Net Zero Strategy: High Court Ruling

Lord Callanan Excerpts

Thursday 21st July 2022 Lords Chamber

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

My Lords, with the leave of the House, I shall now repeat the Answer to an Urgent Question in the other place given by my right honourable friend Greg Hands MP:

“Over the past three decades, the UK has driven down emissions by over 45%—the fastest reduction of any G7 country. We have one of the most ambitious carbon-reduction plans in the world, pledging to reduce emissions by at least 68% by 2030 and by 77% by 2035, compared to 1990 levels, before of course reaching net zero by 2050. Our track record speaks for itself: the UK has overachieved against the first carbon budget and exceeded the second by nearly 14%. Latest projections show that we are on track to meet the third carbon budget as well.

In its judgment on the judicial review of the net zero strategy, the High Court found that the Government had not complied sufficiently with the Climate Change Act in relation to specific procedural issues and the level of analysis published as part of the 164-page Net Zero Strategy. I would stress that the judge has made no criticism about the substance of our plans to meet net zero, which are well on track. Indeed, even the claimants in the case described the net zero strategy as ‘laudable’. The independent Climate Change Committee described the net zero strategy as

‘an ambitious and comprehensive strategy that marks a significant step forward for UK climate policy’

and as

‘the world’s most comprehensive plan to reach Net Zero’.

We are now considering the implications of the judgment and deciding whether to appeal. As we do this, our focus will remain resolutely on supporting people in the face of globally high energy prices and boosting our energy security. Our recent British Energy Security Strategy—launched by the Prime Minister—which puts Great Britain at the leading edge of the global energy revolution, will deliver a more independent, more secure energy system and support consumers to manage their energy bills.”

[Lord McNicol of West Kilbride (Lab)]

My Lords, paragraph 252 of the High Court judgment ruled that the Government’s net zero strategy was unlawful. The court found that the net zero strategy did not go below national and sector levels to look at contributions to emissions reductions, and that it needs to be rewritten with quantified accounts and a realistic assessment. The Energy Bill is currently passing through your Lordships’ House; it establishes an independent system operator and planner, which is a welcome step. However, the legislation does not establish a system operator and planner at a regional level to promote the 2008 Act. If Her Majesty’s Opposition were to lay an amendment to deliver a regional system operator and planner which would solve some of the problems of the judgment, would Her Majesty’s Government support that?

[Lord Callanan (Con)]

I would need to look at the details of the noble Lord’s amendment before giving him an answer. As the Climate Change Committee recognises, the net zero strategy is a comprehensive plan for meeting our climate targets, which outlines measures to transition to a green and sustainable future, helping businesses and consumers move to clean power. We think we are on strategy; as I said, we will look closely at the judgment and decide whether or not to appeal.

[Lord Stoneham of Droxford (LD)]

My Lords, one of the problems is that the Government have been very good on targets but much less good on delivery. Can the Minister comment on the view of the former Chancellor, Rishi Sunak, that we should not relax the restraints on onshore power or encourage it? Is that how we will achieve delivery against these targets?

[Lord Callanan (Con)]

I think the noble Lord is wrong in his first statements; we have so far met, or indeed exceeded, all our carbon budgets and we are on track to meet the latest one. This is a reference to a carbon budget in 12 or 17 years’ time, so of course we will look closely at the implications of the judgment. On the noble Lord’s question, we have said that we are not against the expansion of onshore wind, but we will need to do it in close co-operation with, and with the support of, local communities. Meanwhile, as he will be aware, we have massively expanded the ambition of our offshore wind, which during the latest contracts for difference round is now coming in at record low prices.

[Lord Howell of Guildford (Con)]

My Lords, when I saw this headline judgment, I thought for a moment that the court might be making the obvious point—which I think most people agree with—that while our national net-zero target is pressing ahead rather well, with the contribution and efforts of my noble friend, and while other Western countries are moving towards net zero, emissions are rising very fast when they should be at least level, if not falling, under the Paris targets. The Paris targets are receding, and almost everyone in the world of combating climate change recognises that a vast uplift in international efforts to curb carbon emissions, of the kind that involves a huge abstraction of carbon from the atmosphere on a global scale, is now needed. That is what the UN and the IPCC are saying and even the CCC agrees to it. Leading figures such as John Kerry also agree with this view. If there is a criticism, it is perhaps that our contribution there is not realised enough, so much are we concentrating on NZ. However, I fully agree that we are doing that rather well, and I hope that we appeal.

[Lord Callanan (Con)]

My noble friend makes some important points. Of course, our contribution to global emissions is relatively small, but this is very much a global problem. As a leading industrialised nation, it is right that we should set an example, and we are doing so. As I said, we have some of the fastest and most ambitious reduction targets. We will certainly look closely at the judgment, but we will carry on with our ambitious decarbonisation strategy.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the court judgment refers to the need for and the lack of quantified realistic assessments. If we look at what we have heard from the Government in recent days, we have the frankly fanciful jet-zero aviation strategy and the Energy Bill, with its huge focus on the unproven-at-scale carbon capture and storage. I am aware that the Minister cannot speak for whatever future Government we might have, but will he acknowledge the judgment of the Committee on Climate Change, among others, that the Government’s plans and action on agriculture, buildings and heat are totally inadequate, and that these are areas in which urgent action and deliverable plans are needed?

[Lord Callanan (Con)]

I thank the noble Baroness for her questions. I do not share her pessimism about the jet fuel initiative. It is very important that we deliver low-carbon jet fuel. After all, we want to enable her Green colleagues to continue to fly up to COP summits in a carbon-neutral manner. With regard to her comments about the other contributions we need to make, of course agriculture is a particular challenge. The energy sector is decarbonising well. Home emissions are difficult for the UK, given the age of our housing stock; something like 6 million homes were built before the First World War, and a third of our properties were built before the Second World War. That presents a fairly unique challenge in Europe, but it is one that we are tackling. Emissions are coming down, and we are proceeding well.

[Lord Bellingham (Con)]

My Lords, surely a key aspect of reaching net zero is implementing the British Energy Security Strategy, which aims to increase the share of nuclear to 25%. Can the Minister tell the House what more the Government are doing to encourage modular nuclear systems and nuclear fusion?

[Lord Callanan (Con)]

My noble friend is absolutely right; I am sure he noticed the granting of planning permission to the Sizewell C reactor yesterday. We are supporting Rolls-Royce to the tune of over £100 million to support the production of designs for small modular reactors, and we think that they will have a significant contribution to make—albeit not for a number of years yet. Of course, the latest developments in fusion, which we are also supporting, are particularly exciting. If my noble friend wants to contribute to the debates on the Energy Bill, we are setting in place a regulatory framework for fusion.

[Lord Bridges of Headley (Con)]

My Lords, can I use this as an opportunity to plug a great new report out today, Investing in Energy: Price, Security, and the Transition to Net Zero, by the Economic Affairs Committee, which I happen to chair? It is very timely because, on the back of this Question, it concludes—as my noble friend Lord Howell said—that while there has been considerable progress by this Government, for which they should be given credit, there are

“gaps between the Government’s ambitions and practical policy”

which are “significant”. I hope my noble friend will take this report with him to his deckchair to read.

I have one specific point regarding where we are right now as we approach what will probably be another very difficult winter in terms of energy and energy prices. One of the committee’s core recommendations was that the Government should publish an energy demand reduction strategy particularly focused on home insulation. Would my noble friend take that recommendation back and peruse it so that the next Government can act on it swiftly when they come in September?

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[Lord Callanan (Con)]

I thank my noble friend for his recommendation for my holiday reading. I am not certain yet I will get a holiday, but if I do, I am sure his committee’s report will make fascinating reading—though I need no persuading of the importance of home energy efficiency and insulation schemes. We continue to progress work on just such a scheme, and I hope the new Prime Minister, when he or she comes into office, will support it.

[Baroness McIntosh of Pickering (Con)]

I will be taking the Energy Bill with me as my holiday reading. I congratulate my noble friend on the Statement he made and on having regard to the unprecedented energy circumstances in which we find ourselves and the challenges this poses for farmers and others. In support of the words of my noble friend Lord Howell, I ask my noble friend the Minister to increase the efforts of international co-operation to ensure that other countries are matching the efforts of this country and others in Europe.

[Lord Callanan (Con)]

My noble friend can be assured that we will do that. We make a relatively small contribution. We need to set the lead, but this is the epitome of an international problem, and all our efforts will be negated if other, bigger emitters do not reduce their emissions as well, so her point is correct and powerfully made.

Employment Rights

Lord Callanan Excerpts

Tuesday 19th July 2022 Lords Chamber

[Lord Woodley]

To ask Her Majesty’s Government what steps they are taking to improve employment rights for workers in Great Britain.

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

My Lords, the UK has one of the best workers’ rights records in the world. As a result of government action, there are now more employees on the payroll than ever before, and the unemployment rate is close to record lows. We have raised the national living wage to the highest amount yet, and on Friday we supported the allocation of tips Bill and the Neonatal Care (Leave and Pay) Bill in the Commons.

[Lord Woodley (Lab)]

My Lords, after last night’s debate it is even clearer now that, far from improving employment rights, this Government are attacking them, even against the will of many employers. With new taxes on trade unions, a nudge and a wink to fire and rehire, and changes in the law to let bad bosses break strikes with agency staff, this is an ideological and unwarranted attack on the trade union movement and it will come back to haunt this Government at the next election—at least, I hope so. I ask the Minister again: why are the Government launching an all-out war on the trade unions? Will he accept responsibility for poisoning industrial relations across this country, as many employers are warning?

[Lord Callanan (Con)]

I could not disagree more with the noble Lord. Given his record it is understandable, but the noble Lord is obsessed with trade unions, which, as I keep reminding him, represent only a minority of workers. The best workers’ right is the right to a job, and this Government are delivering record levels of employment.

[Baroness Ludford (LD)]

We have a national shortage in the workforce of hundreds of thousands, which is a crisis for future growth. Just yesterday we saw a new report from the Recruitment and Employment Confederation, which has found that the UK economy could potentially lose up to £39 billion a year from 2024 if we do not resolve labour and skills shortages. Does the Minister agree that improving employment rights is an important way of attracting people back into the workforce and retaining those already in it?

[Lord Callanan (Con)]

The noble Baroness makes some valid points. We are very proud of our record on workers’ rights. It is about getting the balance right between a flexible economy and allowing employers to manage their workforces. That is what results in the record levels of employment we now have.

[Lord Bridges of Headley (Con)]

My Lords, if the Minister is proud of our record of employment rights, would he agree with me that IR35 has created unfairness in the workplace by taxing 500,000 freelancers and contractors as employees for tax purposes while denying them employment rights? Is it not now time to fundamentally rethink IR35 and, as the Conservative manifesto promised, implement what was contained in the Taylor review?

[Lord Callanan (Con)]

I have some sympathy with the points that my noble friend has made, but, if he will forgive me, I will leave this for the Chancellor to sort out.

[Lord Collins of Highbury (Lab)]

Let us stay on this point. The Minister talks about the record of this Government. Paul Scully, in the other place, said that we will see employment measures come forward in both this Session and before the end of the Parliament. Apart from the statutory code of practice on dismissal and re-engagement, do the Government have a timetable to legislate on the 51 recommendations they agreed to and accepted from the Taylor review? When will we see a timetable for implementation?

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[Lord Callanan (Con)]

We have said that we will legislate when parliamentary time allows. Many of the proposals are being taken forward in Private Members’ Bills that the Government support, and some do not require legislation or can be done through secondary legislation.

[Lord Balfe (Con)]

My Lords, it seems to me that we have come some way from when David Cameron asked me to do what I could in the House of Lords to help trade unions. When will we have an employment Bill? Does the Minister not think it a good idea to do a bit of love-bombing of the trade unions, to try to get them, as they always are, to work in the national interest alongside the Government? That will get us the best level of co-operation. They may be not highly unionised jobs but some areas are, particularly in the public services, and we need them on our side.

[Lord Callanan (Con)]

My noble friend did a good job of working with the trade unions, and of course we are willing to talk to and work with all those who are willing and prepared to work with us.

[Lord Touhig (Lab)]

My noble friend Lord Woodley made an important point about workers’ rights, but if you are disabled, the chances are you are not in work at all. That is why we need to close the disability employment gap. In a Written Answer to a Question asked on 7 March, the noble Baroness, Lady Stedman-Scott, told me that the Government have a £151 million Access to Work budget encouraging employers to take on people who have disabilities. Can the Minister say how many disabled people have secured jobs through this scheme?

[Lord Callanan (Con)]

I am afraid that those figures are not available to me, but I am very happy to write to the noble Lord.

[Lord Watts (Lab)]

My Lords, it will come as a great shock to many workers that the Government believe that their legislation gives workers the best protection in Europe. Would the Minister like to take the opportunity to spell out some of those measures, because I do not think many Members on this side understand what he is talking about?

[Lord Callanan (Con)]

As I said, the best right that workers can have is the right to a secure and well-paid job, which is what we are providing. I have also outlined during previous debates that we have employment rights in this country far in excess of most of the EU standards and which were retained under the Brexit withdrawal Bills. We have an excellent record of workers’ rights, and we should be proud of it.

[Baroness Altmann (Con)]

My Lords, would my noble friend agree that one of the big crises facing the labour market at the moment is the withdrawal of many older workers from the workforce altogether? In the context of employment rights and the previous question, would the Government consider paid leave for carers of elderly loved ones or relatives who need to take some time off, just as mothers with young children need paid maternity leave? Would the Government consider facilitating the return of older workers to the labour force in that manner?

[Lord Callanan (Con)]

My noble friend makes an important point. It is vital, particularly if we are suffering shortages in some sectors, to get as many members of a productive workforce into work as possible. We will keep all these matters under review to see how we can ensure getting more carers back into work.

[Baroness Lister of Burtersett (Lab)]

My Lords, we were hoping that the mythical employment Bill would include a form of the failed shared parental leave scheme, under which only 2% of mothers who started maternity leave in 2021-22 transferred some shared parental leave to the father. It is now more than four years since the Government started their review of shared parental leave, potentially so important to gender equality. When will they finally produce the outcome?

[Lord Callanan (Con)]

That study is still going on, and I am sure we will let the noble Baroness know as soon as we have a conclusive statement to make on it.

[Lord Hain (Lab)]

My Lords, does the Minister see any contradiction between cheering key workers during the pandemic and then condemning them when they strike to get the decent pay rise they have been denied for many years?

[Lord Callanan (Con)]

I do not see any contradiction. This is about getting a balance between those workers who have the right to go on strike and all those other workers who have the right to go to their hospital appointments, take their exams and go to their place of employment.

[Baroness Smith of Basildon (Lab)]

My Lords, I wonder if the noble Lord could help me. In answer to an earlier Question, the noble Lord, Lord True, explained why the Government have not yet introduced their promised unpaid leave for carers. If I understood correctly, in answer to the noble Baroness a moment ago, the Minister said that he was sympathetic to paid leave for carers. Can he explain the Government’s thinking on this and tell us when we are likely to see some action?

[Lord Callanan (Con)]

I do not think that those answers are contradictory at all. It is always nice to go further in these matters. We keep all of these employment rights issues under review. As I have said, we have an excellent record, and we will go further when it is possible to do so.

[Lord Oates (LD)]

My Lords, is the Minister aware of the comments of the noble Earl, Lord Howe, in response to a question in February 2020 on thresholds for constitutional ballots. He said:

“If one had a threshold related to voter turnout, the inflexibility of such an arrangement could easily prove counterproductive and have the paradoxical effect of equating non-participation with no vote, because low levels of participation can void a given result.”—[Official Report, 12/2/20; col. 2265.]


In the light of those comments, what plans does the Minister have to review the trade union legislation which imposes just such ballot requirements on trade unions?

[Lord Callanan (Con)]

We keep all these matters under review but I do not think there are any specific plans to change those thresholds at the moment. It is very important that, before any strike action, there is proper consultation with employees and a proper secret ballot takes place, so that we can make sure that strike action has support from the workforce.

Energy Bill [HL]

Lord Callanan Excerpts

2nd reading
Tuesday 19th July 2022 Lords Chamber

Moved by

[Lord Callanan]

That the Bill be now read a second time.

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

My Lords, I start by acknowledging the record temperatures that we have been experiencing over recent days. I hope your Lordships remain cool while in the Chamber—which is probably the best place to be at the moment, given the air conditioning—and of course while travelling to and from the Chamber. I recognise the wealth of knowledge on energy policy in your Lordships’ House, which will no doubt be on full display in today’s debate.

This landmark Bill comes at a critical time for our country. Record high gas prices, Russia’s illegal invasion of Ukraine and the challenge of climate change all come together to highlight why we need to boost Britain’s energy independence and security. To protect households from the full impact of rising prices, we are acting now with a £37 billion package of financial support this year. This includes the expansion of the energy bills support scheme so that households will get £400 of support with their energy bills.

Secure, clean and affordable energy for the long term depends on the transformation of our energy system. That is why we are bringing forward this Bill, the most significant piece of primary legislation for energy since 2013, delivering key commitments from the energy security strategy, the Prime Minister’s 10-point plan and the net zero strategy. The Bill will help to drive an unprecedented £100 billion of private sector investment by 2030 into new British industries and will help to support around 480,000 clean jobs by the end of the decade.

I turn to the main elements of the Bill. It has 12 parts, which it will be helpful to consider under three key pillars. The first pillar leverages investment in new technologies, securing clean, homegrown industries that can help to reduce our exposure to volatile gas prices in the longer term. The Government have continually demonstrated our commitment to maintaining the security and resilience of our energy system. Investment in clean technologies is an essential part of the system transformation.

Deploying carbon capture, usage and storage—CCUS—and low-carbon hydrogen production will create new industries, helping to transform our former industrial heartlands. The Bill will introduce state-of-the-art business models for CCUS and for hydrogen. That includes provisions to establish an economic regulation and licensing framework for CO₂ transport and storage, and a new levy to fund hydrogen production. These will attract private investment by providing long-term revenue certainty to investors, putting the country on a path to grow these new clean industries and reindustrialise our economy.

The Bill will enable the delivery of a large village hydrogen heating trial by 2025, providing crucial evidence to inform decisions in 2026 on the role of hydrogen in heat decarbonisation. Building on policies such as the £450 million boiler upgrade scheme, the Bill includes provisions to scale up heat-pump installation, providing the powers to establish a market-based mechanism for the low-carbon heat industry to help build the market for heat pumps to 600,000 installations per year by 2028. Through the Bill, we will also make the UK the first country to address fusion in regulation, providing clarity on the regulatory regime for fusion energy facilities.

The second pillar in the Bill will allow for the necessary reform of our energy system. It will protect consumers from unfair pricing and decarbonise our energy system. By reforming the system, we will help to scale up the installation of key clean technologies for the future, ensuring that the system is more efficient in order to enable innovation and reduce the UK’s dependency on global fossil fuel markets.

The Bill will enhance our network security by establishing a new independent system operator and planner, which will support system reform and boost energy system resilience. Working across the electricity and gas systems, the independent system operator and planner will also ensure efficient energy planning, enhance energy security, minimise cost to consumers and promote innovation.

The Bill will reform energy code governance, overhauling the way that the technical and commercial rules of the energy system are overseen and kept up to date. This will make the system more agile, enable innovation and gear our system toward net zero.

In line with our manifesto commitment, we are legislating to extend the existing energy price cap beyond 2023 if necessary. The cap is the best safety net for 22 million households, preventing suppliers over- charging consumers. The Bill also contains provisions to enable competition in onshore electricity networks, delivering up to £1 billion worth of savings for consumers on projects tendered over the next 10 years.

The provisions in the Bill about mergers of energy network enterprises will protect consumers from increasing network prices in the event of energy network company mergers. They will enable the Competition and Markets Authority to consider the impact on Ofgem’s ability to carry out its role when reviewing energy network company mergers. We estimate that this could save energy consumers up to £420 million over 10 years.

The Bill will protect consumers and the grid from cyber threats, with new powers to regulate energy smart appliances. Provisions in the Bill will support continued delivery of the smart meter rollout, which will enable consumers to manage their energy use and cut their bills to help with the cost of living.

We will introduce multipurpose interconnectors as a licensable activity. The provisions will reduce the number of cabling points, landing points and substations. This will reduce the impact on local communities and the environment. It will also support the Government’s ambition for 50 gigawatts of offshore wind by 2030, as well as providing certainty to investors in and developers of multipurpose-interconnector projects.

In line with the 2021 smart systems and flexibility plan, we are legislating to clarify electricity storage as a distinct subset of electricity generation in the Electricity Act 1989. This will facilitate the deployment of electricity storage, such as batteries and pumped hydro storage, and remove obstacles to innovation in this area.

As we committed to in the energy White Paper, we are legislating to enable the removal of obligation thresholds under the energy company obligation scheme, commonly referred to as the ECO scheme. We will do so without creating significant financial and administrative burdens for small suppliers by enabling the Government to establish a buy-out mechanism under the scheme for suppliers.

Through the Bill, we will kickstart the development of heat networks. By enabling heat network zoning in England, we will overcome barriers to deployment by identifying areas where they provide the lowest-cost solution to heating buildings. We will also ensure that families living on heat networks are better protected, by appointing Ofgem as the new regulator for heat networks in Great Britain.

The Bill will provide a replacement power to enable the UK Government to amend the EU-derived energy performance of premises regime. This will ensure that the regime is fit for purpose and reflects the UK’s ambitions on climate change.

The third pillar in the Bill is about ensuring the safety, security and resilience of the UK’s energy system. The Bill follows the British energy security strategy announced earlier this year and puts into law measures to boost long-term energy independence and security. We are clear that nuclear energy has a vital role to play in reducing our reliance on fossil fuels and in our transition to net zero, as reconfirmed in the British energy security strategy. That is why this Bill will enable UK accession to the international Convention on Supplementary Compensation for Nuclear Damage. This will make greater compensation available to potential victims in the highly unlikely event of a nuclear incident and improve the investment climate for nuclear projects.

To build our nuclear future, we also need to clean up the past. Therefore, the Bill will facilitate the safe and cost-effective clean-up of the UK’s decommissioned nuclear sites. It will bring forward the final delicensing of nuclear sites, allowing more proportionate clean-up and earlier re-use of these sites. The Bill will also make it clear that geological disposal facilities located in or under the territorial sea require a licence and are regulated by the Office for Nuclear Regulation. The Bill introduces measures to enable the Civil Nuclear Constabulary to utilise its expertise in deterrence and armed response to support the security of other critical infrastructure sites, helping to keep those sites safe.

The continuity of core fuel supplies and energy resilience has never been more important. As such, the Bill contains measures for downstream oil security, which will apply to facilities such as oil terminals and filling stations. These measures will prevent fuel supply disruption and reduce the risk of emergencies affecting fuel supplies, such as disruption from industrial action or malicious protest and emergencies resulting from wider national security risks.

As we all know, our oil and gas sector plays an important role in our transition to a cleaner energy system. The Bill will enable existing legislation to be updated, ensuring that the offshore oil and gas environmental regulatory regime maintains high standards in respect of habitat protection and pollution response. It is important that we ensure that the UK’s oil and gas and carbon storage infrastructure remains in the hands of companies with the best ability to operate it. Therefore, the Bill will allow the North Sea Transition Authority to identify and prevent a potentially undesirable change of control before it happens.

In line with the polluter pays principle, and in order to protect taxpayers, the Bill introduces a provision on charging schemes for offshore oil and gas decommissioning. This means that the Government will be able to recover the costs of these activities more fully from the industry.

I also share with the House three amendments that we intend to bring forward in Committee. To meet commitments made in the British energy security strategy we will look to amend the Bill to include measures on offshore wind habitats regulations assessment and an offshore wind environmental improvement package. This measure will help to reduce the time it takes to get planning consent for offshore wind projects from up to four years down to just one year. We will also look to include a provision on the Energy Savings Opportunity Scheme, also known as ESOS. This measure will improve the quality of ESOS audits and provide powers to expand the scheme to include net-zero elements in audits and more businesses. Finally, we will look to amend the Bill to include provisions that will bring Nuclear Decommissioning Authority pensions in line with the majority of the rest of the public sector. The new scheme was agreed with unions, and includes provision for retirement on full pension before state pension age.

The Bill will benefit every part of the UK. Some measures of course touch on devolved matters. From the outset, the Government have sought to work closely with the devolved Administrations and are committed to the Sewel convention. Where the Government believe that the Bill is legislating in an area of devolved competence, they have, in good faith, highlighted these areas to the devolved Administrations ahead of their consideration of the Bill.

This is ambitious legislation and allows for the necessary reform of our energy system. We are charged with a great responsibility to ensure the security, affordability and decarbonisation of our energy supply for many generations to come. We are also presented with huge opportunities to leverage investments in new, clean technologies that will reinforce the UK’s position as a global leader in delivering net zero. I hope noble Lords will recognise the exciting opportunity that this Bill represents to facilitate the necessary reforms, boost investment in clean technologies and ensure the security of supply in the longer term. At the same time, it will stimulate economic growth and job creation in support of our levelling-up agenda. I beg to move.

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[Lord Callanan (Con)]

First, let me thank all noble Lords for their contributions to what I think has been an excellent, important and constructive debate. I will attempt to answer as many of the questions asked as possible, and of course, I look forward to debating many of these issues further as the Bill proceeds through Committee.

One of the most pressing issues facing many hard-working households and businesses today is the cost of living, particularly the cost of energy. Unsurprisingly, many noble Lords—including the noble Baronesses, Lady Blake and Lady Hayman, and my noble friend Lord Howell—asked how the Bill will address this issue. The Government are acting now to protect households from the full impact of rising prices with a package of financial support worth £37 billion.

However, the cost of living crisis is not just about providing support today. It is also about ensuring that we have an energy system that is affordable for many years to come. This Bill will create a more cost-efficient energy system by increasing innovation and competition, for example by introducing competition in onshore electricity networks and attracting investment in a strong, low-carbon energy sector. The Bill will also help to reduce our exposure to volatile gas prices.

My noble friends Lord Moylan and Lord Howell and the noble Baroness, Lady Sheehan, touched on the important issue of energy security. It is an absolute priority for this Government. Thankfully, Britain benefits from highly diverse and flexible sources of gas supply and a diverse electricity energy mix, which ensures that households, businesses and heavy industry can get the energy they need. I am happy to confirm that the UK is in no way dependent on Russian gas. We have highly diverse sources of gas supply, providing us with one of the largest liquified natural gas import infrastructures in Europe, for which, I am happy to say, the EU is particularly grateful at the moment, as we support it. Natural gas has an important ongoing role to play in future as the UK decarbonises its energy system. However, how natural gas is used will need to change to eliminate the CO₂ associated with burning it.

In response to my noble friend Lord Moylan, affordability is of course absolutely key to delivering on our energy strategy. The value for money of the measures that we introduce is completely critical.

As many noble Lords have noted, this is a wide-ranging Bill. I welcome the many questions that were asked in the debate about the wider energy sector; most of them do not necessarily relate to the Bill but I will nevertheless attempt to address them anyway.

A number of noble Lords, including the noble Baronesses, Lady Blake and Lady Sheehan, and the noble Lords, Lord Bruce and Lord Whitty, raised the knotty subject of energy efficiency, which we have debated long and hard in this House. Let me say at the start that huge progress is already being made on the energy efficiency of UK homes. We are investing more than £.6.6 billion over this Parliament to improve energy efficiency. However, cost of living pressures mean that now is not the right time to bring in additional requirements for home owners regarding further regulations on minimum energy efficiency standards. However, we will bring forward measures at a more appropriate time.

The noble Lord, Lord Bruce, asked if the Government will introduce windfall taxes back into the oil and gas industry. The energy profits levy will raise around £5 billion in its first 12 months, which will go towards supporting people with the new cost of living measures announced by the previous Chancellor.

The noble Lord, Lord Whitty, asked about the programme of policy statements and secondary legislation. To implement the commitments in this Bill we will of course publish policy statements for the Lords Committee stage, helping your Lordships to understand the intention of the regulation-making powers in the Bill and the next steps which will follow that.

The noble Baronesses, Lady Hayman and Lady Bennett, and the noble Lord, Lord Lennie, asked about onshore wind. On consultation, we are going to introduce a clear route which enables local communities and authorities to work together to signal their support for onshore wind and for onshore wind developers to respond quickly to this. On planning guidance, while we will not introduce wholesale changes to current planning regulations for onshore wind in England, we have committed to developing local partnerships for a limited number of supportive communities which wish to host new onshore wind infrastructure in return for appropriate benefits, including, for example, lower energy bills.

The right reverend Prelate the Bishop of Carlisle, the noble Baroness, Lady Bennett, and my noble friend Lady McIntosh all spoke about community energy. Through the introduction of UK-wide growth funding schemes, the Government are enabling local areas to tackle net-zero goals in ways that best suit their particular community needs.

The noble Lord, Lord Bruce, asked if there would be enough electric vehicle charging points. We are committed to ensuring that an inclusively designed EV charging network is available that works for all consumers.

My noble friend Lord Moylan asked what will take up the slack when the wind is not blowing and the sun is not shining, which is an important question. The Government’s long-term ambition is to increase our plans for the deployment of civil nuclear power up to 24 gigawatts by 2050, which would be around 25% of our projected 2050 electricity demand.

The noble Baroness, Lady Boycott, and my noble friend Lady McIntosh asked about the use of waste for energy. I can inform both that the forthcoming biomass strategy will consider evidence on the likely support for and sustainability of biomass feedstocks and the best use of biomass across the economy to help us achieve net zero.

I turn to some of the points made about measures in the Bill, starting with pillar 1. The noble Baroness, Lady Hayman, and the noble Lord, Lord Bruce, mentioned the cost and viability of heat pumps—a matter dear to my own heart. With the low-carbon heat scheme and other policies, we are confident that the instalment cost of heat pumps will come down significantly over the coming years as the market scales up, making heat pumps an increasingly attractive and affordable option for more and more UK households.

The noble Baroness, Lady Hayman, also questioned whether hydrogen was the appropriate technology for heating homes. Indeed, that is a very good question to pose. It has the potential to make a contribution to fully decarbonising heat by offering consumers a future heating option that works in a very similar way to natural gas, but without the carbon emissions. However, it is important to point out that hydrogen for heat is not yet an established technology. Much further work is required to assess the feasibility, costs and potential benefits. As part of that, a neighbourhood trial will start next year, with a hydrogen village expected to go live in 2025. This is all part of the plan to work out the feasibility of the wide scale use of hydrogen for home heating.

The noble Baroness, Lady Sheehan, the noble Lord, Lord Whitty, and the noble Baroness, Lady Bennett, all questioned whether CCS was an appropriate technology for the UK. The Climate Change Committee has described carbon capture usage and storage—CCUS—as

“a necessity, not an option”

for the transition to net zero, which will enable the UK to deliver upon its global climate commitments. Contrary to what some noble Lords said, CCUS is a proven technology with CCUS projects operating safely globally, in countries such as Norway, the US and Canada. CO₂ storage is a mature and safe technology.

The noble Lords, Lord Bruce and Lord Whitty, spoke of the need to accelerate CCUS delivery and have a clear deployment plan. I agree with them; we remain committed to industrial decarbonisation across all nations and regions of the UK. As we work towards net zero, we are clear that CCUS will continue to play a key role in the process. In April 2022, the British Energy Security Strategy restated our commitment to support the deployment of four CCUS clusters by 2030. Following on from a process to select the first CCUS track 1 clusters to be deployed by the mid-2020s, we intend to bring forth further details on the outcome of phase 2 emitter projects in due course.

My noble friend Lady McIntosh and the noble Baroness, Lady Boycott, asked about the hydrogen levy. The detailed design of the levy is ongoing, including decisions on where it will be placed in the energy value chain. The levy design will reflect wider government priorities and policies to ensure that consumer energy bills are, of course, affordable and that the costs are distributed fairly. We anticipate some public engagement on options for the detailed levy design in early 2023.

I move on to some points that were raised on pillar 2 of the Bill. I thank the noble Baroness, Lady Blake, and the noble Lord, Lord Ravensdale, for their positive stance on the independent system operator. We are also seeing that across the energy sector. I was asked about the timeline for implementation. BEIS and Ofgem are currently working with National Grid and the electricity system operator on the next steps. Depending on several factors, including the passage of legislation and continued discussion with key parties, the ISOP could be established by or in 2024.

The noble Lord, Lord Whitty, asked about the interaction with Ofgem and National Grid. The Bill actually provides a power to set out a strategy and policy statement for the ISOP; that is where the Secretary of State will set out their direction for Ofgem and ISOP. The Bill also provides for Ofgem to license and regulate the ISOP, overseeing its activities in its capacity as the independent regulator.

My noble friend Lady McIntosh raised the important point about why heat network customers do not get protection equal to that of gas and electricity consumers. That is because heat networks typically buy their energy through commercial contracts, which are not covered by the existing default tariff price cap. However, I am pleased to confirm to my noble friend that the legislation provides the BEIS Secretary of State with powers to introduce a price cap, should it be necessary to protect consumers.

The noble Baroness, Lady Blake, asked whether the Bill provides the overhaul needed for the heat networks sector. I very much believe that it does. To address her points on poor design and maintenance, about which I agree, the Bill will include minimum technical standards. It will also introduce powers to regulate decarbonisation; as mentioned, it will also enable powers to set price caps.

The noble Lord, Lord Ravensdale, asked whether zoning, which will of course be run by local authorities as the most appropriate bodies, can be extended beyond heat networks. Our strategic approach in the Heat and Buildings Strategy follows, in our view, the grain of the market. Our policy levers are aligned to certain points of action; for example, when people are replacing their heating systems. Extending zoning to other technologies in our view risks removing choice for households and businesses when consumer choice over heating technology will be best for the transition.

The noble Lord, Lord Bruce, asked about the effectiveness of the price cap. That is a valid question. The price cap remains, of course, a temporary measure until competition in the market improves. BEIS is currently considering what reforms are needed for energy retail market regulation to ensure that the market is resilient and sustainable and continues to protect consumers.

On the points raised that come under pillar 3 of the Bill, the noble Baroness, Lady Blake, asked for more detail on the nuclear decommissioning measures. The proposals do not result in any relaxation in the standards for public protection. Former nuclear sites will continue to be regulated by the relevant environmental agency and the Health and Safety Executive, rather than the Office for Nuclear Regulation, which will regulate health and safety at work activities. She also questioned the reach of the Bill’s core fuel resilience powers. These measures, also raised by the noble Lord, Lord Teverson, are intended to be used in a light-touch way to complement the additional voluntary approach. The Government will use these powers in a proportionate way, including providing for certain rights of appeal and consultation requirements.

The noble Lord, Lord Bruce of Bennachie, and the noble Baroness, Lady Bennett, raised a question in relation to the disposal of nuclear waste. The Bill makes provision in relation to geological disposal facilities which will encapsulate and isolate radioactive waste at great depths. Nuclear Waste Services, the developer of the geological disposal facility, is confident it can meet the additional requirements from new nuclear as set out in the British Energy Security Strategy.

Moving to the point raised by the noble Baronesses, Lady Bennett and Lady Jones, in their double act, about dumping radioactive waste in the sea, of course, disposal of radioactive waste in the sea is banned by international conventions and let me be absolutely clear that no part of a geological disposal facility will be in the sea. The waste will be isolated deep underground, within multiple barriers, to ensure that no harmful quantities of radioactivity reach anywhere near the surface environment.

My noble friend Lord Howell and the noble Viscount, Lord Hanworth, both asked about small modular reactors. Through the nuclear fund, we are providing funding to support research and development for a small modular reactor design and we are progressing plans to build an advanced modular reactor demonstration by the early 2030s at the latest.

The noble Lord, Lord Ravensdale, asked whether the Government could make sure that nuclear power is eligible for the renewable transport fuel obligation, including hydrogen produced from nuclear power. I know this is something we have had exchanges on in the past. We believe this would be complex and would require firmer, further evidence for industry to understand how exactly it might be compatible with wider RTFO eligibility criteria.

I welcome my noble friend Lord Moylan’s support for the promotion of nuclear fusion, and I also welcome the support from the noble Lord, Lord Bruce of Bennachie, for the continuation of North Sea oil and gas production. Perhaps he would like to have a word with his noble friend, the noble Baroness, Lady Sheehan, about this important point, although I welcome her confirmation that she is now apparently in favour of gas as a continuity fuel. My point, which I keep making to the noble Baroness, is that since we produce only about 40% of our own gas in the North Sea and we still import considerable quantities of LNG to be used as a transition fuel, it makes eminent good sense, in my view, to obtain those reserves from our own resources in the North Sea, which of course is of much lower carbon intensity than LNG. I am sure we will continue to have these debates going forward.

[Baroness Sheehan (LD)]

Will the Minister address the point made by the noble Lord, Lord Whitty, as well as by me, that the gas we produce in the North Sea no longer belongs to us? It is a global commodity and has to be traded as a global commodity.

[Lord Callanan (Con)]

It is produced by private sector companies under regulation, and there are interconnectors connecting us to the continent. I am sure that the noble Baroness would want us to support the EU in its time of need at the moment. With our energy terminals, those interconnectors play a crucial role in helping our EU friends with their current difficulties. It is of course a global commodity and the price is set globally. However, if the noble Baroness’s question is about carbon intensity, the carbon intensity of domestically produced resources is much lower than imported LNG. As I have pointed out a number of times before, I fail to see why it is, in her view, more sensible to import gas through LNG rather than getting it from our own North Sea resources. I am sure we will have that debate many times again in future.

Finally, I will deal with the challenge from the noble Lord, Lord Teverson, regarding smart meters. I can tell the noble Lord that we have now installed 27 million smart meters in the UK, and the vast majority of SMETS1 meters have now been upgraded with software upgrades to SMETS2 standards, so that they operate exactly the same as SMETS2 meters and provide full smart meter functionality. Only this morning, I met the DCC to review the progress on that upgrade and was told that the number of meters still to be migrated is tiny—a few tens of thousands of early meters that the DCC will continue to attempt to migrate; if that does not work, they eventually may be upgraded to full SMETS2 meters.

I have addressed most of the points raised by noble Lords. I am sure that noble Lords will say if I have not covered all their points, but we will debate these matters further in Committee. Many of the points made were things that noble Peers would like to see happen separately and outside the provisions in the Bill. However, I think that most of the measures received a wide degree of support in your Lordships’ House. I look forward to continuing this constructive engagement and detailed scrutiny as the Bill progresses through Committee.

Bill read a second time.

Energy Bill [HL]

Lord Callanan Excerpts

Tuesday 19th July 2022 Lords Chamber

Moved by

[Lord Callanan]

That the Bill be committed to a Committee of the Whole House, and that it be an instruction to the Committee of the Whole House that they consider the Bill in the following order:

Clauses 1 to 16, Schedule 1, Clauses 17 to 21, Schedule 2, Clauses 22 to 52, Schedule 3, Clauses 53 and 54, Schedule 4, Clauses 55 to 92, Schedule 5, Clauses 93 to 125, Schedule 6, Clause 126, Schedule 7, Clauses 127 to 130, Schedule 8, Clauses 131 to 151, Schedules 9 and 10, Clause 152, Schedule 11, Clause 153, Schedule 12, Clause 154, Schedule 13, Clauses 155 to 160, Schedule 14, Clauses 161 to 168, Schedule 15, Clauses 169 to 197, Schedule 16, Clauses 198 to 219, Schedule 17, Clauses 220 to 228, Schedule 18, Clauses 229 to 233, Schedule 19, Clauses 234 to 243, Title.

Motion agreed.

Electricity and Gas (Energy Company Obligation) Order 2022

Lord Callanan Excerpts

Monday 18th July 2022 Lords Chamber

Moved by

[Baroness Bloomfield of Hinton Waldrist]

That the draft Order and Regulations laid before the House on 22 June be approved. Considered in Grand Committee on 12 July. Relevant document: 7th Report from the Secondary Legislation Scrutiny Committee

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, on behalf of my noble friend Lord Callanan, I beg to move the Motions standing in his name on the Order Paper en bloc.

Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022

Lord Callanan Excerpts

Monday 18th July 2022 Lords Chamber

Moved by

[Lord Callanan]

That the draft Regulations laid before the House on 27 June be approved.

Relevant documents: 7th and 9th Reports from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument).

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

My Lords, I will also speak to the Liability of Trade Unions in Proceedings in Tort (Increase of Limits on Damages) Order 2022, which was laid before the House on 24 June 2022. The purpose of the regulations is to lift the current ban on employers bringing in agency staff to help them cope with industrial action. The other instrument makes long-overdue changes to the maximum levels of damages the courts can award against trade unions that take unlawful industrial action.

I will start by explaining why the Government are making these changes. Our trade union laws are designed to support an effective and collaborative approach to resolving industrial disputes. They rightly seek to balance the interests of trade unions and their members with the interests of employers and the wider public. While the Government continue to support the right to strike, this should always be a last resort. The rights of some workers to strike must also be balanced against the rights of the wider public to get on with their daily lives. Strikes can, and do, cause significant disruption. This is particularly the case when they take place in important public services such as transport or education.

It cannot be right that trade unions can, as we saw in the case of the recent rail strikes, seek to hold the country to ransom if their demands are not met. Some trade unions appear to us to be looking to create maximum disruption in a bid to stay relevant, rather than constructively seeking agreement with employers and avoiding conflict. In light of this, the Government have reviewed the current industrial relations framework and have come to the conclusion that change is needed.

The first change we are making is to remove the outdated blanket ban on employment businesses supplying agency workers to clients where they would be used to cover official industrial action. Of course, employers can at the moment already hire short-term staff directly to cover industrial action, but this change will give them the ability to work with specialist employment businesses to identify and bring in staff. This change does not in any way restrict the ability of workers to go on strike. However, it will give employers another tool they can use when trying to maintain the level of service they offer to the public.

This is a permissive change. It will not force employment businesses to supply agency staff to employers to cover strikes, agency workers will still be able to decline any assignments they are offered, and the right to strike is unaffected. This change is simply about giving both employers and employees more freedom and flexibility to decide what works best for them—a freedom that the current outdated regulations deny them.

I have seen some, frankly, rather overblown reports that this will somehow put workers or the wider public at risk. This is absolutely not the case. Employers will still have to comply with broader health and safety rules, and employment businesses will still need to be satisfied that the workers they supply are suitably qualified and trained.

Alongside this change, we are increasing the levels of damages that a court can award in the case of unlawful strike action. It has long been the case that employers can bring a claim for damages against a trade union that has organised unlawful strike action. The upper limits to the damages that can be awarded are set out in the Trade Union and Labour Relations (Consolidation) Act 1992 and are based on the size of the union that organised the unlawful action, but this damages regime has not been reviewed since 1982, so these limits are significantly out of date. As a result, the deterrent effect that Parliament intended has now been significantly reduced.

The Secretary of State is using powers granted to him in Section 22 of the Trade Union and Labour Relations (Consolidation) Act 1992 to increase the existing caps in line with inflation. In practical terms, this means that the maximum award of damages that could be made against the smallest unions will increase from £10,000 to £40,000, and for the largest unions it will increase from £250,000 to £1 million. This is a proportionate change because we are simply increasing these amounts to the levels that they would have been at had they been regularly updated since 1982. We are increasing the limits in line with the retail prices index, which is of course a well-understood measure of inflation.

By increasing the limits on damages in line with inflation, we are sending a clear message to trade unions that they must comply with the law when taking industrial action. Strikes should be called only as a last resort and as the result of a clear, positive and democratic decision of union members. The key point is that unions that continue to comply with trade union law will be completely unaffected by this change.

I am grateful to the members of the Secondary Legislation Scrutiny Committee for the time and care that they have taken in reviewing these regulations. I note their comments about the impact assessment for the changes to Regulation 7. This has now been published in line with our commitments to Parliament. As the committee noted, because this is a permissive change there is some legitimate uncertainty about the extent to which employment businesses will want to take advantage of their newly found freedoms. However, as the impact assessment shows, this change needs to lead to only a small reduction in the number of working days lost for it to make an extremely positive difference to the economy and society.

I have also noted the committee’s concerns in relation to Wales, specifically our commitment to repeal the Trade Union (Wales) Act 2017. In response, I simply say that there is nothing new about this commitment. The Government’s position on this issue has been consistent since the relevant Act was passed in 2017. Although we will of course engage further with the Welsh Government on this issue, it is very clear that labour markets and industrial relations are reserved matters.

The changes we are making will ensure that our trade union and agency laws remain fit for purpose. We are giving businesses the freedom to manage their workforce and we are empowering workers by giving them more choices about the kinds of assignments they can accept. We will continue to protect an individual’s right to strike, where proper procedures are followed, while ensuring that trade unions are deterred from taking unlawful industrial action. I therefore beg to move that both instruments are considered by this House.

Amendment to the Motion

Moved by

--- Later in debate ---

[Lord Callanan (Con)]

My Lords, I thank all noble Lords for their contributions to this debate—which, I have to say, was a bit shorter than I expected. I will start with the amendment tabled by the noble Lord, Lord Collins. I thank him for raising his concerns.

I repeat the point I made at the outset. This is very much a question of getting the right balance between, on the one hand, the right of individuals to strike, and on the other hand the rights of individuals to go about their daily lives, whether it be children taking an exam, people going to their hospital appointments or other workers wishing to go to work to do their jobs. These reforms will ensure that our laws strike the correct balance. In doing so, we are protecting the public from unwarranted disruption while, as I said, maintaining workers’ ability to go on strike, which, I repeat, will remain unaffected by these changes.

The noble Lords, Lord Collins, Lord Woodley and Lord Paddick, all referred to the consultation not having been carried out on the agency regulations since 2015. In response to those concerns, I would say that the consultation that we carried out in 2015 was extremely thorough. Given that, I struggle to see what a further consultation will bring up. Are there any new issues or objections that we are not already aware of? I think the response to that is no. As we said in response to the Secondary Legislation Scrutiny Committee, some things have changed but the fundamental issues remain the same. I think that in their hearts, Opposition Peers know that that is the case. This is about finding that right balance between the rights of individuals to strike and the right of the public to go about their lawful daily business.

The noble Lord, Lord Collins, also referred to the impact assessment. As I said in my opening remarks, it has been published, as we committed to do in the Explanatory Memorandum. As the impact assessment makes clear, this is a permissive change: employers will hire agency workers only if it makes sense for them to do so. There is no compulsion on them; it is permissive and their choice. Our assessment also shows that this change needs to lead only to a small reduction in the number of working days lost for it to have a positive effect on the economy.

The noble Lord, Lord Collins, went on to question why it was necessary to raise the damages cap for unlawful strike action when damages are so rarely claimed—in which case, Opposition Peers’ concerns are ill founded. We are simply restoring the deterrent effect that Parliament intended when the original amounts were set.

The noble Lord also suggested that the increase in the cap would inhibit the ability of unions to take legitimate strike action. He himself made the point that there have been no recent cases on this matter. I also respectfully disagree with the point he makes. As I said, this change applies only to action which a court determines to be unlawful. If, as he suggests, trade unions go to the maximum possible trouble to make sure that their action is lawful, they will have nothing to be concerned about. I am sure that no noble Lord would suggest that unlawful strike action is acceptable in this day and age.

Let me address some of the other points made in the debate. My noble friend Lord Balfe asked whether agency workers would be willing to cross picket lines given current labour shortages. Again, this is a permissive change; nobody is going to be forced to take an assignment that they do not want to take. The point is that the current regulatory framework actually prevents them having that choice, and that cannot be right. The noble Lord, Lord Woodley, raised concerns about the damage that this will do to the reputation of the recruitment sector, and the concerns of the employment businesses and others that have registered about this change. Nobody is being forced; nobody is being compelled; no employment businesses will have to supply workers to businesses facing industrial action. Again, it will be their choice to take part or not, as the case may be; no one is going to force them. We just do not see the point in having the blanket ban that we currently have.

The noble Lord, Lord Monks, drew some I think incorrect parallels with the P&O Ferries case earlier this year. This case is completely different. In the P&O Ferries case, the company has admitted deliberately choosing to ignore statutory consultation requirements when firing staff with no notice. All we are doing in the case of these changes is giving employers more flexibility to help them minimise the disruption that industrial action causes. Where proper procedures are followed, staff on strike should not lose their jobs; they will continue to have exactly the same legal protections that they already have.

The noble Lord, Lord Hendy, questioned whether these changes comply with our international legal obligations, including our commitments under trade and co-operation agreement. We have carefully considered all of these issues and we are confident that the changes are compliant with all of our international obligations—as, indeed, I told the noble Lord, Lord Collins, during Question Time last week. The ability of businesses to use agency staff does not affect individuals’ right to strike, and the protections those striking workers have in law remain unaffected. The Government are adjusting the balance between the right of workers to strike, and the rights of the wider public to go about their lawful business, and this falls well within our margin of appreciation when implementing international conventions.

The noble Lord, Lord Paddick, raised concerns about health and safety. Again, these concerns are not well founded, simply because this change does not change the broader health and safety rules that businesses still have to comply with. Similarly, the obligation on employment businesses to supply suitably qualified workers also remains in place. The aim of our trade union laws is to support an effective and collaborative approach to resolving industrial disputes, one that balances the interests of trade unions and their members with the interests of employers and the wider public. The changes we are making will, in my view, support that balance, and I therefore commend these draft regulations to the House.

[Lord Collins of Highbury (Lab)]

My Lords, simply asserting something does not make it true, and that is exactly what the Minister has done tonight. In fact, the reason why this debate was perhaps shorter than he expected is that not a single person supported his line of argument; that is the issue here. He talks about strikes as if there is somehow a desire on the part of workers to go on strike; there is no such desire. It is when they face intransigence; when they face Governments who are determined that negotiations cannot take place—that is what we have heard. I have not heard a single word tonight supporting the Minister’s assertion that this Government are in favour of a collaborative approach. When we were collaborative, as my noble friend said, during the pandemic, the TUC worked hand in hand with this Government to make sure that the economy did not suffer long-term distress—and what is the payback? As the noble Lord, Lord Balfe, says, it is simply to have a pop, to have a go, but with no evidence provided that it will achieve anything that the Minister suggests. It will entrench opinions and it will delay settlements.

The employers, the temporary agency firms—and there are many of them—provide a very necessary service. They provide flexibility in very difficult, tight labour markets, as we have heard, and this action will undermine and discredit them and make it more difficult for them to do their job. It has been a very interesting debate. I hope we will be able to read in Hansard what this Government really are about, because they assert something and do something else. I beg leave to move the amendment and divide the House.

Energy: Prices and Supply

Lord Callanan Excerpts

Thursday 14th July 2022 Lords Chamber

[Baroness Ritchie of Downpatrick]

To ask Her Majesty’s Government what steps they are taking (1) to address rising energy prices, and (2) to ensure the security of the United Kingdom’s energy supply for the coming winter.

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

My Lords, the Government understand the pressures people are facing with high global energy prices and are providing support for the cost of living totalling £37 billion this year. Great Britain has secure and diverse supplies of energy but we have acted to boost electricity security, including by temporarily extending the operations of certain coal-generation units to provide back-up capacity if needed.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, it is acknowledged that the UK is not directly dependent on Russia for the supply of natural gas. However, do the Government recognise that the Russian situation could cause gas supply shortages in mainland Europe, which could have a domino effect that could impact the UK, including Northern Ireland, particularly at a time of high energy prices? What measures are in place to address this issue?

[Lord Callanan (Con)]

The noble Baroness is of course right, and the answer to the question is yes, we recognise this maybe unlikely risk, which is nevertheless a risk. That is why I indicated in the Answer that we have acted to secure additional back-up capacity if needed for this winter.

[Lord Howell of Guildford (Con)]

My Lords, there is a good deal more we can do internationally with our like-minded friends to curb the appalling increase in energy prices which is about to hit households in this country yet again, and even more ferociously. However, does my noble friend accept that in fact, indirect taxes on energy add to the headline consumer prices index, and that if one could bring that down, it would also vastly reduce the Government spend on having to update their outlays on index-linked causes, including benefits? Does he accept that if you take down one, you will take down the other? I do not think that is widely understood by the social experts and commentators in the press, and I wonder whether it is understood by the Treasury. However, it is a way forward.

[Lord Callanan (Con)]

My noble friend is tempting me to say what is understood and is not understood by the Treasury, which is perhaps a road I should not go down. Of course, the point is right. The contribution of energy to the consumer prices index is particularly important, and my noble friend is also correct about the proportion of indirect taxes on energy bills.

[Lord Teverson (LD)]

My Lords, the Conservative manifesto of 2019 stated:

“We will help lower energy bills by investing £9.2 billion in the energy efficiency of homes, schools and hospitals.”


Now that we are over half way through this parliamentary term, exactly how much money has been spent—not planned to be spent—on the energy efficiency of homes and other buildings?

[Lord Callanan (Con)]

Certainly, we are well on the way to that commitment, and this spending review period allocated about £6.6 billion towards those targets. For example, we have spent £471 million to date on the social housing decarbonisation fund and £350 million on the sustainable warmth programme, and we are going out to bids later this year for another £800 million of spending under the social housing decarbonisation fund, so we are making considerable progress.

[Baroness Blackstone (Ind Lab)]

My Lords, does the Minister agree that it would make more sense to incentivise investment in the skills and technologies of the future, rather than in oil and gas companies, which are soon to become technologies of the past? Is there not a danger that investment in oil and gas could lead to stranded assets and stranded jobs?

[Lord Callanan (Con)]

The noble Baroness is partly correct. Of course, we need to invest in the technologies of the future, which is why we are developing our green finance policies and a green taxonomy to help direct investment in those technologies. However, we will also need oil and gas as transition fuels, so it makes sense to continue to exploit our own resources.

[Lord Bridges of Headley (Con)]

My Lords, picking up on the noble Baroness’s original Question, it was reported in the Financial Times about 10 days ago that under the UK’s emergency gas plan, if our gas supplies fall short the United Kingdom will cut the supply of gas to Europe via the so-called interconnectors. Can my noble friend tell us whether that is the case?

[Lord Callanan (Con)]

My noble friend will understand that I am not going to get into discussing emergency situations. Anything as drastic as that is extremely unlikely. All parts of Europe benefit from interconnected supplies of electricity and gas. It helps to secure both our energy supplies and resilience for our future, and that of other European countries.

[Baroness Blake of Leeds (Lab)]

My Lords, I declare an interest as vice-president of the Local Government Association.

The Government’s failures in energy policy go back over a decade, including on energy efficiency. Homes are still being built that do not meet minimum standards of efficiency and will require significant retrofitting in the near future to meet legal standards. As mentioned in the recent Climate Change Committee report to Parliament, the promised future homes standard and changes to the planning system have not yet been delivered. Can the Minister inform us, either now or in writing, how many homes not meeting minimum standards of efficiency have been built since the close of consultation in January 2021? Also, how many planning permissions are in place to allow the building of such substandard homes before June 2023? How many housing units does that amount to?

[Lord Callanan (Con)]

The noble Baroness is asking for some detailed statistics which I do not have to hand, but I will certainly write to her about that. There is a considerable uplift in the building regulations coming next year. The future homes standard is coming in 2025 and when it is introduced, the carbon efficiency of homes will be increased by about 75%.

[Viscount Waverley (CB)]

The Minister will be aware that President Biden is on an energy-related play to Saudi Arabia. Was there a positive upshot of our Prime Minister’s visit to Saudi Arabia with the noble Lord, Lord Grimstone, on related matters? If so, what benefits were accrued?

[Lord Callanan (Con)]

The noble Viscount makes a good point. The Prime Minister and my noble friend Lord Grimstone visited the UAE and Saudi Arabia on 15 and 16 March. They met leaders of both countries and had some extremely productive discussions about collaboration and the importance of maintaining energy security and working together to help the green transition.

[Baroness McIntosh of Pickering (Con)]

My Lords, I declare my interests in respect of National Energy Action.

I welcome Ofgem’s ruling that overpayments of grossly inflated direct debits will be rectified. However, does my noble friend not question why the standing charge on each household bill has increased by up to 50%, given that this goes to distributors whose costs have not increased to the same extent as those of electricity suppliers? Should this not be urgently investigated?

[Lord Callanan (Con)]

Ofgem does look very closely at connection cost standard charges and direct fuel costs. Funding the transition from a big node-type power supply to lots of more diverse, renewable sources of energy requires considerable investment in our transmission system. In order to expand the use of electric cars, heat pumps et cetera, we must reinforce the electricity supply system, which of course needs to be paid for.

[Lord Sikka (Lab)]

My Lords, currently the Government tax people heavily, especially the poorest. They then hand back a few pounds to the people, helping with energy bills—and it is promptly handed over to the energy companies. In this circuit, there is no check whatsoever on curbing inflation, energy prices or corporate profiteering. Why are the Government neglecting these three things?

[Lord Callanan (Con)]

I am afraid that I simply do not agree with the noble Lord. A number of aspects of his question were wrong. The Government are not handing money over to energy companies: the money is going directly to consumers—more than £37 billion of expenditure. The noble Lord might think that that is a few pounds, but I think it is a considerable sum of money. Clearly, energy prices are likely to go up again in the autumn, and that is something we will need to return to.

[Lord Houghton of Richmond (CB)]

Can the Minister reassure the House regarding when energy security last appeared on the agenda of, and was discussed by, the Joint Committee on the National Security Strategy?

[Lord Callanan (Con)]

I am not a member of that committee, so I am afraid that I cannot answer that question.

[Lord West of Spithead (Lab)]

My Lords, nuclear is crucial to our future energy supply. Will there be an announcement before the House rises next Thursday about Sizewell C and all of the decisions that have been delayed?

[Lord Callanan (Con)]

The noble Lord makes an important point and I completely agree about the importance of nuclear and Sizewell C. Negotiations are continuing; I think it unlikely that there will be an announcement before the House rises.

[Baroness Altmann (Con)]

My Lords, commendably, the Government are trying to shield households from these excessive rises in energy costs. However, will my noble friend consider carefully the excellent point made by our noble friend Lord Howell: that cutting fuel duties could indeed set up a virtuous circle? Given the extent of the rise in fuel costs, households surely need time to transition to this higher-cost environment. A tax cut, as long as it is passed on to bill payers, could assist in that transition.

[Lord Callanan (Con)]

This has of course been a source of considerable debate in the current leadership contest. I am sure that the new Prime Minister and the new or existing Chancellor will want to consider these matters very carefully. As I said, we have already supported households to a massive extent, but given the inevitable rises that are coming down the line later in the year, I am sure the Chancellor will want to look at these matters again.

Register of Overseas Entities (Delivery, Protection and Trust Services) Regulations 2022

Lord Callanan Excerpts

Tuesday 12th July 2022 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Register of Overseas Entities (Delivery, Protection and Trust Services) Regulations 2022.

Relevant document: 7th 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 the draft Register of Overseas Entities (Delivery, Protection and Trust Services) Regulations 2022, which were laid before the House on 22 June 2022, be approved. These regulations are a particular delight for me because I promised the House that we would have them before the summer holidays, so I thank all those officials who worked so hard to deliver them. It shows what you get if you make rash promises—officials will work overtime to get them delivered for you.

These regulations form part of an essential tranche of secondary legislation needed to implement the Register of Overseas Entities, which I will refer to for ease as “the register”. It will be created—as noble Lords opposite me who took part in the debates will know—under Part 1 of the Economic Crime (Transparency and Enforcement) Act, which gained Royal Assent earlier this year. I thank the House, and the Opposition in particular, for helping us to expedite that legislation.

The register will help to crack down on dirty Russian money, and any other kind of dirty money, in the UK, and other foreign corrupt elites abusing our open economy. The register will require overseas entities owning or buying property in the UK to give information about their beneficial owners and/or managing officers to Companies House. It will provide more information for law enforcement to help them to track down those using UK property as a money-laundering vehicle.

During the Act’s passage through Parliament, I undertook to deliver the register as soon as practicable. Subject to the approval of Parliament of this and two other instruments, the register will begin operating over the summer. The three UK land registries, together with Companies House, have been working at pace—I think “at pace” is probably an understatement—to build the systems and processes to ensure that we can get the register up and running as quickly as possible and that it works as intended.

The two other instruments I have just mentioned were laid before the House on 30 June and are subject to the negative resolution procedure. The subject of today’s debate is the only instrument subject to the affirmative resolution procedure. These regulations together will ensure that the register is ready to come into operation. It is worth saying that some further instruments necessary to underpin the register’s steady-state operation—and again this is subject to the hard work of officials over the summer—will be made in the autumn.

Overseas entities in scope that currently hold land in England, Scotland and Wales will have six months from the date that the register goes live to register their beneficial owners. We think the six-month transition period—and noble Lords will remember the debate we had—strikes a balance in allowing for the free enjoyment of property and helping to maintain the UK’s reputation as a stable investment environment while ensuring that property owners register their beneficial owners. It is worth saying that, if an overseas entity does not comply with these new obligations or submits false filings, the overseas entity and every officer in default can face tough criminal or civil penalties, and ultimately it will not be possible to sell the property in question.

These regulations being debated today must be in force when Part 1 of the Act is commenced in order for the register to operate effectively.

I turn to the details of these regulations, which are laid under the powers in the Act and two powers in the Companies Act 2006. They deal with three main elements. First, they require certain documents to be delivered to Companies House by electronic means. Secondly, they will set up a protection regime, which will allow individuals to apply to have their information made unavailable for public inspection. To apply, individuals must provide evidence that they are at serious risk of violence or intimidation if their link to the overseas entity is publicly disclosed. This mirrors an existing provision for the person of significant control of UK companies. Thirdly, they set out that legal entities governed by the law of a country or territory outside the United Kingdom that provide trust services regulated by a supervisory authority, and which are subject to their own disclosure requirements, are classed as “registrable beneficial owners”.

On the first of these measures, Part 2 of the instrument sets out that certain documents are to be delivered to Companies House by electronic means. Regulation 3 specifically sets out a duty on overseas entities to deliver certain information to the registrar by electronic means. These regulations state that the following information must be delivered to the registrar: an application for registration; the statements, information and anything required for the updating duty; an application for removal; the replacement of or additional documents delivered to the registrar for the purpose of resolving inconsistencies in the register; and an application to rectify the register. Regulation 4 sets out an exception to this duty to deliver documents by electronic means.

Mandating electronic delivery for certain documents enables the registration process to be streamlined and efficient, and is intended to avoid delays in processing valuable property transactions. Therefore, it is important that electronic delivery to the registrar can be mandated in most cases through these regulations.

The duty to deliver a document by electronic means will not apply where the document relates to an application which contains information about individuals who have applied for their details to be protected. The aim of this limited exception is to provide for those who may be at risk of serious harm to apply for protection from having their details publicly available on the register. Their details would need be handled in a sensitive manner. As such, electronic communication might not be appropriate in those cases.

On the second measure, Part 3 sets out details of the protection regime. This allows beneficial owners and managing officers, or the relevant overseas entities, to apply to have their details protected from disclosure and from inclusion in the public register, if they or someone who lives with them are at serious risk of violence or intimidation because of their link to the overseas entity. Evidence must be provided to the registrar to support the application. As I said, this approach is very similar to the one currently applied in the equivalent regime for people with significant control—PSC—of UK companies.

It is also important to note that an application for information to be protected from public disclosure will not exempt an overseas entity from the requirements of the Act in general. The required information must still be supplied to Companies House and will be available to law enforcement agencies if required.

As for the measure on corporate trustees, Part 4 provides a description of legal entities subject to their own disclosure requirements. Schedule 2 to the Act provides that beneficial owners who are legal entities must be subject to their own reporting requirements in order to be registrable beneficial owners. The aim of this measure is to ensure that corporate trustees fall within the definition of a registrable beneficial owner. If this definition is satisfied, overseas entities must take reasonable steps to obtain and provide to the registrar the required information about those trusts. This reflects the requirements already imposed where trustees are individuals. This will provide greater transparency about the true owners and beneficiaries of the land.

I thank the House’s Secondary Legislation Scrutiny Committee for examining this instrument and note that it was included as an instrument of interest in its recent report. I confirm that UK Crown dependencies and overseas territories that own property in the UK will be required to register details of their beneficial owners with Companies House in the same way that all others do.

In conclusion, I emphasise that the measures in these regulations are crucial for the effective operation of the register of overseas entities. I was grateful for the opportunity to demonstrate the operation of the register to a number of noble Lords last week. I hope that aided understanding of the measures and the objectives. Therefore, I commend the draft regulations to the Committee.

--- Later in debate ---

With the Summer Recess coming very shortly, the next steps will take even longer, so I have some key questions for the Minister. When can we expect the full implementation to take place? From when will ownership of UK properties have to be logged? When will it finally become public? With that, we support these regulations.

[Lord Callanan (Con)]

I thank noble Lords for their support and their valuable contributions. I think the measure has a wide measure of support. I too pay tribute to the officials who have worked long and hard to bring this into operation.

Before I talk about this, I will answer the point from the noble Lord, Lord Clement-Jones, about economic crime 2, as we are not in fact referring to it; we are not allowed to call it that, for some strange reason, but it is the next tranche of economic crime legislation that we expect to introduce to Parliament shortly after the Summer Recess. The measure is being worked on now. I am afraid I cannot promise him that all the measures he outlined at length will be contained in it—I am sure we will have some debate about that—but we intend to take action on some or many of the things he mentioned, particularly reforms to Companies House.

The Government are committed to ensuring that this register strikes the right balance between improving transparency and minimising the burdens on legitimate commercial activity. The measures contained in this instrument will play a key part in the effectiveness of the register from its launch. To pick up on the point from the noble Lord, Lord McNicol, I hope we can bring the register live on 1 August. That is the intention.

These regulations are essential for the register of overseas entities to operate effectively from the outset. To answer the point from the noble Lord, Lord Clement-Jones, they will enable it to operate. I am afraid they are not the end of the regulations—we will need some additional ones to further clarify the operation, et cetera—but they will enable it to commence and the six-month countdown period to start. All existing entities, including those that have made transactions since 28 February, will have to register in that period. That was a discussion we had during the passage of the Act.

[Lord Clement-Jones (LD)]

I thank the Minister for the detail. Can he say whether that will be by an affirmative or a negative process?

[Lord Callanan (Con)]

Four affirmative and six negative, I am informed by the experts. So we will be back, yes. We will return, as they say.

These regulations are essential for the register to operate, so we can commence it and get the six-month countdown period started. There has been some debate about whether we might expect a large rush of applications as soon as the register goes live. I reiterate that the vast majority of these overseas entities are legitimately owning property. They are corporations and others that legitimately own land, commercial properties, et cetera, in the UK. They will want to ensure that they are in compliance from the outset.

Mandating digital delivery for certain documents ensures that the registrar is able to receive and process information in a timely manner. An effective protection regime will protect those at real risk of serious harm because of their link with the overseas entity from the public disclosure of their details. I say again that this information must still be provided and will still be available to law enforcement. I will say a few more words about that shortly.

The measure on trustees allows for a consistent approach to dealing with corporate and individual trustees. It is a complicated area, but I assure noble Lords that we are attempting to close every possible potential loophole. We will also have some further measures in the economic crime Bill to tackle this issue of trustees, which, as the noble Lord, Lord Vaux, is always reminding me, is extremely complicated. But we are determined, and we will not hesitate, to return to this if any inadvertent loopholes are discovered. But we want to make it harder for corporate structures to be altered to avoid reporting requirements.

The main point raised—predictably—by noble Lords was the issue of protections. To try to alleviate concerns, I will give some of the statistics for the existing regime. There are something like 4.9 million companies registered on the UK companies register. Since 2016 there have been 436 applications for protections from that register, of which 163 have been granted—163 out of 4.9 million. Bearing that in mind, there are about 35,000 overseas entities; it is possible, given their nature, that a slightly greater proportion of the persons with significant control of overseas entities will want to be exempted, but I hope I can reassure noble Lords that the system is not being abused and that, given the proportions, tiny numbers of applications are being granted. Of course, I will make sure that this is closely monitored and that there is no excessive use of this provision. It will be only for those who have a very real need for that protection. But I think we can see from the use of it—it is pretty much an identical regime for the persons with significant control—that it is a tiny proportion, and an even smaller proportion of applications are granted. As I said, only 163 of 436 applications were granted.

This will be a public register. All information will be displayed, aside from, as I mentioned, protected information, such as date of birth and residential address information. Of course, again, that will be available to law enforcement and other public bodies. Companies House does have experience of determining these applications for protections since the PSC regime was introduced in 2016. We will ensure that the mechanism is robust and we will require applicants to provide evidence as to why they think there is a serious risk of violence or intimidation. If necessary, we will refer cases to the appropriate law enforcement agency. I reiterate that the protection does not exempt the person from disclosing this information to Companies House and all protected information is still available to law enforcement. So there is no place to hide.

I will give the figures once again. There were 436 applications under the previous regime, and 163 of them were granted.

The noble Lord, Lord Vaux, asked about verification. Agents who will provide the verification will be UK anti-money laundering supervised professionals—

[Lord Clement-Jones (LD)]

Before the Minister moves on to verification, I just wanted to probe a little further on the Regulation 7 points he was talking about. It is reassuring that it will be a limited number, but my question was about Regulation 7(3):

“The grounds on which an application may be made are that the applicant reasonably believes that if that protected information is available for public inspection or disclosed by the registrar … the activities of that overseas entity; or … one or more characteristics or personal attributes of the relevant individual when associated with that overseas entity, will put the relevant individual or a person living with the relevant individual at serious risk of being subjected to violence or intimidation.”


How is Companies House going to assess that? Is it going to consult other crime prevention authorities? Is there an evidence-checking process?

[Lord Callanan (Con)]

The answer to that question is: absolutely. It is kept deliberately—not vague; that is the wrong word. There is a wide scope here, because different individuals will be affected in different ways. They might be foreign diplomats, to take one example. There could be a number of different opportunities depending on their personal circumstances, but the Act is very clear: they will have to provide evidence. That evidence will be checked and verified, and if necessary the head of Companies House, the registrar, will consult the law enforcement agencies.

Noble Lords can see that 163 out of the 436 applications made were granted under the previous regime, so it is clearly a rigorous process and they will have to provide the appropriate evidence. We will monitor it and make sure that the system is not abused. I reiterate that the information is still available to law enforcement; it is just not on the public register. It is also worth saying that there is considerable interest in this from transparency organisations, who I am sure, once the register goes live, will—correctly—crawl all over it and point out any obvious errors or omissions, or anybody who is attempting to avoid the provisions.

I move on to the verification of agents. They will be UK anti-money laundering supervised professionals, and most of those individuals already carry out due diligence when completing property transactions. Those who seek to circumvent the requirements of the Act, including any who provide misleading, false or deceptive information, are liable to criminal or civil sanctions. The identity of the person carrying out the verification will be made public and appear on the face of the register, and if necessary there will be future enhancements for making that information more accessible. We are determined that there is no place to hide for either those seeking to acquire property maliciously or the professionals who enable them to do so.

Companies House will engage with the verifier’s supervisory body, but ultimately the enhanced false filing offence may be used in this circumstance, if necessary. Some of the feedback we have had from professional organisations—I shall not mention them—think that these provisions are too draconian; they are unwilling to put their name to some of them. I did say that there was unlikely to be much sympathy in the House for that position.

The noble Lord, Lord Clement-Jones, questioned the impact assessment. The secondary legislation does not make any significant changes that were not anticipated in the primary legislation impact assessment, and for this reason, in line with the better regulation framework, for which I am also responsible, we did not think another impact assessment was necessary and one has not been produced.

The noble Lord also rightly raised the point of tackling the enablers of economic crime. As I said, the information about agents and verifiers will be published on the register. We believe the supervisory regime we have in the UK is comprehensive. We regulate and supervise all businesses most at risk of facilitating money laundering, including accountants, estate and letting agents, high-value dealers, trust or company service providers, the art market, et cetera.

HMRC’s civil and criminal enforcement powers and capabilities are an integral part of government work to collect and protect revenue and build a trusted, modern tax and customs department. Our enforcement powers allow us already to tackle a minority who attempt to cheat the system and whose actions cause wider harms. HMRC uses a range of supervisory enforcement powers robustly, to address money laundering and terrorist financing risks caused by non-compliant businesses. The aim of this register is to help them in that task.

As always, of course, the Government keep the law under regular review to ensure that there is a robust legislative framework. Following concerns that parts of the criminal law may not be fit for purpose and calls for legislative certainty around the prosecution of corporate bodies for economic crime, the Government sought to establish whether there was a case for change. In 2020 the Government commissioned the Law Commission to undertake a detailed review of how the legislative framework could be improved to appropriately capture and punish criminal offences committed by corporations, with a particular focus on economic crime. That paper was published on 10 June this year. We are carefully assessing the options presented and are committed to working quickly to reform corporate criminal liability.

Electricity and Gas (Energy Company Obligation) Order 2022

Lord Callanan Excerpts

Tuesday 12th July 2022 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Electricity and Gas (Energy Company Obligation) Order 2022.

Relevant document: 7th 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 the draft order be approved.

Since 2013, the energy company obligation scheme has ensured much-needed support to low-income households to improve the energy efficiency of their homes. Since it began, it has delivered around 3.5 million energy efficiency and heating measures to around 2.4 million households. The Government committed in the sustainable warmth strategy 2021 to extend, expand and reform the scheme, to accelerate our efforts to improve the worst-quality homes in line with our fuel poverty strategy and target. This order provides for this expanded and reformed ECO scheme in Great Britain until March 2026.

The order succeeds the previous ECO order in Great Britain. Its main provisions are the scheme’s extension by four years to 2026 and its expansion from around £640 million to around £1 billion per year. There is an increased focus on support for low-income and vulnerable households in the least efficient homes. There will be mandatory minimum energy efficiency improvements required for energy performance certificate bands F and G homes; they have to be improved under the scheme to a minimum band D, and bands D and E homes have to be improved to a minimum band C. The introduction of a new minimum requirement will see at least 150,000 EPC bands E, F and G private tenure homes upgraded.

The solid wall minimum requirement will ensure that solid wall insulation is installed in at least 90,000 homes. This order introduces minimum insulation requirements for all homes receiving any heating measure, subject to certain exceptions, to encourage a fabric-first approach. Broken boiler replacements will continue to be limited under the scheme, with upgrades capped at 20,000 homes to encourage the transition to renewable heating and align with the Government’s long-term plan for reaching net zero. The scheme’s eligibility criteria are reformed, placing greater focus on households on the lowest incomes. Households in receipt of means-tested benefits will continue to be eligible.

The proportion of a supplier’s obligation that can be delivered under the flexible eligibility element of the scheme will increase to 50%. Under this, multiple options are introduced to encourage improved targeting of low-income and vulnerable households that may not be in receipt of benefits. These flexible eligibility provisions will enable local authorities, energy suppliers, Citizens Advice and the NHS to work together to identify households that are vulnerable to the effects of living in a cold home. A new scoring framework will apply to incentivise multiple-measure delivery, along with a series of score uplifts to steer measures and delivery where it is needed the most.

Installation quality will continue to be governed under TrustMark’s compliance and certification framework. As part of this, the quality of installs alongside a whole assessment of the property will continue to rely on independent industry standards, PAS—publicly available specification—2030 and 2035. Thanks to these reforms, we estimate that around 800,000 measures will be installed in around 450,000 homes. Of those, around 360,000 homes will be upgraded to EPC bands B and C, removing those households from fuel poverty. This is expected to save around £300 on average over the lifetime of the measures and up to £1,600 for those living in the least energy-efficient homes. However, those savings could average around £600 next winter, providing crucial long-term help where it is most needed.

To help deal with the gap between ECO schemes, the order permits measures installed since 1 April to count towards the suppliers’ obligation target. These are split into two elements: first, interim delivery, for measures installed between 1 April and 30 June to slightly amended ECO3 rules; and, secondly, early delivery, for measures installed to the new rules. Nearly 33,000 measures have already been installed since 1 April as a result of those provisions.

The Government held a consultation on these reforms last summer and published the government response in April. The majority of consultation responses supported extending and expanding the scheme as well as the proposals for reform. The Government are proceeding with the main proposals, with some key changes in light of the responses received and the final impact assessment. We have increased the EFG minimum requirement from 100,000 to 150,000 private tenure homes, focusing more help to those with the highest energy bills. We are providing extra incentives for the installation of measures in rural off-gas-grid areas in Scotland and Wales to account for the extra costs of delivery. The repair of efficient or inefficient oil and liquefied petroleum gas heating systems will be allowed as a last resort in homes that are off the gas grid and where it is not possible to instal low-carbon heating measures. This will help to ensure that people are not left without a functioning heating system.

In conclusion, the energy company obligation scheme remains important in supporting low-income and vulnerable households to improve the energy efficiency of their homes and to help reduce the energy bills of an estimated 450,000 households. The scheme remains a key contributor to meeting our fuel poverty and carbon reduction goals and is consistent with the heat and buildings strategy and, of course, our transition to net zero. I commend this order to the Committee.

--- Later in debate ---

It is right that low-income households and vulnerable households, and households on benefits, are the priority, but there are many other households out there that do not currently fall into these categories but are in households that are E, F or G-rated. What are the Government doing, or looking to do, to benefit all households to increase energy efficiency? With that, we support the instrument.

[Lord Callanan (Con)]

I thank all noble Lords for their contributions to this debate. There is a certain irony in standing here on one of the hottest days of the year, when we are all sweating like billy-o, debating what will happen next winter as people insulate homes, but I am sure we all realise that it is important to get started on this work as soon as possible, and we have done so, as I will set out shortly.

This is all done in the context of what has been an extraordinary increase in the cost of energy, and let me say from the start that the Government recognise that millions of households across the UK may need further support with the cost of living. That is why the Government have announced additional supports this year worth over £37 billion, including a considerable amount of targeted support for those of our fellow citizens who are on the lowest incomes. All domestic electricity customers in Great Britain will receive £400 off their bills from October through the energy bills support scheme. Meanwhile, over 8 million households across the UK in receipt of means-tested benefits will receive £650 as a cost of living payment, and further payments will be made to pensioners and disabled people.

The Government remain committed to helping low-income and vulnerable households to reduce their fuel bills and to heat their homes efficiently. The energy company obligation, or ECO scheme, will be a crucial element of that help this winter and for many years to come. It is not the only element, as I will outline later to the noble Lord, Lord Whitty, and others.

In response to some of the questions that were asked, let me start with my noble friend Baroness McIntosh, who rightly commented on the delays to the scheme. It is worth saying that ECO4, the latest iteration, is the most significant reform since the scheme began, and we have had to make sure that it is fit for purpose right through to March 2026. It is fair to say that this has presented some challenges in policy design, modelling and drafting.

It is important to point out that, while there has been a gap between ECO3 and ECO4, delivery has not stopped, due to the mitigations that we put in place. As I mentioned in my introductory remarks, nearly 33,000 measures have been installed since 1 April and registered with TrustMark, and we expect that number to go up by several thousand, as there is a time lag between the actual installation taking place and it being registered with the registration provider, TrustMark. Moreover, by allowing suppliers, as we did, to overdeliver against their ECO3 targets—referred to in the trade as the “carry-over”—at least 40,000 extra measures were delivered earlier than they would have been otherwise. I accept that these regulations were delayed and are later than I would ideally have liked; nevertheless, delivery has not stopped in the interregnum.

On my noble friend’s point about household contributions, the most recent evaluation of ECO showed that 18% of households made some sort of contribution to the installation of measures. With regard to insulation, that figure was only 12%. Moreover, we have designed ECO4 to fully fund upgrades, so actually we would expect the contribution figure to be even lower than that in ECO4. It is worth saying that banning contributions completely would add some considerable complexity to scheme compliance, and would also remove an essential element of flexibility for customers and for the supply chain. However, I give my noble friend an assurance that we will continue to monitor and keep the matter under review.

On my noble friend’s question on the solid wall insulation minimum, ECO4 will focus on the least energy-efficient properties. As I mentioned, we have introduced a requirement for a minimum of 150,000 E, F and G private tenure homes to be treated, and most of those will be solid-walled homes. We estimate that around 75% of total scheme spending will go to improving them to band D or better. We believe that the current solid wall minimum strikes the right balance between giving on the one hand certainty to those in the supply chain while also giving them the essential flexibility to treat homes in a more appropriate way.

My noble friend also made a good point about energy advice. I can reassure her that we are providing tailored advice and support to homeowners on what they can do to improve their homes. Our simple energy advice service has already had more than 1.7 million users, providing homeowners with personal tailored advice for improving and decarbonising their homes and links to local accredited and trusted installers. Homeowners can also find out about various government schemes, which I shall talk about shortly and for which they may be eligible. We intend shortly to enhance this digitally led service this year, and we are considering a number of options to support tailored retrofit advice in local areas. Our ultimate aim is to create a Government-led, multi-platform, home energy advice journey, supported by tailored local advice. We hope that it will provide a much-improved user experience for all households.

I will pick up on the point made by the noble Lord, Lord Whitty, about some people who may be missing out under ECO. Let me make the point yet again that ECO is not the only energy efficiency scheme. It is one element to it—the element funded by supplier bills. As I am often reminding the House, we have a number of other complementary schemes in England and Wales, funded by the Exchequer to the value of about £6.6 billion over this spending review period, including the social housing decarbonisation fund, on which we are about to go out in the next month or two for further bids for another £800 million of spending. There is the home upgrade grant, which specifically targets the poorest performing homes in off-gas-grid areas. Those schemes alone will also upgrade tens of thousands of homes, before we go on to the green homes grant local authority delivery scheme. These are complementary policies. I make the point again to the noble Lord, Lord Whitty, that ECO is not the only scheme; we have a number of different complementary programmes providing energy efficiency improvement in a range of homes in different tenures and areas.

I have mentioned the solid wall insulation minimum that both the noble Baroness, Lady McIntosh, and the noble Lord, Lord Whitty, raised. To add to that point, the additional schemes I have mentioned will also provide solid wall insulation. Again, ECO is not the only mechanism to incentivise what is an essential change for many solid wall homes. Those with cavity walls have often already had cavity wall insulation under the various iterations of the scheme. Solid wall homes are the next challenge we will receive.

There are actually some really exciting developments in solid wall treatments, if noble Lords want to research them. I viewed some external wall insulation in Holbeck, a poor part of Leeds—the area of the noble Baroness, Lady Blake—and saw the difference it made to both the performance of the homes and their external appearance. It really improved the whole look of the street. The finish is so good that it looks identical to either a brick or stone finish and, unless you go up and tap on it, you really cannot tell that it is external wall insulation, so it has that additional benefit. I saw it in County Durham as well. It improves the visual appearance of the street and the homes, as well as providing excellent levels of insulation. The more we can roll out these schemes in the UK and bring their cost down, the more we can make a serious difference to both the appearance of communities and the energy performance of homes.

I agree with the noble Lord, Lord Whitty, about the challenge of decarbonising domestic heating systems. As the noble Lord knows, we set out our approach in the heat and buildings strategy. Notwithstanding the eventual heating system we go for from the various options—it will almost certainly be a combination—we always have a fabric-first approach, which is the ultimate no-regrets option. Whatever heating system you have, if you have more insulation, you will benefit. All homes can be insulated to a level which will make them suitable for whatever heating technology we ultimately opt for. In addition, we also estimate that around 60,000 heat pumps will be installed under ECO4, following the appropriate insulation measures. That complements the heat pumps being installed under the boiler upgrade scheme and the other schemes I have mentioned.

I respectfully disagree with the noble Lord when he says that we do not have a strategic approach. We set it out in the heat and buildings strategy. It is true that ECO alone cannot meet our fuel poverty and net-zero targets. However, as I mentioned, it has been designed in tandem with other schemes so that they can all be delivered together to serve the cross-section of low income and vulnerable households that exist across a multiplicity of different tenures in both cities and rural areas and on and off the gas grid.

Moving on to the questions from the noble Lord, Lord Grantchester, who queried the saving figures cited, the £290 is what we expect the savings to be on average over the lifetime of the measures, which could be up to 42 years. The £600 is how much we expect households to save on average with the coming winter’s energy prices.

On the point the noble Lord raised about obligation thresholds, the Government have committed to significantly reduce thresholds where this can be done without introducing disproportionate costs for the very smallest suppliers. Under the previous scheme, the thresholds were lowered from 250,000 to 150,000 customer accounts and we will also consult on an appropriate buyout mechanism to bring about further reductions in the scheme thresholds in later phases. As I mentioned, the scheme will go through to 2026. The Committee will be pleased to know that we are seeking the primary powers necessary to do this within the upcoming Energy Bill. No doubt we will have further discussions about this when we debate that, starting next week.

Households in receipt of means-tested and disability benefits will of course continue to be eligible under ECO4. The Government are satisfied that those on the lowest incomes and with disabilities which make them vulnerable to cold will still be supported through the ECO4 Flex elements of the scheme.

The gas boiler replacement cap is for only the replacement of efficient boiler and electric storage heaters and is set at 20,000 homes across the scheme. Again, we think the caps are proportional to the ECO3 caps when compared with the number of homes that are expected to be treated under ECO4 and the reforms being made to eligible heating measures. We are of course not capping their replacement with renewable heating systems or district heating connections; nor are we capping inefficient heating system replacements.

TRIPS Agreement: Vaccines

Lord Callanan Excerpts

Monday 11th July 2022 Lords Chamber

[Lord Browne of Ladyton]

To ask Her Majesty’s Government how, and to what extent, the temporary waiver of provisions of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), agreed at the World Trade Organization’s Ministerial Conference on 17 June, will expand access to current and new vaccines, given that it does not include a waiver of trade secrets.

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

My Lords, the consensus-based agreement reached at the WTO’s 12th ministerial conference streamlines compulsory licensing processes for developing countries to manufacture and export Covid-19 vaccines while preserving the incentives to innovation that the international IP system provides. We welcome that the agreement does not undermine the existing IP framework, which has been key to the effective response to the pandemic.

[Lord Browne of Ladyton (Lab)]

My Lords, regrettably, the Minister’s Answer—I do not blame him for this as he was probably following his brief—did not address the issue that, without the inclusion of a waiver of trade secrets, essential access to critical manufacturing know-how and clinical data, and therefore to the ability to manufacture new vaccines, is denied. Why is this our Government’s policy, and why did our negotiators, who spent 18 months resisting this waiver completely, try to weaken the text further by requesting the deletion of the reference to the possibility of expanding the agreement in TRIPS on Covid-19 to include therapeutics and diagnostics in six months’ time? Who on earth instructed them to do that?

[Lord Callanan (Con)]

I disagree. This is a very good agreement, and the Government have seen no evidence that IP rights, including the protection of undisclosed information or trade secrets, are any barrier to accessing treatments for Covid-19. The problem now is that we are seeing supply effectively outstrip demand, with the current level of vaccine production. There is evidence—reports of a South African Covid-19 vaccine plant being at risk of closure because it has no orders, and the Serum Institute of India halving production of AstraZeneca’s vaccine due to no new orders.

[Baroness Sugg (Con)]

My Lords, I hear what my noble friend the Minister says around supply now but, if all the vaccines that the G7 committed to had been donated in 2021, around 600,000 lives would have been saved. I would like to ask about the finances. The UK has delivered some of the vaccines that it committed to, but I understand from the British Medical Journal that the Government have charged donated vaccines to the aid budget at much more than they paid for them, which has meant that there have been further cuts to life-saving UK aid programmes. Why have the Government counted each vaccine as £3.26 of aid spending, despite paying just £2.30 for doses in the first place?

[Lord Callanan (Con)]

I thank my noble friend for the question. All vaccine dose donations will be reported as official development assistance and be included in the 0.5% total. Expenditure for 2021 has been published in the UK Statistics on International Development, and by the OECD Development Assistance Committee. In 2021, we donated 30.8 million doses of AstraZeneca, which we reported at cost in line with the DAC guidance.

[Lord Hannay of Chiswick (CB)]

My Lords, what are the Government doing to prepare for when the next global pandemic comes along, to make sure that there is better and more equitable distribution of vaccines to developing countries? If this is such a wonderful agreement, why were we the last people to accept it?

[Lord Callanan (Con)]

The noble Lord makes a very good point, of course. The best answer to future vaccine development is achieved by preserving the intellectual property system. It is a good, consensus-based agreement that all member states can go along with, and a good agreement for vaccine manufacturers and developing countries.

[Lord Boateng (Lab)]

My Lords, under the existing intellectual property system, as of June this year 72.9% of people in high-income countries have been vaccinated with at least one dose of Covid-19 vaccine whereas only 17.94% in low-income countries have been vaccinated. The UN special rapporteur on discrimination and the Office of the UN High Commissioner on Human Rights have attributed this directly to the existing TRIPS intellectual property system. What is the moral justification for that?

[Lord Callanan (Con)]

My Lords, I think the noble Lord is wrong: the problem is not with vaccine production, as there is now an excess number of vaccines being produced; the problem is with the healthcare systems of individual countries that are unable to store, distribute and inject those vaccines, which is why we are working with developing countries to help them with that. We know that this is the case because of the problems we had rolling out the vaccine in this country, which of course has a very advanced healthcare system. I repeat the point: the problem is not with vaccine production, as there are already excess vaccines being produced; the problem is with the healthcare systems in those countries which enable them to be distributed and put into peoples’ arms.

[Lord Purvis of Tweed (LD)]

So why was it that the Government cut by nearly 60% their support for countries to have the health systems to distribute the vaccines when they became available? Why was it that when countries needed the vaccines, at the early stage of this, the Government vehemently opposed this move at the WTO? Returning to the question of the noble Baroness, Lady Sugg, can the Minister be very clear as to whether vaccine support is within or over and above the 0.5% cap? In March, in relation to a donation to Bangladesh, the Government said:

“The cost of this donation has been funded through UK Overseas Development Assistance and will come over and above the ODA spending target of 0.5% of GNI if needed.”


That is not what the Minister just told the House, so which is it?

[Lord Callanan (Con)]

The position is as I repeated to my noble friend Lady Sugg: all vaccine dose donations will be reported as overseas development assistance and be included within the 0.5%. I think the noble Lord is being very unfair about the UK’s support. We are in fact a leader of international support in response to the pandemic; we have spent more than £2.1 billion since 2020 to address its impacts and that includes up to £829 million to support the global development, manufacture and delivery of vaccines, treatments and tests in lower-income countries.

[Lord McNicol of West Kilbride (Lab)]

My Lord, the deal agreed at the WTO conference obviously fell short of what was initially proposed. Even after 18 months, discussions on extending the waiver to treatments and tests have been postponed again by another six months. Surely sharing clinical data and research on vaccine production is in our own self-interest, but a poor substitute would be having a relationship with or speaking to the pharmaceutical industry. Have Her Majesty’s Government had any representations with British pharmaceutical corporations to try to bypass the obstacles that exist?

[Lord Callanan (Con)]

The UK Government have regular meetings with pharmaceutical companies. Of course we want to see the maximum amount of support offered to lower-income countries. I just outlined the support we are providing, but we agreed at the meeting to a consensus-based decision that does not waive IP rights but streamlines the processes for developing countries using compulsory licensing to produce and export Covid-19 vaccines.

[Baroness McIntosh of Hudnall (Lab)]

My Lords, I have been listening very carefully to what the noble Lord has said so far; I did not hear him answer the question that the noble Baroness, Lady Sugg, asked him, which was about the difference between the price that was paid and the price that was charged for the vaccines. Will he have another go at explaining that difference?

[Lord Callanan (Con)]

I did answer the question but let me repeat the answer. In 2021, we donated 30.8 million doses of AstraZeneca—

[Noble Lords]

Oh!

[Lord Callanan (Con)]

If noble Lords would listen—which we reported at cost, in line with the DAC guidance.

[Baroness Chakrabarti (Lab)]

My Lords, this question of intellectual property is going to be really important in future pandemics. It is not absolute. We gave up liberties. People stayed at home and did not go to work. All sorts of sacrifices were made. Why cannot big pharma make its little bit of sacrifice as well?

[Lord Callanan (Con)]

It is making sacrifices. I agree with the noble Baroness about the sacrifices that have been made, but if we want big pharma and the private sector to invest, then we need to preserve the intellectual property regime, because next time it will require billions of pounds of investment, production and research. That is best achieved by preserving the intellectual property regime, but we need to make sure that developing countries have access to these vaccines, which we have done. Many of these countries do not have the facilities, the knowledge, the expertise or the know-how to produce these vaccines.

[Baroness Bryan of Partick (Lab)]

My Lords, developed countries have been accused of aligning themselves with the narrative of the pharmaceutical industry. Does the Minister accept that the development of these vaccines was not dependent on the innovation of the private sector, but rather came out of public investment and research? Can he explain why these companies were allowed to influence these vital discussions?

[Lord Callanan (Con)]

The noble Baroness is partly right; of course, there was substantial public research, but we needed the facilities in the private sector to help with the development, production and distribution of those vaccines. It was a partnership. The House is eager to criticise big pharma, but AstraZeneca produced all these vaccines at cost and donated many of them to the third world; it has done a fantastic job, for which we should be grateful.