Energy Supplies

Lord Callanan Excerpts

Wednesday 12th October 2022 Lords Chamber

[Baroness Jones of Moulsecoomb]

To ask His Majesty’s Government what assessment they have made of the impact of (1) increased fracking and oil and gas extraction on energy costs for consumers, and (2) the time frame required for such supplies to come on stream in comparison with renewable energy capacity.

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

My Lords, measuring the impact of any specific gas project or energy costs for consumers is inherently complex. The UK is not isolated from international markets. Shale gas can also support energy security. Renewable energy sources have a wide range of development timeframes. The process of extracting onshore shale gas can be relatively rapid and scalable but will always depend on specific development factors.

[Baroness Jones of Moulsecoomb (GP)]

I thank the Minister for his reply; I will not call it an Answer. I am sure that he is extremely embarrassed by his Government’s ditching of one of their election promises not to frack any more. I would like a yes or no answer to a question. If local people—and perhaps even the local council—are against fracking in their area, as for example is the Tory-led council in East Riding, will the Government accept that and allow no fracking in their area?

[Lord Callanan (Con)]

The Prime Minister and the Secretary of State have said that local support for fracking projects is very important. It is one of the factors that we will take into account.

[Lord Lilley (Con)]

My Lords, more than a million shale wells have been drilled in North America and elsewhere. There is no record of a single building having been shaken down by the occasional microtremors, nor of a single person being poisoned by allegedly contaminated aquifers. Is not the scaremongering of the anti-frackers as bad as that of the anti-vaxxers? Should it not be treated similarly?

[Lord Callanan (Con)]

The noble Lord makes an important point. A number of scare stories have been circulating, although I would gently point out that many parts of America are much less densely populated than many parts of the UK.

[Lord Teverson (LD)]

My Lords, it is well understood that fracking will take some time to develop, and it is more expensive than many renewables. As an alternative, solar is renewable, a lot cheaper and can be implemented much more quickly. Can the Government guarantee that they will not restrict further the rollout of solar in the country during the next couple of years?

[Lord Callanan (Con)]

Not only can I guarantee that but we will be expanding renewables production. We need to do both. We need to roll out renewables, which have a good track record. They are relatively cheap, but they are intermittent—it is no good telling people that they can keep their lights on for only 60% of the time. The real watchword is that we need diversity of supply. We need more renewables; we need gas; we need nuclear; we need biomass production—we need all of them.

[Baroness Hayman (CB)]

My Lords, I declare my interests. I welcome the Government’s movement on the planning regime for onshore wind. I also endorse the need to change the illogical charging regime for electricity generation which was announced today. How will the Government ensure that funding for research and investment in renewables is maintained, given the effective windfall tax on renewables that is being introduced, when the detrimental effect on investment in research on oil and gas was the reason for not having a windfall tax on those industries?

[Lord Callanan (Con)]

I agree with the first part of the question from the noble Baroness, but we do have a windfall tax on oil and gas producers: the energy price profits levy was announced earlier in the year. We do not propose a windfall tax on renewables. I welcome her support for increased supplies of wind energy.

[Lord Watts (Lab)]

My Lords, does the Minister’s previous answer mean that the suggestion that the local people will have a say is meaningless, because the Government will overrule them?

--- Later in debate ---

[Lord Callanan (Con)]

No, that is not what I said—if the noble Lord would care to consult Hansard. I said that local support is extremely important. It is one of the factors that we will be looking to see demonstrated before any hydraulic fracturing licences are issued.

[Baroness Foster of Oxton (Con)]

My Lords, as a former Member of the European Parliament for North West England, and for many months in this House, even before the invasion of Ukraine, I have been a vocal supporter of the reintroduction of shale gas extraction in the Bowland fields in Lancashire. The protesters at the time generally were not those who lived there, but people who came from outside. We are also now aware of the fearmongering propaganda against fracking across Europe and the UK, which emanated from Russia. Can my noble friend the Minister reassure this House that the process will go ahead?

[Lord Callanan (Con)]

I know that my noble friend has been a long-standing supporter of fracking. There are a lot of steps to go through. There could be potential for large amounts of shale gas. We do not yet know. Local planning will still need to happen, the licences will need to be issued, the Secretary of State will want to be reassured that it is still safe in operation et cetera, but it is certainly a potential that we are looking at.

[Lord Wigley (PC)]

My Lords, I am sure that the Minister is aware that the Government of Wales have banned fracking, not just on the question of environmental impact in the conventional sense but because of the uncertainty of the underground workings in many of the coalfields and other mineral areas of Wales. In those circumstances, in the context of the possibility of fracking in west Cheshire and the Wirral, and the uncertainty about many of the underground tunnels in the industrial area of Flintshire, can he ensure that there is close co-operation and discussion with the Government of Wales before any consent is given on the eastern side of the border?

[Lord Callanan (Con)]

The Welsh Government are of course responsible for policies, planning et cetera in Wales, and the British Government are responsible for that in England.

[Baroness Liddell of Coatdyke (Lab)]

My Lords, many of the issues that we are discussing today could be covered in the Energy Bill. What has happened to it?

[Lord Callanan (Con)]

Well, we have had some extensive debates, as the noble Baroness knows. We had an excellent Second Reading and two days in Committee. I am sure that we will want to look at when that returns to the House.

[Lord Walney (CB)]

My Lords, do the Government accept that public and community support for fracking projects and others such as onshore wind could be greatly increased if it was made easier—perhaps even mandated—for companies to share the revenue directly with local consumers in the environment of the projects where they are either fracked or where the wind turbines go up?

--- Later in debate ---

[Lord Callanan (Con)]

The noble Lord speaks a great deal of sense. They are eminently sensible suggestions and of course local communities will want to feel the benefit of any procedures that they consent to in their areas.

[Baroness McIntosh of Pickering (Con)]

My Lords, following up that point, does my noble friend agree that energy from waste is very much the way forward, and will he ensure that any benefits go to the local community from electricity generated from waste?

[Lord Callanan (Con)]

I am happy to agree with my noble friend that energy from waste is an excellent production technique. There are many successful energy-from-waste projects; it is another technology that will make a contribution to our energy supply.

[Baroness Sheehan (LD)]

My Lords, a short while ago in the Commons, the Prime Minister stated that fracking would go ahead only where there was community support, and the Minister has just corroborated that. Can he categorically state that community support will be gauged neither by the fracking companies themselves, of which there is a rumour, nor by Jacob Rees-Mogg’s department, given the debacle of his consultation on imperial measurements, in which “no” was not an option?

[Lord Callanan (Con)]

I am happy to hear from the noble Baroness the great news that the Prime Minister agrees with me and has said the same thing, which is always good for a Minister to hear. However, the reality is that the issuing of hydraulic fracturing consents is a matter for BEIS and the Secretary of State for BEIS.

[Lord McNicol of West Kilbride (Lab)]

My Lords, as many speakers have alluded to, there is little evidence to suggest that fracking is the answer to the current energy crisis. However, reducing our collective energy demand would improve energy security and lower prices. Why was the Government-led campaign to encourage household energy savings scrapped?

[Lord Callanan (Con)]

If I can just correct the noble Lord: fracking is not the only answer; it is one of the potential answers to energy security. As I said earlier, we need a diverse range of supply. I remind the House that while we have our own domestic supplies of gas, we still import a considerable amount of very carbon-intensive LNG. If fracking gas—shale gas—can replace some of that, then that is a net carbon saving.

With regard to information, the Government will continue to promote all our energy efficiency schemes. We will continue to provide information to consumers on ways that energy can be saved and, more importantly, on how they can reduce their bills. There is one pre-eminent technology that everybody should do, which is to turn down the flow temperature of your condensing boiler: you will end up with the same temperature, the boiler will run much more efficiently, and you will save 8% to 10% on your gas bills.

Warm Home Discount (Scotland) Regulations 2022

Lord Callanan Excerpts

Tuesday 11th October 2022 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Warm Home Discount (Scotland) Regulations 2022

Relevant documents: 9th 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 29 June 2022, be approved. This Government have taken decisive action to support people with their energy bills. From 1 October a typical household in the UK will pay no more than £2,500 a year on their energy bill for the next two years. This is in addition to the £37 billion of support announced earlier this year, including the energy bills support scheme that provides a £400 discount for around 29 million households. The warm home discount complements these measures, focusing on those at risk of fuel poverty, primarily through the provision of a £150 direct energy bill rebate.

We have already passed legislation for the extension, expansion and reform of the warm home discount scheme in England and Wales, with better targeted and automated rebate provision. The Scottish Government have devolved powers under the Scotland Act 2016 to design and implement a warm home discount scheme in Scotland. The BEIS Secretary of State has certain reserved powers, including approving any scheme for Scotland. Earlier this year, Scottish Ministers requested that the UK Government make provisions for a continuation of the scheme in Scotland. In May, the UK Government consulted on this continuation and expansion of the scheme in Scotland, which was supported by a majority of respondents.

This SI extends the WHD scheme in Scotland to 2025-26, providing much-needed certainty on energy bill support to low-income and vulnerable households in Scotland. The Government committed to expanding the scheme in the energy White Paper 2020. The £475 million —at 2020 prices—spending envelope is set for Great Britain and will be approximately £506 million in 2022 prices. The warm home discount in Scotland will increase proportionately in line with the GB-wide increase to the scheme. The UK Government will apportion 9.4% of the total spending to Scotland; this means £49 million of the overall scheme value, an increase of around £13 million compared with last year.

Overall, around 280,000 Scottish households in or at risk of fuel poverty will receive a rebate this winter, which is 50,000 more households than last winter. The apportionment of spending to Scotland is based on the number of domestic gas and electricity meters across Great Britain and ensures that the costs of the scheme are spread evenly across all customers. As a result, the proportion of spending in Scotland will exceed Scotland’s share of the Great Britain population.

The scheme participation threshold for energy suppliers is lowered to 50,000 domestic customer accounts in 2022-23 and to 1,000 domestic customer accounts from 2023-24. This mirrors the scheme in England and Wales, and will mean that from 2023-24, suppliers obligated under the scheme will cover over 99% of domestic customers.

As requested by Scottish Ministers, the WHD scheme in Scotland will be a continuation of the scheme previously in place across Great Britain in 2021-22 and therefore will continue to include three main components: the core group, the broader group and Industry Initiatives. First, under the core group element of the scheme, around 90,000 low-income pensioners in receipt of pension credit guarantee will continue to receive their rebates automatically. Secondly, under the broader group element, around 190,000 low-income and vulnerable households, mainly of working age, will receive a rebate following an application to their energy supplier. The broader group is expanded to include housing benefit as one of the mandatory eligibility criteria, as per the England and Wales scheme. Income thresholds for the criteria relating to child tax credits and universal credit are increased.

Each energy supplier’s obligations under the scheme will be set according to their market share in Great Britain. This is the fairest way of spreading costs across all customers in Great Britain and will ensure consistency across the two warm home discount schemes.

The Government recognise that there are differences in the proportions of energy customers that suppliers have in the different nations. There will be different challenges for suppliers with a higher proportion of customers in Scotland and those with a lower proportion. We are making allowances for these differences by allowing suppliers with few broader group customers in Scotland to transfer up to 100% of their broader group target to Industry Initiatives, which of course will be subject to Ofgem’s approval. Ofgem’s approval will mainly be based on each supplier’s market share in Scotland relative to Great Britain. Only energy suppliers with a disproportionally low number of broader group customers are likely to be permitted this flexibility.

Scottish households in or at risk of fuel poverty will continue to benefit from support under Industry Initiatives funded under the warm home discount. This element of the scheme will continue to provide valuable support to households, such as energy advice, benefit entitlement checks, energy debt and emergency financial assistance, as well as energy efficiency measures. We increased the cap on spending on Industry Initiatives to £7 million per annum, which is broadly proportionate to the spending expected in England and Wales in 2025-26.

Although activities permitted under Industry Initiatives will be the same as in previous years, there will be some exceptions. Part of the permitted Industry Initiatives spending on debt write-off is ring-fenced for customers with pre-payment meters, as these customers are particularly at risk of self-disconnection. Again, this mirrors the scheme in England and Wales. As per the scheme in England and Wales, limits are imposed on boiler and central heating system installations supported under Industry Initiatives, which will help to support our decarbonisation objectives.

No caps have been imposed on the amount of Industry Initiatives spending that can be used for financial assistance. The list of eligibility criteria for financial assistance has been expanded to include the mandatory eligibility criteria for the broader group. This will include suppliers whose broader group is oversubscribed to direct customers to financial assistance under these Industry Initiatives.

In conclusion, the warm home discount remains a source of critical support for low-income households across Great Britain. These regulations extend the scheme in Scotland until 2026 and increase energy bill support from £140 to £150 for over 280,000 low-income and vulnerable households each winter, when they need it most. This is an additional 50,000 households receiving vital support compared with last year. Therefore, I commend these regulations to the Committee.

[Baroness Blake of Leeds (Lab)]

I thank the Minister for his very full explanation. I start by expressing regret that this scheme is necessary in the first place. I think all of us recognise that while fuel poverty is really high profile at the moment, it is a scourge that has been with us for a long time, as reflected by the fact that the original scheme came in in 2011. Many people and families have struggled to pay their bills for a very long time. Of course, as outlined by the Minister, we recognise the support that has been given for the extreme circumstances we have found ourselves in recently.

I do not want to spend too much time going through the detail. I recognise that there has been extensive debate on the England and Wales scheme in the Commons and in this place, and that these regulations are bringing in the necessary additions to meet the requirement to have a separate scheme for Scotland, as has been outlined. We recognise that point, but I would like further clarification and reassurance that the Scottish Government are happy with the outcome of the debate and consultation as it has gone forward. That is very important; obviously, there are peculiar circumstances in terms of the responsibilities of the Scottish Government and the role that the UK Government have to play.

As we have heard, most respondents to the second consultation agreed with the proposed extension of the current scheme until 2026, but the other question that came up was whether it was possible to have an earlier review of the scheme given the circumstances people are facing at the moment. There is concern generally about the higher fuel poverty rates in Scotland that the evidence suggests. Obviously, concerns were raised about the method for apportioning spending to Scotland, and some asked for higher apportionment to reflect those higher rates. I think it is fair to say that some energy suppliers also expressed concern about the additional costs of running two separate schemes, in England and Wales and in Scotland, and I do not know whether there is any assessment of what that additional spend will be.

Of course, it was probably inevitable that there were many requests for the value of the rebates to be increased. I understand that the rebate is fixed at the level proposed for consistency with the England and Wales scheme, but I will leave that issue there as something that will probably come up in the Minister’s response. I wonder if there are any comments to be made on how we will assess the situation as we go forward into continuing uncertain times.

The way the scheme is structured means that the cost of the rebates will be passed on to consumers in Scotland. My understanding is that the suppliers will pass on the cost of the scheme to their customers. This is estimated to come out at about £19 per dual fuel account, which is an increase from £14 under the current scheme. The Minister is shaking his head; I take from his response that he has a comment to make on this. I look forward to hearing that this is not the case. The reason I raise it, of course, is because we are seeing across the whole of the UK more and more people starting to struggle to pay their energy bills—and an additional cost for some who might not be eligible for this rebate scheme is probably not sustainable and could end up forcing more people into needing to take part.

I shall leave my comments there. It is very important that we approve the regulations so that we can get them into place, so families can benefit as quickly as possible. I end my comments with the general view that I hope we are not losing sight of the wider imperative of moving forward with schemes that will actually reduce the need to use fuel. I am thinking of home insulation, for example. There is some uncertainty at the moment, and I would welcome reassurance that the work that has started will be continued and, indeed, increased.

[Lord Callanan (Con)]

I thank the noble Baroness very much indeed for her questions. She deserves admiration for being the only Member to turn up to discuss this important issue, so I am grateful to her for that. I am happy to confirm that the Scottish Government are very satisfied with the scheme before us today; in fact, they asked us to implement it on their behalf. They originally talked about doing a separate scheme for ECO and the warm home discount for Scotland, then they decided that they could not and therefore requested us to launch the process and implement it for Scotland. That is why we are debating these regulations separately from the England and Wales regulations. So not only are they satisfied with it but it is at their request that we do this.

On the noble Baroness’s question about a review, it would be possible for the Scottish and UK Governments to carry out a review and consult on amendments to the scheme, should they consider it appropriate. We are apportioning a fair amount to Scotland; it is equivalent to 9.4% of the overall spending, which is proportionate to the number of domestic gas and electricity meters in Scotland compared to the rest of Great Britain. This is higher than Scotland’s proportion of the population in Great Britain, which was 8.4% in mid-2020, and it will also exceed its share of means-tested benefits recipients. This approach makes it fairer for consumers across England, Wales and Scotland, ensuring similar levels of cost and benefit across consumers.

On the administration costs of the schemes, the scheme in Scotland is a continuation of the current scheme, so there would be limited additional burdens in implementing it, and there would be continuity for suppliers. The reform of the scheme in England and Wales will reduce the administrative burden of running the scheme compared to the current one, and flexibility to transfer the broader group into industry initiatives will reduce the burdens for suppliers with low or zero broader groups in Scotland.

On the noble Baroness’s point about the cost of the scheme on energy bills—I think that she cited the figure of £19—the ECO scheme and warm home discount form part of the so-called green levies, which the noble Baroness will recall the Chancellor announcing, rather than being funded through bills. The scheme will be funded, at least for the next two years, by the Exchequer directly under the energy price guarantee scheme. So we are continuing with the scheme as previously, but the suppliers will be refunded by the Exchequer from that.

The noble Baroness also asked a very important question about our insulation schemes. As she will know, we have insulation and energy efficiency schemes of about £6.6 billion through a number of different initiatives. I am thinking of the home upgrade grant, the social housing decarbonisation fund, the public sector decarbonisation scheme, the local authority delivery scheme, and so on. I am happy to confirm that they are continuing, as well as the ECO scheme, which is also part of the obligations on suppliers. Indeed, I am happy also to confirm that we are extending it. As part of his recent Statement, the Chancellor announced an ECO plus scheme, which will be worth about £1 billion over three years. We are currently working on implementing it, and we will bring a regulation back to this House to discuss its further implementation in future.

I hope that has dealt with all the noble Baroness’s queries. Again, I commend the draft regulations to the Committee.

Motion agreed.

Prepayment Meters: Pricing

Lord Callanan Excerpts

Tuesday 11th October 2022 Lords Chamber

[Baroness Kennedy of Cradley (Non-Afl)]

My Lords, in begging leave to ask the Question standing in my name on the Order Paper, I declare my interest as director of Generation Rent.

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

My Lords, prepayment customers will benefit from both the energy price guarantee and the Energy Bills Support Scheme. Under the energy price guarantee, a typical household in Great Britain will pay around £2,500 a year on their energy bills from 1 October 2022. There will continue to be a small difference under the energy price guarantee between the unit cost for a prepayment meters and other types of payment methods to reflect higher costs to serve those customers.

[Baroness Kennedy of Cradley (Non-Afl)]

My Lords, using a prepayment meter is the most expensive way to pay for your energy, yet they are most likely to be used by the households least able to afford to heat their home. To cope, these families severely cut back on the energy they use, but their efforts are diminished because of the impact of the rise in standing charges, which remain the same regardless of the energy used. So I ask the Minister two things. Will the Government insist that there is a winter truce on energy suppliers forcing families already struggling to pay their bills to use prepayment meters to clear their debt? Will the Government make it clear to Ofgem that the continuing ratcheting up of standing charges to cover costs over and above what the standing charge should cover is unacceptable?

--- Later in debate ---

[Lord Callanan (Con)]

I am afraid that the noble Baroness is incorrect: using a prepayment meter is not the most expensive way of paying for your gas and electricity. Actually, normal credit is the most expensive way. The cheapest way is direct debit; slightly more expensive is prepayment; but the most expensive way is credit. The problem with what the noble Baroness is saying is that if we were to equalise the charges, and there is actually a higher percentage of customers who are fuel poor who are paying by direct debit, they of course would have to bear increased costs to take account of any reductions for prepayment customers.

[Baroness Finlay of Llandaff (CB)]

My Lords, will the Government ensure that all children and seriously ill adults in receipt of the new SR1 benefit and being cared for at home are moved to the lowest energy cost tariff, irrespective of the type of meter and system of payment in place? Will the Government ensure that they are provided with emergency supplies in the event of any power cuts in their area, particularly in the winter, as power to their equipment, such as home ventilation, oxygen concentration and so on, is absolutely essential to their care at home?

[Lord Callanan (Con)]

The noble Baroness makes a very important point. Obviously, we are doing everything we can to make sure that there are no blackouts, but if that very unlikely eventuality comes to pass, of course we will want to do all we can to make sure that the most vulnerable are protected.

[Baroness Sheehan (LD)]

My Lords, I am sure the Minister will agree that although the situation now with the differential is not as extreme as it used to be, we could easily go back to a situation in which those on prepayment meters will be paying the highest tariff. If the Government were minded to, they could easily remedy the situation; for example, simply by removing the ability of Ofgem to set differential rates for people with prepayment meters. If they did that, that would sort the problem. Does the Minister agree that this would do the job and would get rid of the injustice whereby the poorest are being asked to pay the most?

[Lord Callanan (Con)]

I refer the noble Baroness to the Answer I gave earlier: using a prepayment meter is not the most expensive way, and many customers choose to do it for their convenience. The licensing conditions for Ofgem reflect the cost of serving different groups of customers. Of course, we keep these matters under review, but if we equalised it, then those paying by direct debit—often those who are fuel poor as well; there is a higher percentage of customers on that level —would end up paying more. There are no easy answers to this.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend not accept that it is all very well talking about those people paying on direct debit, but we are talking about people who, if they have a bank account, are probably overdrawn and are certainly not in a position to do so? I pay by direct debit, but I do not understand why my standing charges, which are a major part of the costs, are going up as well as the energy costs. At a time when the Government are giving huge support to consumers and therefore to the utilities themselves, which would otherwise be facing severe financial difficulty, do we not have a bit of leverage and can we not speak up for those people struggling to pay those bills?

[Lord Callanan (Con)]

We are helping those struggling to pay bills; I refer the noble Lord to the massive programme of support that we have put in place. These charges are set by Ofgem. I am aware that the standing charge is a controversial subject, but that reflects the network costs and other costs that every customer has to bear in addition to the unit costs of gas and electricity.

[Lord Lennie (Lab)]

My Lords, there are 4 million prepayment energy customers in this country whose bills are not smoothed out over the year, unlike those who pay by direct debit. Ofgem figures show that prepayment customers are likely to pay two-thirds of their annual energy costs during the winter. What immediate measures will the Government take to help relieve pressures on these hard-pressed energy customers?

[Lord Callanan (Con)]

The answer to the noble Lord’s question is the massive programme of support we have put in place, which amounts to about £60 billion of direct payment support. Had we not put these measures in place, the average unit cost would have been about £6,000 per year; now it is down to an average of £2,500 per year. I emphasise that that is not a maximum but an average of the unit costs of energy that are capped under the price guarantee.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, is the Minister aware that renewable energy is nine times cheaper than fossil fuel energy? If there were not an anti-science coalition in the Conservative Party—including previous Prime Minister Cameron, who said to cut the green “stuff”—bills would not be as high and we would not be in this mess now.

[Lord Callanan (Con)]

Happily, on this matter I can partly agree with the noble Baroness, which will shock her. Some renewables are considerably cheaper than gas- fired generation, although it varies—we are experiencing a price spike in gas at the moment. That is one of the reasons why we have in place the largest programme of offshore wind in Europe; we have the second-highest level in the world, and it is something we want to ramp up greatly, to 50 gigawatts by 2030, because at the moment it is the cheapest form of generation.

[Baroness Brinton (LD)]

My Lords, to return to the question asked by the noble Baroness, Lady Finlay, I thank the Minister for saying that the Government will do all they can to provide a secure electricity supply, particularly to seriously ill disabled children who may be using ventilators and other equipment. My family has experience of this; when there was a cut on the south London estate where my three year-old granddaughter was—she had to have a ventilator and a heart monitor—it took over three hours before the generator arrived, even though she was on the list. The scale of the cuts, if they happen, will be of a different magnitude. It is an enormous undertaking, so I would be really grateful if the Minister could make sure that this facility is available to not just children but other people who use this life-saving equipment at home.

[Lord Callanan (Con)]

Of course I can give the noble Baroness that assurance; we will do all we can to protect the most vulnerable. We all recognise the difficult circumstances that such people would be in, but our top priority is to make sure that there are no interruptions to supply at all. That is one of the reasons why we are ramping up efforts to make sure that we have enough energy to serve the UK this winter.

[Baroness Walmsley (LD)]

My Lords, those renting from private registered landlords often have little choice about how they pay for their energy. I am thinking in particular of students in houses of multiple occupation, many of whom are faced with very large bills indeed. Are landlords in that situation obliged to pass on any government subsidies to those students?

[Lord Callanan (Con)]

We certainly encourage them to do so. We are looking at the upcoming legislation, which the House will consider shortly, to ensure that not just people in situations such as houses of multiple occupation but also those on heat networks, those in temporary accommodation, et cetera, get the reduction passed on to them.

[Lord Watts (Lab)]

My Lords, is it not the case that once again the regulators are failing the public? Is it not about time that the regulator in this case looked at standing charges again and did something about them?

[Lord Callanan (Con)]

I assume the noble Lord is referring to Ofgem. I can assure him that it looks very closely at the balance between standing charges and individual units, but the network has to bear certain standing costs, which are independent of individual units of gas and electricity. We talked earlier in this Question about the expansion of renewables. Of course, the expansion of renewables involves enormous changes to the structure and operation of the grid to make sure that that power can be transmitted around the country, and that has to be paid for.

[Baroness McIntosh of Pickering (Con)]

My Lords, my noble friend will be aware that those living in rural areas pay the highest cost of fuel, which is not covered by the price cap. I am thinking of oil, solid fuels and LPG. What plans do the Government have to extend the price cap to these fuels to help those living in rural areas, particularly in the north of England and other parts of the country where it is particularly cold in the winter?

[Lord Callanan (Con)]

Of course, a number of people across the country live off the gas grid and use oil, LPG, et cetera. The noble Baroness is right that in most cases they benefit from the electricity cap, but they do not benefit from the gas cap. We are looking at how they can be assisted. We have a commitment that they will receive an equivalent level of support and we will ensure that that is the case.

Economy: The Growth Plan 2022

Lord Callanan Excerpts

Monday 10th October 2022 Lords Chamber

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

My Lords, I begin by joining my noble friend Lady Neville-Rolfe in welcoming the noble Baroness, Lady Gohir, and congratulating her on her maiden speech, which I listened to with great interest, although I do not think she is in her place any longer. The noble Baroness, Lady Hayman, said that she is full of fire and passion, evidence that she will be an eloquent voice for women. She is no doubt delighted to discover that we are now on our third woman Conservative Prime Minister, and I am sure we are all looking forward to hearing her future contributions.

Today is clearly a day for our second city. I thank the right reverend Prelate the Bishop of Birmingham for the contribution he has made to this House over the years. He joked about my noble friend Lady Neville-Rolfe’s reference to his “mature” and “sensible” contributions, and then proved how right she had been to say it. The right reverend Prelate made many noteworthy points in the few minutes allotted to him, not least about the importance of the need for the devolution of power and influence. He asked about “wealth created for whom”, an important question which I am sure we will be debating for many weeks to come, sadly without his presence.

It is a privilege to close this debate on behalf of the Government and I thank noble Lords for their many contributions. We have heard about and debated the many steps the Government are taking to achieve economic growth: a series of bold initiatives which we believe will, together, reboot this country’s long-term prospects. It is an agenda which protects and reassures now in the form of our plans to cut energy bills at a time of global uncertainty for our people, and an agenda which lays the foundations for a future about which we all can and should feel optimistic. In her introduction, my noble friend Lady Neville-Rolfe rightly said that we need to do things differently and we need to do them better. This Government are making growth their guiding mission, which I am sure many of us agree it needs to be.

I shall address in turn the different aspects of the Government’s plans that were raised in the debate. I start with plans to reduce millions of energy bills, an issue raised by many speakers, including the noble Baroness, Lady Smith of Basildon, the noble Lords, Lord Fox and Lord Burns, my noble friends Lord Forsyth of Drumlean and Lord Lamont, and others. The Government had previously announced £37 billion of support, meaning 8 million of the most vulnerable households receiving £1,200 of support and others receiving £400. Last month, the Government built on that and announced the energy price guarantee to limit the energy bills of typical households to £2,500 a year for the next two years—that is an average, of course. In turn, another benefit of that is significantly reducing the rate of inflation.

As many noble Lords observed, there are no cost-free options. The Government must now intervene to guard against the worst economic outcomes going forward, and that intervention will therefore initially be funded by the Exchequer.

The noble Lord, Lord Fox, asked about the case of fixed-rate contracts that were agreed before 1 April this year. I can confirm to him that the Government will be revising the cut-off date such that only contracts taken out before 1 December 2021 are excluded from the non-domestic energy scheme. This means that all fixed-rate contracts taken out when the wholesale prices were above the government-supported price will be eligible for relief under the scheme. I am sure that that will be welcomed by the whole House and in particular by the noble Lord; I thank him for asking the question which gave me the opportunity to say that.

The noble Baroness, Lady Brinton, argued that business energy bill support is needed for more than six months. I am also pleased to be able to tell her that after the initial six-month period we will provide further support for vulnerable sectors. We will publish a review of the energy bills support scheme after three months to assess effectiveness and how the scheme might be extended, further targeted or revised beyond the six-month period for vulnerable non-domestic customers. Continuing support to those deemed eligible would begin at the end of the initial six-month support scheme without any gap.

The right reverend Prelate the Bishop of Edmundsbury and Ipswich—he must have the longest title in the House—also raised the important subject of energy poverty. In addition to the extensive support I have just mentioned to support people who need additional help on top of the warm homes discount, the Government are also providing an extra £500 million of local support via the household support fund, which will be extended from this October to March 2023. The household support fund helps those in most need with payments towards the rising cost of food, energy and water bills.

The Government are also aware—again, this point was raised by many Members—that the energy price guarantee will leave those households currently with unregulated energy sources, such as those living off the gas grid, with uncapped bills this winter. However, our objective is that all households, regardless of their heating source, will be no worse off than an equivalent domestic gas household under the energy price guarantee.

As the noble Baronesses, Lady Hayman and Lady Walmsley, and again, the right reverend Prelate the Bishop of Edmundsbury and Ipswich, noted, there is more at stake here, and there is a need for a more holistic approach. That is why the Government are investing more than £6.6 billion over this Parliament to improve energy efficiency and decarbonise heating. Despite the comments of some Members, we are making good, steady progress on this issue. In 2008, 9% of homes had an energy performance certificate of C or above, and that figure is now 46%. Meanwhile, the energy company obligation, or ECO, has been extended from 2022 to 2026, boosting its value from £640 million to £1 billion a year, which will help about 450,000 families with green measures such as insulation. I am sure that it did not escape the attention of Members that last week the Chancellor announced an additional £1 billion investment over three years in the ECO-plus energy efficiency scheme—something I am sure we will return to in this House when we bring the legislation forward to implement it.

The noble Baronesses, Lady Smith of Basildon and Lady Kramer, and the noble Lords, Lord Burns and Lord Razzall, and other noble Lords, all raised the issue of a windfall tax on energy companies. We already have a tax on energy companies. The energy profits levy was introduced on 26 May 2022. It is an additional 25% tax on UK oil and gas profits on top of the 40% headline rate of tax that they already pay, which takes the combined rate of tax on profits to 65%. I do not know how much further Labour and the Liberal Democrats want to increase that tax, but it already appears to be at a very high level.

[Lord Sikka (Lab)]

My Lords—

[Lord Callanan (Con)]

If the noble Lord will have patience, I will finish my paragraph and then he can intervene.

It applies to profits earned by companies from the production of oil and gas in the UK and on the UK continental shelf.

[Lord Sikka (Lab)]

My Lords, the net impact of the windfall tax the Minister referred to is only 2% of the earnings before interest, tax, depreciation and amortisation of BP’s profits and only 1.5% of Shell’s. It excludes profits made in the forecourts, from refineries and by trading, which is the biggest source of profits for oil and gas companies. Surely that tax was just a joke and a sop, because a large amount of it is then handed back through accelerated investment allowance.

[Lord Callanan (Con)]

I know that there has never been a tax that the noble Lord does not want to increase even further, but it is already a very high level of tax. I think I saw a figure of £170 billion mentioned by the Opposition. That is worldwide profits. The UK cannot tax profits made in other jurisdictions; we can tax those that are made in our country, that we have control of. I remind the noble Lord that we also want those companies to invest in renewables, as they are doing. There are many renewable projects—offshore wind projects, hydroelectric projects, et cetera—in which we need additional investment. So the calculation made by the Treasury, which I have never seen to be shy of raising taxes in the past when it could, is that, on the one hand, of course we want to secure a fair return for taxpayers, but we also want to make sure that the profits are there to enable the massive sums that we need to invest if we want to move to a green transition in future.

On the suggestion of the noble Lord, Lord Vaux of Harrowden, of a briefing on energy markets for interested Peers, I say to the noble Lord that, as he knows, this is a complicated subject. Exactly who is making the excess profits under which particular regime is a complicated issue. He will be pleased to hear that we will shortly be debating the legislation to implement the support policies I have mentioned, and I am sure that these matters will be raised further in the debate during the passage of that legislation. I look forward to discussing it further with him then.

The noble Lord, Lord Liddle, made the point that we need to get onshore wind moving—a matter I know is dear to the heart of the noble Baroness, Lady Hayman, and she will no doubt agree. The British Energy Security Strategy recognises the range of views on onshore wind across the country and, as I said before, we will be consulting on developing partnerships with a number of supportive communities that wish to host new onshore wind infrastructure, perhaps in return for guaranteed lower energy bills. The growth plan went further, with specific changes to accelerate delivery of infrastructure, including bringing onshore wind planning policy in line with other infrastructure policies to allow it to be deployed more easily in England. The noble Baroness, Lady Walmsley, has asked many times about that; I am sure she will be pleased to hear that.

The noble Baroness, Lady Fox of Buckley, meanwhile noted the need for green innovative growth. We have indeed established a Green Jobs Delivery Group, headed by Ministers and business leaders, to act as a central forum for driving forward action on green jobs and skills. Our plans for net zero and energy security are driving an unprecedented £100 billion-worth of private sector investment by 2030 into new British industries, supporting about 480,000 green jobs by the end of the decade. To return to my earlier point, many of the companies investing in the UK are those that the Opposition wish to tax to death.

The noble Lords, Lord Bilimoria, Lord Eatwell and Lord Fox, alongside my noble friends Lord Lamont, Lord Lilley and Lord Bridges of Headley, all commented on the Government’s plans regarding taxes. The plain truth is that the Prime Minister promised that this would be a tax-cutting Government and we are keeping that promise.

A number of noble Lords also raised the overall approach of the growth plan.

[Lord Liddle (Lab)]

As I understand it, the Government are at present in negotiation with renewable energy suppliers, including companies running onshore and offshore wind farms, to persuade them voluntarily to accept a lower price than they are presently getting. This is effectively restricting their profits without any benefit to the Government in terms of tax.

[Lord Callanan (Con)]

This goes back to the point I made to the noble Lord, Lord Vaux, earlier: we will indeed be debating these matters further when the legislation arrives. It is a complicated subject. There are two types of renewables certificate. The earlier renewables obligations were given before 2015, and it can be said that some of those operators are indeed making considerable profits. They are perhaps the ones that the noble Lord is talking about. Then there are those that have been on the contracts for difference scheme since 2015, which are now, I am pleased to say, paying back into the system, such is the success of the CfD regime. But, as I said, we will be debating that when the legislation comes to this House.

[Lord Tunnicliffe (Lab)]

The Minister has admitted that this is an extremely complex subject. I wonder whether he would consider acceding to the request from the noble Lord, Lord Vaux, and arranging more of a seminar-type event before Second Reading so that we can probe into the understanding—that is, not to make political points but to understand the technicalities we face.

[Lord Callanan (Con)]

I will certainly look at doing that but, as I said, we are preparing for the legislation. There is furious drafting going on at the moment. It will be in the House shortly. I think noble Lords will find that it addresses some of the points they are raising, but I would be happy to look at holding a seminar as well if they would find that helpful.

Once again I can only agree, as I normally do, with my noble friend Lord Forsyth’s words; what a great Budget Statement it was. He rightly noted, for instance, that investment comes from retained profits after tax. The noble Lord, Lord Bilimoria, for his part, agreed that it is absolutely right to target growth. My noble friend Lord Lamont said that going for growth is a laudable objective. My noble friend Lord Lilley said simply that growth is crucial. All were correct. I cannot agree with everything that the noble Baroness, Lady Wheatcroft, said—I do not normally agree with her very much—but she was right to say that, on growth, the problem has been about delivering.

My noble friend Lord Frost observed that the Government’s opponents think that the right way forward is more of the same, while our belief is that we have to do things differently. The measures in the growth plan represent an ambitious first step towards getting to the 2.5% target through removing barriers to the flow of private capital, supporting skilled employment, accelerating infrastructure construction, getting the housing market moving and cutting red tape for businesses. Historical experience suggests that 2.5% GDP growth is ambitious but achievable given the growth that the UK has observed in the past.

Independent economic forecasters have estimated that the energy package could reduce the headline rate of inflation by around 5% by freezing energy bills. As always, the Chancellor is of course working closely with the Governor of the Bank of England to tackle inflation and closely co-ordinate support for the economy. While more government borrowing is required in the short term to tackle high energy prices, the Chancellor is committed to seeing government debt fall over the medium term. The independence of the Bank of England is sacrosanct and the Government have reconfirmed their commitment to the monetary policy remit. The Government have full confidence in the Bank of England to take action to get inflation back to target.

The right reverend Prelate the Bishop of Durham and the noble Baroness, Lady Brinton, used the phrase “trickle-down economics” as if it is somehow official government policy. I am afraid that, as my noble friend Lord Hannan said, this phrase is a fantasy of extremely fertile left-wing imagination. We have no such policy, as my noble friend Lord Bethell said. No Minister has ever used that phrase. I cannot be clearer: it is fantasy.

The noble Baronesses, Lady Smith of Basildon, Lady Bowles of Berkhamsted and Lady Fox of Buckley, discussed the perceived market reaction to the Government’s decisions. Of course I cannot get into commenting on specific financial market movements. They are determined by a wide range of international and domestic factors. We recognise that there has been some market volatility, which is to be expected as financial markets adjust to policy decisions. The Government do not have a preferred price or yield for assets in financial markets; the price is set by that market. I note, however, my noble friend Lord Lilley’s astute observation that sterling has recovered against the US dollar.

On corporation tax—again, this was mentioned by the noble Baroness, Lady Smith of Basildon—the Government have prioritised cancelling the corporation tax rise and announcing the permanent level of the annual investment allowance to support businesses and increase the productive capacity of the economy. Importantly, the decision on corporation tax is not a cut: it is not proceeding with a previously announced increase.

Meanwhile, the income tax rate cut is being brought forward to April 2023 instead of 2024. This is the first cut to the basic rate in 15 years, supporting over 30 million taxpayers to keep more of their own income. Taxpayers in England, Wales and Northern Ireland will all gain around £170 on average.

The noble Baroness, Lady Walmsley, made the point that freezing the personal allowance is bad for low-income households.

[Lord Forsyth of Drumlean (Con)]

I apologise for interrupting my noble friend the Minister at this late hour. Can he explain why, as a result of the cut in the basic rate of income tax, it is necessary to send money to Scotland to compensate them for English taxpayers paying less?

[Lord Callanan (Con)]

My noble friend is tempting me down a difficult road with the Barnett formula. I am sure that he will allow his point to stand, but I will not get into an argument about it at this late stage.

The Government equalised the primary threshold and the lower profits limit, the point at which employees and the self-employed respectively start paying class 1 and class 4 NICs, with the personal allowance at £12,570 from July 2022. This was the largest ever increase to a personal tax starting threshold, with an almost 30% increase. About 2.2 million working people have been taken out of paying NICs altogether, on top of the 6.1 million who already do not pay NICs.

The right reverend Prelates the Bishop of Durham and the Bishop of Derby both spoke on the importance of benefits, and I know that the House had a discussion on this earlier today. The next annual review of government-provided benefits is due to commence this autumn, and the Government will announce their outcome following this review.

Achieving economic growth is about a good deal more than just cutting tax, crucial though that is. The Government have announced a series of complementary steps to support that growth. As my noble friend Lord Wolfson of Aspley Guise rightly noted, supply-side reforms are key, and the Chancellor made a series of announcements to achieve those reforms.

The noble Lord, Lord Davies of Brixton, asked about IR35. The Government recognise that administering the reforms places a high burden on businesses that engage contractors. The Government’s overarching priority is growth, so now is the right time to simplify the tax system and reduce those burdens, so that businesses can focus once again on core profit-making activities.

The noble Lord, Lord Hendy, questioned the Government’s plans on strike legislation, which were also mentioned by my noble friend Lord Northbrook. On this, I agree with my noble friend Lord Dobbs that the Government should be on the side of the workers trying to get to work. I confirm that the Government will indeed legislate to implement our manifesto commitment on minimum service levels. Our plans will also ensure that staff in organisations that are in active industrial disputes always have the opportunity to resolve disputes when fair and meaningful pay offers are made from employers. The measure will make it simpler to end industrial disputes over pay and ensure that trade union leaders do not have undue influence in causing disruptive strike action through rejecting fair pay offers without the consent of their members.

The noble Lord, Lord Patel, noted the importance of capital investment, particularly in research, science and innovation. The Government are committed to their target to increase R&D investment to 2.4% of GDP across the economy, which I know that the noble Lord will welcome. At the 2021 spending review, the Government committed to £20 billion by the end of the SR period, £5 billion more than in 2021-22 and the largest ever sustained uplift in public research and development spending.

The noble Lord, Lord Inglewood, asked about the business rates offer in investment zones. Investment zones could benefit from a range of time-limited tax incentives over the next 10 years, such as reliefs on business rates, stamp duty, land tax and employer national insurance contributions. Businesses in designated areas and investment zones will benefit from 100% business rates relief on newly occupied and expanded premises.

Crucially, the Government understand that growth and sustainable finances go hand in hand and that maintaining fiscal discipline will provide the confidence and stability to underpin long-term growth. As the Chancellor said last week, there is no path to higher sustainable growth without fiscal responsibility.

The noble Lord, Lord Liddle, said that he did not believe that the numbers could be made to add up. The point of the medium-term fiscal plan, three weeks from now, is to do exactly that. My noble friend Lord Lamont rightly said that fiscal responsibility is not the enemy of growth and furthermore noted that the Chancellor has the resolve and determination to face these challenges.

Given the exceptional circumstances, we moved quickly to provide significant support for households and businesses in the first days and we are acting swiftly to set out a growth plan. The Chancellor has brought forward the medium-term fiscal plan and OBR forecast date to 31 October, alongside the publication of the medium-term fiscal plan. This reflects the Chancellor’s desire to provide clarity and certainty, by setting out a plan to get debt falling and by publishing a full economic and fiscal forecast.

The core economic mission of this Government is growth. We have a plan to achieve it. The Prime Minister promised that this would be a tax-cutting Government and we are keeping that promise. Most importantly, we promised to release the enormous potential of our great country, and that is what the growth plan does and what this Government are determined to deliver.

Motion agreed.

Horizon Europe

Lord Callanan Excerpts

Thursday 8th September 2022 Lords Chamber

[Viscount Stansgate]

To ask Her Majesty’s Government what assessment they have made about the United Kingdom’s participation in the Horizon Europe research programme.

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

My Lords, the Government remain ready to associate to Horizon Europe. We have entered into formal consultations with the EU, aiming to finalise the UK’s association. If the UK is unable to associate soon, we will be ready to introduce a comprehensive alternative programme that delivers many of the benefits of Horizon through international collaboration, end-to-end innovation, and a strong and attractive offer to encourage talented people to build their careers here in the UK.

[Viscount Stansgate (Lab)]

My Lords, I thank the Minister for his Answer, but I have asked this several times and there has been no progress whatever. We have not even had a Minister of Science during the crucial period of this summer. Does the Minister not realise that the uncertainty about this issue is running the very real risk of a brain drain? Surely the Minister wants to keep the best and the brightest in this country. Do the Government really want to sacrifice British science on the altar of the Northern Ireland protocol? Moreover, will the Minister accept that the Royal Society, major learned societies, Cancer Research UK and even this House’s own Science and Technology Committee make the point that a plan B is not the answer?

It is not the money but the irreparable damage to the collaboration between scientists around Europe and wider afield that is at risk. If the Government feel that there is a strong case for their position, perhaps the new Leader of the House could arrange a debate in government time to discuss this extremely important issue. We cannot call ourselves a science superpower unless we find a way to join Horizon Europe. What are the new Government going to do about this?

--- Later in debate ---

[Lord Callanan (Con)]

The noble Viscount is attacking the wrong target. We remain ready to associate to Horizon Europe at the earliest possible opportunity, in line with our agreement with the EU on the TCA. It is the EU that is preventing this agreement, which is why we have launched the dispute procedure. The noble Viscount is linking two entirely separate issues: the Northern Ireland protocol is a separate issue in a separate agreement. This is the EU’s fault; it is trying to hold science hostage under the banner of another issue. We remain ready to associate, so, however many times the noble Viscount asks me the question, he will get the same answer.

[Lord Clement-Jones (LD)]

My Lords, the creation of ARIA was an admission of the bureaucratic nature of the current UKRI research funding system. The Government must adopt plan B, which would be regrettable, and introduce a new research funding stream for international research co-operation. Will they commit to streamlining UKRI procedures to make them as flexible and generous regarding direct costs and innovation, and as start-up friendly, as current European funding? Surely it cannot be the Government’s intention to increase red tape if we are unable to remain in Horizon Europe.

[Lord Callanan (Con)]

I very much agree with the noble Lord; it is very much not our intention to increase red tape. We are not ready to give up on Horizon yet, but it is obviously regrettable that the EU does not want to finalise our association and abide by the agreements that it entered into. We have launched the dispute procedure mechanism as a last try to persuade it of the benefits of this co-operation. We have excellent co-operation in other areas, such as energy, where we are helping the EU out in its hour of need. So we hope that it will see sense and abide by the agreement that it entered into, but, as the noble Lord said, we have a plan B if that proves not to be the case.

[The Earl of Clancarty (CB)]

My Lords, the press release of 16 August announcing formal consultations with the EU uses much stronger words than the Minister has. It says:

“UK membership of Horizon Europe would be a win-win for both the UK and EU.”


Will this Government continue to support the words of the then Foreign Secretary, Liz Truss? Will they hold their nerve to achieve that goal, whatever temporary blockage there may be?

[Lord Callanan (Con)]

I stand completely by those words: it would be a win-win, and we want to do it. It would be to the benefit of the EU and the UK scientific community, and it is regrettable that the EU is refusing to finalise the agreement that it entered into.

[Lord Hamilton of Epsom (Con)]

My Lords, will my noble friend tell us why we cannot be associate members of the Horizon project, like Israel and Tunisia? Israel is not a member of the EU, and Tunisia is not even a member of the Eurovision Song Contest.

--- Later in debate ---

[Lord Callanan (Con)]

My noble friend makes a good point, as he often does. I am not sure that the Eurovision Song Contest is a sufficient precursor to Horizon Europe, but, to be serious, his point is very valid: other non-EU countries are associate members. We want to join; that was the agreement that we entered into, and I hope that the EU will see sense and abide by the agreement that it signed.

[Lord Anderson of Swansea (Lab)]

My Lords, surely the Government’s default programme is a second best. The Minister has said that it will deliver “many of the benefits” of the current programme. Where are the gaps, and what will not be delivered?

[Lord Callanan (Con)]

I am not sure that it is second best; it is an alternative. We have many scientific co-operation programmes with many other parts of the world; the EU is not the be-all and end-all of scientific co-operation. However, we think that there is a lot of value in Horizon Europe, which is why we agreed that we should join up. Of course, we are prepared to pay all the associated costs. That was the agreement that we entered into and we want to try to join, but we have a plan B if that proves impossible.

[Lord Patel (CB)]

My Lords, for a change, I start by congratulating the Government for appointing one of the best candidates as CEO of ARIA—well done. One key issue of the Horizon Europe programme—apart from us becoming a full member, which should be our aim—is the collaborations we develop with other scientists worldwide. If we do not become part of Horizon Europe, there is no strategy in the plan B to increase collaboration internationally for our scientists.

[Lord Callanan (Con)]

I thank the noble Lord for his kind words about the CEO of ARIA and completely associate myself with them. He makes an important point: we have many collaborations with other scientists across the world. We think that this is very valuable and we want to build on it, but there are many scientific institutions in the EU with which we would also like to co-operate through association to Horizon. Of course, we will look at alternatives and will certainly work with alternatives in other parts of the world.

[Baroness Garden of Frognal (LD)]

My Lords, subjects such as maths are crucial in ensuring that the UK achieves the Government’s ambition of becoming a science and technology superpower. The Minister has outlined a UK programme but that will not have the power of Horizon in collaborating internationally. How can we ensure that the UK remains attractive as a place for STEM experts to move to and work in, if our reputation and scientific capability suffer due to a lack of association with Horizon?

[Lord Callanan (Con)]

The main attraction of the UK in terms of collaboration with other parts of the world is our world-leading scientific community—which is why it happens now. We have a number of the best universities and researchers in the world. We are very proud that there are many people of other nationalities who want to come to the UK to continue their research programmes, and we have a considerable investment programme to enable that to happen. We want all that to continue and we will build on that, but we also want to work with our European colleagues, which is why we want to associate to Horizon Europe.

[Lord Cormack (Con)]

My Lords, we have a new Prime Minister and her words, when she was Foreign Secretary, have been quoted and my noble friend the Minister has endorsed them. We want to have a new beginning; we wish the new Prime Minister every possible success, for all our sakes. Would it not be a good idea if she were to write to the President of the European Commission reiterating what she said as Foreign Secretary and expressing the hope that we can build new relations with our former partners in the EU?

[Lord Callanan (Con)]

I am sure that the Prime Minister will be having many conversations with EU leaders and the European Commission. I am not sure that another letter would make a tremendous difference to the EU’s position on this; in my view, it is being incredibly unreasonable. We will continue to work with the EU. We have co-operation in a number of areas, so it is a win-win situation in which both sides benefit, and we want it to continue.

[Baroness Blake of Leeds (Lab)]

My Lords, innovation thrives on collaboration, as we have heard. Delaying resolving the relationship shows that the UK is not stepping up to face the challenges of the future. We must accept our responsibility in this relationship. We have heard that organisations such as the UK Dementia Research Institute are on course to become world leaders in the field, but they need the collaboration of the brightest and the best of Europe. What assessment has the Minister made of the impact that the uncertainty around the UK’s association with Horizon Europe is having on the UK’s research field?

[Lord Callanan (Con)]

There are some negative impacts: the current uncertainty is damaging for scientific co-operation. There are many researchers who want to get on with the job, and we have put in place transitional arrangements to help them in the meantime. We want all that co-operation to continue. The noble Baroness cites some good examples, and this is exactly why we want to associate to Horizon Europe. We call on the EU to do that and to finalise the agreements that it freely entered into and signed. I am sure that the House is united in wanting that to continue.

North Sea Gas

Lord Callanan Excerpts

Wednesday 7th September 2022 Lords Chamber

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

My Lords, Great Britain has 1.5 billion cubic metres of gas storage capacity, which equates to approximately five days of peak January demand. Energy security is an absolute priority for the Government, and therefore we welcome Centrica taking the necessary steps to reopen the Rough storage facility this winter, which is its commercial decision. Last week, the North Sea Transition Authority granted its approval to Centrica to open Rough. Centrica has also received approvals from the Health and Safety Executive and Ofgem.

[Lord Rooker (Lab)]

I thank the Minister for what I consider to be quite a positive Answer. However, does he agree that it is not alarmist to point out the bad decision of the then Chief Secretary, a former Shell employee, in 2017 to refuse the public contribution to maintaining the modest amount of gas storage in the Rough field? On the other hand, if it can be reopened this winter, Centrica was not telling the truth in 2017 about the safety and economic aspects of it. They cannot both be right. Is it not the case that we relied on the stock market and just in time, and this has cost the UK dear? We have a very low level of storage, as the Minister said, and Rough would give us an extra 10 days, compared to Italy which has 157 days. We are miles behind, and it is much better to have some security rather than the minimal amount that we have now. My final question is: can we stay part of the EU system for gas networks, if only for the fact that Ireland gets its gas via the UK?

[Lord Callanan (Con)]

The noble Lord has made a number of points that deserve an answer. First, it was a commercial decision for Centrica to close the Rough storage facility. Secondly, the reason that the UK has traditionally had lower levels of underground storage than the likes of Italy or Germany is precisely because 45% of our own capacity is from our own domestic resources, which is essentially a huge gas storage facility. We also have 20% of all the LNG unloading facilities in Europe, and in fact the UK has been taking the opportunity during the summer to help the EU, including Germany and other countries, to refill their storage capacities using our LNG import facilities, because they did not have enough of them. So it is a complicated picture, but energy security is a great priority for us, and we are well placed for it.

[Lord Bridges of Headley (Con)]

My Lords, I want to pick up on the final point that my noble friend just made and on the point that the noble Lord made in his question on the role of the interconnectors. I am sure that my noble friend will have read the Economic Affairs Committee report on energy which was published at the end of July. One of our main conclusions on the short-term issues was:

“There is no agreement in place between the UK and its European partners to manage energy supply emergencies. The Government should urgently seek an agreement with its … partners on energy cooperation.”


This concern has been echoed by many in the industry during the summer. Can my noble friend please tell us whether such an agreement is now in place and whether, as was pointed out earlier, the British Government will be sending a Minister to the emergency energy summit on Friday in Prague?

[Lord Callanan (Con)]

As I intimated in my previous answer, we are co-operating closely with the European Union, and as I said, throughout the summer, in the quiet months, the UK’s LNG terminals—we have 20% of the entire European capacity—have been working overtime precisely to help our European friends to refill their storage capacity in time for the winter months. Therefore, security is a top priority for us, and of course we work very closely with other suppliers such as Norway, with LNG suppliers, and with our European friends.

[Lord Teverson (LD)]

My Lords, it is incredible to me that Centrica, a private company, was just able to close our national gas storage facility without, it would seem, any consultation or intervention by the Government. What will stop that happening again in two or three years’ time?

[Lord Callanan (Con)]

We have received proposals from Centrica, which we are closely examining at the moment. I point out that the market in 2017 was in a very different position. A number of independent reports were produced by experts at the time, supporting that decision from Centrica. However, the situation is very different now, which is why it is now looking at reopening it.

[Lord McNicol of West Kilbride (Lab)]

My Lords, following on from that answer, I welcome the Government’s approach to reopening the gas storage facility in the North Sea. However, as the Minister just touched on, questions persist with regard to the safety of Rough wells, and these concerns, as he mentioned, are shared by many, including energy consultants and safety experts. This raises real concerns over the safety of reopening without extensive remedial work. Can the Minister say what measures the Government are putting in place to ensure the safety of both the facility and the workers, to make sure that they are protected?

[Lord Callanan (Con)]

As I said, the facility was closed in 2017 for commercial reasons, and that was not a decision for BEIS or Ministers at the time. The Government understand that Centrica is seeking all the necessary regulatory approvals to reopen the facility. The decisions to grant any and all approvals are of course taken by independent safety regulators; health and safety is their top priority.

[Baroness Worthington (CB)]

My Lords, we are in the process of discussing an Energy Bill. I am sure the Government are correct when they say they take energy security very seriously. However, we are 85% dependent on gas for heating our homes and we in Britain have some of the leakiest homes. Just because we produce 45% does not mean we will actually be able to afford to buy it, so we need more intervention. In the Bill, there is a power to intervene in the market to secure core fuels. However, that applies only to oil products: petrol and diesel. Is it time to consider gas as a core fuel?

[Lord Callanan (Con)]

Gas is clearly a very important fuel. As I said, our sources of supply are diverse. We have 45% from our own North Sea production; we have secure supplies from Norway; we have 20% of the entire EU capacity of LNG storage regasification facilities. So we are well served, but we are not complacent about these matters. We keep a very close eye on what is a fast-evolving situation and take energy security as our top priority.

[Lord Cormack (Con)]

My Lords, my noble friend Lord Bridges asked a very specific question about representation in Prague at the end of this week. My noble friend did not reply to that. Can he tell the House whether the UK will indeed be represented?

[Lord Callanan (Con)]

I do not know the answer to that question.

[Lord Watts (Lab)]

My Lords, is it not the case that it is not up to a private energy company to decide whether it provides a facility to safeguard British gas to the customers? It is the Government’s responsibility, and it is the Government who have failed to make sure that there is sufficient gas in case of an emergency.

[Lord Callanan (Con)]

We have not failed to make sure there is sufficient gas in case of emergency. As I just said, we get 45% of our supplies from our domestic sources; we have extensive LNG terminals; we have a good relationship with Norway, which has another part of the North Sea and supplies gas to the UK. We are much better served than the rest of the European Union in these matters.

[Lord Roberts of Llandudno (LD)]

Is the Minister really serious about this, and will what he advocates be in the plan which we receive tomorrow? There is so much concern, not only among ordinary families, who are desperately concerned in many cases, but among businesses. Only this morning, I had a message from a local businessman in my town of Conwy. He said that the amount his energy is going to cost this coming year is six times what it was in the past year, from £148,000 to £790,000. When we have businesses that are going to breach nearly £1 million to keep their business going, no wonder there is great consternation. What will the plan be about tomorrow?

[Lord Callanan (Con)]

I totally agree with the noble Lord. Of course, the issue of energy security is completely different from the issue of being able to afford it, and we are all, of course, all too painfully aware of the tremendous increases in gas prices in particular that have taken place recently. There will be important announcements tomorrow. The noble Lord will understand that I cannot tell him what they are at this stage, but he will not have long to wait to find out.

[Baroness Altmann (Con)]

My Lords, following on from the questions of my noble friends Lord Bridges and Lord Cormack, I ask my noble friend to relay back to his department the concerns that have been expressed about the UK’s potential non-attendance at the meeting on Friday, and perhaps report back to interested Peers whether it is possible for the UK to be represented in the middle of an energy crisis in a meeting that is so important?

[Lord Callanan (Con)]

To be honest, this Question was the first I have heard of this meeting. I do not know the answer. I do not even know if we have been invited to it, but I will find out.

[Lord Sikka (Lab)]

My Lords, the Rough gas storage facility was closed because the Government refused to subsidise the repairs, which means that the Government made the decision. I therefore have two questions for the Minister. First, was a cost-benefit analysis conducted from an energy security and public interest perspective? If so, will he now publish it?

[Lord Callanan (Con)]

Indeed, the reports written at the time were published. There was one report by Cambridge academics studying precisely this matter. It is easy to be wise after the event. If that facility had been retained, the cost would have gone on to gas bill payers—Peers in many parts of the House are criticising us for the high level of prices—and that would have been an additional cost. That was the decision taken at the time. The world looks very different now, so we have received proposals from Centrica, and we are closely examining them. These are important matters; we take the security of supply incredibly seriously; and we will look at it.

Energy Bill [HL]

Lord Callanan Excerpts

Committee stage
Wednesday 7th September 2022 Lords Chamber

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

I thank the noble Lord, Lord Teverson, for his kind invitation to address noble Lords on this subject, and I thank others who have contributed to the debate.

Let me start with Amendment 40, tabled by the formidable Scottish duo of the noble Baroness, Lady Liddell, and the noble Lord, Lord Foulkes. He is sadly not with us today, which is a shame: he always adds to the jollity of the proceedings, but I am sure he will be back with us soon. This amendment seeks to ensure that the conferral of functions on persons by revenue support regulations is appropriately delegated.

Clause 57 sets out the Secretary of State’s power to make provision in regulations about revenue support contracts, including the funding of liabilities and costs in relation to such contracts. These are referred to as, as has been said, as the revenue support regulations. Clause 57(7) states that

“revenue support regulations may confer any function on any person.”

This is intended to enable persons other than a revenue support counterparty, allocation body or a hydrogen levy administrator to take on a role in the delivery of revenue support contracts and related funding. As with revenue support regulations, such functions would be limited to those about revenue support contracts, including the funding of liabilities and costs in relation to such contracts.

Let me make it clear to the House that Clause 57(7) absolutely does not provide the Secretary of State with a general power to confer any function on any person, outside of the scope of revenue support regulations. It is also worth noting that the selection by the Government of any person to undertake such functions would be subject to principles of public decision-making. The Government are, of course, duty bound to take only relevant considerations into account when making a decision.

I move on to Amendments 42, 44 and 64, from the noble Lord, Lord Lennie, and the noble Baroness, Baroness Blake, and spoken to by the noble Lord, Lord Teverson. These amendments seek to ensure propriety when conducting the designation exercise and when transferring any relevant property, rights and liabilities. Of course, it goes without saying that I too support ensuring the upmost standards for those wishing to fulfil the role of hydrogen production counter- party.

The Government anticipate that the Low Carbon Contracts Company Ltd, or LCCC, which is the existing counterparty for contracts for difference and the planned counterparty for the dispatchable power agreement, will in fact be the counterparty for the low-carbon hydrogen agreement, subject of course to successful completion of administrative and legislative arrangements. That is also the case for the industrial carbon capture contracts. In taking the decision to proceed with the LCCC as the counterparty to the low-carbon hydrogen agreement, the Secretary of State considered, among other things, its ability to deliver the required functions and experience and track record in contract management. These considerations would of course be made on any future decisions, which would also be subject, as I have said, to the normal principles of public decision-making.

It is worth pointing out—I suppose that this is the Government declaring an interest—that the LCCC is wholly owned by the Secretary of State for BEIS and is governed by its articles of association and a framework document setting out the relationship with the Secretary of State and its guiding principle.

The justification of the noble Lord and the noble Baroness for the inclusion of “fit and proper” was its apparent precedent in what was the National Security and Investment Bill, yet this phrasing does not in fact appear in the Act as made. Therefore, with the reassurances and information that I have been able to provide to noble Lords, I hope that the noble Baroness will feel able to withdraw her amendment.

[Baroness Liddell of Coatdyke (Lab)]

Given that explanation, I am prepared to withdraw the amendment.

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

We come to Amendment 41. Lord Callanan?

[Lord Callanan (Con)]

Moved formally. No! I will speak to it.

[Baroness Bloomfield of Hinton Waldrist (Con)]

That was my fault.

[Lord Callanan (Con)]

You just can’t get the Whips to support you properly nowadays, can you?

[Baroness Bloomfield of Hinton Waldrist (Con)]

Thanks.

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[Lord Callanan (Con)]

I am only joking. My noble friend is brilliant at the job.

Amendment 41

Moved by

[Lord Callanan]

41: Clause 57, page 52, line 21, at end insert “or (Enforcement).”
Member's explanatory statement
This amendment provides for regulations under new clause (Enforcement) to be subject to the affirmative procedure.

[Lord Callanan (Con)]

I will speak to government Amendments 41 and 63 standing in my name. Amendment 63 will enable the Gas and Electricity Markets Authority and the Northern Ireland Authority for Utility Regulation to enforce hydrogen levy requirements imposed on relevant Great Britain and Northern Ireland market participants respectively.

The existing enforcement provisions in the Bill enable regulations to make provision for the levy administrator to, for example, issue notices and charge interest on late payments in respect of market participants who default on levy payments. Amendment 63 complements the existing enforcement provisions. Crucially, it ensures that regulations can make provisions for more robust forms of enforcement and enables enforcement under the terms of the licences held by market participants obliged to pay the levy, such as the possibility of licence revocation. It is critical that the levy is supported by a suite of enforcement measures. This will help reduce the risk of defaults on levy payments and help ensure that the levy administrator can collect the money required to fund the hydrogen business model and cover related costs.

Amendment 41 ensures that regulations made under this new clause will be subject to the affirmative resolution procedure, to ensure sufficient parliamentary scrutiny of these more robust enforcement arrangements. Therefore, I hope they will be acceptable to the House. I beg to move.

[Lord Lennie (Lab)]

My Lords, these government amendments are evidence of the rather chaotic state of the Bill as it has come to us. It is long—300-plus pages, 13 parts, et cetera—and missing this from the original drafting is an oversight by the Government that needs some explanation. Having said that, the amendments allow for an enforcement provision under the new regulations and for these to be subject to the affirmative procedure. We welcome that scrutiny and the ability to enforce regulations that are made. These amendments will also allow revenue support regulators to make provision for the relevant requirements found in the pre-existing enforcement regimes win the Gas Act 1986 and the Electricity Act 1989, as well as, as the Minister said, regulations regarding Northern Ireland. I would be interested to know when the existence of these pre-existing requirements was discovered. I look forward to his response.

[Lord Callanan (Con)]

The noble Lord is correct that a lot of drafting work went in. There is always limited OPC drafting time in government. It is regrettable that these clauses have had to be added, but I hope that I have provided sufficient explanation for them. The detailed levy design is pending, of course, but they include the enforcement arrangements for the levy. It is crucial that we allow for regulations to make provision for a range of enforcement measures. This provision simply allows regulations to enable the Gas and Electricity Markets Authority and the utility regulator to use their existing enforcement powers to ensure that relevant market participants comply with the obligation to pay the levy. Participants in the energy market are already very familiar with these arrangements.

Amendment 41 agreed.

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[Lord West of Spithead (Lab)]

My Lords, I support the amendment in the name of the noble Lord, Lord Moylan, which relates to resilience. We are very bad at spending money on resilience. The Treasury hates to spend money on resilience, as I know from my time as a Minister.

[Lord Callanan (Con)]

It hates to spend money full stop.

[Lord West of Spithead (Lab)]

Well, yes, it hates to spend money full stop, but especially on resilience. Whether it is the loss of our GPS system and how we would counter that or PNT, there is a whole raft of areas where it is really unwilling to move and spend money even though these things are crucial. In this case, it is extremely important that we have the ability to store gas as we move into the future. I agree totally with the noble Lord, Lord Moylan, that the amount we have to store may vary quite dramatically.

Earlier, the Minister spoke about how we have infrastructure built to bring LNG into this country. We certainly do—I was heavily involved in ensuring that we got the right ships from the North Dome in Qatar to Milford Haven and setting up the infrastructure there. It was meant to provide 15% to 30% of our LNG. That was fine when people were not outbidding us for that LNG. That is the problem now; we cannot guarantee that that LNG will come to us, so we need some form of resilience. I believe that resilience should be our having some gas storage capability.

I have to get a naval thing in. It is interesting that, between the two wars, we forced the Treasury to ensure that our then 850-ship Navy—it is a bit smaller now—had sufficient fuel stored in this country to fight at war rates for six months. Someone in government had calculated it. We have to have a calculation; 25% might be wrong, but there is a requirement for some storage. We need to think very hard and the Government need to come up with a view from their experts on how much that should be. It may dwindle in time, but we certainly need it in the near term as quickly as possible. I very strongly support Amendment 225.

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[Lord Lennie (Lab)]

My Lords, the amendments from the noble Lord, Lord Oates, are very welcome and they plug a gap in the Energy Bill. Amendment 50 facilitates the changes proposed by allowing the Secretary of State to

“designate the person to be a counterparty for long duration energy storage revenue support contracts.”

Amendment 51 introduces a new clause which allows the Secretary of State to

“direct a long duration energy storage counterparty to offer to contract with an eligible person”.

Clauses 59, 61 and 63 already allow designation of counterparties for transport and storage, hydrogen production and carbon capture revenue support contracts, and Amendment 50 simply replicates this for long duration energy storage. Similarly, Clauses 60, 62 and 64 already allow the Secretary of State to direct counterparties to offer to contract, and Amendment 51 replicates this for long duration energy storage.

The amendments define long-duration energy storage revenue support contracts as being

“between a long duration energy storage counterparty and the holder of a licence under section 7”

and, as ones

“entered into by a long duration energy storage counterparty in pursuance of a direction given to it under section 60(1).”

This fills a big gap for long-duration energy storage. According to the Government, longer-duration storage—access across days, weeks and months—could help to reduce the cost of meeting net zero by storing excess low-carbon generation for longer periods of time, thereby helping to manage variation in generation, such as extended periods of low wind. This in turn could reduce the amount of fossil-fuel and low-carbon generation that would otherwise be needed to optimise the energy output from renewables.

Long-duration energy storage includes pumped storage as well as a range of innovative new technologies that can store electricity for four hours to supply firm, flexible and fast energy that is valuable for managing high-renewables systems. Introducing long-duration energy storage in large quantities in Britain by 2035 can reduce carbon emissions by 10 megatonnes of CO₂ per annum, reduce systems costs by £1.13 billion per annum and reduce reliance on gas by 50 TWh per annum. That seems to me worth consideration in this Bill.

Amendment 225 in the name of the noble Lord, Lord Moylan, which has general support around the House, requires the Government to produce a strategy for the storage of gas for domestic consumption. This would see the construction and operation of gas storage facilities capable of holding 25%, although it could be more—it could be 100%—of forecast domestic consumption each year beyond 2025. While agreeing that UK gas storage is currently small, which may have left us exposed to higher prices and shortages thus far, is it the solution to the long-term energy supply problems that we may face? It may well be that we need an immediate expansion of gas, but whether it is the long-term solution to our energy supply is open to some question. The UK currently stores enough gas to meet demand over four or five winter days, which is clearly not enough. But the new Chancellor said, when he was the Business Secretary, that the answer to mitigating a quadrupling of the gas price in four months was to get more diverse sources of supply, and more diverse sources of electricity, through non-carbon sources. So there is some doubt about the long-term viability of increasing gas storage.

Amendment 240 from the noble Lord, Lord Foster, would establish a new clause to store energy generated by solar panels in the list of energy-saving materials that are subject to zero-rate VAT. He had the example of his friend in the south-west. Modelling from Cornwall Insight’s view of the GB power market out to 2030 has shown that between 2025 and 2030 the Government must spend almost one-fifth of their total energy technologies investment, which includes solar, wind, nuclear and carbon capture and storage, on energy storage batteries, if we are to meet renewable targets and stabilise the energy market. Latest data estimates that almost 10% of grid capacity will be provided by battery storage by 2030, at an estimated cost of £20 billion. So, considering both the need and the cost of this, the amendment seems a sensible proposal to encourage the market to take up some of the burden.

[Lord Callanan (Con)]

I thank all noble Lords for participating in what has been a fascinating debate on an important subject, very much building on the discussion that we had earlier this afternoon. I shall come on to the issue of gas storage—a popular topic of the day—a bit later.

I start with Amendments 50 and 51, tabled by the noble Lord, Lord Oates. Long-duration energy storage covers a wide range of technologies, and the Government are looking at the need for revenue support for these separately, as they all face different challenges and solve different problems. While I commend the noble Lord’s intentions, I put it to him that these amendments are premature at this stage.

In the case of electricity storage, I reassure the noble Lord that we are committed to developing policy enabling investment for large-scale, long-duration electricity storage by 2024, as we have set out in our response to the call for evidence. As noted by the noble Lord, Lord Oates, we recognise that these technologies face significant barriers to deployment under the current market framework, due to their long build times, the high upfront costs, and the lack of forecastable revenue streams. Similarly, in the case of hydrogen storage, the 2021 UK hydrogen strategy set out our ambitions in this area.

More recently, and in recognition of the important role that hydrogen storage is expected to play in the hydrogen economy, we committed in the 2022 British energy security strategy to design hydrogen transport and storage business models by 2025. Indeed, we published a consultation on these matters in August. It is my contention that adding these clauses to the Bill now would prejudge the outcomes of the policy development which, as I hope noble Lords recognise, is already well under way.

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[Lord Teverson (LD)]

That is moving back from what I understood. I understood there had been an agreement, or is it just that the facility has been licensed? Is that how far it has got, and so a commercial agreement has still to be made? Is that where we are?

[Lord Callanan (Con)]

As I said at OQs this afternoon, licences have been granted by Ofgem, by the regulatory bodies, because the safety and security of the facility is important. Centrica has taken a commercial decision to open part of the storage facility for this winter, and it has submitted other plans for our consideration, which we are doing. I apologise to the noble Lord, but I can go no further than that at the moment. As soon I have further information, and we expect progress in the near future, I will inform the noble Lord and the rest of the Committee.

[Lord Teverson (LD)]

I thank the Minister for that information, but it sounds to me like Centrica is conducting a very hard negotiation with the Government, maybe at the security expense of the country—I do not know.

[Lord Callanan (Con)]

I will leave that as a comment; there is nothing I can reply to on it. When I have further information, I will update the Committee.

The commitment proposed by my noble friend Lord Moylan to have in storage gas equivalent to 25% of forecast domestic consumption by 2025 is extremely ambitious. It is also horrendously expensive to do and, I submit to the Committee, unnecessary. The Government fully recognise the importance of gas storage, as I said, and officials continue to work on the future role that it can play in the clean energy landscape, particularly as gas production, as a number of noble Lords have said, can start to decline. But, of course, the fact that we get 45% of our production from our own continental shelf is, in effect, a giant gas storage facility and that is why we have traditionally had much less than continental countries which do not have those advantages. There is an integrated market—that is correct—and both sides benefit from it. As I said, the interconnectors over this year have been operating massively in the direction of the rest of continental Europe from the UK.

I think I have answered all the questions that were raised about gas storage facilities.

[Baroness McIntosh of Pickering (Con)]

I am sure it is on the departmental website, but do we know how much gas is supplied by interconnectors from Norway, and how much is supplied by tankers from Dubai and other countries in the overall scheme of things?

[Lord Callanan (Con)]

When my noble friend says “tankers”, I take it she means LNG tankers. I forget the exact figure, but we get 45% from our own domestic capacity and about 3% to 4% through interconnectors, so I guess the rest will be made up from LNG shipments. We have three LNG gasification terminals in the UK. Those figures are off the top of my head; I will correct them if they are not right.

Turning to the amendment in the name of the noble Lord, Lord Foster, I am sure he expects the reply that he is going to get. As he will be well aware, changes to tax policy are considered as part of the Budget process. As Treasury officials are always very keen to tell me whenever I put forward such proposals, they have lots of proposals from people for exemptions from various taxes but not many proposals for how to make up the revenue that would be lost from them. I am sure that the Chancellor will want to take that fully into consideration in the context of the Government’s wider fiscal position. I fully take on board the points that the noble Lord made. The Government keep all taxes under review and always, the Treasury tells me, welcome representations to help inform future decisions on tax policy.

[Baroness Worthington (CB)]

In case there are any Treasury officials listening or, indeed, reading Hansard, I suggest that one form of new tax would be on the trading of fossil fuel commodities. This is a huge source of revenue to the suppliers of fossil fuels into the market, and the commodity trading markets is a very good place to look for taxation revenue.

[Lord Callanan (Con)]

I thank the noble Baroness for her suggestion. The Treasury is not normally shy in coming forward with proposals for extra taxes if it thinks it can get away with it. Of course, we have already imposed the excess profits levy on a number of producers in the UK; indeed, those producers already pay increased rates of corporation tax. We must be careful that we do not disincentivise investment. Putting aside the wider politics of it, which we all understand, I am sure that everybody is aware that we need tens of billions of pounds of investment into existing oil and gas facilities. I welcome the support of the noble Lord, Lord Teverson, for the continued production of UK gas; it is an important transition fuel and I hope he will manage to convince some of his Liberal Democrat colleagues to support us in this. We do need gas in the short term, but many of those same companies are investing many billions of pounds also in offshore wind and other renewable energy infrastructure, so we want to be careful not to disincentive them too much from that. I am sure the Treasury will want to take into account all these helpful considerations as to how it can increase its tax base.

In conclusion, I am grateful to noble Lords for their amendments on these topics. I hope I have been able to provide at least some reassurance to some people on their amendments and that they will therefore feel able not to press them.

[Lord Oates (LD)]

I thank the Minister for his reply. On the tax treatment of batteries for solar power, I heard the Prime Minister at Prime Minister’s Questions today say on a number of occasions, “What I am about is cutting tax”, so perhaps he could suggest to her that this is one of the first tax cuts she could make.

On long-duration storage, the Minister made the point that there is a wide range of technologies, some of which are innovative, and the Government need to consider them. As I said in moving my amendment, that is acknowledged, but there are some that are not innovative: they are proven and effective and we need to get on with them. I hope the Minister can find a way of addressing this, because we will come back to it. The Government need to find a way, whether it is through specific pathfinder pilots or whatever it is, to get on with some of the things that need to happen now. The Minister said that it was premature at this stage to come forward with this stuff. If he talked to the project managers of Coire Glas, I think they would tell him it is not premature at all; in fact, it is desperately needed. They have a project ready to go, but they have no revenue model. We know we need it, the Government acknowledge in their consultation on long-duration storage that we need to massively ramp this up, so we really need to get on with it. I am afraid the Minister did not really address that.

I have one final question for the Minister. He said we will have the solution “by 2024”. Can he confirm that that means we will have the revenue models by 1 January 2024? There is a big difference between “by 2024” and during 2024. The industry is very worried that, when it has pressed the department on this, it has been given no assurance that it actually means “by 2024” and that it could be by the end of 2024. Can the Minister clarify that, in writing perhaps, to me and other Members of the Committee? These are critical things. We just have to get on with doing the things that we know how to do. There are lots of things that we do not know how to do. I beg leave to withdraw my amendment.

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[Lord Teverson (LD)]

My Lords, I think we are all trying to achieve the same thing here. As the noble Baroness, Lady Blake, said, maybe we need to take this forward as a way to do it. The cost to consumers is absolutely central at the moment, and this is not a short-term thing—it is at least medium term. Later we will come to an amendment which says we should repeal the Nuclear Energy (Financing) Act, which was all about raising costs to consumers in the short term and has nothing to do with nuclear power otherwise.

In my amendment, I am trying to do something very similar to what has already been debated: if we are going to accept this levy—we know levies are always very contentious when implemented in terms of who has to pay for them and who gets the benefits from them, which leads to a lot of argument—it is quite clear that for hydrogen there is only a very limited sector of organisations, people and population who will actually benefit from it. In its own way, my amendment seeks to prevent other consumers who are not benefiting from hydrogen having to pay for that investment.

It is very much in line with other Members’ amendments and it is absolutely fundamental to the messages that we as a Parliament, and the Government, are putting out at the moment to consumers and company users of energy. Let us make sure that, if we have this levy, it is kept to those who benefit from hydrogen rather than those outside who do not.

[Lord Callanan (Con)]

I thank the noble Lords, Lord Lennie and Lord Teverson, and the noble Baronesses, Lady Worthington and Lady Blake, for their amendments relating to the hydrogen levy provision. Before turning to the amendments, let me make the general point that these provisions in the Energy Bill will not, as all noble Lords are aware, immediately introduce this levy; they will only enable government to introduce the levy later through secondary legislation.

I will start with Amendments 52, 54 and 62 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. Amendments 52 and 54 seek to limit the energy market participants that could be obliged to pay any future hydrogen levy to gas shippers only. The Government intend that the levy would initially be placed on energy suppliers, and it will operate in a similar way to the existing levy schemes, where revenue support is funded through energy supplier obligations, such as the supplier obligation that funds the current contracts for difference regime. That is because these funding mechanisms are well understood by the private sector and have been extremely successful. The Government consider that establishing a similar levy would provide investors and developers with confidence to invest in low-carbon hydrogen production projects.

The option to levy gas shippers has been included with the intention to allow for a greater range of options for future levy design. The Government anticipate that the costs of any future levy on gas shippers would be passed through the energy supply chain and ultimately on to energy users, in a similar way to existing supplier obligations. It is unlikely therefore that these amendments would have the effect of preventing costs associated with the levy being passed on to households.

I turn to Amendment 62, which seeks to guarantee the return of overpayments of the levy to energy customers. The Government’s intention, and our expectation, would be that, in the event of overpayment by relevant market participants, those sums would be returned to market participants, who in turn should then pass them on to their customers.

Amendment 53, tabled by the noble Lord, Lord Teverson, seeks to ensure than an obligation to pay a hydrogen levy would, where possible, be placed only on those who would directly benefit from the low-carbon hydrogen production funded by the levy. Low-carbon hydrogen could support decarbonisation across the economy, which could benefit gas and electricity customers generally.

The powers that we have in the Bill provide options for where a hydrogen levy might be placed in the energy value chain, enabling future regulations to make provisions requiring one or more descriptions of gas suppliers, electricity suppliers and/or gas shippers to pay the levy. The Government have not yet reached a decision regarding which types of market participants will be obliged to pay the levy. That decision will be taken in due course and will no doubt be discussed in our Lordships’ House during the course of the secondary legislation that would be required to implement it. The decision will take into account a wide range of considerations, including but not limited to considerations related to fairness, which I know are the focus of the amendments tabled by the noble Lords. Given the Government’s approach to policy development on this levy, I hope that noble Lords recognise the amendment is unnecessary.

I turn to Amendments 55, 56 and 57, tabled by the noble Baroness, Lady Worthington. Amendment 55 seeks to ensure that an obligation to pay a hydrogen levy administrator could not be placed on electricity suppliers. I would contend that it is crucial that the provisions in the Bill allow for a range of options for where the levy might be placed to help enable the Government to future-proof the levy over the longer term and accommodate changes to the wider energy market.

As I alluded to earlier, we expect low-carbon hydrogen to play an important role in decarbonising the electricity sector. This provides support to the case for including electricity suppliers as a possible point of obligation for the levy. I understand the concern expressed by the noble Baroness and, if she will allow me, I will take this away and possibly revisit it at Report, but I hope she will not press her amendment.

[Baroness Worthington (CB)]

I am grateful for the Minister’s response. I have no doubt that hydrogen will have a role to play, but it is more likely to go into fertiliser production or long-distance fuels for shipping and aviation. The provisions being taken here do not allow for it to be applied to the sectors that consume fossil fuels—gas obviously covers fertilised gas. This needs to be thought through in relation to where hydrogen will most likely be needed. It will play a tiny role in decarbonising electricity, if at all, because there are so many other ways of doing it more cheaply and more efficiently.

[Lord Callanan (Con)]

I understand the point made by the noble Baroness. I have also seen the models of where it is most likely that hydrogen would be used, and I have considerable sympathy for many of the points that she made. As to the where it will be used, it will clearly be in industrial processes and heavy-goods transportation. These would be more likely uses than home heating or decarbonisation, but it would possibly play a role. Nevertheless, as I said, I have taken note of what has been said in the Committee and understand the points that have been made. If the noble Baroness allows me, I will take them away to look at, and possibly revisit them at Report.

Amendment 56 seeks to impose restrictions on when the hydrogen levy can be introduced to fund the hydrogen business model. This will help to unlock potentially billions of pounds worth of investment in hydrogen that we need across the UK. The Government are committed to ensuring that long-term funding is provided through the hydrogen business model, and the provisions in the Bill do not require the Government to introduce the levy by a particular date. We do not expect the levy to be introduced any time before 2025, and so we do not expect it to have any impact on consumer bills before then, at the earliest. Decisions regarding when to introduce the levy will take into account wider government policies and priorities, including considerations related to energy bill affordability, which is always at the forefront of our considerations.

The first set of regulations under Clause 66, establishing the levy, will also be subject to the affirmative resolution procedure, so we would fully expect Parliament to exercise its role, and particularly your Lordships’ House to scrutinise how the Government intend to exercise those powers.

Amendment 56 would, in my view, introduce restrictions that are unnecessary, given the Government’s approach to decisions related to when to introduce the levy and the parliamentary scrutiny requirements that would be associated with any relevant secondary legislation.

Amendment 57 seeks to protect consumers by introducing a requirement for the Secretary of State to publish a specific consumer impact report before making regulations under Clause 66, establishing a hydrogen levy. As I mentioned, the parliamentary procedure for the first set of regulations that establish the levy will help ensure that the levy receives sufficient scrutiny from Parliament. Crucially, I can tell the Committee that it is already the Government’s intention to publish an impact assessment alongside the draft regulations made under Clause 66. I hope noble Lords will recognise that the amendment is unnecessary and feel able to not press their amendments.

[Baroness Blake of Leeds (Lab)]

I thank the noble Lord for his comments and welcome, as we all do, the commitment to revisit one of the amendments from the noble Baroness, Lady Worthington. We look forward with interest to that. However, on some of the other aspects, there will be conversations between now and Report, and I am fairly confident that we will come back to discuss what is, in our view, a really important area. With those comments, I beg leave to withdraw the amendment.

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Moved by

[Lord Callanan]

63: After Clause 77, insert the following new Clause—
“Enforcement
Enforcement(1) Revenue support regulations may make provision—(a) for requirements imposed under the regulations on—(i) a gas supplier who holds a licence under section 7A(1) of the Gas Act 1986, or(ii) a person who holds a licence under section 7A(2) of that Act (gas shipper),to be enforceable by the Gas and Electricity Markets Authority as if they were relevant requirements within the meaning of sections 28 to 30O of that Act;(b) for requirements imposed under the regulations on an electricity supplier who holds a licence under section 6(1)(d) of the Electricity Act 1989 to be enforceable by the Gas and Electricity Markets Authority as if they were relevant requirements within the meaning of Part 1 of that Act;(c) for requirements imposed under the regulations on—(i) an electricity supplier who holds a licence under Article 10(1)(c) of the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231 (N.I. 1)), or(ii) a gas supplier who holds a licence under Article 8(1)(c) of the Gas (Northern Ireland) Order 1996 (S.I. 1996/275 (N.I. 2)),to be enforceable by the Northern Ireland Authority for Utility Regulation as if they were relevant requirements within the meaning of Part 6 of the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6)).(2) References in subsection (1) to enforcement include enforcement under the terms of a licence mentioned in any of paragraphs (a) to (c) of that subsection.”Member's explanatory statement
This amendment enables revenue support regulations to make provision about the enforcement of requirements imposed by the regulations.

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Moved by

[Lord Callanan]

65: After Clause 81, insert the following new Clause—
Modifications of licences etc
(1) The Secretary of State may modify—
(a) a condition of a particular licence under section 6(1)(b) of the Electricity Act 1989 (transmission licences);
(b) the standard conditions incorporated in licences under section 6(1)(b) of the Electricity Act 1989 by virtue of section 8A of that Act;
(c) a document maintained in accordance with the conditions of licences under section 6(1)(b) of the Electricity Act 1989, or an agreement that gives effect to a document so maintained.
(2) The Secretary of State may modify—
(a) a condition of a particular licence under section 7 of the Gas Act 1986 (licensing of gas transporters);
(b) the standard conditions incorporated in licences under section 7 of the Gas Act 1986 by virtue of section 8 of that Act;
(c) a document maintained in accordance with the conditions of licences under section 7 of the Gas Act 1986, or an agreement that gives effect to a document so maintained.
(3) The Secretary of State may modify—
(a) a condition of a particular licence under Article 10(1)(b), (bb) or (d) of the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231 (N.I. 1)) (transmission, distribution or SEM operator licences);
(b) the standard conditions of licences under Article 10(1)(b), (bb) or (d) of that Order;
(c) a document maintained in accordance with the conditions of licences under Article 10(1)(b), (bb) or (d) of that Order, or an agreement that gives effect to a document so maintained.
(4) The Secretary of State may modify—
(a) a condition of a particular licence under Article 8(1)(a) of the Gas (Northern Ireland) Order 1996 (S.I. 1996/275 (N.I. 2)) (licences to convey gas);
(b) the standard conditions of licences under Article 8(1)(a) of that Order;
(c) a document maintained in accordance with the conditions of licences under Article 8(1)(a) of that Order, or an agreement that gives effect to a document so maintained.
(5) The powers conferred by subsections (1) to (4) may be exercised only for the purpose of facilitating or supporting enforcement of, and administration in connection with, obligations under regulations within section 66 (including facilitation and support by way of allowing or requiring the provision of services).
(6) Provision included in a licence, or in a document or agreement relating to licences, by virtue of any power under subsections (1) to (4) may in particular include provision of a kind that may be included in revenue support regulations.
(7) If under subsection (1) or (2) the Secretary of State makes modifications of the standard conditions of a licence, the GEMA must—
(a) make the same modification of those standard conditions for the purposes of their incorporation in licences of that type granted after that time, and
(b) publish the modification.
(8) If under subsection (3) or (4) the Secretary of State makes modifications of the standard conditions of a licence, the Northern Ireland Authority for Utility Regulation must—
(a) make the same modification of those standard conditions for the purposes of their incorporation in licences of that type granted after that time, and
(b) publish the modification.
(9) Before making a modification under this section, the Secretary of State must consult—
(a) the holder of any licence being modified, and
(b) such other persons as the Secretary of State considers it appropriate to consult.
(10) Subsection (9) may be satisfied by consultation before, as well as by consultation after, the passing of this Act.
Member’s explanatory statement
This new clause and new clause (Section (Modifications of licences etc): supplementary) confer power to modify certain licence conditions, industry codes etc for purposes related to the enforcement of the hydrogen levy.

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[Lord Callanan (Con)]

My Lords, in moving Amendment 65 I shall speak also to Amendments 66, 147, 149 and 190 standing in my name. These amendments will allow the Secretary of State to modify the licences of certain gas and electricity market participants in Great Britain and Northern Ireland. They will also allow the Secretary of State to modify documents maintained in accordance with these licences, such as industry codes, or agreements that give effect to such documents. The Secretary of State will be able to make such modifications only for the purpose of facilitating or supporting enforcement of, and administration in connection with, hydrogen levy obligations.

As I have said, decisions on the detailed design of the levy are pending. However, it is likely that persons other than the levy administrator will need to perform functions, provide services, and/or provide information and advice that support and facilitate the administration and enforcement of the levy. This power is required in order that the Secretary of State can modify relevant licences and codes to support and facilitate the administration and enforcement of the levy. In particular, it is required so that the Secretary of State may make modifications to support or facilitate persons who are parties to relevant industry codes to take on roles related to the levy’s administration and enforcement.

I can tell the Committee that there is precedent for this type of provision, with similar powers contained in the Energy Act 2013 and the recent Nuclear Energy (Financing) Act 2022. Provisions in the Energy Act 2013 were used to make licence and code modifications in relation to the contracts for difference regime. This power will help future-proof the levy, enabling the Secretary of State to implement licence or code modifications in order to accommodate any future changes to the levy design.

I can reassure your Lordships that these amendments of course include a requirement for the Secretary of State to consult the holder of any licence being modified and such other persons as the Secretary of State considers it appropriate to consult before making any modification. This will help ensure that relevant bodies are engaged in any potential modifications.

In addition, before making modifications under this power, the Secretary of State must lay a draft of the modifications before Parliament, where they will be subject to a procedure analogous to the draft negative resolution procedure used for statutory instruments. This also allows for additional scrutiny for any proposed modifications under this power. I beg to move.

[Baroness Blake of Leeds (Lab)]

Briefly, I thank the Minister for that explanation. I am sure, looking back at comments made earlier this afternoon, that the team opposite cannot be happy with the number of government amendments that are coming through on the Bill at this stage—I hope that will be taken up on a serious note on this and other Bills that have come forward.

The only slight question I have is that we talk about consultation as though everyone understands exactly how it happens and everyone is happy with the way it is done. Is it possible to be slightly more specific about who else might be consulted apart from the owner of the licence? I would also like some reassurance around the openness and transparency of a process to make sure that all parties are aware of any changes made in the future.

[Lord Callanan (Con)]

I am happy to reassure the noble Baroness that the relevant consultations will of course take place on any changes made.

Amendment 65 agreed.

Moved by

[Lord Callanan]

66: After Clause 81, insert the following new Clause—
“Section (Modifications of licences etc): supplementary(1) In this section “relevant power” means a power conferred by any of subsections (1) to (4) of section (Modifications of licences etc).(2) Before making modifications under a relevant power, the Secretary of State must lay a draft of the modifications before Parliament.(3) If, within the 40-day period, either House of Parliament resolves not to approve the draft, the Secretary of State may not take any further steps in relation to the proposed modifications.(4) If no such resolution is made within that period, the Secretary of State may make the modifications in the form of the draft.(5) Subsection (3) does not prevent a new draft of proposed modifications being laid before Parliament.(6) In this section “40-day period”, in relation to a draft of proposed modifications, means the period of 40 days beginning with the day on which the draft is laid before Parliament (or, if it is not laid before each House of Parliament on the same day, the later of the 2 days on which it is laid).(7) For the purposes of calculating the 40-day period, no account is to be taken of any period during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days.(8) A relevant power—(a) may be exercised generally, only in relation to specified cases or subject to exceptions (including provision for a case to be excepted only so long as specified conditions are satisfied);(b) may be exercised differently in different cases or circumstances;(c) includes a power to make incidental, supplementary, consequential or transitional modifications.(9) Provision included in a licence, or in a document or agreement relating to licences, by virtue of a relevant power—(a) may make different provision for different cases;(b) need not relate to the activities authorised by the licence.(10) The Secretary of State must publish details of any modifications made under a relevant power as soon as reasonably practicable after they are made.(11) A modification made under a relevant power of part of a standard condition of a licence does not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Gas Act 1986, Part 1 of the Electricity Act 1989, the Electricity (Northern Ireland) Order 1992 or the Gas (Northern Ireland) Order 1996. (12) The power conferred by a relevant power to “modify” (in relation to licence conditions or a document) includes a power to amend, add to or remove, and references to modifications are to be construed accordingly.(13) In section 81 of the Utilities Act 2000 (standard conditions of gas licences), in subsection (2), after “Smart Meters Act 2018” insert “or under section (Modifications of licences etc) or sections 193 to 195 of the Energy Act 2022”.(14) In section 137 of the Energy Act 2004 (new standard conditions for transmission licences), in subsection (3)—(a) omit the “or” after paragraph (f);(b) after paragraph (g) insert—“(h) under section (Modifications of licences etc) of the Energy Act 2022,”Member's explanatory statement
See the explanatory statement for new clause (Modifications of licences etc).

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[The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)]

We come to Amendment 67. Lord Callanan?

[Lord Callanan (Con)]

Moved formally.

[Baroness Bloomfield of Hinton Waldrist (Con)]

No.

[Lord Callanan (Con)]

I am one group ahead.

[The Lord Privy Seal (Lord True) (Con)]

Don’t worry, Martin—we’re counting it against you.

Amendment 67

Moved by

[Lord Callanan]

67: Clause 82, page 71, line 22, leave out subsection (1) and insert—
“(1) The Secretary of State may by regulations make provision for requiring relevant persons to provide security for the performance of obligations relating to the future abandonment or decommissioning of carbon dioxide-related sites, pipelines or installations.(1A) For the purposes of subsection (1) an installation, site or pipeline is “carbon dioxide-related” if it is, or is to be, used for a purpose related to the geological storage, or transportation, of carbon dioxide.(1B) In this section references to an installation, site or pipeline include one that is located in, under or over—(a) the territorial sea adjacent to the United Kingdom, or(b) waters in a Gas Importation and Storage Zone (within the meaning given by section 1 of the Energy Act 2008).”Member's explanatory statement
This amendment and the amendments in the name of Lord Callanan at page 71, line 34 and page 71, line 38 revise the scope of the power in subsection (1) so that it is defined in terms of the provision of security for the performance of certain obligations, rather than by reference to the provision of security in respect of specific kinds of costs.

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[Lord Callanan (Con)]

I apologise to the House for the delay. It is typical that I should do that when the new Leader has just arrived and when my possible reappointment is still under consideration.

Amendment 67 ensures that regulations requiring provision of security for decommissioning can capture obligations relating to “carbon dioxide related” installations, sites and pipelines. It also clarifies that the power extends to both onshore and offshore assets.

Amendment 69 expands the class of people who may be required to provide security in respect of their carbon capture usage and storage decommissioning obligations. This includes an economic licence holder under Clause 7, or someone to whom a notice has been, or may be, given for the preparation of an abandonment programme under the Petroleum Act 1998. Amendment 68 amends the label to “relevant person” so it is more consistent with this revised definition. Amendments 73, 77 and 85 are consequential to those amendments.

Amendment 70 introduces a broader definition of decommissioning costs. This is to ensure that the regulations requiring provision of security reflect the full range of decommissioning obligations. These obligations include such things as the decommissioning of infrastructure and the post-closure monitoring obligations as set out in the Government’s 2021 consultation. Amendments 71, 72, 74, 83 and 89 are consequential.

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[Lord Lennie (Lab)]

Okay, do not reappoint him. What can I say? I was going to set out a hypothetical situation about an oil and gas plant that had been decommissioned, but not fully, and was to be recommissioned and transferred to CCUS usage. I do not know whether that will never be possible, but who knows? It is a complicated situation and I wanted to know where the Minister thought responsibility would lie. However, I am pleased to say that he has pointed us towards the 1998 Act, the 2008 Act and some other Acts, so somewhere in there lies an answer. It would seem sensible to draw together whatever is the answer to the question and put it in the Bill, to update it. The Minister can come back on that and to the question of the noble Lord, Lord Teverson, about whether that will ever be the situation.

As for the other government amendments to the Bill, I have again to make the point that this Bill of 350-plus pages, three parts and however many clauses is surely sufficient to cover the energy circumstance. As I said in my introduction yesterday, the Bill is a mix of all sorts of things without a coherent theme. If it had a coherent theme, it might well have covered these matters in the first place, but that is really for then, not for now.

[Lord Callanan (Con)]

I thank noble Lords, and let me apologise to the Committee for the number of government amendments. They are quite technical, and the Bill is obviously very large. It was drafted at pace, and it was not possible with the resource we had available to get all the details finalised, which is why there are a number of technical amendments.

The answer to the question of the noble Lord, Lord Teverson, which is a very good one at first sight, is that, of course, when the storage facilities are full, the storage facilities themselves are not decommissioned. They are used, but all the storage infrastructure—pipework and all the associated engineering, platforms, injection facilities, et cetera—will need to be decommissioned. I am sure the Liberal Democrats fully support the “polluter pays” principle, whereby someone who has benefited from a facility should be made to bear the costs of decommissioning it, which is why we are setting up a fund to do that. I reassure him that we do not decommission the actual sites—as he said, it would be quite difficult to extract the carbon dioxide from them to put it somewhere else—but they require monitoring, and the associated infrastructure will need to be decommissioned, which is why the fund is being established.

Amendment 67 agreed.

Moved by

[Lord Callanan]

68: Clause 82, page 71, line 28, leave out “licence holder” and insert “person”
Member's explanatory statement
This amendment and the amendment in the name of Lord Callanan at page 71, line 29 enable regulations under clause 81(1) to apply to a person falling within paragraph (a) or (b) of subsection (3).

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Moved by

[Lord Callanan]

82: Clause 82, page 73, line 7, leave out “under or”
Member's explanatory statement
See the amendment in the name of Lord Callanan at page 72, line 42.

--- Later in debate ---

Moved by

[Lord Callanan]

85: Clause 83, page 73, line 34, leave out “licence holders” and insert “persons”
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 71, line 28.

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Moved by

[Lord Callanan]

87: Clause 83, page 74, line 29, leave out “licence holder” and insert “person”
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 71, line 28.

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Moved by

[Lord Callanan]

89: Clause 84, page 75, line 25, leave out “and legacy”
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 71, line 34.

Low-Income Families: Energy Cost Support

Lord Callanan Excerpts

Tuesday 6th September 2022 Lords Chamber

[Lord Wood of Anfield]

To ask Her Majesty’s Government what further support they plan to provide for low-income families who do not pay income tax, to help meet their rising energy costs.

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

My Lords, we are making necessary preparations to ensure that a new Government will have options to deliver additional support as quickly as possible. Further to the support measures announced in May, the Government will of course continue to support low-income and fuel-poor households with their energy bills through the warm home discount, winter fuel payments and the cold weather payments scheme to ensure that the most vulnerable are better able to heat their homes over the cold winter months.

[Lord Wood of Anfield (Lab)]

My Lords, the incoming Prime Minister spent the summer repeatedly pledging income tax cuts, yet 43% of adults, including those in the greatest need, pay no income tax and would not benefit from this. Meanwhile, her pledge to reverse the national insurance rise will give the poorest 10% of households £7.60 per year and the richest 10% £1,800 per year. When asked about this, the new Prime Minister said,

“to look at everything through the lens of redistribution … is wrong”.

Does the Minister think it fair at a time of such widespread fear among low-income households to prioritise income tax cuts that would give the most frightened families no help whatsoever?

[Lord Callanan (Con)]

The noble Lord is commenting on proposals that he has not yet seen. The House will not have long to wait, and a lot of options have been worked on over the summer. As well as putting preparations in place for the Energy Bills Support Scheme, which I remind the House will be rolled out from 1 October in a series of monthly payments, other options have been prepared. The energy price rise is unprecedented, and we all know the reasons for that. The noble Lord will have to be patient and wait and see what we announce.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend not agree that the reason why 46% do not pay income tax is that this Government have raised their thresholds? If it was right to pay an extra £20 in universal credit during lockdown, when circumstances were bad—they are considerably worse now—should we not look to increase universal credit payments on a temporary basis?

[Lord Callanan (Con)]

My noble friend makes powerful points on both the issues that he raises. Of course, we should be proud of our record in taking the lowest paid out of income tax altogether, but I am sure that the new PM will want to bear my noble friend’s words in mind.

[Lord Addington (LD)]

My Lords, if we are going to give these assistance packages, would it not be a good idea to have a document that clearly states the Government’s thinking and what will be sacrificed? If we get it wrong, we will end up paying for this primarily in the health service.

[Lord Callanan (Con)]

I am not quite sure that I understand the noble Lord’s point. Of course, all of the appropriate documentation would be produced. With a lot of these schemes, it is easy to bandy around large numbers, as we have seen recently, but they take a lot of time to implement. Officials in my department have been working solidly over the summer to implement the last package of announcements—the Energy Bills Support Scheme—which is why it is now ready to go, from the first of next month. A considerable amount of very swift work would be required to implement a new package as well.

[Baroness Finlay of Llandaff (CB)]

Do the Government recognise that there are clinically vulnerable people whose lives depend on the equipment they have at home, such as oxygen concentrators, pressure-relieving mattresses and ventilators, as well as warmth in cold weather, of course? These people must be placed on a “clinically vulnerable” list that must be kept up to date to ensure that their electricity supply is not cut off if they are unable to pay their bills. They need additional financial help; otherwise, as has been suggested, they will end up being emergency hospital admissions to an NHS that already cannot cope with the pressures on it.

[Lord Callanan (Con)]

I agree with the noble Baroness. She listed one particularly vulnerable group but there are others, as well as many small businesses, who will suffer because of the high energy prices at the moment. We are all aware of that and we all know the problem. Of course, coming up with solutions is difficult and potentially expensive, but we are working on it.

[The Lord Bishop of Oxford]

My Lords, it is very good to hear that a plan is in place to address this catastrophe, which is concerning so many people, and to bring help to households. What steps will the Government take to address this fundamental failure of the market, such that huge, almost unimaginable profits are accruing to energy companies, while the poorest in the country face the dreadful choice between heating and eating?

[Lord Callanan (Con)]

The right reverend Prelate is not correct about that. It depends on which energy companies he is talking about: many of the energy suppliers have gone bankrupt over the last year or are making very marginal profits. Some producers, often in other parts of the world, are making very large profits. There are issues to do with some of the early renewable power obligation companies, which are also doing well. Under the latest contracts for difference schemes, that money is being recouped from the taxpayer. In all of these things, it is easy to make these observations but of course, it is an overly complicated situation.

[Lord Lennie (Lab)]

My Lords, following on from the right reverend Prelate’s question, figures from the University of York suggest that four in five households will face fuel poverty by January and millions of people are struggling to make ends meet. The i newspaper reported yesterday that the new PM is following the pattern of the former PM and doing a screeching U-turn, now saying that direct intervention in the fuel crisis is necessary and following Labour’s proposal to freeze energy bills. Can the Minister tell us if and when we can expect this to be delivered?

--- Later in debate ---

[Lord Callanan (Con)]

The noble Lord will, as I said to the noble Lord, Lord Wood, have to be patient and allow the PM to look at all the various options. I know that she has been doing work on this over the last few days, and I am sure that the House will not have long to wait.

[Baroness Browning (Con)]

Will my noble friend take a particular interest in those who are entirely dependent on benefits—disability benefits in particular—and for whom that is their only source of income? I declare an interest, having some responsibility for close relatives in this position. Whatever happens in the future, to date people on employment support allowance, for example, are divided into two groups: those deemed to be contributors through their past national insurance contributions and who are eligible for the grants that are available now, and those who have not had that experience and get nothing. This seems to be the worst form of discrimination.

[Lord Callanan (Con)]

I think my noble friend is talking about the warm homes discount, which we retargeted in the summer. Another three-quarters of a million people became eligible for it—some three million people are now eligible—and we were trying to target it at the most vulnerable. Clearly, there are lots of different groups that we will need to look at very closely.

[Lord Vaux of Harrowden (CB)]

My Lords, my postman asked me a question the other day that I was not able to answer, so I hope the Minister can help. He is on a tariff that guarantees him 100% renewable electricity. The cost of generating renewable electricity has fallen, yet his bill is more than doubling. He does not understand this, and neither do I. Either these renewable tariffs are nothing of the sort—they are just greenwashing—or companies must be profiteering outrageously. Which is it? If it is profiteering, is it right that the taxpayer should subsidise that?

[Lord Callanan (Con)]

That is another good question, and the answer is complicated. The marginal rate of electricity is set because of the highest contributor to that, which is gas-fired generation at the moment. This is why we have launched the review of market arrangements, which is looking urgently at that exact situation. The noble Lord makes a powerful point.

[Lord Sikka (Lab)]

My Lords, I have spent the last few weeks visiting pawnbrokers across parts of London to see how the people at the bottom of the pile are managing. They are pawning vacuum cleaners, microwave ovens, radios, televisions, bicycles and DIY tools. One lady even pawned a toaster so that she could get £5 to buy a birthday card and a present for her friend. That is the level of abject poverty we have at the bottom. Can the Minister invite the Prime Minister on my behalf to accompany me to visit the pawnbrokers and see for herself what has happened to the people under this Government?

[Lord Callanan (Con)]

I am not sure that pawnbrokers have necessarily arisen just under this Government. However, I totally accept the general point the noble Lord is making: there are many people—actually, on all income levels—who are suffering because of this crisis, which we all know was caused ultimately by Putin’s invasion of Ukraine. This is a difficult problem, and there are no simple and easy answers. All the potential solutions are very expensive and need to be looked at closely, and I am sure that the PM will do that.

[Baroness Garden of Frognal (LD)]

Can the Minister please confirm that the Government are still intending to give £400 to all households, regardless of their income, and two or three times that amount if they happen to own two or three properties? Why are they not redistributing that money to those who really need it?

[Lord Callanan (Con)]

Yes, that is the intention. Again, the reasons for it are long and complex, as I just explained to the noble Baroness. By far the largest package of the support measures that were announced is in fact going to those on the lowest income. Having said that, there is a recognition that those who do not necessarily rely on benefits and are not on the lowest income—perhaps what is referred to as the “just about managing”—are also suffering and deserve some help. It is very difficult with current policies to target support directly at those people. We wanted to get the support out as quickly as possible, and that is the reason why one element of the package was universal—to ensure that support goes to those “just about managing” as well. However, as I said, the majority of the package is targeted at those on the lowest incomes—which is correct.

Four-Day Working Week

Lord Callanan Excerpts

Monday 5th September 2022 Lords Chamber

[Baroness Bennett of Manor Castle]

To ask Her Majesty’s Government what assessment they have made of the benefits of a four-day working week as standard.

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

My Lords, the Government have assessed the costs and benefits of flexible working, but not specifically a four-day week. We do not believe that there can be a one-size-fits-all approach to work arrangements. That is why, rather than telling people and businesses how to work, we put individual agency and choice at the heart of our approach to flexible working. In this way, individuals and employers can work out the best arrangements for their particular circumstances.

[Baroness Bennett of Manor Castle (GP)]

I thank the Minister for this Answer, although I regret its emphaticness. I know the difficulty of any Minister giving assurances at the present time, but can the Minister assure me at least that the Government will look carefully at the results of the large, significant, global trial in which Britain is taking a large part? That is the trial being taken though by the 4 Day Week Global partnership with Autonomy and the UK campaign, which will be assessed by academics, including from Oxford and Cambridge. There are scores of different companies taking part. Will the Minister say that the Government will look at these results?

[Lord Callanan (Con)]

Yes, of course. As I said, we are committed to flexible working: indeed, we gave people the right to request flexible working in legislation. So we are committed to the principle, but the circumstances will of course vary from individual to individual and from organisation to organisation. What is good for one sector is not good for another—but of course we will keep these things under review.

[Lord Fox (LD)]

My Lords, that is all well and good, but Jacob Rees-Mogg recently said that he wanted to crack down on flexitime, and he has also been very hard on working from home. I agree with the Minister’s point that it should be up to individual employers to assess the benefits of flexible working and, indeed, working from home. The Government are the employer of hundreds of thousands of people, so what is their assessment of flexible working and working from home when it comes to operational effectiveness, skills and recruitment and employee well-being? What data is being gathered and when can we see it?

[Lord Callanan (Con)]

The right to request flexible working applies as much in the public sector as in the private sector. Civil servants already have very good working conditions and many do work flexibly—there are, for instance, many job-share arrangements in my department. So we think it is a good thing, but it very much depends on the circumstances of individual organisations.

[Lord Grocott (Lab)]

Does the Minister acknowledge that a reduction in the working week has been a trend overall—although there have been hiccups—in people’s working experience over the last 100 years? The previous generation would normally have worked a five-and-a-half-day week, not a five-day week. Is not the problem at present that those people who are lucky enough to be able to work from home are, in effect, having their working week shortened in any case, because they no longer have to spend time travelling to work? Is it not therefore important—in fact, essential—that, if there is to be any reduction in the working week, it applies as well to those people who cannot work from home, who are often in heavy, demanding and physical jobs? They are the ones who need to see their working week reduced.

[Lord Callanan (Con)]

The noble Lord makes an important point. Of course, there has been a general reduction over decades, and if that continues it is a good thing. But it depends on the individual circumstances and on the industry—the noble Lord made that important point. However, even during the pandemic, there was a maximum of only about 48% of people who were ever working from home, because many other people in essential industries and other service industries could not.

[Baroness Berridge (Con)]

My Lords, does my noble friend agree that are a number of mandated four-day weeks? We obviously have a number of bank holidays per year and there is an inequality between the nations as to the number of bank holidays that workers get. Can my noble friend undertake to look at those bank holidays? The schools have gone back today and the next bank holiday is in fact Christmas Day. For many workers who have a statutory holiday entitlement plus the bank holidays—not including them—this could be of real benefit to them.

[Lord Callanan (Con)]

My noble friend makes a very good observation. Of course, there have been a number of bank holidays recently and we keep these things under review. I do not think there are any immediate plans to introduce any additional ones, but I am sure it is something that the new PM will want to look at.

[Lord Bassam of Brighton (Lab)]

My Lords, the noble Lord of course will be aware that many four-day week working pilots are going on across the world, including one involving 3,500 workers here. The pandemic has proved, I think, that flexible working works and is an effective way of ensuring that we maintain levels of productivity, so will the Government commit not just to carrying out a review of the pilot but, when that pilot is complete, to publishing their own findings and then reviewing their policy? This is a very important policy direction for this country and it could unlock greater levels of productivity, which we are much in need of the moment.

[Lord Callanan (Con)]

Of course we will take any lessons that are learned through the different pilot studies that are taking place. I think I disagree with the noble Lord that the pandemic proved that flexible working is the norm: it worked in some areas and some industries, but of course the Government did pay huge numbers of people to stay at home during the furlough scheme, which is not something we could ever carry on doing. Of course, it can work in some industries: a number of private sector companies have adopted it and, great, if it works for their particular circumstances and their particular employees, good for them—but it does not work for every industry.

[Lord Austin of Dudley (Non-Afl)]

My Lords, is it not fantasy economics to pretend that most employers can afford to pay people the same amount of money for working fewer hours? The truth is that there is no simple answer, no quick fix, to dealing with the weakness of our economy: it requires hard work, serious policies to improve productivity and investment in education and skills. We have to invest in technology, innovation and green industries, so that we can create good new jobs, particularly in places such as the West Midlands that have lost their traditional industries and struggle to find new ones. There is no easy answer to this, whether it is reducing hours and pretending to pay people the same money or, for example, the universal basic income.

[Lord Callanan (Con)]

I think I was agreeing with the noble Lord right up to his last sentence. Yes, of course there are no simple answers, and it can work for one industry and not for others; I really doubt that a universal basic income is the answer to this, though.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, as part of the Minister’s work in assessing the benefits of flexible working and four-day working weeks, and all the many outputs from the pandemic in terms of much good work and much good production as a result of working from home, will he consider talking to ministerial colleagues in the devolved Administrations and seeking a view on best practice in other countries such as New Zealand, which has stated that there is much to be gained from a four-day week?

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[Lord Callanan (Con)]

Of course, we have regular discussions with Ministers in the devolved Administrations: in fact, I spoke to one only on Friday. So, yes, of course we will learn any lessons that other countries can show us—but, as I said, there are no easy answers to this. It is a complicated area and can work in one sector but not in others.

[Lord Leigh of Hurley (Con)]

My Lords, the Question talks specifically about four days a week, not about working from home. Bizarrely, this may have the effect of increasing productivity, only because productivity in this country is measured as output per hour. So, when the Government consider the devastating effect a four-day week would have, can the definition of “productivity” be refined to take account of the fact that it is total GDP we are interested in, not output per hour?

[Lord Callanan (Con)]

Again, my noble friend makes an interesting point. Of course, there are many different ways of defining it. He is right to point out that productivity is the key to this. If there is evidence that people will work smarter and harder during the time they are at work, of course that would be a good thing and it would help to bring it about.

[Baroness Wheatcroft (CB)]

My Lords, the Minister has quite rightly stressed the importance of businesses being able to decide this sort of thing for themselves—what is right for them. So can he give the House an assurance that, under this Government, there will be no return to a three-day week, whatever happens in the energy crisis?

[Lord Callanan (Con)]

Well, we have no plans for a four-day week; we certainly do not have any plans for a three-day week.

[Lord Hendy (Lab)]

My Lords, it is all very well to say that the negotiation of working time should be between individuals and businesses, and I understand the Minister’s logic in saying so, but the reality is that employers have overwhelming power in relation to individuals. Is it not necessary to allow trade unions to speak on their behalf, and should the ministry not be encouraging collective bargaining on these issues?

[Lord Callanan (Con)]

In this country, we believe in freedom of choice. People are free to join a trade union if they wish and, as I have remarked before, only a minority have chosen to do so.

[Lord Suri (Con)]

My Lords, your Lordships have heard from many noble Lords that working four days is not a good idea. I would like to hear some more detail from the Minister. Would it be worthwhile to have four working days in the week?

[Lord Callanan (Con)]

I did not really catch what the noble Lord said. If he was asking whether we will look at flexible working provisions, of course we will. We have responded to the consultation and introduced the right for employees to ask for flexible working. However, flexible working is a lot more than just a four-day week; it can involve a whole range of different flexibilities in the workplace.

Energy Bill [HL]

Lord Callanan Excerpts

Committee stage
Monday 5th September 2022 Lords Chamber

[Baroness Hayman (CB)]

My Lords, I declare my interest as co-chair of Peers for the Planet. I will speak very briefly to the amendments. I have amendments of my own later in the Bill on energy demand reduction and the regulator’s responsibilities.

I support the amendments in the name of the noble Lord, Lord Ravensdale. It is important that this Bill is specific about the implementation of the aspirations that we hear from government. We have not had enough detail about the plans to implement the strategies, and we have not had enough detail in the strategy. For that reason, I have some sympathy with the amendment of the noble Lord, Lord Moylan. He raises important issues about putting flesh on the bones of the aspirations, but I disagree with him about changing the timetable. I also disagree with the noble Viscount, Lord Trenchard, on the question of whether, because our contribution to global emissions is low, we should go ahead with the contribution we can make in innovation and leadership, which completely ratchets up the effect of this country’s own policies on a global scale.

One serious point I want to make about the noble Lord’s amendment is that I am extremely worried about the suggestion that the Secretary of State should commission and publish “an independent assessment” of the costs, the implementation dates and the risks of the net zero strategy. We have the Climate Change Committee, which is admired for its work throughout the world. It is an important and respected body and it is independent of government. It would be ridiculous to try to get different independent advice: if we go down that road, we are in “anyone’s view is the best view” territory. We have an independent adviser for government. We have the Office for Budget Responsibility; we have lots of people who can comment on the advice it gives, but it would be quite wrong to put in this legislation anything that undermined its position.

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

Let me say first what a pleasure it is to open for the Government in today’s discussions: I am sure we will have lots more as we go through the Bill. I thank the noble Lords, Lord Lennie, Lord Ravensdale and Lord West, the noble Baronesses, Lady Blake and Lady Worthington, and my noble friends Lord Frost, Lord Moylan and Lady McIntosh, for their amendments, which seek to address the purpose and strategic aims of the Bill and of course the Government’s energy policy more generally. That allowed us to have a debate with more of the flavour of a Second Reading debate, rather than addressing the specifics of the Bill, but that is understandable given the nature of the amendments.

I turn first to Amendments 1, 6 and 7 from the noble Lords, Lord Lennie and Lord Ravensdale, the noble Baronesses, Lady Blake and Lady Worthington, and my noble friend Lady McIntosh. These amendments all seek to address the fundamental purpose of the Bill. While they are well-intentioned, it is my strong contention that these amendments are not necessary as the Bill already has a clear purpose. Provisions in the Bill as drafted not only have regard to the outcomes those noble Lords seek, but they are actually designed with those outcomes in mind. For example, a number of measures in the Bill will contribute to the resilience of the UK’s energy system—most obviously, those powers related to the ensuring the security of the core fuel sector. I am happy to give the assurance that my noble friend Lady McIntosh sought today: that energy security is of paramount importance to this Government.

Amendment 245 would give effect to Clause 1 once the Act is passed and, for the reasons I described, I do not believe that it is necessary. On Amendment 5, from my noble friends Lord Moylan and Lord Frost, and the noble Lord, Lord West of Spithead, relating to energy strategy statements, I reassure them that the Energy Bill is to a significant extent an expression of the Government’s strategic intent as set out in the 10-point plan, the energy White Paper, the net-zero strategy and the various sector-specific policy papers we have published. Furthermore, government policy evolves over time and strategies do not always neatly replace others. Some aspects may remain government policy, and some are updated in response to a changing landscape—of course, we have seen that very recently with the Ukrainian invasion. I submit that, rather than prescribing policy intent in primary legislation, it makes more sense to allow Ministers to exercise discretion in these matters and respond to a changing policy environment and international environment.

I move on to the requirement to publish a strategy

“for managing intermittency of electricity supply”.

Intermittency is an important issue, but the National Grid Electricity System Operator is responsible for balancing electricity supply and demand, because while production is intermittent, so is demand. The Government remain confident that they have all the tools needed to operate the electricity system reliably. We can call on a wide range of technology types to do this, some of which were mentioned in the debate today, including emergency gas-fired generation, interconnectors and, crucially, demand-side responses such as insulation, retrofit measures, et cetera.

The capacity market is the Government’s main mechanism for ensuring the security of electricity supply. It has done a great job and we have already secured the majority of Great Britain’s capacity needs to meet future peak electricity demand out to 2025-26. The Government have also committed to ensuring a flexible system which involves the use of a wide range of technologies—again, a number of them were mentioned in the debate today—including battery storage and pumped storage, which I was really interested to hear my noble friend Lord Howell talk about. In my electrical engineering degree many years ago, we studied that particular development; for those who have not been able to see it, it is an incredible feat of engineering.

This amendment also has a requirement to commission assessments of the 10-point plan and of the costs of achieving net zero. My noble friend Lord Moylan raised concerns that progressing towards net zero is a “constraint” to achieving affordable and abundant energy in the UK. I reassure him that, as we transform the energy system, the Government are committed to pursuing the most cost-effective solutions, which, at the moment, are offshore and onshore wind. Ensuring security of supply and decarbonisation, and affordability to the consumer and the Exchequer, are of critical importance. While there will be costs, the costs of inaction in this sector, as we have seen through the invasion of Ukraine, are much greater. Had we not acted over the last decade or so to secure the second-largest supply of offshore wind in the world, the costs we would be facing now would be much greater and our security of supply would be at much greater peril.

As set out in the Net Zero Strategy, we estimate that the net cost to achieving net zero, excluding air quality and emissions-savings benefits, will be the equivalent of 1% to 2% of GDP in 2050. That strategy was informed by the Treasury’s 2021 Net Zero Review, which looked at the potential costs and benefits to businesses and consumers of the transition to a net-zero economy.

Furthermore, several mechanisms already exist to analyse the path towards net zero, as mentioned by my noble friend. For example, the Government’s approach to net zero is already subject to independent scrutiny by the Climate Change Committee, whose 2022 progress report included an analysis of the economic impact of decarbonisation. Much of this work already takes place.

I turn to Amendments 2, 3 and 4, tabled by the noble Baroness, Lady Blake, and the noble Lord, Lord Lennie. The Energy Act 2013 introduced the power for the designation of a strategy and policy statement that sets out the Government’s strategic priorities for energy policy, the roles and responsibilities of those implementing such a policy and the policy outcomes to be achieved. The Government have committed to laying a strategy and policy statement for energy policy later this year and a statement at the earliest appropriate time. Designation of a strategy and policy statement will ultimately be a decision for Parliament, not the Secretary of State. Therefore, I submit that these amendments are duplicative and unnecessary.

I thank my noble friend Lord Moylan for submitting Amendment 231. He raises an important point; splitting the wholesale market into two—namely, creating one market for variable renewables and another for firm generation—is already being considered as part of the review of electricity market arrangements, or REMA. An initial consultation, which included exactly this proposal, was published in July. Splitting the market is one of many options being considered within REMA. My department is currently assessing the viability of implementing a split market and the potential costs and benefits associated with doing so.

Based on stakeholder responses to the consultation and based on further policy developments, we will publish a second consultation in 2023 to set out any feasible options in more detail. Legislative proposals on how to implement recommended reforms will then follow. Adding a clause into the Bill that commits the Secretary of State to publishing legislative proposals on splitting the market by a specific point in time would, I submit, prejudge the outcomes of both the consultation and the review.

[Lord Moylan (Con)]

My Lords, did I hear my noble friend say 2023? Did I hear that correctly?

[Lord Callanan (Con)]

Yes, it is a complicated area that requires proper and detailed policy analysis, but that work is under way, and we will do so.

Splitting the wholesale market would a necessitate a fundamental and irreversible design of our electricity market arrangements, and without the appropriate consideration of the potential costs and any potential benefits and without sufficient stakeholder input, it could well lead to higher bills for consumers, and it would create an investment hiatus which would jeopardise our ambitions for decarbonising the power sector by 2035—which is exactly the point I was making to my noble friend. So, this is an important issue, but it is one that needs to be looked at thoroughly, properly and professionally. I hope that my noble friend is assured that the issue is being closely examined and will therefore feel able to withdraw his amendment.

[Baroness Worthington (CB)]

My Lords, would the Minister care to comment on the fact that—and this has been mooted as a potential solution in the short term during these unprecedented times where we see such high prices and so many people suffering—there is surely a logic to take a power now, to use it in extremis and then to continue with the longer-term conversation? I think the nation wants to see some action quite quickly and we have an Energy Bill.

[Lord Callanan (Con)]

I do not think it is important to do that at this stage; we have published the consultation, we are closely analysing responses, as the noble Baroness will understand. It is a difficult area, it is a complicated area, there are a number of potential ramifications, and we think it is worthy of consideration. If we took a power now, that might have a very destabilising effect on the market and on the amount of investment that is flowing into many of the sectors, so the Government’s position at the moment is that we do not think that is necessary or desirable.

I reassure noble Lords that the addition of electrification to the Energy Bill is also unnecessary. The net-zero strategy sets out the Government’s view on how electrification can enable cost-effective decarbonisation in transport, in heating and in industry—to that extent, I agree with the noble Baroness, Lady Worthington, and the points that she made—along with our approach to deliver reliable, affordable and low-carbon power. The energy security strategy accelerated, as I am sure the noble Baroness is aware, our ambitions for the deployment of renewables for nuclear and for hydrogen. I can assure noble Lords that the Government will never compromise our security of supply: that remains our primary consideration. But our understanding of what the future energy system will look like and the level of the demand that we will need to meet through electrification will essentially and inevitably evolve over time. So, we are not targeting a particular solution, but we rely on competition to spur investment in the different technologies and new ways of working, and new technologies such as more efficient batteries et cetera are coming onstream every day. We will closely take all these matters under consideration. We take the view that the Government’s role is to ensure the market framework is there and that encourages effective competition and, at the same time, delivers a secure and reliable system.

Finally, let me thank the noble Lords, Lord Howell and Lord Teverson, the noble Viscount, Lord Trenchard, and the noble Baronesses, Lady Jones and Lady Hayman, for their valuable contributions to the debate. I assure my noble friend Lord Howell that we are working internationally with the US, with the EU and with our other partners to produce a secure and reliable energy system together. In response to the noble Viscount, Lord Trenchard, I am sure he will be pleased to hear that through the £385 million advanced nuclear funds, we are providing funding to support research and development for precisely the small modular reactor designs that the noble Viscount wishes to see, and we are progressing plans to build an advanced modular reactor demonstration by the early 2030s at the latest. Therefore, with the reassurances that I have been able to provide, I hope that noble Lords will not press their amendments.

[Lord Lennie (Lab)]

My Lords, first, I apologise for not thanking the Minister for meeting us earlier today; that was helpful. To answer one or two points, the noble Viscount, Lord Trenchard, asked about what Boris Johnson said when he was Prime Minister—up to yesterday, or today. He raised questions about power stations being built and the figure of one a year for however many years necessary, and not being sure what power stations there were. The PM was never really good on detail and I think this proves that point. That does require some clarification.

The bigger point raised by the noble Lord, Lord Howell, and the Minister was in relation to the preambles. They asked: why these preambles? They are a combination, if you like, of the preambles to the climate change and sustainability Act and the Energy Act 2013, as the Minister pointed out. They seek to give some definition, some guidance, to what the Bill is intended to achieve, as opposed to its rather rambling, ongoing, imprecise nature. It is not so much that the Bill is objectionable; it is just not adequate to achieve what it intends.

We will look at this before Report. With those few comments, I beg leave to withdraw my amendment.

--- Later in debate ---

[Lord Lennie (Lab)]

My Lords, Amendments 11,12 and 13 in my name would all strengthen the relationship between Ministers and the economic regulator by insisting that the Secretary of State and the economic regulator are bound by the listed regulatory principles and the need to contribute to achieving sustainable development rather than just having regard to them. Further, they would oblige a Minister to be bound by their duties as a Minister, as opposed to just having regard for them. They would also require the economic regulator to be bound by the need to assist the Secretary of State, compliant with its duties and targets. It is not sufficient to have regard to these matters; it is important to be bound by them. Can the Minister say what “have regard to” means if not to be bound by them?

Amendments 15 and 16 espouse that the Bill does not specifically include carbon capture usage. To add to the example given by the noble Baroness, Lady Worthington, in January 2021, the major US oil company Chevron announced that it had made investments in the San Jose-based corporation Blue Planet Systems—then a start-up—which manufactures and develops carbon aggregates and carbon capture technology intended to reduce the carbon intensity of industrial operations. Blue Planet Systems manufactures carbon-based building aggregate from flue-gas-captured CO₂. These amendments aim to encourage the use of captured carbon as opposed to its storage.

[Lord Callanan (Con)]

My Lords, I thank everyone who has contributed to this short debate. Addressing the amendments in turn, I will start with Amendment 8, tabled by the noble Baroness, Lady Liddell, and my old friend the noble Lord, Lord Foulkes, who is very conciliatory today—I am suspicious; something has happened to him over the summer, but I am sure that we will get the old noble Lord, Lord Foulkes, back before we get much further into the debate.

This amendment seeks to amend the principal objective applying to the Secretary of State and the Gas and Electricity Markets Authority in respect of consumer protections. Under the current drafting of this principal objective, it is for the Secretary of State or the economic regulator to protect the interests of consumers who they consider may be affected by regulatory decisions. This drafting is intended to ensure that the economic regulator and Secretary of State have discretion as to the consumer impacts that are taken into account. While the noble Lord’s and the noble Baroness’s amendment is intended to ensure that only actual or likely impacts are taken into account, we consider that the existing drafting already provides for this. Therefore, I submit that the amendment is unnecessary.

I turn next to Amendment 9, which is also in the name of the noble Baroness, Lady Liddell, and the noble Lord, Lord Foulkes, joined on this occasion by the noble Baroness, Lady Bennett. The amendment as drafted would place an additional principal objective on the Secretary of State and the economic regulator to assist in the delivery of the net-zero objective. I know that we have had this discussion on a number of Bills, but I will reiterate that, under the Climate Change Act 2008, the Secretary of State is already bound by law to ensure that the targets to reduce greenhouse gas emissions are met.

Under Clause 1(6), the economic regulator is required to have regard to the need to assist the Secretary of State in complying with his duties to achieve carbon emissions reduction targets and to have regard to these targets in each of the devolved Administrations. I therefore submit that the economic regulator is already required to take these net-zero targets into account in its regulatory determinations.

Next, I turn to Amendment 10, proposed by the noble Lord, Lord Teverson. This amendment seeks to ensure that cross-subsidy of carbon dioxide transport and storage activities, from users of other networks, is avoided. Clause 1 of the Bill establishes the Gas and Electricity Markets Authority as the economic regulator of carbon dioxide transport and storage. It also establishes the principal objectives and general duties for the Secretary of State and the economic regulator in the exercise of their respective functions in relation to the economic regulation of carbon dioxide transport and storage.

The principal objectives in Clause 1 include protecting the interests of current and future users of the network and those of consumers. In relation to the regulation of gas and electricity, the Secretary of State and the Gas and Electricity Markets Authority remain bound by the principal objectives to, respectively, protect the interests of current and future consumers in relation to gas conveyed through pipes, and in relation to electricity conveyed by distribution systems. Different principal objectives are appropriate to reflect that the objectives for carbon dioxide transport and storage networks are different from those of the gas and electricity networks.

Under the provisions in the Bill, the economic regulator should be able to take into account, in its decision-making in relation to CO₂ transport and storage activities, any impacts on users of gas and electricity networks that may arise from those decisions. I hope that the noble Lord is sufficiently reassured on this point.

I move on to Amendment 11, tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. This seeks to ensure that the Secretary of State and the Gas and Electricity Markets Authority are bound by the principles of regulatory best practice and the need to contribute to the achievement of sustainable development. Clause 1 sets out the principal objectives and general duties of the Secretary of State and the economic regulator. The principal objectives are complemented by statutory duties on the Secretary of State and the economic regulator to have regard to certain matters. This includes having regard to principles of regulatory best practice and the need to contribute to the achievement of sustainable development. To have regard to these matters means that the Secretary of State or the economic regulator, as the case may be, must give genuine attention and thought to these matters.

In a complex sector with varying objectives that can sometimes conflict, it is important that the regulator’s duties strike the right balance between setting out all relevant issues and considerations, while giving some necessary discretion to the regulator to balance those considerations in its decision-making process and to have sufficient authority and independence in that decision-making. I hope that explains the point for the benefit of the noble Lord, Lord Lennie.

The formulation of the statutory duty as proposed by the noble Lord and the noble Baroness in our view risks compromising what is quite a delicate balance. The greater the number of statutory duties, and the more binding their nature, the more difficult the act of balancing the different, possibly conflicting, duties becomes. I hope that provides sufficient reassurance.

Amendments 12 and 13, again from the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, also seek to amend the statutory duties applying to the Secretary of State and the Gas and Electricity Markets Authority to ensure that the greenhouse gas emissions reduction targets under the Climate Change Act 2008 are a binding consideration in regulatory determinations. In relation to Amendment 12, as I have already set out, under the Climate Change Act the Secretary of State is already bound by law to ensure that the targets to reduce emissions are met. We therefore do not consider that this amendment is necessary.

--- Later in debate ---

[Baroness Worthington (CB)]

I have a point of clarification. Are the definitions different because regulation over transportation is not needed or is the Minister saying, “We have picked a winner. It is going to be storage through this mechanism and we are not interested in the innovation that is coming through in these other sources of permanent storage.”? If it is the latter, I would find that very hard to understand in a Bill that is seeking to support new technologies.

I think it is the case—the noble Baroness, Lady Bennett, mentioned it—that there is a company in the UK already doing this, with limited support from government. It can scale. It is not a silver bullet by any means but there is not a single operational carbon capture and storage facility in the UK apart from that one, and yet the Bill does not seem interested in supporting it. I would like to understand: if the Government is interested in supporting new technologies, can we make that as broad as possible?

[Lord Callanan (Con)]

The Bill is intended to establish an economic means of support for geological formation. Of course, I commend the company referred to by the noble Baroness, which is managing to find ways of—I hope—permanently storing carbon dioxide in a form other than geological formation; indeed, there are other potential support mechanisms that could be deployed towards that. There is lots of research and development funding through UKRI and there is a whole range of other advanced technologies that we are supporting. In this case, in relation to economic regulation, the market mechanism that we want to set up on CCUS is dedicated principally towards geological long-term storage; we think that is the area that needs support under this system. That would provide the vast majority of storage that we can envisage at the moment but, of course, we are always willing to consider other methods. If this company is proving to be a success, that is great and I would be very happy to look at alternative ways of supporting it.

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[Baroness Blake of Leeds (Lab)]

My Lords, it gives me great pleasure to contribute on this set of amendments. I add my admiration and support for my noble friend Lord Foulkes, who has stepped into the breach admirably in the unfortunate absence of my noble friend Lady Liddell. I very much look forward to her return. I also add my thanks to the Minister for giving us time today to discuss this very important Bill; I think all of us recognise its significance at this time. Without reopening the debate from Second Reading, it is clear to us all that there are gaps. We need to take the opportunity to fill those gaps, given the state of crisis that the country is entering.

I want to speak to the amendments in the name of my noble friend Lord Lennie, starting with Amendments 21 and 22. They seek to make it clear that a licence can be granted for transportation or storage, or both if wanted, but that a licence need not be granted for everything. The activities that Clause 7 relates to are

“(a) operating a site for the disposal of carbon dioxide by way of geological storage; (b) providing a service of transporting carbon dioxide by a licensable means of transportation”.

We have to acknowledge the importance of this section of the Bill. Indeed, the Climate Change Committee has referred to all of this area as a necessity, not an option, particularly as we move forward and technologies improve. As drafted, the Bill provides a single licence for both but, given that they are separate activities, we see no reason why individual licences could not be provided for each activity—even if it may be the case that most of the persons carrying out these activities carry out both.

A broad portfolio of technologies is needed to achieve deep emissions reductions, practically and cost effectively; carbon capture and storage is just one of them. In the International Energy Agency’s sustainable development scenario, in which

“global CO₂ emissions from the energy sector fall to zero on a net basis by 2070”

carbon capture and storage

“accounts for nearly 15% of the cumulative reduction in emissions, compared with the Stated Policies Scenario. The contribution grows over time as the technology improves, costs fall and cheaper abatement options in some sectors are exhausted. In 2070, 10.4 Gt of CO2 is captured from across the energy sector”.

This would provide more flexibility for a developing market, with the intention of driving down price within it.

We have already heard just how expensive carbon capture is and how, despite its importance for achieving clean energy, it has been rather slow to take off. According to the IEA, there were only around 20 commercial operations worldwide midway through last year. Commentators often cite carbon capture as being too expensive and unable to compete with wind and solar, given their falling costs over the last decade, but to dismiss the technology on cost grounds would be to ignore its unique strengths, its competitiveness in key sectors and its potential to enter the mainstream of low-carbon solutions. I am pleased that the Government have not done this. However, as we have made clear, we feel that not enough attention has been given to solar and onshore wind, in particular. It is important that we take whatever steps we can to make the market as attractive as possible and encourage licensing from fit and proper persons.

The noble Baroness, Lady Bennett, has already spoken to the next set of amendments, particularly Amendment 23. We feel that the phrase “fit and proper”, having already had a usage in the National Security and Investment Act, is something that we should take very seriously. The aim of these amendments is to put the responsibility on the Secretary of State to personally deem the individual fit and proper.

Perhaps the greatest concern that we have to acknowledge is the environmental risk associated with long-term storage of captured CO_2, as any gradual or catastrophic leakage would likely negate the initial environmental benefits of capturing and storing CO₂ emissions. It is worth itemising those key risks, just so that we have them on record. First, there are technical hazards: we know that the construction of plants needed to capture and process CO₂ can be complex. Whether for new facilities or retrofitting and enabling the separation of CO₂ from other gases, there are inherent technical exposures in the CO₂ separation process relating to the compression and cooling of gases flying through pipes and the use of chemical solvents, for instance.

Secondly, on fire and explosion, as we know, there are lifting, handling and accidental damage risks at carbon capture plants, as is the case at any construction site. When carbon-capture technology is retrofitted to operate in industrial plants or facilities in typically high-hazard locations such as power stations, the risk of accidental damage and subsequent fire and explosion risks to existing assets might be enhanced. As I have stated, the risk of leakage must clearly be the subject of much consideration as we go forward.

Business interruption is another risk that we have to acknowledge in the failure to meet the carbon goals as they are laid out. Pure carbon dioxide gas can be compressed so that it reaches its dense and supercritical phase. In some cases, it can instead be cooled, which transforms it into a liquid state. Mechanical failures or breakdowns affecting this stage of the process could lead to lengthy business interruptions for clients. If the captured CO₂ cannot be transported, this may affect the emissions targets and carbon credits committed to by clients. Therefore, the need to look at all proper precautions is absolutely vital, and the persons tasked with doing this need to have the confidence of the whole sector.

Amendment 24, in the name of my noble friend Lord Lennie, would make regulations related to carbon dioxide transport and storage licence applications subject to the affirmative procedure. Surely it is sensible that Parliament has a full say in any regulations to ensure that licensing is done both to encourage carbon capture and storage and to ensure that it is properly safeguarded.

We have to see this in the context of an enormous possibility to create significant numbers of jobs—the estimate is 50,000 by as soon as 2030—across industry, power, transport and storage networks. It is absolutely essential that the confidence is there and that all the people who will be engaged in the work we intend to do are properly protected wherever possible.

[Lord Callanan (Con)]

My Lords, this group of amendments considers the licensing of carbon dioxide transport and storage, and I thank everyone for their contributions. I will speak to Amendment 25, in my name, which relates to the definition of “decommissioning costs”. Carbon dioxide transport and storage licence holders will be expected to establish decommissioning funds for each of their transport and storage networks. These funds will accrue money over the operational life of the network to pay for the expected offshore decommissioning and post-closure costs associated with the network.

As originally drafted, the Bill enables the Secretary of State to make regulations about the provision of security for decommissioning in relation to carbon storage installations. This is to ensure that regulations could require relevant persons to provide security for costs that reflect the full range of decommissioning obligations that arise in relation to carbon transportation and storage activities.

Regulations will provide the framework for how the decommissioning funds are to ensure that the funding is secure and available when it is required to pay for the decommissioning and post-closure obligations. The costs are likely to be those associated with the obligations that the licence holder will have under the permit, which could include costs associated with preparatory works between closure and the commencement of decommissioning activities and post-closure monitoring.

As noble Lords will be aware, a series of amendments has been tabled relating to the financing of the decommissioning of carbon storage assets, and I look forward to the forthcoming debate on those amendments. Should our amendments be accepted to apply these decommissioning fund powers to the new defined term “decommissioning costs”, explained in Amendment 70, the previous definition of “decommissioning and legacy costs” becomes redundant and should therefore be omitted from Clause 11.

I will move on to the amendments tabled by noble Lords in this group. Amendment 17, tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, seeks to amend the scope of the prohibition on operating a CO₂ transport and storage network without an economically regulated licence. Although there is an existing framework for the licensing of carbon dioxide storage activities, established under the Energy Act 2008, that Act provides for technical regulation to ensure the secure geological storage of carbon dioxide. It therefore does not provide any powers in relation to economic regulation.

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[Baroness Bennett of Manor Castle (GP)]

Perhaps I may come back to Amendment 27 and the associated amendments about a “fit and proper person”. Throughout his response, the Minister referred to the granting and awarding of licences at the initial point. However, Amendment 27 is concerned in particular with the transferring of licences. I drew a parallel with our water companies. Most of those have been through multiple ownerships, including hedge funds and companies based in overseas tax havens, et cetera. These companies have a similar nature and have been operated through continual financial transactions and financialisation. Could the Minister comment, either now or in writing, on how the Government see that ongoing process? Okay, you have checked out the person and granted a licence, but then, in a year or two’s time, the company might be bought by someone else and then again by someone else, including companies that may be very unclear. How will the Government keep control?

[Lord Callanan (Con)]

If the licence is transferred to another body, it will also have to be approved under the same process. You cannot just wake up in the morning and decide to transfer your legal obligations to somebody else who is not an appropriate, fit and proper person. So, of course, that will be taken into consideration.

I must say that the noble Baroness is wrong to provide the parallel with the existing water companies. I do not think that anybody is arguing that people who hold those licences are not fit and proper to do the job. There is a legitimate argument about levels of investment and how that money is being spent, et cetera. However, no one is arguing about their competence; the noble Baroness is trying to draw a very bad parallel there.

[Lord Teverson (LD)]

My Lords, I hope the Minister will forgive me for not understanding some of this, because it has raised a number of questions in my mind. If the CO₂ is put, say, under the sea—as we have been talking about—who actually owns the CO₂ once it has gone there? Who is liable for it and who has the legal right to the storage area itself? Given that most of these are created from the oil and gas that has been extracted, does that belong to the lease of the fossil fuel company that extracted them and does that last for ever? I do not understand how this works and where the liabilities land.

As the noble Baroness, Lady Bennett, said, if an organisation says, “I don’t want to do this any more”, there is no obligation for anybody else to take it on—so there will be a legal limbo. Perhaps the Minister could explain how this licensing works within that context. It seems to me that the Crown Estate will come into this somewhere, but maybe the Minister could enlighten me. I apologise again, because I should know the answer to all of these questions.

[Lord Callanan (Con)]

I am happy to confirm the legal detail of the system to the noble Lord in writing, but my understanding is that the operator of the site would bear the responsibility. That is precisely why we have built in the relative decommissioning costs. The fund will have to be established and the operator will have to show that the ability is there to decommission the relevant pipe work, et cetera. I assume that that assurance and other long-term effects will also be built into that condition, but I will be very happy to confirm that in writing to the noble Lord.

[Lord Teverson (LD)]

That would be very useful.

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Moved by

[Lord Callanan]

25: Clause 11, page 12, line 39, leave out “and legacy”
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 72, line 25.

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[Lord Callanan (Con)]

My Lords, the noble Lord will know that I hate to disappoint him on any occasion, so I shall say something unprecedented, which, as far as I am aware, has never been said in this House before: on this specific and limited occasion, the noble Lord is right on this point. I can say with the full force of the Government behind me that we are prepared to accept his Amendment 28, and I thank the noble Lord for pointing out this typographical error.

I move on to the noble Lord’s more substantial amendments, Amendment 29 to 31 and 37, for which I thank him and the noble Baroness, Lady Liddell. These amendments aim to set out further detail on the economic licence for the transport and storage of carbon dioxide. In particular, they concern the protection of a licence holder’s commercially sensitive information from certain disclosure requirements contained in Parts 1 and 2 of the Bill. These provisions, as drafted, enable the Secretary of State and the economic regulator to access information that is necessary for the conduct of their functions. It may be appropriate in some cases for the economic regulator to provide such information to relevant regulatory bodies or entities on which powers or duties have been conferred by legislation, such as the counterparty to the emitter contracts, or to obtain relevant information from those entities to ensure that decision-making is robust and takes into account all relevant considerations. Meanwhile, provision has been made in Clauses 26 and 27 to confirm that appropriate data protection requirements would continue to apply.

The noble Lord can be reassured, I hope, that these provisions were not drafted to facilitate any widespread publication of commercially sensitive information but to enable robust, informed decision-making. Further, the powers limit information requests to those which the economic regulator or Secretary of State consider necessary to facilitate the proper exercise of their functions.

Amendment 32, again tabled by the noble Lord, Lord Foulkes, seeks to ensure that the economic regulator must reasonably consider whether the urgency of a matter makes it impracticable or inappropriate to carry out and publish an impact assessment for major proposals, or to make a statement as to why it is unnecessary for it to do so. Under current drafting of the Bill, it is where the economic regulator is minded to pursue a proposal which could have a significant impact on licence holders, persons engaged in activities associated with licensable activities, or on the general public or the environment. In such instances, the economic regulator is required to carry out and publish an assessment of the likely impact of implementing the proposal, or to confirm that it considers it unnecessary to carry out an assessment, with the reasons being given for this conclusion. This requirement does not apply if it appears to the economic regulator that it would be impractical or inappropriate, given the urgency of the matter to which the proposal relates.

In some situations, the urgency of the proposal would make it impractical for the economic regulator either to conduct the impact assessment before implementing a proposal or to publish a statement explaining why an assessment would be unnecessary. We think that it is important that the economic regulator is empowered to act swiftly without the need to produce such documentation in the unlikely event that that need arises.

I hope that I have been able to offer sufficient reassurance to the noble Lord in respect of the requirement for the economic regulator to conduct an impact assessment where required before implementing a major proposal, except in the limited situation of potential urgency or emergency. Therefore, with the reassurances that I have provided him, I hope that the noble Lord will feel able to withdraw or not press all his amendments, except for Amendment 28, which we accept.

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

My Lords, I am most grateful to the Minister for accepting and agreeing to Amendment 28. I can assure him that I will not let that go to my head, but I will keep on trying with other amendments. I listened carefully to his explanation in relation to the other amendments. I understand what he is saying and I think it is right, so I will not pursue them.

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Moved by

[Lord Callanan]

33: Clause 32, page 30, line 25, leave out from beginning to “provision” and insert “Schedule (Enforcement of obligations of licence holders) makes”
Member's explanatory statement
This amendment, the amendment in the name of Lord Callanan at page 30, line 28, and New Schedule (Enforcement of obligations of licence holders) provide for the enforcement of obligations of licence holders and accordingly omit the powers in clause 32 to make corresponding provision by regulations.

[Lord Callanan (Con)]

My Lords, in moving Amendment 33 I will also speak to Amendments 34 and 36 standing in my name. These amendments seek to amend Clause 32, concerning the enforcement of obligations of licence holders in the carbon dioxide transport and storage sector.

Clause 32, as drafted at introduction, establishes a delegated power for the Secretary of State to make, by regulations, the conditions of a carbon dioxide transport and storage licence enforceable by the economic regulator. In particular, this clause as originally drafted stipulates that regulations may provide that both the conditions within licences and notices served on the licence holder to provide information to the economic regulator may be enforced in the manner provided for in Section 25 of the Electricity Act 1989. However, Amendments 33, 34 and 36 would instead provide for the necessary enforcement measures in the Bill.

The powers available to the economic regulator to enforce licensable carbon dioxide transport and storage activities are intended to align broadly with enforcement powers in the gas and electricity sectors. However, in our view, setting out these powers in the primary legislation, which establishes the new economic regulation and licensing framework for carbon dioxide transport and storage, provides greater clarity for both the regulator and those who are to be regulated. This will remove any potential for debate regarding the different principal objectives and general duties that the economic regulator would be subject to when exercising these powers and the territorial extent of such powers.

I hope that noble Lords will agree that this further clarity and separation will serve to effectively enable the economic regulator to take appropriate action against any breach of the CO₂ transport and storage licence conditions and in the event of non-compliance with information requests. Appropriate enforcement powers are essential to ensure that the licensing framework operates as intended, to ensure that licence conditions are adhered to and to prevent anti-competitive behaviour. This amendment to provide the economic regulator with complete powers for enforcement would therefore further secure its ability to support the establishment of the UK’s CCUS industry. I beg to move.

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[Lord Lennie (Lab)]

My Lords, the government amendments appear to correct an oversight in the Bill. If noble Lords are confused then so am I. I am not entirely sure what the Minister was saying, but it appears to me that there was a stage missing in the original drafting of this Bill and the attempt now is to put in that stage—which is, in effect, a final warning to licence holders to act in specific ways in order to become compliant. If that is right, then I understand it and I do not oppose it, but I want to make sure that I understand correctly what the Government are trying to do. If I am right then, other than to point out the original omission, we do not oppose these measures; we just want clarification of what is being put into the Bill.

[Lord Callanan (Con)]

I am happy to provide the reassurance that the noble Lord, Lord Lennie, asks for. It was simply a matter where, originally, we intended to take a power to do this through secondary legislation but, as we got to a later stage of drafting on the Bill, we thought that it would be more appropriate to put it in primary legislation. That is normally something that the House asks us to do. We were, on this occasion, trying to pre-empt some of the points that may be made by Peers to say that we should not do so much under powers and secondary legislation and should put it in the Bill—that is in fact what we are doing.

With regard to the point made by the noble Lord, Lord Teverson, on resourcing, it is very early days—we have not even set up the regulator yet—so I cannot give him any specific figures on what resourcing the regulator will have. The Treasury will no doubt want to have considerable input into this, but we will want to make sure that it is appropriately resourced and that we have the appropriate technical abilities, technical inspectors and so on to make sure that this activity is appropriately licensed and enforced and, of course, is safe for operators, personnel and the public.

Amendment 33 agreed.

Moved by

[Lord Callanan]

34: Clause 32, page 30, line 28, leave out subsections (2) and (3)
Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 30, line 25.

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Moved by

[Lord Callanan]

36: Before Schedule 3, insert the following new Schedule—
“ScheduleEnforcement of obligations of licence holdersOrders for securing compliance with certain provisions
(1) Where the economic regulator is satisfied that a licence holder is contravening, or is likely to contravene, any relevant condition or requirement, the economic regulator must make an order (a “final order”) containing such provision as appears to the economic regulator to be necessary for the purpose of securing compliance with that condition or requirement (but this sub-paragraph does not apply if the economic regulator is required to by sub-paragraph (2) to make a provisional order in respect of the contravention or likely contravention).(2) Where it appears to the economic regulator—(a) that a licence holder is contravening, or is likely to contravene, any relevant condition or requirement, and(b) that it is appropriate to make an order under this sub-paragraph,the economic regulator must (instead of taking steps towards the making of final order) make an order (a “provisional order”) containing such provision as appears to the economic regulator to be necessary for the purpose of securing compliance with that condition or requirement.(3) In determining for the purposes of sub-paragraph (2)(b) whether it is appropriate to make a provisional order, the economic regulator must have regard, in particular, to the extent to which any person is likely to sustain loss or damage in consequence of anything that is likely to be done (or omitted to be done) in contravention of the relevant condition or requirement before a final order may be made.(4) The economic regulator must confirm a provisional order, with or without modifications, if—(a) the economic regulator is satisfied that the licence holder is contravening, or is likely to contravene, any relevant condition or requirement, and(b) the provision made by the order (with any modifications) is necessary for the purpose of securing compliance with that condition or requirement.(5) If a provisional order is not previously confirmed under sub-paragraph (4), it is to cease to have effect at the end of such period (not exceeding three months) as is determined by or under the order.(6) Sub-paragraphs (1) to (4) are subject to sub-paragraphs (7) to (9) and paragraph 2. (7) The economic regulator—(a) must, before making a final order or making or confirming a provisional order, consider whether it would be more appropriate to proceed under the Competition Act 1998 (see section 37);(b) must not make a final order, or make or confirm a provisional order, if the economic regulator considers that it would be more appropriate to proceed under that Act.(8) The economic regulator may not make a final order or make or confirm a provisional order if the economic regulator is satisfied that the duties imposed on the economic regulator by section 1 preclude the making or, as the case may be, the confirmation of the order.(9) The economic regulator is not required to make a final order or make or confirm a provisional order if it is satisfied—(a) that the licence holder has agreed to take and is taking all such steps as appear to the economic regulator to be for the time being appropriate for the purpose of securing or facilitating compliance with the condition or requirement in question, or(b) that the contraventions were, or the apprehended contraventions are, of a trivial nature.(10) Where the economic regulator decides that it would be more appropriate to proceed under the Competition Act 1998 or is satisfied as mentioned in sub-paragraphs (8) and (9), the economic regulator must—(a) give notice to the licence holder that the economic regulator has so decided or is so satisfied, and(b) publish a copy of the notice in such manner as the economic regulator considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by them.(11) A final or provisional order—(a) must require the licence holder (according to the circumstances of the case) to do, or not to do, such things as are specified in the order or are of a description so specified,(b) must take effect at such time as is determined by or under the order, which must be the earliest practicable time, and(c) may be revoked at any time by the economic regulator.(12) In this Schedule—“final order” means an order under sub-paragraph (1);“provisional order” means an order under sub-paragraph (2);“relevant condition” , in relation to a licence holder, means any condition of any licence (as defined in section 7) held by that person;“relevant requirement” , in relation to a licence holder, means any requirement imposed on the licence holder by or under this Part.Procedural requirements
2 (1) Before making a final order or confirming a provisional order, the economic regulator must give notice—(a) stating that the economic regulator proposes to make or confirm the order and setting out its effect,(b) stating—(i) the relevant condition or requirement,(ii) the acts or omissions which, in the economic regulator’s opinion, constitute or would constitute contraventions of it, and (iii) the other facts which, in the economic regulator’s opinion, justify the making or confirmation of the order, and(c) specifying the time (which must not be less than 21 days from the date of publication of the notice) within which representations or objections to the proposed order or confirmation of the order may be made,and must consider any representations or objections which are duly made and not withdrawn.(2) A notice under sub-paragraph (1) is given—(a) by publishing the notice in such manner as the economic regulator considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by them, and(b) by sending a copy of the notice, and a copy of the proposed order or of the order proposed to be confirmed, to the licence holder.(3) The economic regulator must not make a final order with modifications, or confirm a provisional order with modifications, except with the consent of the licence holder or after complying with the requirements of sub-paragraph (4).(4) The requirements are that the economic regulator must—(a) give to the licence holder such notice as the economic regulator considers necessary of the economic regulator’s proposal to make or confirm the order with modifications,(b) specify the time (which must not be less than 21 days from the date of the service of the notice) within which representations or objections to the proposed modifications may be made, and(c) consider any representations or objections which are duly made and not withdrawn.(5) Where the economic regulator decides to proceed under the Competition Act 1998 in a case falling within paragraph 1(7)(b), the economic regulator must—(a) inform the licence holder concerned of that decision, and(b) publish the notice in a manner that the economic regulator thinks appropriate for bringing the notice to the attention of persons likely to be affected by the decision.(6) Before revoking a final order or a provisional order which has been confirmed, the economic regulator must give notice—(a) stating that the economic regulator proposes to revoke the order and setting out its effect, and(b) specifying the time (which must not be less than 28 days) from the date of publication of the notice within which representations or objections to the proposed revocation may be made,and must consider any representations or objections which are duly made and not withdrawn.(7) A notice under sub-paragraph (6) is given—(a) by publishing the notice in such manner as the economic regulator considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by them, and(b) by sending a copy of the notice to the licence holder.(8) As soon as practicable after a final order is made or a provisional order is made or confirmed, the economic regulator must— (a) serve a copy of the order on the licence holder, and(b) publish such a copy in such manner as the economic regulator considers appropriate for the purpose of bringing the order to the attention of persons likely to be affected by it.Validity and effect of orders
(1) If the licence holder is aggrieved by a final or provisional order and wishes to question its validity on the ground that the making or confirmation of it was not within the powers of paragraph 1, or that any of the requirements of paragraph 2 have not been complied with in relation to it, the licence holder may within 42 days from the date of service on the licence holder of a copy of the order make an application to the court under this paragraph.(2) On any such application the court, if satisfied that the making or confirmation of the order was not within those powers or that the interests of the licence holder have been substantially prejudiced by a failure to comply with those requirements, may quash the order or any provision of the order.(3) Except as provided by this paragraph, the validity of a final or provisional order may not be questioned by any legal proceedings whatever.(4) The obligation to comply with a final or provisional order is a duty owed to any person who may be affected by a contravention of it.(5) Where a duty is owed by virtue of sub-paragraph (4) to any person any breach of the duty which causes that person to sustain loss or damage is to be actionable at the suit or instance of that person.(6) In any proceedings brought against any person in pursuance of sub-paragraph (5), it is a defence for the person to prove that they took all reasonable steps and exercised all due diligence to avoid contravening the order.(7) Without prejudice to any right which any person may have by virtue of sub-paragraph (5) to bring civil proceedings in respect of any contravention or apprehended contravention of a final or provisional order, compliance with any such order is to be enforceable by civil proceedings by the economic regulator for an injunction or interdict or for any other appropriate relief.(8) In this paragraph “the court” means—(a) in relation to England and Wales and Northern Ireland, the High Court;(b) in relation to Scotland, the Court of Session.Penalties
(1) Where the economic regulator is satisfied that a licence holder has contravened or is contravening any relevant condition or requirement, the economic regulator may, subject to paragraph 6, impose on the licence holder a penalty of such amount as is reasonable in all the circumstances of the case.(2) Before imposing a penalty on a licence holder under sub-paragraph (1), the economic regulator must consider whether it would be more appropriate to proceed under the Competition Act 1998.(3) The economic regulator must not impose a penalty on a licence holder under sub-paragraph (1) if it considers that it would be more appropriate to proceed under the Competition Act 1998.(4) Before imposing a penalty on a licence holder under sub-paragraph (1) the economic regulator must give notice—(a) stating that it proposes to impose a penalty and the amount of the penalty proposed to be imposed,(b) setting out the relevant condition or requirement, (c) specifying the acts or omissions which, in the opinion of the economic regulator, constitute the contravention in question and the other facts which, in the opinion of the economic regulator, justify the imposition of a penalty and the amount of the penalty proposed, and(d) specifying the period (which must not be less than 21 days from the date of publication of the notice) within which representations or objections with respect to the proposed penalty may be made,and must consider any representations or objections which are duly made and not withdrawn.(5) Before varying any proposal stated in a notice under sub-paragraph (4)(a) the economic regulator must give notice—(a) setting out the proposed variation and the reasons for it, and(b) specifying the period (which must be at least 21 days from the date of publication of the notice) within which representations or objections with respect to the proposed variation may be made,and must consider any representations or objections which are duly made and not withdrawn.(6) As soon as practicable after imposing a penalty, the economic regulator must give notice—(a) stating that it has imposed a penalty on the licence holder and its amount,(b) setting out the relevant condition or requirement in question,(c) specifying the acts or omissions which, in the opinion of the economic regulator, constitute the contravention in question and the other facts which, in the opinion of the economic regulator, justify the imposition of the penalty and its amount, and(d) specifying a date, no earlier than the end of the period of 42 days from the date of service of the notice on the licence holder, by which the penalty is required to be paid.(7) The licence holder may, within 21 days of the date of service on the licence holder of a notice under sub-paragraph (6), make an application to the economic regulator for it to specify different dates by which different portions of the penalty are to be paid.(8) Any notice required to be given under this paragraph must be given—(a) by publishing the notice in such manner as the economic regulator considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by them, and(b) by serving a copy of the notice on the licence holder.(9) This paragraph is subject to paragraph 10 (maximum amount of penalty that may be imposed).(10) Any sums received by the economic regulator by way of penalty under this paragraph must be paid into the Consolidated Fund.Statement of policy with respect to penalties
5 (1) The economic regulator must prepare and publish a statement of policy with respect to the imposition of penalties and the determination of their amount.(2) In deciding whether to impose a penalty, and in determining the amount of any penalty, in respect of a contravention the economic regulator must have regard to its statement of policy most recently published at the time when the contravention occurred. (3) The economic regulator may revise its statement of policy and where it does so must publish the revised statement.(4) Publication under this paragraph must be in such manner as the economic regulator considers appropriate for the purpose of bringing the matters contained in the statement of policy to the attention of persons likely to be affected by them.(5) The economic regulator must undertake such consultation as it considers appropriate when preparing or revising its statement of policy.Time limits on the imposition of penalties
6 (1) Where no final or provisional order has been made in relation to a contravention, the economic regulator may not impose a penalty in respect of the contravention later than the end of the period of five years from the time of the contravention, unless before the end of that period—(a) the notice under paragraph 4(4) relating to the penalty is served on the licence holder under paragraph 4(8), or(b) a notice under section 29(2)(b) is served on the licence holder which specifies that the notice is served in connection with a concern on the part of the economic regulator that the licence holder may be contravening, or may have contravened, a relevant condition or requirement.(2) Where a final or provisional order has been made in relation to a contravention, the economic regulator may not impose a penalty in respect of the contravention unless the notice relating to the penalty under paragraph 4(4) was served on the licence holder under paragraph 4(8)—(a) within three months from the confirmation of the provisional order or the making of the final order, or(b) where the provisional order is not confirmed, within six months from the making of the provisional order.Interest and payment of instalments
7 (1) If the whole or any part of a penalty is not paid by the date by which it is required to be paid, the unpaid balance from time to time is to carry interest at the rate for the time being specified in section 17 of the Judgments Act 1838.(2) If an application is made under paragraph 4(7) in relation to a penalty, the penalty is not required to be paid until the application has been determined.(3) If the economic regulator grants an application under that sub-paragraph in relation to a penalty but any portion of the penalty is not paid by the date specified in relation to it by the economic regulator under that sub-paragraph, the economic regulator may where it considers it appropriate require so much of the penalty as has not already been paid to be paid immediately.Appeals against penalties
8 (1) If the licence holder on whom a penalty is imposed is aggrieved by—(a) the imposition of the penalty,(b) the amount of the penalty, or(c) the date by which the penalty is required to be paid, or the different dates by which different portions of the penalty are required to be paid,the licence holder may make an application to the court under this paragraph.(2) An application under sub-paragraph (1) must be made— (a) within 42 days from the date of service on the licence holder of a notice under paragraph 4(6), or(b) where the application relates to a decision of the economic regulator on an application by the licence holder under paragraph 4(7), within 42 days from the date the licence holder is notified of the decision.(3) On any such application, where the court considers it appropriate to do so in all the circumstances of the case and is satisfied of one or more of the grounds falling within sub-paragraph (4), the court—(a) may quash the penalty,(b) may substitute a penalty of such lesser amount as the court considers appropriate in all the circumstances of the case, or(c) in the case of an application under sub-paragraph (1)(c), may substitute for the date or dates imposed by the economic regulator an alternative date or dates.(4) The grounds falling within this sub-paragraph are—(a) that the imposition of the penalty was not within the power of the economic regulator under paragraph 4,(b) that any of the requirements of sub-paragraphs (4) to (6) or (8) of paragraph 4 have not been complied with in relation to the imposition of the penalty and the interests of the licence holder have been substantially prejudiced by the non-compliance, or(c) that it was unreasonable of the economic regulator to require the penalty imposed, or any portion of it, to be paid by the date or dates by which it was required to be paid.(5) If an application is made under this paragraph in relation to a penalty, the penalty is not required to be paid until the application has been determined.(6) Where the court substitutes a penalty of a lesser amount it may require the payment of interest on the substituted penalty at such rate, and from such date, as it considers just and equitable.(7) Where the court specifies, as a date by which the penalty or a portion of the penalty is to be paid, a date before the determination of the application under this paragraph it may require the payment of interest on the penalty, or portion, from that date at such rate as it considers just and equitable.(8) Except as provided by this paragraph, the validity of a penalty is not to be questioned by any legal proceedings whatever.(9) In this paragraph “the court” means—(a) in relation to England and Wales or Northern Ireland, the High Court, and(b) in relation to Scotland, the Court of Session.Recovery of penalties
9 Where a penalty imposed under paragraph 4(1), or any portion of it, has not been paid by the date on which it is required to be paid and—(a) no application relating to the penalty has been made under paragraph 8 during the period within which such an application can be made, or(b) an application has been made under that paragraph and determined,the economic regulator may recover from the licence holder, as a civil debt due to it, any of the penalty and any interest which has not been paid.Maximum amount of penalty
10 (1) The maximum amount of penalty that may be imposed on a licence holder in respect of a contravention may not exceed 10 per cent of the licence holder's turnover.(2) The Secretary of State may by regulations provide for how a person's turnover is to be determined for the purposes of this paragraph.(3) Regulations under sub-paragraph (2) are subject to the affirmative procedure.(4) In this paragraph “penalty” means a penalty imposed on a licence holder under paragraph 4.”Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 30, line 25.

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[Baroness Blake of Leeds (Lab)]

I do not have an enormous amount to add to the comments of the noble Lord, Lord Teverson. I highlight again the significance of linking strategy and policy: that is crucial. We will discuss in future debates the issues around the role of the ISOP and its independence, and, particularly in the context of this afternoon’s debate, look at long-term thinking, making sure that we get all the checks and balances in place. We are in a very fast-moving environment and need to make sure that we are absolutely on top of all the changes that are taking place. The noble Lord, Lord Teverson, highlighted the risk of lack of coherence: we need to make sure that everything is nailed down, line by line, and I am sure we will have further discussion on these areas as we go through different aspects of the Bill. I look forward to the Minister’s conclusions on this group of amendments.

[Lord Callanan (Con)]

I thank the noble Lord, Lord Teverson, for his amendments, beginning with Amendments 38 and 112. The Bill provides that the Secretary of State may designate a CCUS strategy and policy statement to set out the strategic priorities of the Government in formulating their CCUS policy. This would also need to take account of any statement designated under Section 131 of the Energy Act 2013. The Secretary of State must carry out their functions under this part in the manner they consider is best to further deliver the policy outcomes set out in the statement. In addition, parliamentarians will have the opportunity to consider any draft CCUS strategy and policy statement before it can be designated, as is provided for by Clause 91(10). Setting out in a strategic policy statement possible scenarios for policy change would start to introduce considerable uncertainty for both investors and the regulator which would, in my view, hamper the stability of the sector.

Amendment 120 to Clause 98 would require that, when making regulations establishing or adjusting a low-carbon heat scheme, the Secretary of State must publish a statement demonstrating how the scheme would deliver in line with both the carbon capture usage and storage strategy and policy statement and any overall strategy and policy statement provided for by the Energy Act 2013. Of course, I agree with the noble Lord in his principle that policy-making should be aligned with the broader strategy and the latest science: that is why all policy on heat and building decarbonisation is and will continue to be developed in line with wider government energy and decarbonisation strategy. As we said in a recent government response to a consultation, the plan to introduce, for instance, the market-based low-carbon heat scheme is aligned with the aim to expand the deployment of heat pumps towards 600,000 installations per year by 2028. I am afraid I do not agree with the noble Lord, and therefore do not believe that requiring another series of publications each time new regulations are made is ultimately necessary. I therefore hope he will feel able to withdraw his amendment.

Turning to Amendment 128, Clauses 108 and 109 will enable the safe and effective delivery of a village-scale hydrogen heating trial to gather vital evidence to help make decisions on the potential role of hydrogen in heat decarbonisation. I reassure the noble Lord that trial development is already following the latest science. This amendment would delay the introduction of new regulations which are focused on the protection of consumers until two strategy and policy statements are published. The exact contents of these documents would also need to be properly consulted on before they are issued.