by environmental specialists and non-specialists on cost-recoverable activities, multiplied by the hourly rates. The new hourly rates were approved by Her Majesty’s Treasury in November last year. They were calculated in line with the Treasury’s Managing Public Money guidance and cover the expenditure on all resources used by OPRED to support cost-recoverable activities: for example, staff salaries, accommodation, IT and office services and corporate services such as human resources, senior management, legal, finance and learning and development.

Guidance on OPRED’s fee-charging regimes is published and clearly explains the scope of the cost-recoverable functions undertaken by OPRED and how the costs are to be calculated and recovered. The cost-recoverable functions undertaken by OPRED include: the evaluation of applications and issuing of consents for seismic surveys and the conducting of appropriate assessments on the likely significant environmental effects of proposed projects; assessing and approving operators’ oil pollution emergency plans; and compliance monitoring activities, including offshore environmental inspections.

The revised fees to be paid will increase by a small amount, sufficient only to allow OPRED to recover its eligible costs. In this regard, the additional total cost resulting from the increase in hourly rates will be around £300,000 per year. OPRED’s guidance on its fees-charging regime will be revised to reflect the new hourly rates. Those charged by OPRED are aware that it reviews its hourly rates annually and, although there was no statutory requirement to consult on the fees regulations, in February OPRED informed the offshore industry of the planned increase to the hourly rates. No representations were received.

I conclude by emphasising the importance of the increase to the hourly rates being introduced by the fees regulations. The increase will enable OPRED to recover the costs of providing regulatory services from those who benefit from them, instead of those costs being passed on to the taxpayer. The fees regulations were debated and approved by the House of Commons on 26 May. I therefore hope that noble Lords will support the measure and I commend the regulations to the Committee.

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[Lord Callanan (Con)]

First, I thank all noble Lords for their valuable contributions to this debate. It is not often that I come along with charging instruments to have people complain that we are not increasing the fees enough but, as always, the noble Baroness, Lady Jones, provides a contrary view to established practice in this House. Nevertheless, it was an interesting debate.

As I said during my opening remarks, the fees regulations will enable OPRED to recover its costs for the provision of regulatory services under the offshore oil and gas environmental legislative regime, as opposed to such costs being passed on to the taxpayer. In response to the noble Lords, Lord Oates and Lord Grantchester, let me set out the position on OPRED’s budget and fees income. As they both said, OPRED’s annual fees income is £6.2 million on average. This represents around 65% of the cost of running its environmental operations unit. The total costs of around £10.6 million a year include that of the office in Aberdeen and corporate support provided from London.

On chargeable activities, OPRED considers the environmental implications of all offshore oil and gas operations before issuing permits and consents covering areas as diverse as seismic surveys, marine licences, oil pollution emergency plans, chemical permits, oil discharge permits and consent to locate permissions for offshore installations. To this end, OPRED reviews around 5,000 applications for permits and consents annually. In addition, there is a regular programme of monitoring and inspection to ensure compliance with the environmental regulations.

As the noble Lord, Lord Grantchester, said, in line with Her Majesty’s Treasury’s Managing Public Money guidance, OPRED does not charge for policy work—for example, the enacting of new, or revisions to existing, offshore environmental legislation. Nor is OPRED able to charge for enforcement activity, such as prosecutions. Let me also point out that OPRED had originally planned to implement the changes to its hourly rates through the Oil & Gas Authority (Levy and Fees) Regulations 2021, which were laid before Parliament under the negative resolution procedure and entered into force on 1 April 2021.

However, OPRED is relying on a power that requires an affirmative procedure. This is because the increases allowing it to recoup the costs for the provision of regulatory services are not alterations to reflect changes in the value of money. The OPRED provisions were therefore not suitable for the Oil and Gas Authority’s regulations, hence the proposal to introduce these fees regulations.

In response to my noble friend Lord Bourne, who asked about UK progress on the deployment of carbon capture and storage, let me highlight the following. CCS will be essential for meeting the UK’s 2050 net-zero target, playing a vital role in levelling up the economy, supporting the low-carbon economic transformation of our industrial regions and creating many new, high-value jobs. In November 2020, we announced a £1 billion CCS infrastructure fund, which will provide industry with the certainty required to deploy CCS at scale.

In addition, CCS will play an important role in the Government’s industrial clusters mission, which sets out the ambition to establish the world’s first net-zero carbon industrial cluster by 2040, backed by £170 million from the Industrial Strategy Challenge Fund, with the spend profile running between January 2021 and March 2024. In February this year, BEIS published a consultation seeking stakeholder input on a potential approach to determining a natural sequence for locations to deploy CCS. Close to 100 responses to the consultation were received and BEIS recently published guidance for organisations wanting to take part in phase 1 of the CCS cluster sequencing process, which helps to meet the Government’s commitment to capture 10 million tonnes of CO₂ per annum and have 5 gigawatts of low-carbon hydrogen capacity by 2030.

In response to the noble Baroness, Lady Jones, who asked why the costs were rising by such a very small sum and appear, as she said, to be subsidising the industry for government service, I remind her that, as I said earlier, the fees are calculated in accordance with Her Majesty’s Treasury’s Managing Public Money guidance, of which I am sure the noble Baroness is a great supporter, and any revisions to OPRED’s charges that result from annual reviews can cover only the actual cost of providing its regulatory services. OPRED is not permitted to make a profit under Treasury rules. I know that the noble Baroness will be a strong supporter of Treasury rules, so our hands are tied in this regard.

When conducting future annual reviews of the fees-charging regime plus associated functions, OPRED will ensure that the fees being charged fully reflect its regulatory activity and, in turn, the level of offshore operations in any given year. It is important to emphasise that, while the offshore oil and gas industry transitions to a net-zero basin, a comprehensive environment regulatory regime will be applied to its operations to ensure that a high level of protection for the marine environment is maintained. As we move towards net zero, the noble Baroness, Lady Jones, will also no doubt be delighted to hear that oil and gas will play a smaller role in meeting UK energy demand; however, it will still continue to play a role.

In response to my noble friend Lady Altmann, OPRED is an integral part of the Department for Business, Energy and Industrial Strategy. It is based in Aberdeen and currently has 97 staff. Those staff are civil servants. The calculation of the fees includes the full economic costs of the staff, including superannuation costs, which are also taken into account.

Questions were asked by, I think, the noble Lord, Lord Oates, about decommissioning costs. They are recovered through separate fees regulations. Currently, about 50% of the cost of running this unit is recovered through fees, and a consultation opened on 24 May on a proposal to increase fees recovery to around 80%.

My noble friend Lady Altmann also asked about transition. I would like to mention the North Sea transition deal, which will help significantly to reduce emissions, ensuring a net-zero basin by 2050 and supporting our goal of decarbonising the wider economy. Commitments in the deal will help to achieve a reduction in UK greenhouse gas emissions of 60 million tonnes, including 15 million tonnes through the progressive decarbonisation of UK production over the period to 2030. If the UK stopped producing gas, we would then need to import it and would therefore have little control over the carbon intensity of those inputs while losing the benefits of a domestic natural resource.

In response to the points made by my noble friend Lady McIntosh, I am sure that she is well aware that the wind farm fee regime is not part of these regulations. I will write to her on the main points she asked about. The North Sea transition deal will harness the existing skills of the offshore oil and gas sector supply chain to help to deliver our new low-carbon technologies, such as hydrogen and carbon capture usage and storage, helping the UK to meet its net-zero targets.

I think I answered the questions asked by the noble Lord, Lord Oates, in the early part of my speech.

On the question from the noble Baroness, Lady Altmann, the fee increase mainly comprises two elements: an increase in staff costs as a result of a pay award and an increase in corporate costs relating to IT, HR, finance et cetera, which is allocated on a per head basis. As I explained earlier, it is all in line with the Treasury’s Managing Public Money guidance, which does not allow OPRED to make a profit on its activities.

In response to the points made by the noble Lord, Lord Grantchester, although it might be helpful to the industry to have a form of indexing, again, this would fall foul of the favourite document of the noble Baroness, Lady Jones: Her Majesty’s Treasury’s Managing Public Money guidance regime, which provides that charges should be set to recover the full costs of the service being provided. This approach is intended to ensure that the Government neither profit at the expense of the industry nor make a loss for taxpayers to subsidise. OPRED’s fees are reviewed annually to ensure that, year on year, the full costs of the service are recovered. If costs were to reduce, the fees would also reduce; however, if the costs increase, the fees will also increase so that the burden does not fall on the taxpayer but remains on those benefiting from the service.

I think I have dealt with most of the questions asked by noble Lords and I therefore commend the regulations to the Committee.

Motion agreed.

Ecodesign for Energy-Related Products and Energy Information Regulations 2021

Lord Callanan Excerpts

Tuesday 8th June 2021 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Ecodesign for Energy-Related Products and Energy Information Regulations 2021.

Relevant document: 1st Report from the Secondary Legislation Scrutiny Committee

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

My Lords, I beg to move that these regulations, which were laid before the House on 28 April 2021, be approved.

Before I begin, let me provide a brief overview of ecodesign and energy labelling and what these policies are attempting to achieve. Ecodesign policies regulate products that consume energy when in use, such as household white goods, by setting minimum energy performance standards to increase their energy efficiency. More recently, ecodesign policies have also included resource efficiency measures, which seek to make products more repairable and recyclable, thereby reducing their use of material resources. In effect, ecodesign policies make the products we use in our homes and businesses more environmentally friendly, and also support long-term product innovation.

Energy labelling policies are intended to make clear and consistent information on a product’s energy usage readily available to consumers at the point of purchase, to help them make more informed purchasing decisions. In effect, energy labelling encourages the uptake of more energy-efficient products, thereby reducing energy usage and saving consumers and businesses money on their energy bills.

Taken together, these policies make an important contribution to reducing energy use, improving environmental outcomes and cutting energy bills. It is estimated that the suite of ecodesign and energy labelling policies in force in Great Britain will save consumers £75 on their energy bills and save 8 megatonnes of carbon dioxide in 2021—the equivalent of the average yearly carbon emissions from electricity use of something like 12 million homes.

This statutory instrument seeks to enact commitments made by the UK in 2018 and 2019 when it was an EU member state in support of a package of new product-specific ecodesign and energy labelling measures. New ecodesign requirements are introduced by this statutory instrument for welding equipment, electric motors, household washing machines and dishwashers, domestic and commercial fridges, and televisions placed on the market in Great Britain. These requirements will raise the minimum energy efficiency of products on the market. In effect, this will phase out the least energy-efficient products—in other words, the most costly and environmentally damaging products to run.

New obligations on manufacturers to make these products easier to recycle and repair will also be introduced. When buying a new washing machine or television, consumers will now be entitled to access spare parts with which to repair their appliances. This will help consumers keep appliances in use for longer, thereby reducing electrical waste. A wider range of spare parts and helpful information will be made available to professional repairers, which will facilitate even more complex repairs to be carried out by people with the right skills to do it safely.

In addition, this statutory instrument will introduce an energy label for commercial refrigerating appliances for the first time. Underpinned by new minimum energy efficiency requirements, the energy label will provide information to businesses when buying a new refrigerated sales cabinet, for example, to help them to understand and compare the energy consumption of different products. This will encourage businesses to opt for more energy-efficient fridges for use in supermarkets and other commercial environments, helping to cut down on the energy use and associated carbon emissions of this product group. Furthermore, by setting ambitious boundaries for the A-G classes on the energy label, this policy will spur innovation in the design of commercial refrigerating appliances as manufacturers compete to achieve the highest energy efficiency ratings.

By introducing these more ambitious and environmentally friendly ecodesign and energy labelling requirements, we will ensure that we maintain high product standards in Great Britain and push the market to achieve ever greater carbon savings. The measures introduced by this SI will contribute savings of approximately 1.7 megatonnes of carbon dioxide between now and 2050. On top of this, the resultant reduction in energy use will improve air quality in Great Britain and cut many pounds from household and business energy bills. As I mentioned earlier, through greater repairability and recyclability of these electrical appliances, the measures introduced by this SI will help reduce the quantity of electrical waste reaching landfill each year. Lastly, introducing these requirements in Great Britain will ensure a common set of product standards with Northern Ireland, thereby facilitating trade across the Irish Sea.

A public consultation was conducted between September and November 2020. Feedback on the consultation proposals showed significant support among the respective manufacturing bases for the affected products and among environmental campaign groups for implementing these new requirements in Great Britain.

In conclusion, introducing these requirements is aligned with the Government’s ambitions to achieve our carbon budget and net-zero targets; they will take us ever closer to reducing our energy use and environmental impact. Furthermore, the new measures will provide greener choices for consumers and businesses and will encourage product innovation. I therefore commend this statutory instrument to the Committee.

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[Lord Callanan (Con)]

First, let me thank noble Lords for their contributions to this debate. As I said before, the Government are committed to delivering their carbon budget and net-zero targets. These regulations will help to achieve this by increasing resource efficiency and setting higher product standards, leading to 21.5 terawatt hours of electricity savings in the domestic sector by 2050, equivalent to around 1.7 megatonnes of carbon dioxide.

In response to the points made by the noble Baroness, Lady Jones, I thought for one brief moment that she was about to agree with something we were doing but, sadly, about two minutes into her speech, my hopes were dashed: she did not quite agree with everything we were doing, although perhaps she thought that we were on the right track.

On what the SI actually does, it will raise the minimum energy efficiency requirements of these products. Manufacturers will be obliged to make products easier to recycle and repair, including giving consumers access to spare parts to repair their appliances. An energy label for commercial refrigeration will be introduced to provide businesses with information to help them to understand and compare the energy consumption of different products, encouraging them to opt for more energy-efficient fridges. Furthermore, the measures will ensure a common set of product standards with Northern Ireland, helping to facilitate trade across the Irish Sea.

The regulations closely reflect the EU regulations, with the exception, as the noble Baroness pointed out, of the UK flag. We will be coming forward with our own proposals for how the UK can go further with ecodesign and energy labelling in future with our energy-related products framework. I am sure that the noble Baroness will be delighted to support us when we do so.

In response to the noble Baroness’s question about consultation, the 2020 call for evidence will help to inform which products and policies to pursue as part of our energy-related products policy framework, which was announced in the Prime Minister’s 10-point plan last November. To support building the UK evidence base for energy-related products, we have launched a study that will help to inform which products are high priority in terms of their overall environmental impact, considering their contribution to carbon emissions and resource depletion and the potential for improving their environmental performance. I am sure the noble Baroness and the Greens will welcome the Government’s intention to launch a world-class product policy framework for energy-related products later this year, when more details will be set out on future policy and ambitions.

In response to the points raised by the noble Lord, Lord Oates, who asked about designated standards, it is not uncommon to introduce new requirements before standards have been officially designated here. The regulations and supporting test standards have been discussed at length with industry, and alternative methods are available to measure the technical parameters. The designation process will take place very shortly, and the designated standards will be made clear in guidance. I would be very happy to write to the noble Lord about battery-powered appliances. It is a fact that the UK no longer has access to the public part of the EU product database, so the same information will be available to consumers on a free-to-access website. In relation to water usage, as part of our world-class policy framework we will set out our ambition to maximise the energy, carbon and energy bill savings from these energy-related products.

The noble Lord, Lord Grantchester, asked about the Northern Ireland protocol. These regulations will apply to Great Britain only. Under the terms of the Northern Ireland protocol, equivalent eco-design and energy label requirements already apply in Northern Ireland in line with EU regulations. This will ensure that a consistent approach on product standards is followed across Great Britain, Northern Ireland and the EU. In all future policy we will need to uphold the terms of the protocol.

To close, let me underline once more the main purposes of the instrument. It will help raise the minimum energy efficiency of a range of electrical products sold in Great Britain, including many household goods, such as washing machines, dishwashers and televisions. It will involve new obligations on manufacturers to make products easier to recycle and repair through better access to spare parts, and it will introduce energy labelling for commercial refrigerating appliances for the first time, helping to make the fridges we see in our supermarkets and shops more energy efficient. These measures will help to spur innovation, maintain high product standards and give consumers the choice of more energy-efficient products on the market. I commend these regulations to the Committee.

Motion agreed.

Net-Zero Carbon Emissions

Lord Callanan Excerpts

Monday 7th June 2021 Lords Chamber

[Baroness Boycott]

To ask Her Majesty’s Government whether they plan to publish a strategy for public engagement and behaviour change to support their target for net zero carbon emissions by 2050; and if so, when.

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

My Lords, leading up to COP 26, we will publish a comprehensive net-zero strategy setting out the Government’s vision for transitioning to a net-zero economy, making the most of new growth and employment opportunities across the United Kingdom. Through the net-zero strategy we will communicate our approach to public engagement and support the public to make green choices. Achieving our net-zero target will be a shared endeavour requiring action from everyone in society.

[Baroness Boycott (CB)]

I thank the Minister for his Answer. For public-led behaviour change to happen, there will need to be perceived and real fairness. Those are not my words, but those of Dr Christina Demski, who has been advising the Government on this issue. Currently, that fairness is lacking. The Cambridge Sustainability Commission report shows clearly that it is the global elite who have been responsible for most of our emissions since 1990. What are the Government doing to tackle this inequality, both real and perceived? The BEIS public attitudes survey shows that there is a great deal of concern about climate change but quite an area of misunderstanding of what net zero means. Will the Minister encourage the Government to write to every household in the UK explaining what it means and what they can do to play their part in it, so that when we get to COP 26, we will all feel involved?

[Lord Callanan (Con)]

The noble Baroness is right that we need to involve all members of society in this. We have done a lot in this space. Since 2019, we are funding or running 13 deliberative dialogues on a range of net-zero issues such as net-zero homes, heating and transport, decarbonisation, and so on. A lot is going on in this space.

[Baroness Whitaker (Lab)]

My Lords, will the Government let us know how they propose to get many more members of the public to commit to or be remitted the considerable expense of exchanging their gas boilers for ones with zero carbon emissions? What will be the carrot and what will be the stick?

[Lord Callanan (Con)]

The noble Baroness is right that this will indeed be a challenge. If she will be patient, we are planning to publish our heat and buildings strategy in due course. That will set out how our industry and consumers can take the immediate actions they need to take in order to reduce emissions from all buildings, both industrial and commercial.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, according to a summary report from the Public Accounts Committee, as much as 62% of the reduction in future carbon emissions will rely on individual choices and behaviours such as replacing boilers or buying electric vehicles. Have the Government told the public that they are relying on such behaviour change and what it will mean ultimately for individuals if they have no choice but to comply? When will the Minister tell the public how much net zero will cost them? As we have just heard, gas boilers cost a great deal less than the heat pumps being proposed, which produce a lot less heat. For an ordinary home to achieve net zero will cost approximately £90,000. Whether they are carrots or sticks, they are very expensive regardless.

[Lord Callanan (Con)]

I do not recognise the figures given by the noble Baroness. It will be an expensive change, but I do not think that it will cost that much per home. However, she is right in theory. We need to educate people about the changes required and to take them with us, and of course the policy will be brought about by a mix of regulations and grant assistance.

[Baroness Rawlings (Con) [V]]

My Lords, given the Government’s admirable net-zero target for carbon emissions by 2050, will that include all transport becoming electric? We will have silent motorcars and buses, but will there also be legislation to make motorcycles electric?

[Lord Callanan (Con)]

These are matters to be decided in the future, but we will not be able to power all transport by electric means. Certainly, some will be, but heavy articulated lorries, trains and so on mean that we will have to look at other solutions such as hydrogen.

[Lord Oates (LD)]

Do the Government recognise the key role that local authorities need to play in public engagement strategies to support net zero? Can the Minister tell the House what discussions his department has had with the Local Government Association on how best to integrate the work of central and local government in this respect?

[Lord Callanan (Con)]

The noble Lord is quite right that we need to involve local authorities and we are doing that. Indeed, local authorities are one of our key partners in many of our strategies, such as the local authority green homes grant. I am the Minister responsible for this. We are working closely with local authorities and so far they are doing an excellent job in helping us deliver it.

[Lord Howell of Guildford (Con) [V]]

My Lords, I declare my interests as set out in the register. Can my noble friend explain how our planned net-zero goal actually contributes directly to checking the prospective growth in global carbon emissions and atmospheric concentrations? As these continue to rise worldwide, as they are likely to do, are any changes in priorities or in the direction of British resources to combat climate change being considered so as to make a real impact on the major emissions sources, especially the Asian utilities, where most of the increase is going to come from?

[Lord Callanan (Con)]

My noble friend has made a good point. The UK was one of the first major economies to legislate for net-zero emissions by 2050, and of course our ambitious domestic action gives the UK the credibility to influence and to accelerate global action. If the noble Lord looks at some of the commitments that have been made by major economies before COP 26, he will see that considerable action is being taken.

[Baroness Hayman (CB) [V]]

My Lords, I return to the issue of decarbonising homes. Does the Minister accept that public confidence and engagement have been damaged by the failure of several schemes, culminating in the green homes grant? Will the much-delayed heating and buildings strategy provide a clear and comprehensive framework for the changes that are necessary, including costings, so that industry and individuals alike can plan?

[Lord Callanan (Con)]

The noble Baroness will have to be patient to see the detail of the heating and buildings strategy, but it will provide a clear and comprehensive road map for the challenging work that we all understand will need to take place on decarbonising the heat that goes into both commercial and domestic buildings.

[Lord Grantchester (Lab)]

The Government are right to insist that companies bidding for government contracts should publish their plans on how their own companies will achieve net zero. However, for the Government, it is necessary that they publish detailed delivery plans to accompany legislative targets in a timely fashion. The current policy is insufficient even for the existing targets. While we await the net-zero strategies, how are the Government working together with the devolved Administrations, mayors and local authorities to secure buy-in? Does the Minister agree that it is unsafe to rely on as yet undeveloped technologies to come along just in time?

[Lord Callanan (Con)]

As I mentioned in my answer to the noble Lord, Lord Oates, we are working closely with local authorities and the devolved Administrations because this will be a shared effort. There are often challenging targets that we need to meet, but we are working with all our partners across the country and engaging with the public as well so as to take them along with us on this journey.

[Baroness Randerson (LD)]

My Lords, total CO₂ emissions from the national vehicle fleet have hardly reduced in recent decades, despite emissions from individual cars being much lower in many cases and despite the increase in popularity of electric vehicles. The main problem is the increasing number of highly polluting SUVs on our roads. Does the Minister agree that the Government need to restructure taxation levels so that people are discouraged from buying more heavily polluting vehicles?

[Lord Callanan (Con)]

The noble Baroness will be aware that I cannot give any commitments on taxation because that is a matter for the Chancellor. However, there are some excellent examples of electric and hybrid SUVs; people can continue to use these vehicles while still contributing to the cause of reducing their emissions.

[Baroness Prashar (CB) [V]]

Does the Minister agree that the engagement of the not-for-profit sector in developing public strategies is absolutely crucial? Does he also agree that this is an excellent opportunity to ensure that we strengthen our democracy by involving young people through non-governmental organisations?

[Lord Callanan (Con)]

We are closely engaging with young people. The Youth Climate Action Team is closely working with many young people’s groups on this agenda.

[The Earl of Caithness (Con)]

My Lords, does my noble friend agree that what he is going to publish before COP is merely the start of a long, ongoing process that will happen every year, for many years to come? Could he tell the House what he is doing, particularly with schools, as an education programme? Unless we are all educated, we will not achieve anything near the target that we all hope for.

[Lord Callanan (Con)]

Indeed, my noble friend is right that COP is an important milestone, but that this work—this strategy and policy—will go on for many years until we achieve our net-zero target in 2050. The young people in schools and taking part in youth groups now will be consumers in the years ahead, so it is important that they are educated and informed of the changes that they will need to make.

[The Lord Speaker (Lord McFall of Alcluith)]

My Lords, all supplementary questions have been asked, so we now move to the next Question.

Climate Change: Targets

Lord Callanan Excerpts

Thursday 27th May 2021 Grand Committee

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

My Lords, as I made clear to the House just a few weeks ago, climate change remains one of the most pressing issues of our time. While we of course presently find ourselves in the midst of a fairly vicious health pandemic, we will not abandon our climate change goals and risk further crises down the line. Let me reaffirm the point I made to the House a few weeks ago: this Government are absolutely determined to play their part in upholding the Paris Agreement and driving down our own greenhouse gas emissions.

To this end, we recently passed a significant milestone by beginning the process of enshrining the UK’s sixth carbon budget in law, proposing a target which would reduce greenhouse gas emissions by 78% by 2035 compared to 1990 levels. This is a huge commitment which the Government are working flat out to achieve. Despite the considerable challenges that we face, we can leverage our strengths to deliver a greener and stronger economy, and go further and faster to level up and accelerate the transition to net-zero greenhouse gas emissions by 2050.

In response to the noble Baroness, Lady Sheehan, I am pleased to confirm that on 31 March 2021 the UK Government implemented their new policy and will no longer provide any new direct financial or promotional support for the fossil fuel energy sector overseas. This applies to any new ODA and investment, including support provided by UK Export Finance. We are working hard to drive down demand for fossil fuels. However, there will continue to be ongoing demand for oil and gas, which is recognised by the work of the independent climate change committee.

Through our recent landmark North Sea transition deal, we are the first G7 country to set in place an ambitious partnership to back the oil and gas industry to transition away to clean, green energy while supporting the tens of thousands of highly skilled jobs that exist in this sector. I agree that it is an existential issue and that we need to get it right. The foundation for delivering net zero is through the Prime Minister’s 10-point plan for the UK to lead the world into a new green industrial revolution. This innovative programme sets out ambitious policies, backed by £12 billion-worth of government investment.

To respond to the point on legislation, and to a similar point made by my noble friend Lord Sheikh, this is key to delivering our climate change goals. We were the first major economy in the world to set a legally binding target to reach net-zero greenhouse gas emissions across our economy by 2050 and in April we laid the draft legislation for the UK’s sixth carbon budget. As I said earlier, it proposes a target which would reduce emissions by 78% by 2035.

Under the Climate Change Act 2008, we have made significant progress in meeting our climate targets. We confidently met the first two carbon budgets and we are projected to meet the third out to 2022. We exceeded the required emissions reduction in the first carbon budget by 1.2%, and in the second by nearly 14%. Now is the time to double down and decrease our emissions further and faster.

In response to the noble Lord, Lord Lennie, we do recognise the need for further action to meet the fourth and fifth carbon budgets. Our forthcoming sector decarbonisation strategies and our wider plans that deliver a green economic recovery following the Covid-19 pandemic will contain further proposals to support delivery of carbon budgets 4 and 5. We will also publish a comprehensive net-zero strategy ahead of COP 26, setting out the Government’s vision for transitioning to a net-zero economy.

The noble Baroness, Lady Meacher, and the noble Lord, Lord Oates, talked about the UK’s plans to develop hydrogen production. Working with industry, the UK is aiming for five gigawatts of low-carbon hydrogen production capacity by 2030. This is stretching but credible for the UK. We welcome the Scottish Government’s ambition, which will be important in developing low-carbon hydrogen production at scale within the UK. Our ambition will be supported by a range of policy measures, including the £240 million net-zero hydrogen fund, which was confirmed out to 2024-25, for co-investment in hydrogen production. We have committed to consulting on our preferred hydrogen business model in 2021 and set out a revenue mechanism to enable our new business models to bring through private sector investment. The noble Lord will be aware that we are developing our hydrogen strategy in partnership with industry, because while our ambition is important, the key ask from industry is that we have a clear revenue/business model to support delivery. That is why we are not rushing ahead with a strategy.

My noble friend Lady Altmann spoke about using pension scheme assets to assist in the battle against climate change—indeed, she has spoken about this a number of times before. Trustees of occupational pension schemes are, as she is well aware, independent of government and not bound by the commitments which the Government have signed up to. However, given the significance of the financial risks posed by climate change, the Government expect all investment decisions made by pension scheme trustees to take climate change into account. As of 2019, trustees of pension schemes with 100 or more members have been required to set out in their statement of investment principles policies on stewardship and on environmental, social and governance considerations, including climate change.

In the Pension Schemes Act 2021, the DWP took powers to require trustees to manage climate risks and opportunities to their savers, and to report on how they had done so. After two consultations, the DWP will lay the required regulations next month. If approved, they will come into force in October 2021 and will require larger occupational pension scheme trustees to undertake governance activities, assess how their scheme will fare in different temperature rise scenarios, calculate the emissions of their portfolio, and set targets. They will need to make annual disclosures about these activities in line with the TCFD recommendations. This will make the UK the first major economy to mandate TCFD reporting for its pensions sector.

The noble Baroness, Lady Altmann, also asked about the Government’s plans for bitcoin and other cryptocurrencies. As always, we stand ready to respond to emerging risks or changes in the market, and we will continue to monitor how cryptoassets are being used in the UK. Regarding the emissions they create, it is of course important to consider this in the context of the UK’s success in decarbonising the power sector. As she will be aware, between 1990 and 2019, the sector saw a reduction of 71% in emissions.

The noble Lord, Lord Bradshaw, spoke about balancing our ideas to reach net zero with their cost and their deliverability. Our ambition to protect the planet goes hand in hand with supporting economic growth and prosperity across the UK. The 10-point plan will also help develop the cutting-edge technologies needed to drive down emissions in industries across the United Kingdom, such as through the significant investment in hydrogen that I spoke about earlier, and in carbon capture technologies through our £1 billion net-zero innovation portfolio. We have developed our plans to reach net zero centred around the UK’s strength, and there is huge potential in boosting innovation and advancing technology to help meet those ambitions. At every step on the path to net zero, we will of course put affordability and fairness at the heart of our reforms.

In response to the noble Baroness, Lady Bennett of Manor Castle, analysis from the Climate Change Committee shows that to achieve net zero, GGR methods will be required to balance residual emissions from some of the most difficult to decarbonise sectors—for example, some parts of agriculture and aviation.

Last year, it was my pleasure to meet the noble Lord, Lord Mountevans, and his colleagues to talk about the maritime sector, so let me respond to the points he made about the maritime industry. The UK will continue to play a prominent role in international forums, including at the International Maritime Organization, to encourage action from other countries to cut emissions from this sector. We will invest £20 million in the clean maritime demonstration programme to develop that clean maritime technology. We are already running hydrogen ferry trials in Orkney and we are due to launch a hydrogen refuelling power plant in Teesside, as we seek to revitalise our ports and coastal communities. The clean maritime demonstration competition includes feasibility studies on our sites, such as Orkney and Teesside. The competition will support the development of hydrogen and alternative fuel shipping hubs across the UK, enabling a number of clean maritime clusters.

In response to the noble Baroness, Lady Hayman, and the noble Lord, Lord Sheikh, on legislation being key to delivering our climate change goals, I remind them that, as I said, we were the first major economy in the world to set a legally binding target and in April, we laid draft legislation for the UK’s sixth carbon budget. Under the Climate Change Act 2008, we have made significant progress in meeting those climate targets. As for the point the noble Lord raised about requiring every policy submitted to have a climate impact assessment, net zero has become an increasing priority for this Government. For the first time, we now have two Cabinet committees, chaired by the Prime Minister and the COP president-designate, to turbo-charge the net-zero transition and co-ordinate action across government. As the lead department for net zero, BEIS works in the centre of government and other key departments to ensure that net zero is factored into all our key policy decisions and future plans.

The noble Lord, Lord Sheikh, also raised the point that in order to deliver on net zero, we must ensure that local authorities and the devolved Administrations are adequately involved and trained in delivery of net zero. We are working closely with our partners in the DAs and many local authorities to achieve those climate goals. Local authorities are key delivery partners in projects ranging from electric vehicle charging infrastructure to heat networks and energy efficiency schemes.

Unfortunately, I am running out of time, so I shall write to those noble Lords I have not had a chance to answer and that will be a more effective use of our time. I am grateful for the time of the Committee.

Post Brexit: Small Service Businesses

Lord Callanan Excerpts

Monday 24th May 2021 Lords Chamber

[Lord Aberdare]

To ask Her Majesty’s Government what assessment they have made of the impact of the United Kingdom’s departure from the European Union on small service businesses dependent on mobility between the United Kingdom and the European Union; and what support they have offered to such businesses to preserve their incomes and jobs.

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

My Lords, the Government are committed to supporting SME owners from all parts of the UK. My colleague, Minister Scully, recently formed an SME action group, which meets regularly to discuss key issues. The EU-UK Trade and Cooperation Agreement supports small services businesses, ensuring that many business visitors can stay in the EU for 90 days of any six-month period without requiring a work permit. BEIS is currently expanding GOV.UK guidance on member states’ immigration systems.

[Lord Aberdare (CB)]

My Lords, numerous small UK providers of cross-border services, based in the EU, EFTA and the UK, have found their businesses under existential threat following Brexit, including IT consultants, translators, exhibition organisers, tradespeople, sailing-holiday providers, ski instructors, journalists, artists and, of course, musicians, to name just a few. They find it hard to get clarity on the rules now governing their activities or on where to get help to resolve issues. What guidance can the Minister offer to such service providers to help them find ways of saving their businesses and their livelihoods, and will the Government consider setting up something similar to the EU’s Your Europe Advice and SOLVIT services to support them?

[Lord Callanan (Con)]

The noble Lord makes a good point. This is a complicated area. We are upgrading existing GOV.UK guidance on the immigration systems of EU and EFTA member states to help businesses adjust to the new requirements. The first tranche of these guides is available now, and from 1 January 2021, for short stays of up to 90 days in any 180-day period, UK nationals will not need a visa when travelling to and within the Schengen area to undertake a limited range of activities.

[Lord McCrea of Magherafelt and Cookstown (DUP) [V]]

Now that a free trade agreement with the EU is in place that enables the selling of equipment into Europe, what discussions have been held that would aid the removal of the 90-day restriction that is an impediment to UK experts being able to service the equipment or machinery that has been sold?

[Lord Callanan (Con)]

I understand the noble Lord’s concerns but we have reached a balanced deal with the EU similar to the EU’s agreements with Canada and Japan, and the TCA is the basis of our agreement, so I am sorry to tell him that this will not be renegotiated.

[Baroness McIntosh of Pickering (Con)]

I declare an interest as I practised European law in Brussels. Can the Minister explain the situation regarding the freedom to provide services, in particular family law, under the EU-UK Trade and Cooperation Agreement? I understand that this is not covered. What would the situation be if a solicitor or an advocate in this country wanted to represent a member of the family living in the European Union? How would the agreement apply to that? Also, can the Minister and his department urgently address the availability of insurance for small firms and solicitors post Brexit and post Covid?

[Lord Callanan (Con)]

As my noble friend is aware, legal services are subject to separate international agreements. The details of how that will apply across member states are complicated, so it is best for me to write to her.

[Lord Berkeley of Knighton (CB) [V]]

My Lords, does the Minister understand how grave the mobility problem is for the musical community, many of whom have earned nothing for the last year and are now struggling with piles of forms and visa fee demands? Did I understand him to say that they could work and be paid in that 90-day period? Illness often means that, in both directions, players and singers must be able to move at short notice.

[Lord Callanan (Con)]

As the noble Lord is aware, having raised this a number of times, we are working closely with the music industry to help musicians adjust to the new trading relationship. Bilateral conversations have established that some touring activities are possible and, under certain conditions, without visas or work permits being required. We have created landing pages on GOV.UK to provide guidance to musicians on these areas.

[Lord Stevenson of Balmacara (Lab) [V]]

Further to the question from the noble Lord, the TCA contains no overarching agreement with the EU on short-term work relating to our creative industries and, despite what the Minister says, no bilateral or reciprocal agreements are being signed at the moment. What assessment have the Government made of the impact that this will have on our services trade, which in 2019 was worth over £534 billion?

[Lord Callanan (Con)]

As I said, we are working closely with the sector and across government to consider how we can help resolve these issues. I understand the noble Lord’s point. This has been very damaging to the creative industries. It is hard to quantify the impact at the moment. Given the pandemic, not many people are travelling anywhere, but we will monitor the situation closely.

[Baroness Ludford (LD) [V]]

My Lords, the noble Lord, Lord Frost, admitted last week to our European Affairs Committee that the Government rejected the EU’s offer of a visa waiver system whereby arts and culture workers, such as musicians, could tour on the continent without a mass of red tape. The Government now seem to be trying to reach bilateral deals with individual EU countries, but this may well be blocked by Brussels. What effective strategy do the Government have to give mobility to a sector worth billions to our economy?

[Lord Callanan (Con)]

The proposals from the EU were complicated and would not have resolved many of these issues, so the noble Baroness should be wary of believing some of the propaganda she reads. We tried to reach a comprehensive agreement, but our proposals were rejected by the EU. I know that she will find this hard to believe but that is what happened in practice.

[Lord Bilimoria (CB) [V]]

My Lords, the nuances of the TCA mean country-by-country understandings for business travel. The CBI, of which I am president, welcomes the recently published guidance from the Government. However, do the Government agree that, as travel restrictions ease, government support should be provided to help businesses, particularly SMEs, navigate these complex new requirements? Do the Government also agree that the UK and the EU should work together to make these processes as efficient as possible?

[Lord Callanan (Con)]

I agree with the noble Lord, and we are doing exactly that to support SMEs. The Government have announced a £20 million SME Brexit support fund. We have also established a network of 38 growth hubs to support businesses, one in each local enterprise partnership area in England, and will continue to offer whatever support we can to business.

[Lord Hain (Lab) [V]]

My Lords, already hit by Brexit and Covid, small businesses have suffered a decline in their post-Brexit exports because of increased paperwork and shipment delays. The Federation of Small Businesses found that by the end of March, almost a quarter had suspended sales to Europe. Some companies have given up on trade with the EU or Northern Ireland altogether. Can the Government urgently use the provisions of the trade and co-operation agreement to ease post-Brexit burdens on small businesses?

[Lord Callanan (Con)]

Of course; we are more than interested and keen to ease burdens as much as possible. It requires a willing partner on the EU side to engage in constructive discussions, but we will continue attempting that.

[Baroness Bull (CB)]

My Lords, the increased costs and complexity of post-Brexit touring, about which we have heard, are particularly acute for the many micro-businesses in the cultural sector which do not have access to the resources or specialist skills needed to navigate multiple regimes in EU states. Can the Minister say what further discussion there has been about the establishment of a new creative export office to provide expert advice and support since Ministers first mooted the idea in February? Can he say what the remit of this office would be?

[Lord Callanan (Con)]

The noble Baroness makes some very good points, and I know that she has raised this point about the provision of services before. Regarding the creation of the creative export office, I will speak to my colleagues in DCMS who have responsibility for this and write to her with the details.

[Lord Rooker (Lab) [V]]

My Lords, I told my colleagues that I would try to sweep up any questions the Minister did not answer, but I have so many to choose from that it is difficult. However, in at least two of his answers, he has been very critical of the EU. In answer to the noble Baroness, Lady Ludford, he implied that the EU was not being sincere or constructive in practice and, in his answer to the question from my noble friend Lord Hain, he said that the EU is not a willing partner in discussion. We cannot carry on like this. We have left the EU. That is it: we have left. The consistent inability to do deals, to talk to the EU and to accept that it might be a willing partner and that the problem might be with us is very difficult. Will the Minister try to answer those two questions again please?

[Lord Callanan (Con)]

As I said to the noble Baroness, Lady Ludford, the UK’s proposals on input from the sector were repeatedly rejected by the EU and the EU’s proposals would not have addressed many of the sector’s concerns. They were non-binding and did not include touring.

[Baroness Harris of Richmond (LD) [V]]

My Lords, some members of the local business association in my town of Richmond are reporting that Brexit has driven up running costs by 10% to 15% since January. Can the Minister tell me how they are supposed to stay competitive in the global marketplace and where the much-promised level playing field is?

--- Later in debate ---

[Lord Callanan (Con)]

The level playing field in the context of the TCA refers to horizontal regulations governing business. In areas of competition, labour and environmental and climate law, our regulatory environment will no longer be determined by EU rules. We are free to set our own policies and, with the will of this House and the other place, we can make ourselves as competitive as we possibly can by adjusting those regulations.

[The Lord Speaker (Lord McFall of Alcluith)]

My Lords, all supplementary questions have been asked. We now move to the fourth Oral Question.

Post Office Update

Lord Callanan Excerpts

Monday 24th May 2021 Lords Chamber

[Lord Fox (LD)]

My Lords, let us remind ourselves of the human scale of this outrage. Starting more than 20 years ago, the Post Office prosecuted nearly 1,000 sub- postmasters and sub-postmistresses based on incorrect information from a recently installed computer system. Some went to prison following convictions for false accounting and theft, many were financially ruined, and some have since died with the shame of this still hanging over them and their families.

As we know, a subset of those people were acquitted and, as we discussed around a month ago, the Government have asked Sir Wyn Williams to inquire into this episode. We are of course pleased that the lid is beginning to be lifted on some of these issues. Speaking on 28 April about suggestions that the inquiry was underpowered, the Minister was very clear:

“Given that all parties so far are committed to co-operating, we remain of the view that a non-statutory inquiry is the right approach.”


He added:

“However, if Sir Wyn does not get the co-operation he requires, then all options are on the table and we will not hesitate to act.”—[Official Report, 28/4/21; col. 2324.]


Today we are discussing a new Statement that says the context of the inquiry has changed, hence the move to a statutory basis, but it cites the successful appeal as that context. That is strange as the results of that appeal were available on 28 April. So what has actually changed? What has caused the department to change its mind? For example, has the co-operation of which the Minister spoke evaporated? If so, who is now no longer co-operating?

I do not think the noble Baroness, Lady Hayter, or I are surprised that this change has had to happen. Like her, we welcome it as a small step in the right direction, but I point out that on an already tight schedule this has not helped. On 28 April the Minister said he expected the report in the summer, and in your Lordships’ House the Minister was adamant that this deadline could be met. Now the inquiry report is delayed. What will take the extra time? What has caused that delay? Will the new deadline of the autumn be met?

As the Statement suggested, the terms of reference for Sir Wyn have been amended. As we do not have the benefit of tracked changes, can the Minister please outline for the record and for your Lordships the principal changes in those terms of reference? If we look overall at the terms of reference, the overriding problem is there for all of us to see: six clauses, each set out with very passive language. “Assess”, “understand” and “acknowledge” are all good words, I will admit, but they are not an indicator that this inquiry has any way to identify culprits. They are not the words of a robust bringing to book. Even if he wanted to, Sir Wyn will not be able to go beyond those terms of reference as there is no wriggle room. If this is the only inquiry, I fear it is not going to be a satisfactory one.

For example, section B of the terms of reference uses the words

“to establish a clear account of…the implementation and failings of Horizon”

and the Post Office’s use of that information—the latter are my words, not those of the ToR. Given that this inquiry is essentially a fact-finding mission, what will the Government do with the facts when they get them? Further, it seems to be focused largely on the failure of the Horizon system and not that of Post Office management—and, as we know, this case was compounded by what appears to have been an intentional decision by the Post Office not to disclose material that undermined its case. So where in the terms of reference will this issue be tested and judged?

As in other cases, there are two levels of failure here. The first was an excess of trust in the system and technology; the second was the failure to deal with the consequences of this when the facts became apparent to some people within that organisation. This inquiry is set up to learn lessons from history but not to deal with the legacy of this past. With these terms of reference, I do not see how this inquiry will establish culpability from these facts, and how it will be the means to deliver resolution to the sub-postmasters and sub-postmistresses and their families over whom this case hangs. I do not see it as a route to compensating these people. So, while it is a step forward, I can understand why former sub-postmasters are demanding a judge-led inquiry into this scandal. I have a great deal of sympathy for their demand.

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

I thank the noble Baroness, Lady Hayter, and the noble Lord, Lord Fox, for their comments. Let me say from the start that I completely share their outrage about this scandal, as I think they both know. It has been going on for many years, under many different Ministers and Governments, and we should all accept our share of the responsibility for the dreadful way these poor people were treated. Nobody who saw them emerging on to the steps of the High Court a few weeks ago could have failed to have been moved by what they had to say.

Turning to the many questions that the noble Lords asked, as I said, this Government deeply regret that this situation has occurred. Since it was launched in September 2020, the Post Office Horizon inquiry has made swift progress. The inquiry’s chairman, Sir Wyn Williams, and his team have heard from many affected postmasters and gathered evidence from key parties, including the Post Office, my department, UKGI and Fujitsu.

The noble Lord, Lord Fox, asked about the changes to the terms of reference. It is clearly critical that the inquiry is able to look at exactly what decisions were made and why, in relation to the Horizon prosecutions, so that lessons can be learned. The terms of reference have changed to clarify that the inquiry can investigate the Post Office’s decision-making in taking action against postmasters, including pursuing prosecutions and a fairly aggressive legal strategy, and in particular of course it can investigate the cases of those whose prosecutions have now been quashed.

The noble Baroness, Lady Hayter, asked about accountability. Let me be clear, for the avoidance of doubt, that the inquiry can make findings of fact and make recommendations. With regards to accountability, as noble Lords will understand, matters of criminal and civil law remain for the courts, as only the courts can make such judgments. However, they and other bodies can draw on the findings of the inquiry when considering these issues. It is therefore now for Sir Wyn to establish what happened, what went wrong and why it went wrong. We can then consider whether more needs to be done in the light of those findings.

The noble Lord, Lord Fox, asked about the timeframe for the inquiry. The deadline for the final report has now been extended to autumn 2022, to take account of the new statutory nature of the inquiry, but we are expecting a progress update later this summer. The changes to the inquiry’s timeline mean that Sir Wyn will have more time to determine exactly what went wrong at the Post Office during this period and to make sure that a situation such as this cannot happen again.

The noble Lord, Lord Fox, and the noble Baroness, Lady Hayter, both raised the issue of compensation. I know that many postmasters, and Peers across this House, have called for further compensation for those who have been caught up in this situation. Those whose convictions have been quashed, with a settlement amounted in the group litigation, are of course outside the scope of the inquiry. But, as I said previously, the Government are keen to see that all sub-postmasters whose convictions are overturned are fairly compensated as quickly as possible. We will ensure that we work with the Post Office to make this happen as quickly as it is possible to organise.

The noble Baroness, Lady Hayter, referred to Fujitsu. She will be aware that two Fujitsu employees are still the subject of a police investigation. However, so far Fujitsu has co-operated fully with the terms of the inquiry. I confirm to the noble Lord, Lord Fox, that all actions of the Post Office, including its fairly aggressive legal strategy, can and will be examined under the terms of the inquiry.

[The Lord Speaker (Lord McFall of Alcluith)]

We now come to the 20 minutes allocated for Back-Bench questions. I ask that questions and answers be brief so that I can call the maximum number of speakers.

[Lord Arbuthnot of Edrom (Con)]

My Lords, last week the Minister, Paul Scully, said:

“We want to ensure justice and fair compensation for all who have been affected”.—[Official Report, Commons, 19/5/21; col. 721.]


He did not limit that to those whose convictions had been overturned. Does my noble friend accept that this must mean reopening the settlement of the group litigation order? Please will he stop using the words “full and final settlement” to describe a settlement which was not just and not fair?

[Lord Callanan (Con)]

Let me again pay tribute to the work that the noble Lord has done, both in the other place and here, in seeking to draw attention to this scandal. He was well ahead of many people in seeing the true extent of this horrendous scandal but, as I have previously said to the House, the December 2019 settlement was between the Post Office and a group of sub-postmasters. Both those parties were legally represented; the Government were not a party to this litigation, nor to the settlement that was agreed, and we still believe that it would not be appropriate for the inquiry to reopen or review such a settlement, which was agreed in the courts.

[Lord McNicol of West Kilbride (Lab)]

Perhaps I may take the question put by the noble Lord, Lord Arbuthnot, a little further and probe the Minister. I would like to ask about the scale, scope and timeframe of compensation; the Minister touched on it a little, but perhaps I could dig a little further. As we all know, Her Majesty’s Government are the sole shareholder in the Post Office, which has ultimate responsibility for where the compensation lies. Can the Minister set out in a bit more detail the scale and scope of the compensation discussed between Her Majesty’s Government and the Post Office? Importantly, can he put a bit more meat on the bones of the timeframe? We all know that this compensation for sub-postmasters and sub-postmistresses is so well deserved.

[Lord Callanan (Con)]

I agree with the noble Lord and understand his impatience. The Government are keen to ensure that postmasters whose convictions are overturned are fairly compensated. But I am sure he will understand that it is for the Post Office to consider the next steps in this case, in the first instance. I therefore regrettably cannot provide him with a timescale for this process or make commitments on funding at this point, but I can assure the House and the noble Lord that we are eager to see that this happens as speedily as possible.

[Baroness Tyler of Enfield (LD) [V]]

My Lords, this shocking injustice, perpetrated by the Post Office, has left a sour taste in the mouth of many people and badly damaged public trust in a national institution. Sadly, this comes at the same time as the Post Office is playing an ever more important role in helping people to access cash and other banking and financial services, particularly in poorer and less well-served communities. So what plans do the Government have to rebuild trust in the Post Office, particularly in its management culture, and provide greater direction in the way that it runs its affairs while the inquiry takes place? Can the Minister confirm that the Post Office will continue to play a key role in the new access to cash banking hub pilots, to protect people from the impact of bank branch closures?

[Lord Callanan (Con)]

The noble Baroness makes some very astute observations and I agree with her; the Post Office is a vital access point for customers to deposit cash, enabling the Government’s financial inclusion agenda and ensuring that many small businesses can benefit from accessible, convenient and local ways of depositing cash. The Post Office has seen significant growth in the use of this facility in recent years and it is particularly important for more vulnerable or remote customers in the context of bank closures, so it is very important for it to carry on with this work. She is also right to point out the need to rebuild the trust of the public.

[Lord Forsyth of Drumlean (Con) [V]]

My Lords, I congratulate the Government on extending the remit of the inquiry, but I am afraid my sympathies are with my noble friend Lord Arbuthnot. I do not understand why all those affected cannot be compensated, nor why we are not asking Fujitsu to stump up. Has my noble friend seen the report in Computer Weekly of 19 February, in which a developer said that

“senior managers at Fujitsu were aware that an important element of the Horizon system did not function correctly and could not be fixed”

and that, when this product was launched,

“no design documents, no test documents, no peer reviews, no code reviews, no coding standards”

were issued?

Surely these people are victims of gross incompetence, both on the part of the Post Office and by a corporate organisation which is still working for the Government. Why it it not being properly held to account and stumping up, instead of relying on the taxpayer?

[Lord Callanan (Con)]

We are actively discussing the next steps with the Post Office, including the best process for ensuring that fair and swift compensation is provided. As I said, it will be for the Post Office to determine the next steps but, as I have said repeatedly, we want this to be done as quickly as possible. Regarding Fujitsu, I have considerable sympathy for the points the noble Lord made, but compensation from Fujitsu is a contractual matter between the Post Office and Fujitsu. I hope all options are being examined. It is for the Post Office to lead on the compensation process, but I assure my noble friend that Ministers are closely following this process.

[Baroness Quin (Lab) [V]]

My Lords, I welcome the Government’s U-turn and I agree with what the noble Lord, Lord Arbuthnot, said about compensation. Will the inquiry also look at issues such as the way the Post Office’s actions left some remote, rural villages without a post office for months? This includes one example I know of where the post office was closed without notice on pensions day, leaving a number of pensioners and vulnerable people stranded without any proper explanation, help or apology.

[Lord Callanan (Con)]

The next stage of the inquiry will continue to hear from affected sub-postmasters to understand what impact the Post Office’s actions had on individuals and local communities. I do not know the specific example the noble Baroness refers to, but if she wants to write to me about it, I will certainly get her a more detailed answer.

[Lord McLoughlin (Con)]

My Lords, the sheer size and scale of this miscarriage of justice is quite difficult to believe—that in this day and age an organisation such as the Post Office was allowed to continue doing this year in, year out. I pay tribute to my noble friend Lord Arbuthnot for the way he conducted the campaign, both in this place and the other place. In welcoming the fact that this has now been turned into a statutory inquiry, I think the Government have a responsibility to speed up the compensation to those who were treated appallingly by both the Post Office and, in turn, as the Post Office was owned by the Government, by Governments of all colours.

[Lord Callanan (Con)]

It is for the Post Office to determine the next steps, but Ministers are closely following the situation. We are keen for it to act as speedily as possible and get on with the process, as we all want to see these people fairly compensated.

[Baroness Stuart of Edgbaston (Non-Afl)]

My Lords, the Minister is making a valiant attempt at defending the split between the Government as a shareholder and allowing the Post Office to conduct its own operations in relation to compensation. The path we are currently going down is only adding insult to injury. To say that the outcome of the inquiry can be used for future compensation claims and further civil action simply delays wrong being put right. I urge the Minister to reconsider this and not hide behind the operational and shareholder split on this issue.

[Lord Callanan (Con)]

I assure the noble Baroness that I am not trying to hide behind anything. I totally accept that the Government need to accept their share of responsibility, as do the Post Office management and Fujitsu, but all these matters will be brought out. That is what the inquiry is for: to determine what went wrong, what lessons can be learned and who was responsible. So we need to wait for that inquiry. But as I have said, we want to ensure that the compensation process proceeds as swiftly as possible.

[Lord Hain (Lab) [V]]

My Lords, I am sorry but the Minister’s answers on compensation are simply not good enough. Surely the Government must fully admit to their own culpability? Throughout the shabby and shameful persecution of innocent sub-postmasters, the Permanent Secretary in the department was the Post Office’s accounting officer and a government representative sat on its board. It is no good just passing the buck. The Treasury must fully fund an extremely generous compensation scheme to atone for a criminally negligent failure of ministerial and Permanent Secretary responsibility.

[Lord Callanan (Con)]

I am not trying to pass the buck to anybody; I have accepted all the responsibility that falls on my department and on Ministers present and previous. The inquiry will draw all these facts out in due course. I say to noble Lords that it is for the Post Office to continue with this process. The Government will accept their share of responsibility when it comes to that, but we need the Post Office to get on with it and we want it to do so as soon as possible.

[Lord Polak (Con)]

My Lords, over the weekend I checked in with my friend Rita Threlfall, one of the 555 claimants who brought the successful action against the Post Office in 2019 but received scant compensation. She is rightly concerned that some victims are being treated differently from others. Does my noble friend the Minister agree that we should be insisting on fairness and equity for all those wronged in this appalling injustice? Can he assure me that everything will be done to create a level playing field for all those who suffered? There is a danger that the Post Office will be responsible for a system where there is a first class and a second class. How can my noble friend the Minister ensure that this applies only to its stamps and not to its people?

[Lord Callanan (Con)]

As I have said to other noble Lords, we are discussing the next steps with the Post Office. I agree with my noble friend that that needs to include the best process for ensuring that fair and swift compensation is provided to those sub-postmasters whose convictions were quashed, but it is for the Post Office to decide on the next steps.

[Lord Mackenzie of Framwellgate (Non-Afl) [V]]

My Lords, I thank the Minister for updating the House on this industrial miscarriage of justice. On 28 April, I, along with other noble Lords, asked for the powers of the inquiry to be increased. I am delighted that the Government have acted decisively in converting this into a statutory inquiry. Can the Minister confirm that the Government will press the Post Office to include Fujitsu in any liability for compensation? In the light of the Statement mentioning that a criminal investigation is going ahead, can the Minister confirm this will give certain witnesses the right to remain silent? Does this not somewhat inhibit the scope of the inquiry?

[Lord Callanan (Con)]

The noble Lord refers to the ongoing Metropolitan Police investigation into two Fujitsu employees following a referral from the Director of Public Prosecutions in response to the findings of the Horizon issues judgment. I see no reason this should cause problems with Fujitsu co-operating with the inquiry, as the company—notwithstanding the announcement of the police investigation—has already fully indicated its willingness to co-operate with Sir Wyn and the inquiry. As I have said in previous answers, the matter of compensation from Fujitsu is a contractual one between the Post Office and Fujitsu.

[Lord Browne of Ladyton (Lab) [V]]

My Lords, some of these wrongful convictions go back to 2003—a wait for some of nearly 20 years for justice. The delay can be explained in part by the Post Office cover-up and its contesting of cases for as long as possible. However, this is also an egregious, systemic failure of the criminal justice system. What is being done to stop it happening again, especially with regard to the digital evidence rule that made it easier for the Post Office to bamboozle courts, with regard to judicial capacity to test the reliability of computer evidence and with regard to the power of self-interested entities to bring private prosecutions? Where were the lawyers?

[Lord Callanan (Con)]

There were lots of lawyers involved in this case; some might think that there were too many. However, the noble Lord makes some very good points about the operation of the justice system. As I have indicated in previous answers to this House, I have received personal assurances from the Post Office that it is no longer pursuing any private prosecutions and will not do so in future. This is indeed an egregious scandal; there are many lessons to be learned from the inquiry, and we will learn them.

[Baroness Altmann (Con)]

My Lords, I echo the welcoming of the extension of the inquiry. I also echo the tributes to my noble friend Lord Arbuthnot for his work on this issue. This was an affront to justice and compensation is urgent. There is a clear feeling across the House that the sense of urgency perhaps needs to be increased by a level or two. More than £100 million of taxpayers’ money was spent on criminal prosecutions of innocent people that were investigated, managed and conducted by the Post Office itself—marking its own homework. Can my noble friend assure the House—I believe that he may have just done so in answer to the previous question—that private prosecutions will not be used as a fast-pass ticket to jump the queue to the criminal courts by companies with deep pockets? This would mean that we could learn lessons in this case so that, generally speaking, wealthy private companies would not be able to bring private prosecutions or we could review their ability to do so.

[Lord Callanan (Con)]

I have given the noble Baroness an answer about the Post Office pursuing private prosecutions. I reiterate that it has no special powers in this regard: the power to bring private prosecutions exists across the piece and is used by a number of other organisations. The Post Office has assured us that it has no plans to pursue any further private prosecutions. The issue of private prosecutions generally has been studied extensively; indeed, a committee of this House looked at the issue and recommended—I will correct this for the noble Baroness if it is not right—that the power should remain. However, I repeat that the Post Office will not be pursuing any more private prosecutions.

[Baroness Ritchie of Downpatrick (Non-Afl) [V]]

My Lords, the Minister referred to the fact that the Government were actively discussing this issue with the Post Office. Can he confirm whether that means that the Government will take full responsibility for the compensation for all those post personnel, including those from Northern Ireland, who were so wrongly maligned and convicted?

[Lord Callanan (Con)]

The noble Baroness is of course right, and I assure her that the Government are keen to see that all sub-postmasters with quashed convictions are fairly compensated. The noble Baroness will understand that this question is being followed closely by the Treasury; the Post Office as a company is 100% owned by the Government, so we are following it and the financial implications very carefully.

Biomass Electricity Subsidies: Deforestation

Lord Callanan Excerpts

Thursday 20th May 2021 Lords Chamber

[Lord Randall of Uxbridge]

To ask Her Majesty’s Government what assessment they have made of the impact of their biomass electricity subsidies on deforestation (1) in the United States of America, and (2) elsewhere.

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

My Lords, the UK supports only biomass which complies with strict sustainability criteria, and electricity generators receive subsidies only for compliant biomass. The criteria ensure that the carbon stock and area of the forest is not decreased, irrespective of its location. The sustainability criteria require that biomass fuels are sourced from forest waste wood and residues from commercial forestry operations, and that the forest owner adheres to the relevant legal requirements to protect biodiversity and the environment.

[Lord Randall of Uxbridge (Con) [V]]

My Lords, I thank my noble friend for his reply and congratulate the Government on their commitment to renewable energy. However, as he is probably aware, the UK is now the top subsidiser of bioenergy in Europe. It spent more than £1.9 billion in 2019 on bioenergy subsidies, primarily to burn wood imported from overseas forests at Drax power station. Despite what he said, I have serious concerns that the wood pellets supplied for burning come from primary forest in both the US and Europe. This has a potentially devastating effect on important bird species and biodiversity in general. Does he agree that we should be cutting carbon, not chopping down carbon-reducing forests?

[Lord Callanan (Con)]

I understand my noble friend’s concern about this and know he takes a close interest in birds and wildlife, but I emphasise once again that the UK supports only biomass that complies with strict sustainability criteria, which take into account impact on the biodiversity of the forests. I refer him back to the Answer I gave earlier: biodiversity is top of our list of priorities.

[Baroness Ritchie of Downpatrick (Non-Afl) [V]]

My Lords, Drax in the United States is subsidised by the Government until 2027 to supply biomass energy to the UK. In view of this, will the Minister confirm what discussions have taken place with Drax about its dependence on biomass, which puts some of the world’s ecologically valuable forests at risk and impacts on our environment through higher levels of greenhouse gas emissions?

[Lord Callanan (Con)]

I really do not think the noble Baroness is correct about this. Let me make the point once again that our sustainability criteria, which are some of the most stringent in the world, also take into account the greenhouse gas emissions from collecting, transporting and turning the biomass, which predominantly comes from waste products from the forest, into a viable energy source to deliver a carbon saving compared to fossil fuels.

[The Earl of Caithness (Con) [V]]

My Lords, my noble friend Lord Randall is absolutely right: virgin forests are being cut down. How is this being policed? Other countries are cutting down woodland, and what penalties are there on firms, such as Drax, which breach these conditions, if they are discovered to be in the wrong?

[Lord Callanan (Con)]

The sustainability criteria are policed by Ofgem and, if firms do not meet them, the subsidies are withdrawn.

[Lord Krebs (CB) [V]]

My Lords, I declare my interests as recorded in the register. This is a contested topic with opposing views. The devil is in the detail, and rigorous scientific analysis is crucial. In this context, is the Minister aware of the independent analysis published in March 2021 by Resources for the Future showing that, in the south-eastern United States, demand for forest products such as biomass is associated with an increase in the area of forest in the region, as well as with a 30% increase in carbon storage in those forests over the past few decades?

[Lord Callanan (Con)]

Indeed. The noble Lord is an expert on this topic and is of course correct. He is also correct to say that this is an area of ongoing debate among the scientific community, and it is one that my department is following very closely by gathering the evidence. The latest scientific data will form part of our forthcoming biomass strategy.

[Lord Browne of Ladyton (Lab) [V]]

My Lords, the Minister has confirmed that the Government accept the principle that a scheme designed to reduce emissions needs to account fully for all emissions generated by it and must not cause environmental destruction, and therefore a loss of biodiversity. As there appears to be credible evidence to the contrary, and as he has assured your Lordships’ House that UK production of biomass meets that standard, will he publish the evidence, including the data that supports the assessment that he just made?

[Lord Callanan (Con)]

Many of these studies are published and the noble Lord, Lord Krebs, referred to a previous study that supports the assertion that forest is actually increasing in the area. But yes, the noble Lord, Lord Browne, is quite right—we need to act on the basis of proper, validated scientific evidence and our forthcoming biomass strategy will explore that further.

[Lord Oates (LD)]

Will the Minister publish information about the inspection, monitoring and enforcement of compliance with the criteria he set out in his initial Answer? Will he put that in the public domain and explain exactly how that enforcement takes place?

[Lord Callanan (Con)]

Provided that it is not commercially confidential, I will certainly share that with the noble Lord.

[Lord Lucas (Con) [V]]

Instead of razing American forests would it not be a better use of our subsidies to stimulate the development of a coppice harvesting service in the southern UK? Coppiced woodlands are rich ecologies that need regular felling but they are not getting it because there is currently no economic outlet for the timber.

[Lord Callanan (Con)]

My noble friend makes a good suggestion. We did try that, of course. Subsidies have been available for more than a decade but we have seen a lack of uptake because they cannot compete with the use of waste products in huge commercial forestries in the US.

[Lord Grantchester (Lab) [V]]

My Lords, we await a biomass strategy due in 2022 and the Minister can confirm that this will assess the link between biomass electricity subsidies and deforestation. The Drax plant is investing in carbon capture in order to be a “carbon-negative company” by 2030. Does he think that that is achievable? When will the Government decide on a development consent order for Drax?

[Lord Callanan (Con)]

In the biomass strategy, we will explore all the factors to which the noble Lord referred. I do not have a date for when a development consent order will be agreed but all this and the relevant factors will be explored in the strategy.

[Lord Bhatia (Non-Afl) [V]]

Does the Minister agree that the only source of electricity for third-world villages is biomass?

[Lord Callanan (Con)]

No, I do not agree, because there is also the potential for PV—solar photovoltaic—generation.

[Baroness Sheehan (LD)]

My Lords, given the need to rapidly decarbonise and the impact of pellet production on forests, will the Government review the decision to class biomass as carbon-neutral under the UK ETS and stop subsidising new biomass projects? I should say here that I own a biomass boiler.

[Lord Callanan (Con)]

As I said, the biomass strategy will review all those factors. We want to continue subsidising biomass only if there are genuine carbon savings, if it does not contribute to deforestation and if it is produced in a sustainable way.

[Baroness Young of Old Scone (Lab) [V]]

I hate to disagree with the noble Lord, Lord Krebs, but my reading of the science is that it is uncertain. There is little science looking at the impact of biomass extraction in Europe, particularly in Estonia. In America and Estonia, we have clear evidence of declining numbers in protected species and biodiversity. Is the Minister aware that 500 scientists have written to protest to President Biden and the European Commission about those continued activities? Does he agree that the comparison between biomass electricity generation and other technologies should be made not with fossil fuels, which we know are poor in their performance, but with other green technologies?

[Lord Callanan (Con)]

The different contributions from noble Lords in this debate have illustrated that this is a contentious subject. There is much debate in the scientific community. The noble Baroness referred to the 500 scientists who have written to the US Administration. Other scientists take different points of view. That is part of the nature of the debate but it is our view that biomass, when compared to fossil fuels, is considered to be a renewable, low-carbon energy source. The carbon released from the organic material was sequestered recently from the atmosphere, compared to fossil fuels where the carbon was sequestered hundreds of millions of years ago. We will continue to follow this debate and explore the issues further in the biomass strategy. If we continue with policies supporting biomass—it is an if—we will take all these factors into account. We want to make sure that there are genuine carbon savings, that biomass is sustainable and that there is no long-term damage to the areas referred to.

[The Lord Speaker (Lord McFall of Alcluith)]

My Lords, all supplementary questions have been asked.

10-point Plan: Six Months On

Lord Callanan Excerpts

Wednesday 19th May 2021 Lords Chamber

[Lord Grantchester (Lab)]

I thank the Minister and his department for the energy Statement. This is the scatter-gun 10-point plan: six months on—the repeat. We have a climate emergency, the most pressing issue of our age, which the Conservatives call hyperbole. They cannot bring themselves to declare and sign up to the size of the challenge. The Statement says the Government are already delivering on it, yet in the next sentence says the plan is projected to create so many jobs and mobilise so much investment. These are targets without delivery, rhetoric without reality and wishful thinking. This is underlined by the point in the Statement that says the Government

“have enshrined the UK’s sixth carbon budget in law”.

However, this is yet to happen. The statutory instrument has yet to go through your Lordships’ House for approval. We will not oppose it, but merely point out that the Government have yet to meet the fourth and fifth carbon budgets, mentioned in the Statement, which refer to years sooner than those referred to in the sixth carbon budget.

The climate emergency is real. What these scattergun headlines miss is a comprehensive overall plan, with priorities and route maps along the way to meet in a systematic way the challenges we face. I congratulate the Government on starting to face the task since announcing the scattergun headline plan six months ago. The gestation is slowly evolving. The Government have at least published the energy White Paper, The North Sea Transition Deal, and have begun to recognise the further missing strategies as ingredients that need to be addressed and delivered if this plan is to be comprehensive. The response to the climate emergency is nowhere near being oven ready.

I thank the Minister for recognising in this Statement that we still need a heat and building strategy ahead of COP 26. We still need a transport decarbonisation plan. More than ever, we need a national retrofit and fuel poverty strategy with skills training, now that the green homes grant scheme has been abandoned and its funding withdrawn, rather than being allocated elsewhere. Where is the Treasury’s crucial net-zero review, due in the autumn last year, then promised this spring? Can the Minister give us another target? When will it see the light of day and set the overall size and context of the financial commitment needed? Germany has invested £38 billion in a green recovery, France £31 billion; and in the US President Biden has committed $1 trillion of his green infrastructure plan to green initiatives.

Will the Government commit to bringing forward the £30 billion green recovery fund Labour has called for? Do Government now accept that the UK is facing a climate emergency, and do they believe that this scattergun 10-point plan is really meeting the scale of that emergency? According to the climate change committee, the Government’s emissions target needs £50 billion of public and private investment every year by 2030, but the scattergun plan promises only £54 billion of public and private investment over the entire next 10 years put together. Has the Minister seen this analysis and how does he propose the Government make up the shortfall?

The Government’s emissions target will require huge changes, including the full decarbonisation of our power sector by 2035 and half of new cars sold by 2025 being electric. Can the Minister lay out in precise terms how the scattergun 10-point plan will achieve this? Will he commit to publishing his modelling? Given that petrol and diesel cars cannot be sold from 2030 onwards, what plans do the Government have to ensure that those on low to middle incomes are not priced out of electric car ownership?

The Government and the nation have a long way to go. Industry will play its part. As recently stated, much of the technology that will be needed to achieve net zero has yet to come into existence and be readily available. Hydrogen will be a key part of the energy mix and key to the decarbonisation of heat, as well as the solution to rail transport, especially for freight. There is a massive opportunity for Britain, with our fantastic scientists, our brilliant workforce and world-leading businesses. We need a Government with ambition and real commitment who get the task done, matching the ingenuity and inspiration of the British people. The Minister has shown great bravery in announcing his scattergun plan—the repeat—so soon. The Government are second to none at self-congratulation. Labour has put some clear red lines through much of the rhetoric and has a sharp message across the bottom: “Good but must do better”.

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

I thank the noble Lord, Lord Grantchester, for his comments. Obviously, I do not agree with many of them, but let me go through the points he raised in turn.

He talked about the fifth and sixth carbon budgets. The noble Lord needs to see this in the context of the UK’s record on decarbonisation. As he said, we have recently, on 21 April, laid the legislation to set the sixth carbon budget, covering 2033-2037. That will require a 78% reduction in emissions compared to 1990. In addition to the carbon budgets, as he is well aware, we have set the highly ambitious nationally determined contribution, through the UN process, to reduce emissions in 2030 by at least 68% compared to 1990 levels. This is the highest reduction target made by any advanced economy. We have shown through our actions that cutting emissions and growing the economy can go hand in hand. We achieved record clean growth between 1990 and 2019. Our economy has grown by 78%, and at the same time, we have managed to reduce emissions by 44%. That is a better record than any other G7 nation. I would have hoped that the noble Lord might at least have given us some credit for delivering that.

The noble Lord mentioned the green homes grant. Yes, we will not hide from the fact that it did run into some difficulties in terms of delivery, but we have made excellent progress across much of the investment. We have invested substantial sums in social housing, schools and hospitals, as well as in homes through the green homes grant, in particular supporting local authorities through the local authority delivery scheme. As he will be aware, the Chancellor also announced additional funding of £300 million going into the local authority delivery scheme, and we are working in partnership with many local authorities. I have met with many of them, and they are very grateful for this funding.

He asked about the Treasury net zero review. We have announced that the net zero report will be published this spring. It was delayed from autumn last year because of the pandemic. In the meantime—in order to keep his reading up to speed—Her Majesty’s Treasury published an interim report this autumn. This sets out our approach to the review and analysis which will form the final report. The initial timing of the review was delayed due to the Covid crisis. Given these circumstances, we took the decision to move publication to 2021, so if he will have a little bit more patience, the review will be there for him to read shortly. He also mentioned our investment in transport decarbonisation. Let me give him some of the figures. We have provided £1.3 billion to accelerate the rollout of charge points for electric vehicles, we have provided £582 million in plug-in vehicles grants, we have spent nearly £500 million on the automotive transformation fund and we spent considerable sums on improving public transport and government investment in low-carbon buses and trains. In March, we published England’s long-term national bus strategy, setting out a bold vision for bus services across the country.

He also asked about the transport decarbonisation plan. We have announced that the UK is embarking on a comprehensive transport plan—a bold and ambitious programme of co-ordinated action needed to meet the UK’s transport greenhouse gas emissions targets through to 2050, and that ensures that the transport sector plays its part. I think I have responded to most of his points.

[The Deputy Speaker (Baroness Pitkeathley) (Lab)]

My Lords, we now come to the 20 minutes allocated to Back-Bench questions. I ask that questions and answers be brief so that I can call the maximum number of speakers.

[Lord Bradshaw (LD) [V]]

I have given notice to the Minister that I wish to concentrate on the role of the national grid. On a number of occasions that I have come across, the national grid has been shown to be operating at margins that are very close. For example, and this is an instance that I am familiar with, if you want to run a couple more freight trains up the east coast main line, immediately the shout goes up, “The power supplies will not support this!” It is the case that throughout the economy a lot of people are going to have to spend a lot more money on electricity both to charge their cars and run their trains, particularly freight trains. I am something of a hydro-sceptic, but even if you want hydrogen you are going to have to spend electricity money on it.

When I looked today at National Grid’s shareholders, many of them could hardly be described as friends of Great Britain. The sorts of friends that you see in that list are perhaps not always the sort with which you wish to be associated. So my question for the Minister is: is Ofgem up to the job of making sure that National Grid is preparing plans so that the electricity is available to do many of the things to which he has drawn attention? This is possibly a national fault, but we run too close to the margin and then, when we want to do something a bit extra, find that we cannot.

[Lord Callanan (Con)]

The noble Lord has drawn attention to some important questions. Of course, as we proceed with decarbonisation there will be an inevitable rise in electricity use and in the dispersion of electricity sources as we move away from fixed nodes to more dispersed forms of power generation. He is right to draw attention to the important role that Ofgem and the regulators, working in close partnership with the grid operators, will need to play to ensure that there is sufficient capacity, and I reassure him that we are doing exactly that. The Energy White Paper gave a commitment that the Government would consult on a strategic policy statement for Ofgem during the course of 2021, so we will absolutely ensure that it is up to the job—fit, battle-ready and taking part in important debates, negotiations and strategies to ensure that there is sufficient electricity capacity to meet the demand that he refers to.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I associate the Green group with the accurate description by the noble Lord, Lord Grantchester, of the plan as scattergun, and with many of his other concerns. I am sure the Minister will recall that point 5 of the plan refers to green public transport, cycling and walking, but when I look at the progress Statement I can find no mention of cycling and walking—or indeed of public transport, although the Minister mentioned it in response to the noble Lord, Lord Grandchester.

The Statement and the Minister have said a great deal about electric cars. Given the recently published Heinrich Böll Foundation European Mobility Atlas noting that on average commuters in London spend twice as long in congestion as those in Paris, in order to be the world-leading and attractive destination for businesses that the Government so often stress they want us to be, should they not be paying far more attention to walking and cycling across the nation, with their many Covid efforts at reducing congestion, improving health, fitness and well-being and supporting small local businesses?

[Lord Callanan (Con)]

I am sorry that the noble Baroness does not give us credit for the considerable sums that we have spent on transport decarbonisation. I took some time to run through some of the figures in answer to the question from the noble Lord, Lord Grantchester. In March last year we published part 1 of the transport decarbonisation plan. We are working to ensure that part 2 is as ambitious as possible, and we intend to publish it shortly. We have been clear that our intention was to get the plan fully published by spring 2021, but of course we have been delayed by wider events. The noble Baroness is right to draw attention to the importance of cycling and walking. They will form a key part of the Department for Transport’s decarbonisation plans.

[Baroness Ritchie of Downpatrick (Non-Afl) [V]]

My Lords, given that energy is devolved in Northern Ireland, along, to a lesser extent, with the environment, can the Minister confirm how the Government’s levelling-up agenda will ensure that the devolved nations, including Northern Ireland, keep up with the decarbonisation agenda, including the provision of more electric vehicle charging points and other elements of infrastructure based on the hydrogen economy?

[Lord Callanan (Con)]

The noble Baroness is right to draw attention to the work of the devolved Administrations. I can tell her that we work very closely with the DAs, at both ministerial and official levels, when developing policies and measures to reduce emissions and in tracking progress against our respective targets. Regular engagement takes place through the bi-monthly net-zero ministerial group, which has been developed in the context of the review of inter- governmental relations, and the supporting director-level net-zero nations board, as well as money policy-specific fora and frequent ad hoc contacts. Separately from that, there is a DA ministerial group chaired by COP president Alok Sharma, and the offshore transmission network review looks at policy and regulatory changes across England, Scotland and Wales.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I was surprised that there was no mention of SMRs or AMRs in the Statement. The original plan says that

“further investment in Small Modular Reactors and Advanced Modular Reactors”

will be made, and mentions sums of £125 million and £170 million respectively. Can the Minister update us on where we are on that regarding both the spend to date and whether the rather larger sums that were due to be brought in from the private sector have actually been forthcoming? Can he also confirm that phase 2 of the SMR proposals is still due by the end of 2021? If so, could he give us a bit more clarity about the dates?

[Lord Callanan (Con)]

The noble Lord is right to draw attention to the importance of nuclear generation in the mix of fuels that we will need to take forward. I am happy to provide an update for him. I am delighted to see that the noble Lord, Lord West, is fully in agreement with this.

The PM has confirmed the Government’s commitment to advancing large, small and advanced reactors as part of our 10-point plan for the green industrial revolution. We have announced £385 million in an advanced nuclear fund to invest further in the next generation of nuclear technology, subject of course to value for money and future spending rounds. The advanced nuclear fund announced as part of the 10-point plan includes funding of up to £215 million for small modular reactors and up to £170 million for advanced modular reactors. We are also investing up to an additional £40 million in developing the regulatory frameworks, including developing, funding and siting policies for small modular reactors, to which the noble Lord referred, and supporting UK supply chains in helping to bring these technologies to market.

The Energy White Paper confirmed that generic design assessment, the first stage of the UK’s nuclear regulatory process, will be opened up to SMR technologies this spring. We are pleased to confirm that the guidance for advanced nuclear technologies to enter GDA has been published on GOV.UK. GDA entry is an open and ongoing process, with a standing invitation for advanced nuclear companies to apply when they believe that they are ready to do so.

[Lord Mackenzie of Framwellgate (Non-Afl) [V]]

My Lords, the Minister will be pleased to hear that I support the 10-point plan, which rightly does not see the strategy as a burden but as a way of building back the economy better, in a way that supports green jobs and creates a healthier Britain for our children by improving the air we breathe. As my contribution to the green agenda—I declare an interest—I have taken the significant step of investing in an all-electric car. Does the Minister agree that one of the big deterrents to taking this important step is the insufficiency of rapid-charging stations throughout the UK? Can he give your Lordships’ House an update on their rollout, and whether planning permissions and the timescales for implementation are being met? As an afterthought, if we are phasing out new gas boilers by 2025, why are they still being fitted into new builds?

[Lord Callanan (Con)]

I congratulate the noble Lord on his purchase of an electric car. I know he is from the north-east, too; I will not ask him what model it is but I hope it is one of the ones made in our region. He is right to draw attention to the need for charging points to be sufficient and widely accessible. We continue to engage with stakeholders to understand what support will be needed to enable the transition and minimise the impacts on businesses, workers and consumers across the UK. Prior to the 10-point plan, the Government have already committed £1.5 billion to support the early market and remove barriers to zero-emission vehicle ownership. Alongside the new phase- out dates, we have pledged a further £2.8 billion for a package of measures to support industry and consumers in making the switch to cleaner vehicles. That includes £582 million in funding for ZEV grants and £1.3 billion of infra- structure investment to accelerate the rollout of charging points, to which he referred.

With regard to the noble Lord’s point about gas boilers, when implemented in 2025 the future home standards will ensure that all new-build homes are zero-carbon ready. While building regulations themselves do not mandate or ban the use of any specific technologies, we intend to set the performance standard at a level which means new homes will not be built with fossil-fuel heating. In line with that ambition, the energy White Paper committed to consulting on whether it is appropriate to end gas grid connections to new-build homes from 2025 in favour of clean heat alternatives. The heat in buildings strategy reiterates our intention to consult on this. We will provide more detail on it in due course.

Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021

Lord Callanan Excerpts

Tuesday 18th May 2021 Grand Committee

Moved by

[Lord Callanan]

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

My Lords, these regulations were laid before the House on 24 March this year. It is now over a year since the emergence of Covid-19, and the Government have consistently taken the swift action needed to save lives, limit the spread of the disease, protect the NHS and mitigate damage to the economy. The Government’s successful rollout of the vaccine programme and the implementation of their four-step road map out of lockdown are both reasons for cautious optimism that we will soon enjoy a return to normality. To date, in excess of 35 million people have had their first vaccination and more than 18 million have had their second dose—including me, yesterday. The British public have also risen to the challenge of suppressing the spread of the virus by sticking to the rules: staying at home; getting tested when appropriate; isolating when required; and following the “hands, face, space” and “letting fresh air in” guidance.

However, we are not out of the woods just yet, and the emergence of new strains of the virus mean that now is not the time to become complacent. The continuation of social distancing measures, introduced to limit the spread of the virus and help save lives, is crucial while we wait for everyone to be vaccinated, but this of course continues to have an effect on business. The Government recognise that, while most businesses have been able to reopen and many have received significant financial support, social distancing measures remain and some businesses continue to face uncertainty and financial difficulties, as they are still unable to open or are not yet able to trade at full capacity.

It is therefore crucial that the Government continue to support businesses by giving them every chance to survive, fully reopen and get through this period of uncertainty. This statutory instrument will do that by extending the temporary measures first introduced by the Corporate Insolvency and Governance Act 2020—which were due to expire variously at the end of March or April—by a further three-month period until the end of June 2021. The temporary measures being extended until 30 June 2021 are: first, the suspension on serving statutory demands and the restrictions on filing petitions to wind-up companies; secondly, the small supplier exemption from termination clause provisions; and, thirdly, the suspension of the wrongful trading provisions. In addition, modifications to the moratorium provisions and the temporary moratorium rules are extended until 30 September 2021.

The temporary suspension on serving statutory demands and restrictions on winding-up petitions continue to help many viable companies during these difficult trading conditions by removing the threat of aggressive creditor action at a time when many businesses remain closed or are unable to operate at full capacity, particularly in the retail, hospitality and events sectors. Extending these measures further will give businesses the confidence and support they need while they are doing their best to reopen safely and return to as normal trading as they can in these unprecedented times.

Noble Lords will know that the Government have already extended the temporary suspension on the ability of commercial landlords to forfeit business tenancies. This will give further protection to tenants who have only recently been able to restart trading after the restrictions introduced because of the most recent lockdown.

Although these measures are intended to help companies that may be subject to aggressive creditor enforcement, the Government have been clear that they are not to be seen as a payment holiday. Where companies can pay their debts, they should of course do so. It is important to note that these measures aim to encourage forbearance and do not extinguish any existing creditor rights or interests. In addition to the protection that these measures give, they are also intended to give those companies with unavoidable accrued arrears caused by the pandemic time to take advice from restructuring professionals and to negotiate and reach agreements with their creditors wherever possible.

I know that many businesses and their business representatives will welcome the continued support that these regulations will give them during this extremely uncertain time. However, I also recognise that these measures will mean a further period of uncertainty for creditors where some of their rights to enforce the recovery of their debts are temporarily restricted. Although we believe that the extension of the statutory demand and winding-up provisions will be particularly welcomed by commercial tenants, it applies to all business sectors of the economy.

Noble Lords will be aware that wrongful trading proceedings are an action that may be taken by an insolvency office-holder against directors, which can lead to a director being held personally liable for losses to a company’s creditors where they allowed the company to continue to trade beyond the point at which it became inevitable that the company would enter formal insolvency proceedings. A successful action may lead to losses being recovered for the benefit of creditors but, more importantly, wrongful trading has a vital role in preventing reckless insolvent trading. The threat of personal liability is a strong deterrent against directors causing companies to continue to trade at the risk of creditors.

The suspension of liability for wrongful trading until 30 June 2021 will allow directors to take steps to save companies that would otherwise be viable but for the impact of the pandemic without the threat that they may be personally penalised for losses incurred during a period of great economic uncertainty if things did not improve and the company later had to enter insolvency proceedings. I should stress that suspending wrongful trading does not give a free pass to directors or allow them to act irresponsibly. Other vital protections for creditors when a company is facing insolvency remain in place, such as the directors’ duties set out in the Companies Act, fraudulent trading or misfeasance actions under the Insolvency Act, and disqualification from acting as a company director.

Finally, the new company moratorium introduced by the Act gives financially distressed companies protection from creditor enforcement while they seek a rescue. In normal economic conditions, the moratorium is intended to work with certain entry criteria that must be met before a company can enter into one. These criteria protect the integrity of the moratorium, which should be used only for those companies with a realistic prospect of rescue. Noble Lords will recall that it was recognised during the debates on the Corporate Insolvency and Governance Act that it would help fundamentally viable companies impacted by the pandemic to make use of the moratorium if these criteria were temporarily relaxed.

These regulations will extend some of those temporary relaxations to 30 September 2021. They include: allowing a company subject to a winding-up petition to access a moratorium simply by filing the relevant documents at court, rather than having to make an application to the court; and, secondly, disapplying the rule that prevents a company entering a moratorium if it has been subject to a company voluntary arrangement, been in administration or been in a previous moratorium within the last 12 months. These regulations will also extend the temporary administrative rules for the moratorium contained in Schedule 4 to the Corporate Insolvency and Governance Act, which enable it to operate.

The important package of temporary measures, first introduced by the Corporate Insolvency and Governance Act last year and by subsequent extensions, continues to be widely welcomed by businesses. We are told by business that these measures, alongside the availability of new permanent tools, have been essential in supporting continued trading, seeking a rescue or restructuring, and allowing many companies to trade without the threat of creditor action being taken against them.

In conclusion, the Government recognise that these measures represent a significant incursion into the normal operation of insolvency legislation, in particular to the rights of creditors, and as such it is right that they are not extended for longer than is absolutely necessary. These temporary measures will, therefore, continue to be kept under constant review. I beg to move.

--- Later in debate ---

[Lord Callanan (Con)]

First, I thank all noble Lords who have contributed to what I thought was a very interesting and informative debate. The points raised have highlighted the importance of the measures being extended by these regulations and the necessity of extending them so that many businesses can continue to benefit from them. Over the past year, businesses have faced an exceptionally challenging time, with many unable to trade or having had their ability to trade at full capacity restricted due to social distancing measures.

My noble friend Lord Bourne asked how many moratoria there have been to date. The answer is four. This relatively low number is a direct result of the decisive government action to support the economy through the worst of Covid-19’s economic impact, which has helped many businesses and saved jobs. These measures have meant that there has been somewhat suppressed demand to date for the moratorium. It should be noted that there have also been far fewer corporate insolvencies in this period; for example, government statistics show that corporate company insolvencies in March 2021 were 86% down on the same month last year—as I say that, there is a clap of thunder; I hope that is not a sign of impending doom.

As the economy begins to emerge from the pandemic, it is of course sad to report that we expect the moratorium to be used more frequently. It will be subject to review to ensure that it works as intended no more than three years from Royal Assent of the Act.

On the different end dates my noble friend asked about, the Government recognise that these measures have a significant impact on the normal working of insolvency legislation and the rights of creditors; it is therefore right that they are not extended for longer than needed. The temporary provisions for moratoria in Schedule 4 are extended to 30 September because the consent of the Scottish Government may be required to implement replacement permanent rules for Scotland, as some aspects of corporate insolvency are devolved. Users have told us that when rules in both England and Wales and Scotland change, they prefer the rules to come into force in both jurisdictions at the same time. An extension of six months will therefore aid this process.

My noble friend also asked whom we consulted. We have engaged with major trade representatives including the Institute of Directors, R3, major restructuring firms and insolvency practitioners. There are too many to list now but I can write to my noble friend if he wishes to have a list.

My noble friend Lord Bourne also asked why we have singled out wrongful trading for these measures. Representatives have made it clear that wrongful trading is a strong deterrent to continued trading, and many responsible directors will cause companies to cease trading rather than risk the threat of future personal liability, with the impact that this could have on the lives of directors and their families and all it entails. As with all these measures, we will keep the need for them under constant review and act swiftly if evidence demonstrates a need to extend them further or turn them off.

My noble friend Lord Leigh asked about the Government’s approach to mounting levels of corporate debt in the economy. While many firms have been hit hard by the pandemic, government support has ensured that the corporate sector has remained resilient, with the increase in indebtedness matched by an increase in net deposits over and above the level of lending. Firms look likely to have used lending to increase cash buffers, both to cover deferred liabilities such as VAT and rent and to prepare for any further shocks. Firms in certain sectors such as hospitality, which has been hit hardest by the pandemic, have received additional government support in grants of up to £9,000 per premises. Support continues to be available to firms as restrictions are eased and economic activity rebounds.

Further temporary insolvency legislation and business support provided by the Government since the crisis began have resulted in fewer insolvencies than would normally be expected. Her Majesty’s Treasury is monitoring the impact that insolvencies will have on lenders’ balance sheets, which to date have remained largely resilient—backed of course by government action —and on their ability and willingness to lend to support economic recovery.

The noble Lord, Lord Sikka, raised some concerns about insolvency practitioner fees. In our view, it is right that insolvency practitioners are paid a fair rate for the work they do. The remuneration and expenses of insolvency office-holders are subject to the approval of creditors in each case and, of course, subject to the overall control of the court. Regulators have a statutory duty to encourage an independent and competitive insolvency profession that provides high-quality services at a fair and reasonable cost to the profession. Complaints about high levels of fees charged by an insolvency practitioner can be made through the Insolvency Service’s complaints gateway.

I was particularly grateful to my noble friend Lord Moylan for highlighting the many ways in which the Government have consistently supported business throughout the pandemic; he also made a number of very important points. He asked what the Government are doing to protect sole trader tenants and/or directors who have given personal guarantees against being made personally bankrupt by aggressive landlords; that is indeed a good point. As my noble friend will be aware, although the restrictions on insolvency proceedings were targeted at companies, the Government have put in place an unprecedented package of support to help the self-employed with their finances during the coronavirus pandemic; this includes the job retention scheme and the recovery loan scheme as well as a number of business support schemes operated by local authorities.

The Government recognise that many people are struggling financially due to the coronavirus. We have worked with mortgage lenders, credit providers and the Financial Conduct Authority to ensure that people can get and access the support that they need. We are also committed to helping people to access the necessary support to get their finances back on track. An extra £37.8 million has been made available to debt advice providers to support people in financial difficulty. I would always encourage businesses that have not been able to access support, or are not sure of the support available, to contact their nearest business growth hub. The Government have established a network of 38 of these hubs, with one in each local enterprise partnership area in England. Expert advisers can offer businesses of all sizes free, tailored, one-to-one guidance on areas such as business plans, building resilience and potential funding streams.

My noble friend asked why these temporary measures are not being extended for longer. The temporary measures can be extended by statutory instrument only for a maximum period, which was set down in the original primary legislation; for the insolvency measures, that is a maximum of six months. However, recognising that these measures involve a significant intervention into the normal working of the insolvency regime, including affecting the rights of creditors, it is right that these measures are put in place only for as long as is necessary and that we keep them regularly under review. The Government will keep this matter under review in the light of ongoing developments during the pandemic, and we will move swiftly to extend them further if that proves necessary.

Turning to my noble friend’s questions about the measures that expired at the end of March, this was solely due to a relaxation of the requirement to hold annual general meetings physically. The provision was effective for a limited period and it was not possible to extend it beyond 5 April 2021. Where there remain concerns in the business community that holding general and annual general meetings post March 2021 would be problematic given continued uncertainty around coronavirus restrictions, officials are working closely with stakeholders as a matter of urgency to explore non-statutory approaches to address the challenges that might arise upon the expiration of the temporary provisions.

Turning to the question of how we avoid a so-called cliff edge when these measures expire, the Government recognise the risks of such a scenario involving the accumulation of unpaid debts becoming due when restrictions and government fiscal support expire. Work is ongoing to develop possible solutions to enable a viable exit from these measures; that continues to support business during the recovery phase.

Finally, I turn to the question of the Government’s approach to the mounting level of corporate debt in the economy. While many firms have been hit hard by the pandemic, HMG support has ensured that the corporate sector remained resilient, with the increase in indebtedness matched by an increase in net deposits. As I said earlier, firms in certain sectors, such as hospitality, have also received additional support through grants of £9,000 per premises.

Further temporary insolvency legislation and business support, provided by the Government since the Covid-19 crisis began, has resulted in far fewer insolvencies than would normally be expected; I outlined the figures earlier to my noble friend Lord Bourne. We continue to monitor the impact of insolvencies on lenders’ balance sheets; backed by government action, these have been largely resilient to date, as have lenders’ ability and willingness to lend to support economic recovery.

The noble Lord, Lord Lennie, asked about the scope for wider insolvency reform. I can tell him that the Government always keep the insolvency regime under review and, if any change is needed, we will not hesitate to bring forward the necessary legislation. These regulations will provide much-needed continued support for businesses as we continue with the Government’s four-step road map out of lockdown, allowing them to concentrate their best efforts on reopening or continuing to trade, and building on the foundations for our economic recovery in the United Kingdom. Careful consideration has been given to extending these temporary measures, and the Government will continue to monitor the situation extremely closely.

Once again, I thank all noble Lords who have contributed to this debate.

Motion agreed.

Electricity Trading (Development of Technical Procedures) (Day-Ahead Market Timeframe) Regulations 2021

Lord Callanan Excerpts

Tuesday 18th May 2021 Grand Committee

Moved by

[Lord Callanan]

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

My Lords, the regulations were laid before the House on 22 March. This instrument is brought forward using powers under the European Union (Future Relationship) Act 2020.

The trade and co-operation agreement that we have secured with the European Union provides for co-operation on a range of energy matters to support and strengthen the UK’s and EU’s shared energy objectives. The agreement requires that new, efficient cross-border electricity trading arrangements be developed between connected UK and EU markets. The UK and the EU are committed to co-operating closely on efficient trading developed in accordance with the process and timeline set out in the agreement.

These new arrangements were a key objective for the UK during the negotiations on the agreement. Efficient cross-border trade can lower bills for UK consumers, as well as support our decarbonisation and security-of-supply objectives. The new arrangements will be based on the concept of multi-region loose volume coupling, where cross-border transmission capacity on an interconnector and electricity are auctioned together. This will ensure that Great Britain can import energy from areas of lower price or export energy to areas of higher price more readily than under current interim arrangements. This will be achieved while the energy market in Great Britain maintains independence from EU regulations.

While the agreement sets out the principles for the design of the new trading arrangements, the detailed technical procedures still need to be developed by transmission system operators. These are, collectively, the companies that own and operate electricity interconnectors that connect the UK to neighbouring markets, and the electricity system operator that runs our onshore electricity network. The development of these new arrangements will need to take place in co-operation with relevant electricity market operators, which are organisations that operate marketplaces for the buying and selling of electricity.

The agreement details the timeframes for transmission system operators to develop technical procedures for the new arrangements, noting that new arrangements should be made operational by April 2022. It is therefore important that development of the new arrangements takes place quickly and efficiently. To support this development, this instrument imposes duties on electricity transmission system operators in Great Britain, with co-operation from relevant electricity market operators, to develop the new cross-border electricity trading arrangements for the day-ahead market period.

The instrument also grants Ofgem the ability to regulate transmission system operators and relevant electricity market operators in their development of the new trading arrangements to ensure that they meet their obligations under the regulations. The instrument further enables Ofgem to make decisions on the allocation and recovery of costs incurred in the development of the new arrangements. It is estimated that these new, efficient trading arrangements could bring significant economic benefits to UK consumers. Any delay in implementation will come at a cost to them. Therefore, it is important that this instrument is approved to ensure that transmission system operators develop the new arrangements within the timeframes set by the agreement and that the benefits can be realised as early as possible.

The new arrangements will also be used for trade between Great Britain and the single electricity market on the island of Ireland. While energy is largely a devolved matter in Northern Ireland, my department has developed this instrument in close collaboration with officials in the Northern Ireland Department for the Economy and the Northern Ireland Authority for Utility Regulation. Input from our colleagues in Northern Ireland has ensured that this instrument supports a UK-wide approach to the development of the new arrangements. The process continues to be underpinned by extensive engagement with UK industry and stakeholders, including Ofgem and the Northern Ireland Utility Regulator, to ensure they can prepare for the development and implementation of new arrangements. My department has regular conversations with the transmission system operators and is pleased with the progress they are making.

The instrument is one part of a programme of work to deliver the new arrangements. On 3 February, the Secretary of State for Business, Energy and Industrial Strategy provided guidance to those organisations to encourage early action to support implementation of the agreement while the regulations were being prepared. This instrument follows on from this guidance, providing a regulatory underpinning for the initial development of the new cross-border electricity trading arrangements. If required, the Government will prepare further legislation for the operation of the new trading arrangements once they are developed. I assure Members of the Committee that this legislation will be laid before Parliament to ensure that it can be appropriately scrutinised.

Since this instrument was laid in both Houses, the numbering of the provisions within the trade and co-operation agreement has been updated following the final legal revision process. Therefore, a correction slip has been laid in respect of the draft instrument to update the cross-references to the agreement.

In conclusion, this instrument is an appropriate use of the powers of the European Union (Future Relationship) Act and will ensure compliance with an international treaty and that an enforcement mechanism is in place to prevent delays in developing technical procedures for cross-border electricity trade. These new trading arrangements will provide for greater efficiency and consumer benefits than the alternative arrangements currently in place without the UK being a member of the EU’s internal energy market and subject to the EU regulations that that entails. I commend the regulations to the Committee.

--- Later in debate ---

[Lord Callanan (Con)]

First, I thank our two hardy contributors who have stayed the course for this afternoon’s debate on the fascinating subject of the technical operation of electricity markets. I thank both noble Lords for their valuable contributions.

Both noble Lords, Lord Oates and Lord Grantchester, raised questions about multi-regional loose volume coupling and whether that is preferable to the previous market coupling. This model provides for greater efficiency than the current alternative arrangements without being a member of the EU internal energy market and subject to EU regulation. The UK and the EU are moving to a new relationship and a continuation of previous arrangements was not an option for either party. There are new internal EU arrangements as a consequence of the TCA.

On the questions regarding Northern Ireland, the department has engaged extensively with the Northern Ireland Department for the Economy and the Northern Ireland electricity regulator on this instrument which obliges parties to consult Northern Ireland counterparts as required under specific stages of development. To ensure that opinions reflect views that are specific to Northern Ireland, the instrument states that Ofgem must provide the Northern Ireland Utility Regulator with relevant information and opportunities to make appropriate representations. Ofgem must have regard to those representations and ensure that they are taken into account as appropriate.

On how long the new arrangements will take to put into place, the anticipated deadline for implementation is April 2022. All stakeholders are taking relevant steps to ensure that this deadline is met. In the meantime, alternative electricity trading arrangements are in place which will endure until a new agreed solution is implemented.

On the enforcement methods available under Section 25, I will write to the noble Lord.

The noble Lord, Lord Grantchester, asked about the SCE and ACER, the European regulator. I can tell the noble Lord that ACER will have no formal role but, of course, there are co-ordination arrangements in the TCA that will require co-ordination between UK regulators and ACER. The specialised committee on energy plays a key role in the development of the EU/UK electricity trading arrangements, and following ratification of the trade and co-operation agreement by the EU we are now working with the EU formally to set up the specialised committee on energy and all associated working groups. In particular,

“The Specialised Committee on Energy shall review the draft technical procedures”


submitted by November 2021 and

“shall take decisions and make recommendations”

as required by the agreement.

The noble Lord, Lord Grantchester, asked about the impact on consumer prices. The cost-benefit analysis shows that there are significant potential benefits in moving to more efficient electricity trading arrangements. The cost-benefit analysis quantifies the potential social-economic welfare benefits, as well as the carbon dioxide emissions savings. We welcome the CBA and outline proposals that the transmission system operators have jointly produced, and are assessing these materials together with the European Commission. We expect to provide feedback to the transmission system operators to support their development of the technical procedures that are required to be submitted to the specialised committee on energy by November this year. Alternative electricity trading arrangements across all Great Britain’s interconnectors have already been developed, which will endure until they can be replaced by the new agreed solution.

I therefore hope that I have been able to provide the necessary assurances to approve this instrument before us. The Government are committed to co-operating closely with the EU on efficient energy trading, energy markets and access to networks, with a deal based on friendly co-operation between sovereign equals. There is no precedent for an agreement on energy trading of this nature between the EU and a third country.

The UK and EU are moving to a new relationship. As of 1 January this year, trading between Great Britain and the internal energy market on the day-ahead market ceased. Until new arrangements are operational, trading will continue using what we feel are less efficient explicit auctions. The UK and EU are committed to developing and implementing a robust and efficient solution that will facilitate efficient electricity trade across interconnectors. As said earlier, these will be based on the concept of the famous multi-region loose volume coupling, allowing transmission system capacity on an interconnector and electricity to be auctioned together and the energy market in Great Britain to maintain independence.

The regulations that the Government are seeking to introduce will oblige transmission system operators to develop new efficient cross-border electricity trading arrangements under the TCA with the EU. They will also enable Ofgem to take the necessary decisions on the allocation and recovery of costs incurred in the development and implementation of the procedures. I am pleased with the progress that the transmission system operators have already made in developing these new efficient trading arrangements and assure the Committee that we will continue to take steps to facilitate their implementation.

As I said earlier, we will continue to work extensively with the Northern Ireland Department for the Economy, Ofgem, the Northern Ireland Utility Regulator and the UK industry to ensure that we see the benefits of the new arrangements as quickly and effectively as possible. The agreement notes that new arrangements should be operational by April 2022. This is a challenging deadline, but adherence to it will enable us to realise the benefits to consumers from the arrangements as quickly as possible. I commend this draft instrument to the Committee.

Motion agreed.