Electricity and Gas (Energy Company Obligation) Order 2018

Lord Henley Excerpts

Tuesday 30th October 2018 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Electricity and Gas (Energy Company Obligation) Order 2018.

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

My Lords, this order was laid before the House on 19 July of this year and I beg to move that it be approved. The Government place great importance on supporting low-income families and ensuring that their energy bills are as low as possible. To that end, we continue to provide direct financial support to vulnerable households through the warm home discount scheme, while the energy price cap will protect around 11 million energy customers who have been stuck on poor value deals. Our election manifesto restated our commitment to tackling fuel poverty by increasing the energy efficiency of homes and the energy company obligation, or ECO, is the key policy in meeting those commitments.

Under ECO, energy suppliers in Great Britain are regulated to reduce domestic energy bills by installing energy efficiency measures. Since its start in 2013, more than 2.4 million measures have been installed in around 1.9 million homes. In 2015, the Government stated their intention to reform ECO to provide more help to those who need it most. The ECO order that we are debating completes that reform and will result in the whole scheme being focused on low-income and vulnerable households until March 2022. We will continue to fund the scheme at £640 million per annum until 2022, and in the Clean Growth Strategy we committed to funding domestic energy efficiency at least at that level until 2028. The Government consulted on proposals for the new scheme in spring and received 239 responses. Most responses were broadly supportive.

Currently, energy suppliers become obliged to act under ECO when they have 250,000 customer accounts. These thresholds were set in 2013, when the “Big Six” energy companies dominated the market. There are now more than 70 domestic suppliers in the market and we consider it appropriate that more are covered. Therefore from April 2019, suppliers with 200,000 customer accounts will be covered, falling to 150,000 from April 2020. We have expanded the eligibility criteria of the scheme so that households on certain disability benefits, their Ministry of Defence equivalents and low-income working households in receipt of child benefit are newly eligible for support. This increases the number of households eligible for support from 4.7 million under the affordable warmth part of the previous scheme to 6.6 million households under the new scheme. We believe this strikes the right balance between supporting those households most in need and keeping delivery costs low. We have also increased the proportion that can be delivered under the local authority flexible eligibility scheme from 10% to 25%. This allows local authorities to refer households for help, including people with health conditions exacerbated by cold homes.

To support the industrial strategy and the clean growth challenge, suppliers will be able to deliver up to 10% of their obligation using measures not previously supported under ECO. While encouraging a broader mix of measures, we will continue to maintain safety and installation standards. The scheme allows the equivalent of 35,000 broken heating systems to be replaced each year so that low-income households can receive support, should their heating system be beyond repair. While other forms of energy efficiency may have greater long-term benefits, a broken boiler can be the immediate crisis point for a struggling family.

--- Later in debate ---

The memorandum provided with the regulation states that one of the core aims of the instrument is to contribute to carbon reduction targets. Bearing in mind the assessment of the Committee on Climate Change in achieving the fourth and fifth carbon budgets, what action will the Government be taking to meet the UK’s target?

[Lord Henley]

My Lords, I welcome the generally positive tone of the noble Lord and my noble friend Lady McIntosh, both of whom recognised that this order is a genuine reform of the ECO system. As I made clear in my opening remarks, it is designed to target it far better at those who are less well off and those who find it harder to adapt their houses to make them more energy efficient. It has achieved a great deal in the past and will continue to achieve a great deal.

I am sorry that the noble Lord, Lord Grantchester, takes a less positive approach to this and accused us of a lack of ambition, given that I talked about increasing very dramatically the number of people that we intend to try to reach, and recommended generally spending more taxpayers’ money in a rather haphazard manner. I point out to him and to the noble Lord, Lord Teverson, that technology will encourage those who can afford it to make changes that will lead to a reduction in the use of energy. One only has to look at, for example, the reduction in the cost of things such as LED lights over the past few years, which has made it far easier for people to change to those lights and therefore decrease their use of energy. Similarly, it is right that those who can afford it should pay for appropriate insulation as is necessary, as they will see the benefit in a reduction in their fuel bills and the country and society as a whole will see a benefit in the reduction in carbon use. These measures are designed to encourage those who find it less easy to afford to make those changes.

[Lord Teverson]

As the Minister knows, in the UK, particularly in commercial buildings and increasingly in private buildings, we have a problem that landlords and tenants have very different goals in this area, so unfortunately it does not always work out that way. However, I do not want to interrupt him further.

[Lord Henley]

I totally agree that landlords and tenants have different views on this. Landlords can benefit from these measures. If the noble Lord would like, I will write to him in greater detail on that point. We would also like to see landlords with old houses make the investment that is right in those houses where they can do so.

I shall deal with some of the more detailed questions that were put to me, particularly by the noble Lord, Lord Teverson, and my noble friend Lady McIntosh. I hope that in the process I will also deal with some of the queries of the noble Lord, Lord Grantchester.

My noble friend talked about energy from waste and the possible advantages that the Danes are getting from us exporting some waste. My noble friend will remember that when I served in Defra I had an interest in waste. She will also know that there are sometimes difficulties in getting planning consent for energy from waste plants. I will write to her in greater detail on that, as it goes slightly beyond my brief at the moment. I also note that she mentioned the firm DONG in Denmark—I think it has now changed its name to something else that I cannot pronounce: Ørsted. I have recently seen some of its windmills off Barrow, which is now the largest wind farm in Europe, providing, I think, a very large increase in renewables from that source.

I agree with what my noble friend said about more homes being retrofitted. The new innovation routes could allow multiple measures to be installed in homes. That approach would need to be sponsored by us to demonstrate that it could be cost-effective. That information would need to be provided to Ofgem, the scheme administrator, to ensure that it met the relevant standards. If I can give her some further detail on that and on potential figures for those new district heating connections, I will write to her in due course.

The noble Lord, Lord Teverson, was concerned about the end of the old scheme and the start of the new. I assure him that early delivery means that the measures which meet the new scheme’s rules, and which are delivered before Parliament agrees these regulations, will count towards the supplier’s obligations. We will have a seamless transformation of these matters. I also assure the noble Lord that there will be the appropriate audit he seeks. Ofgem requires measures to be installed to specific standards and 5% of the measures are checked by Ofgem under the scheme’s technical monitoring checks. I hope that 5% will be sufficient for the noble Lord to consider that it provides the appropriate audit and checks.

The noble Lord asked about the housing stock that is not covered by the ECO scheme. We are reviewing the fuel poverty strategy and will make an assessment of how best to meet the fuel poverty targets. As I made clear, the clean growth strategy has set aspirations to decarbonise all sectors of the UK economy. The buildings mission aims to at least halve the energy use of new buildings by 2030, as well as halving the cost of renovating existing buildings to a standard similar to new buildings. I repeat that new buildings are covered by current building regulations, and therefore any new buildings will be appropriately insulated. However, we want to get old buildings up to the same standard as new buildings while increasing quality and safety.

The noble Lord had other queries. He quoted from paragraph 7.20 that there was some interest from the public and said that he wished to see more. We would all like to see more interest from the public—that is true of a great many schemes throughout government, way beyond this one. I assure the noble Lord that a number of members of the public responded to the consultation. They obviously had an interest in energy issues, energy efficiency and fuel poverty. The majority of the responses were supportive of consultation, as I set out in my opening remarks. I hope that as a result of this debate—should people be taking much interest in it—and other measures, others throughout the country will take an interest in this, and that those firms involved in the scheme will do their bit to contact the public and let them know what is available, particularly for those with low-cost housing.

As I said, I welcome the generally positive tone taken by the noble Lord, Lord Teverson, and my noble friend. I hope that in due course the noble Lord, Lord Grantchester, will come round to that view and accept that this will go a long way towards meeting the problems of fuel poverty, will help to decarbonise and will help to meet the targets that we hope to—and will—meet by 2030 and beyond. I commend the regulations to the Committee.

Motion agreed.

Electricity and Gas (Powers to Make Subordinate Legislation (Amendment) (EU Exit) Regulations 2018

Lord Henley Excerpts

Tuesday 30th October 2018 Grand Committee

Moved by

[Lord Henley]

That the Committee do consider the Electricity and Gas (Powers to Make Subordinate Legislation) (Amendment) (EU Exit) Regulations 2018

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

My Lords, the regulations were laid before the House on 5 September. As we approach EU exit, my department is working to ensure that our energy legislation continues to function effectively after exit day. In recent years the EU has introduced through the third energy package a suite of legislation governing the energy systems of member states. Much of this is technical legislation, known as European network codes and guidelines which apply to energy operators and regulators.

To maximise continuity, the European Union (Withdrawal) Act 2018 will incorporate the majority of this legislation into domestic law when we leave the EU. This instrument is the first of a package of energy-focused regulations amending this retained EU law to ensure that the UK’s energy legislation and markets work effectively after exit. This instrument does so in two ways: first, by ensuring that directly applicable EU law concerning electricity and gas will be effectively incorporated into domestic law; secondly, by enabling the UK Government and the Northern Ireland Executive to amend elements of this retained EU law in a simple and proportionate way, ensuring that our energy legislation can keep up with the rapid pace of technological advances and market developments. To do so, this instrument will transfer legislative functions conferred by four EU regulations from the European Commission to the UK Government and Northern Ireland Executive under the powers of Section 8 of the withdrawal Act.

The first power being transferred by this instrument is a limited ability to create European network codes. The withdrawal Act will incorporate all direct EU legislation so far as is operative immediately before exit day. This means that provisions in force on exit day but applying from a later date will not be incorporated. This is the case for several European network codes. Without government action, this could create gaps in the energy regulatory framework, leading to uncertainty and detriment to industry, which has adapted rules and practices to comply with the network codes. It is therefore important that the UK can incorporate these missing provisions promptly through legislation. This is accomplished by Part 2 of the instrument, which will revoke the European Commission’s power to make new codes and instead substitute limited powers for the Secretary of State and the Northern Ireland Department for the Economy to make regulations bringing into domestic law provisions corresponding to the codes or parts of codes not captured by the withdrawal Act. These statutory instruments will themselves be subject to the affirmative procedure to ensure effective parliamentary scrutiny.

Secondly, this instrument will enable amendments to network codes by transferring powers currently held by the European Commission to the Secretary of State and the Northern Ireland Department for the Economy. These powers would be exercised using subsequent affirmative statutory instruments.

Thirdly, as well as powers relating to network codes, this instrument will transfer to the Secretary of State and the Northern Ireland Department for the Economy powers to amend definitions and reporting requirements under the EU regulation on wholesale energy market integrity and transparency, known as REMIT. REMIT prohibits insider trading and market manipulation in wholesale energy markets and provides energy regulators with valuable tools to fight these crimes. The power to amend definitions is limited and may be used only to ensure coherence with other relevant financial services and energy legislation, or to take into account developments in wholesale energy markets.

The fourth power under this instrument concerns the security of gas supply regulation, which creates common standards and indicators to measure threats to gas security and defines how much gas is needed to maintain security of supply. The regulation contains templates for risk assessments, preventive action plans and emergency plans to be carried out by the Government. Further, the regulation contains powers for the European Commission to amend these templates using delegated acts. This instrument transfers these to the Secretary of State. Powers to amend the security of gas supply regulation and REMIT would be exercised through subsequent negative statutory instruments. This is appropriate as these powers permit only narrow amendments to very limited provisions of these regulations.

This instrument extends to Northern Ireland. As energy is a devolved matter, this instrument transfers powers variously to the Secretary of State and to the Department for the Economy in Northern Ireland, respecting the devolution settlement. In addition, my department has consulted with the Northern Ireland Department for the Economy throughout. While this instrument permits the Secretary of State to exercise its powers in respect of Northern Ireland, this would occur only in respect of a reserved area such as international relations, or when the Department for the Economy determines that it is unable to act in the absence of Northern Ireland Ministers. Each time this occurs, it would be accompanied by a ministerial Statement explaining why it was necessary.

In conclusion, the regulations are a sensible and necessary use of the powers of the withdrawal Act that will maximise continuity in our energy regulations as we leave the EU. I commend the regulations to the House.

[Lord Teverson (LD)]

It is left to me to start this rather technical discussion. On this occasion, I will stick to a rather strategic level, if the Minister does not mind. First, it has been the Government’s intention in our EU negotiations to remain in the single energy market, which I hugely welcome. I would be interested to understand from the Minister whether there has been any progress on that; whether that might appear in the political declaration of our future relationship in the withdrawal agreement; whether the Government are still keen to do that; and, if we are successful despite our red lines and the Government’s general intention to come out of the single market, whether the instruments would be necessary if we remain in the EU internal energy market.

Moving on from that, we have interconnectors. On codes and other technical matters, once we leave, if we are not part of the internal energy market, we will no longer have access to discussions on or information around codes used by that market. I would be interested to understand what effect that will have on interconnectors between us and the European Union at that time. Certainly the Select Committee that I chair was very concerned about the inefficiencies in trading—not so much around interruption of supply but around increases in energy prices due to inefficiencies because of the relationship not being as smooth as it was before—that might come about from that.

I want to ask a fundamental question. As the Minister mentioned, the secondary legislation concerns Northern Ireland as well. As he knows, the island of Ireland has a completely integrated energy market—a so-called single energy market. What preparations have the Government made, particularly in the case of no deal, so that this energy market for electricity and gas can continue to function, with powers coming back to the UK and such disintegration—that is, no longer being completely under the purview of the internal energy market? Will that single energy market in Ireland still work despite the fact that the network codes will change? This system seems fundamental to Northern Ireland’s energy needs, let alone those of the Republic.

[Lord Grantchester (Lab)]

My Lords, I thank the Minister for his introduction to the regulations—the first of many to come concerning the UK’s exit from the EU. The Committee will consider many technical energy matters. It will not be entirely simple to identify the crucial elements and their implications. However, I will echo the remarks of the noble Lord, Lord Teverson, on the more challenging aspects of the regulations on wider-ranging topics, such as the internal energy market and the position of the island of Ireland.

On the face of it, the instrument seems simple enough. It moves powers held by the European Commission to a domestic authority, giving the Secretary of State power to alter them—in this case, referring to European network codes and guidelines—and adopt the amendments overall as “retained direct EU legislation”. Later amendments that will not come into force by 29 March 2019 will not be regarded as retained direct EU legislation. They will be resolved, perhaps even revoked, by exit day under separate secondary legislation, along with elements of retained EU law where the Secretary of State considers that the EU instruments retained in law will not be capable of operating in isolation from the rest of the EU instrument. Powers are also taken in the SI to amend the provisions of REMIT, an EU regulation concerning wholesale market integration and transparency, to apply internally to the UK and not to have to report to EU authorities.

Some amendments will be made by affirmative procedure and some negative. As your Lordships’ Secondary Legislation Scrutiny Committee concluded, all is so clear, so far. Perhaps the Minister can confirm first whether all these amending instruments will be amending only: that is, not enabling new powers through secondary legislation. That does not seem to have been commented on.

More importantly, this question brings up the whole issue of the internal energy market. Unlike Euratom and other bodies established by treaty, the IEM is merely a collection of agreements among member states on how the European energy market is to be conducted. It has been stated many times that it would be advantageous for membership of the IEM to be retained, or a close association with it. How far could any statement go when it is not really a distinct entity? This order would be regarded as a contingent action, to be effected and commenced if no suitable alternative arrangement for energy trading through interconnectors can be put into place—rather like the contingent nature of the Nuclear Safeguards Bill, now an Act, as the Minister will remember. Can the Minister clarify whether this is the Government’s intention or whether, as the memorandum seems to suggest, the order will apply regardless of any deal and be part of a signal to break with the IEM under all scenarios? Will he also clarify the Government’s general intention toward the internal energy market?

Very pertinent in this respect is the position regarding Northern Ireland. Ireland, north and south of the border, already operates under an all-Ireland grid. Given the possibility that Northern Ireland will not operate its own grid requirements at Brexit, is it intended to break up the Ireland grid? While paragraphs 7.12 and 7.13 of the Explanatory Memorandum deal with the position as now, when there is not a functioning Executive, is it intended that Northern Ireland will function on different codes from the rest of Ireland at Brexit? Can the Minister explain what is intended and how it will work on a United Kingdom basis with Northern Ireland and the Irish grid?

While an effective system must be in place upon Brexit, does this order—while enabling continuity for UK authorities—close the door on options for a better working of the energy system after Brexit through close association with the internal energy market? Can the Minister provide the Committee with any further clarity? If any of his remarks can assure the Committee on this point, I can confirm the order today.

[Lord Henley]

My Lords, I am grateful to both noble Lords for their comments. As the noble Lord, Lord Grantchester, rightly said, this is possibly the first of many statutory instruments that will come before the House, possibly as negative orders. He will remember that, if I have this right, I wrote to him and to the noble Lord, Lord Teverson—or if I did not, I copied a letter that my right honourable friend Claire Perry sent to colleagues in another place—about these orders back in August of this year. I will double check whether I did. All I know is that she wrote on 14 August; I thought that I had copied that letter but if not, I will make sure that I have.

The reason why I mentioned it is that I have given a commitment to write to noble Lords as other orders come forward. As I made clear in my introductory remarks, these orders merely give certain powers to the Secretary of State to make powers that previously existed with the EU. Obviously, those powers are to make further orders that will come forward. It is, one might say, quite a complicated landscape and—both noble Lords will have heard the discussions on earlier orders—we might have found it easier and speedier if I had written to them in advance. I thought that I had.

Discontinuing Seasonal Changes of Time (EUC Report)

Lord Henley Excerpts

Wednesday 24th October 2018 Lords Chamber

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

My Lords, I take this opportunity to welcome the noble Lord, Lord McNicol, for a second time to the Dispatch Box, because it will be a rare moment for him to take part in a debate where there is quite such a degree of unanimity—in this House—on EU matters. I hope, as the noble Lord, Lord Whitty, put it, that we get unanimity in another place in due course, and that that will strengthen the Government’s hand. For the benefit of the Chamber, I will set out the Government’s position in due course.

The final questions from the noble Lord, Lord McNicol, are important and need to be addressed at some point in the future, but they are not a matter for this debate. Like the noble Lord, Lord Rooker, I have my views, he has his views, and the noble Baroness, Lady Randerson, has her views—we all have our views, and at some point they will have to be discussed and the benefits argued in relation to accidents, energy and a range of other issues. It is very important that we in this country do it, because, as the noble Lord made clear—I know where he is from—there are different views in the north of England and in Scotland. It affects Northern Ireland in a different way. On top of that, there are the complications that arise because this is a devolved issue in Northern Ireland but a reserved issue in Scotland or Wales.

There is a host of complications. As the noble Baroness, Lady Randerson, said, this is not the moment to discuss them. Just as a diversion, however, I remind her of her former noble friend Lord Tanlaw, who, I think, was also my noble friend for a while, and a noble friend of the Cross Benches for a time. He had very strong views on the subject of clocks and timing, and on a very regular basis brought them before this House. That is not a matter for today.

I start by saying a few words about the backdrop to the proposals before setting out the Government’s views and what we wish to do. We have been aware for some time that several member states in the eastern part of the EU have been lobbying for the abolition of daylight saving. It was reported just over a year ago that Poland was planning to scrap daylight saving unilaterally, but in the end that did not happen. In response to lobbying from those member states and the European Parliament, however, the Commission agreed to review the summer time directive. That review included a public consultation, which took place in July and August this year.

The noble Lord, Lord German, spoke about that consultation and the noble Lord, Lord Rooker, made other comments in more robust and Rooker-esque words—I think he said that he felt it had possibly been rigged. But as the noble Lord, Lord German, made clear, there were some 4 million responses, with some 84% favouring the abolition of daylight saving, but they were disproportionately from Germany and one or two other countries. We felt that the high number of responses was partly due to two citizens’ campaigns, which encouraged people to vote to abolish daylight saving. Following this, President Juncker moved quickly to confirm that the Commission would bring forward proposals regarding the summer time directive. Those were announced on 12 September.

I turn, as the Commission did, to the principles of subsidiarity and proportionality. I am sorry that the noble Lord, Lord German, felt that we had confused or muddled the two together in our Explanatory Memorandum. In areas of shared competence such as that which we are discussing, the European Union can bring forward proposals but must do so within the constraints established in Article 5 of the Treaty on European Union. These are that the European Union may act,

“only if and insofar as the objectives of the proposed action cannot be sufficiently achieved by the Member States”,

and that,

“the content and form of Union action shall not exceed what is necessary to achieve the objectives of the Treaties”.

European Union action in this context must be both necessary and add value in such a way that it would not be better achieved by the member states.

The Government do not doubt the European Union’s competence to bring forward proposals on this subject. Indeed, the European Union has been regulating this area via multiple directives since it first introduced legislation on summer time arrangements in 1980. However, the proposal we are discussing differs from its predecessors in a crucial way: while the others sought to advance the harmonisation of time in line with the objectives of the treaties, this new proposal starts from an existing position of harmonisation. In this context, any proposal seeking to change the current arrangements should be supported by evidence that clearly demonstrates the benefits for the Union, member states and their citizens. We believe that the Commission’s proposals fall short on this point.

The Commission states in its own proposals that the current body of evidence is inconclusive on energy saving, overall health impacts and implications for road safety, and that technological advances in agriculture have largely offset the disruptive effect of biannual time changes. Providing a reasonable timeframe for member states to carry out a proper consultation and impact assessment would have gone some way to remedy this lack of evidence. Yet under the current proposal, member states are expected to have concluded this work and all the necessary domestic measures required to implement the directive by 1 April 2019.

On these points, the Government share the concerns of the committee. The European Commission has not presented a compelling case for the need to legislate on this subject matter to further advance the objectives of the treaties. The Commission affirms that the proposal “does not go beyond” what is,

“necessary to achieve the objective of continuing to safeguard the proper functioning of the internal market as regards time arrangements”.

Yet the existing directive already ensures harmonisation of time across the Union and the Commission does not demonstrate how the proposal under discussion would enhance that.

The Government recognise the benefits of harmonised time arrangements with our neighbours, which the evidence supports. But when we take those as our starting point, we should be cautious about initiating change in the absence of scrutiny and analysis proportionate to its potential impact. Again, I make it clear that the Government fully support what the committee has said. I am grateful for its work on this and I hope that the noble Lord will move his second Motion.

My advice is that another place will consider this matter shortly. I hope at that moment my honourable friend—referred to by the noble Lord as the Minister for time and space—will be able to respond in a similar manner.

I give an assurance that we will continue to work with other member states. As the noble Lord, Lord Whitty, made clear, the views of other member states and other member state parliaments are crucial. In fact, I will be travelling to Austria for a meeting of one part of the Council in the next week to make this point as vigorously as I can. Possibly I will not be allowed even as long as eight minutes to speak, knowing the constraints of how Councils tend to operate. But we will be trying to persuade other member states to see the light on this and I hope we will be able to persuade the Commission to see daylight on this.

Life Sciences Industrial Strategy (Science and Technology Committee Report)

Lord Henley Excerpts

Tuesday 23rd October 2018 Lords Chamber

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

My Lords, the first question put to me by the noble Lord, Lord Stevenson, was, “How will the Minister respond?”, and I have to say: with difficulty. I am taken back to the first debate on the industrial strategy as a whole, which was in this House in January, when we had many distinguished speakers commenting. I had the misfortune on that occasion to respond, and I hope I made it clear that although my Secretary of State and department were behind the industrial strategy—“industrial strategy” appeared in our name—it went wider than the department as a whole and covered the whole of government.

This debate and the comments of noble Lords went far wider than the scope of the report. My noble friend Lord McColl offered his very welcome advice on obesity; the noble Lord, Lord Bilimoria, spoke about the brewing of beer; and the noble Viscount, Lord Hanworth, talked about company takeovers. Indeed, this issue goes wider than both my department and the Department of Health. I will not follow the noble Lord, Lord Stevenson, in his use of metaphors involving buses, their numbers and variety, because metaphors by their very nature often get one slightly more confused. I will try to deal with some aspects of the report that are of immediate concern, and offer, as always, apologies that it is me responding and not my noble friend, Lord O’Shaughnessy. I understand that my noble friend was in fact giving evidence this afternoon to another Select Committee, which rather precluded him from answering this debate.

This debate is a healthy reminder of how seriously we take the work not just of the committee of the noble Lord, Lord Patel, but of all committees of this House. I pay tribute to the noble Lord’s committee and its expertise. Whenever I go up and down the country to meet experts in this field or in other fields, a great many refer to the expertise of the noble Lord’s committee and of other committees of this House. I then normally respond by saying that I have had the misfortune of having to give evidence to the committee with my noble friend Lord O’Shaughnessy, and how difficult that can be. We are grateful for it; the Government take it seriously. I am grateful to the noble Lord, Lord Patel, and the noble Lord, Lord Stevenson, for mentioning that we responded in a timely manner. Had we been allowed yet more time—I shall not be allowed that much time to respond—we might have been able to do an even better job of responding.

I give an assurance to all noble Lords who have spoken, whether or not they are members of the committee, that we will try to respond in due course to the points that have been made. In that regard, I praise and offer thanks in advance to officials in the Office for Life Sciences for all the work that I will be putting them through in providing me with responses.

I wanted to mention the Office for Life Sciences because, as all noble Lords will know, it is a department of government that reports to both my own, BEIS, and to Health. It is significant, in that it offers some view of how government now works. Going back a long time in history to when I first started in government, I think of how much more siloed we were from department to department. The Office for Life Sciences and other new sections that have grown up during the past few years—this goes back to before the Conservative or even the coalition Government; the noble Lord, Lord Hunt of Kings Heath, will remember that it started under the Labour Government—offer a sign that government in many areas can work better and get a more coherent answer. For that reason, I hope we will be able to respond to a great many of the points raised in greater detail in due course.

I note, as the noble Lord, Lord Patel, stated, that the committee started its report in the summer of last year. In August, Sir John Bell published his report, the first part of the life sciences industrial strategy. I think that my noble friend Lady Neville-Jones looked to us to seek slightly greater ownership of his report. We accept the vision that he set out and have seen prompt implementation of parts of that strategy through the first sector deal that came out so soon after publication of the industrial strategy. We do not want to claim the entire credit for Sir John Bell’s excellent report; it is his report that the Government fully accepted.

Sir John’s report came out in 2017. At the end of November, we had the industrial strategy itself. We then had the first sector deal for the life sciences in December. We had a debate on the industrial strategy as a whole in January. The report produced by the noble Lord came out in April. As he reminded us, we responded in good time. I do not need to go through the many recommendations that the report made nor the Government’s responses to them, but I hope that I can address just some of the points.

I remind those who criticised us for not having done enough since the publication of the report—I think the noble Lord, Lord Bilimoria, was among them—of what Sir John said:

“Since the launch of the Life Sciences Industrial Strategy, Government has made enormous progress implementing its recommendations … The new Life Sciences … Implementation Board is functioning and the Office for Life Sciences … is working hard to deliver the rest of the report. No other sector has made such rapid and effective progress”.


He went on to say that he was surprised by the House of Lords’ comments, given the enthusiasm of the sector, this strategy and the progress made.

If I may, I shall just deal with the point about governance that came up so often in the debate. We agree with the committee that a strategic partnership with the sector is crucial to delivering on the vision of the life sciences industrial strategy. It is exactly for that reason that we set up the Life Sciences Council, which has been referred to—the noble Lord, Lord Patel, mentioned the appointment of its new chairman, Andy Haldane. It is a partnership between government and industry, upon which both my right honourable friend the Secretary of State for BEIS and my right honourable friend the Secretary of State for Health sit, to provide strategic oversight for the future of UK life sciences. It provides a forum to discuss how the UK can continue to be a global leader in biopharmaceuticals, digital and health, to help develop products and attract the inward investment we need.

As my noble friend Lady Neville-Jones said, it has 27 members. I take her point—I forget which of Parkinson’s laws it is—that it is better to keep committees down to something of the order of about 20. I see that she nods. The same is true of the Life Science Industrial Strategy Implementation Board, with its 24 members. In an ideal world, one would try to stick to 20, but it is always difficult to exclude certain people. Those are the numbers, and I believe that it will still work effectively. That implementation board, the second body I mentioned, oversees delivery of commitments made in the sector deal and will drive progress on future phases of work to implement that strategy. It will be jointly chaired by myself and Sir John Bell and it will have my noble friend Lord O’Shaughnessy on it. It is there and I believe that, with its roadmap and its timetable, it will be able to effectively measure progress as we wish it to and as my noble friend Lady Neville-Jones wishes. We will monitor that progress and will be happy in due course to share that detailed plan as additional written evidence.

I want to add something about the innovation landscape review, a matter of concern to noble Lords, particularly the noble Lord, Lord Patel. We have been working with NHS England to carry out an internal review of the innovation landscape, a publicly funded scheme supporting health and life sciences innovation, from initial idea to deployment by the NHS. As part of that work, we have developed proposals that seek to maximise the impact, for the NHS and the wider economy, of public funding for innovation in health and care. Those proposals will inform our wider work to deliver a health system that supports innovation, promotes testing and the development of health tech and ensures that the best innovations are used, so that the health and care system, patients and the NHS can all benefit as quickly as possible.

Turning to what I might politely call an organogram but is really my own scribblings on the list of speakers, I note that virtually every noble Lord expressed concern about the mine of NHS data, the need for informed consent, and what use we could make of it. As has begun to be explained to me, one strength of the NHS lies in its data, and the potential advantages to this country. I forget who used the analogy or metaphor of a mine, but it is one in which we must dig. It is also one where this country will have advantages way beyond those of any other country in the world. It presents opportunities for the benefit of patients and the wider economy.

As the noble Lord, Lord Fox, and others made clear, however, a key underpinning for the use of healthcare data will obviously be in building the appropriate trust with the public, along with professionalism and transparency in the use of data, with the information shared in a safe and secure manner. To assist in moving that agenda forward, NHS England and the Local Government Association are establishing a set of local health and care record exemplars, focused on establishing best trust in information sharing. This includes: information governance approaches; the associated cyber standards; how professional engagement should be conducted; and the implementation of associated technical and interoperability standards. These will enable information to be shared and linked across different systems in a consistent manner. I think all of us agreed that we have this and must make use of it, but we will have to tread very carefully to make sure that we can get it. I noted carefully what the noble Lord, Lord Fox, and many others said on this issue.

I turn to the question of immigration and the Migration Advisory Committee’s report. Again, I accept that this issue is of considerable concern and we have to get it right, bearing in mind the vital role that we play in making Europe a pioneering base for research and values, and the contribution which international researchers make to the whole of the UK. That is not going to change when we leave the EU. We will seek an ambitious relationship on science and innovation with the EU. That includes continuing to explore future UK participation in mutually beneficial research programmes with our EU partners, in addition to supporting science, research and innovation. Following the publication of the Migration Advisory Committee’s report on students and EEA workers, we are working with the DfE and the Home Office to achieve the best outcome for science and research in the future immigration system. We will continue to work with them to ensure that any immigration system and/or mobility frameworks serve the needs of science and research.

Perhaps I may correct one point that I made earlier. I am grateful to those who advise me on these matters. I talked about Andy Haldane as the chairman; it is of course Pascal Soriot. I see the noble Lord, Lord Fox, nodding. I apologise to them both but I have at least now got that answer on the record.

As I said earlier, I do not think that it would be for me to go into greater detail on the vast array of questions that were put before me during the debate but I will co-ordinate a response to all those who have spoken. I might even try to persuade my noble friend Lord O’Shaughnessy to sign some of the letters. The key thing to get over is something that was stressed by all speakers: just how important the life sciences area is to this country. That area is worth over £70 billion. It provides jobs for almost 250,000 people. In 2017, we received the highest level of life sciences foreign investment projects in Europe, the highest for the past seven years, and second only to the United States. The sector continues to grow and the Government’s ambitions will also continue in this field. As we made clear in the industrial strategy, we have committed to increase investment in R&D to some 2.4% of GDP by 2027 and to more than 3% over the long term, unlocking an estimated £80 billion over the next 10 years. Our ambition remains for the United Kingdom to be the best place in the world to develop and launch innovative medicines, technologies and diagnostics. We want that to continue. This country is home to a thriving and vibrant life sciences sector. Realising the vision of the industrial strategy and of the part of the industrial strategy that we are debating tonight is crucial to unlocking the opportunities that are appearing ever more rapidly on the horizon.

We will listen to what the committee had to say and to what has been said in the debate. I will make sure that copies of the debate go to members of the implementation board that I have the honour to chair. As we make the ambition of the strategy a reality, we believe that we will continue to strengthen the reputation and appeal of this world-beating sector. I end by again thanking the noble Lord, Lord Patel, and his committee for their work.

Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018

Lord Henley Excerpts

Wednesday 17th October 2018 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.

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

My Lords, I beg to move that these regulations, which were laid before the House on 18 July 2018, be approved.

The purpose of this statutory instrument is to introduce additional requirements for quoted companies and new requirements for large unquoted companies and large limited liability partnerships—LLPs—to report annually on emissions, energy consumption and energy efficiency action. In 2013 the UK was the first country to make it compulsory for quoted companies to include emissions data for their entire organisation in their annual reports. At the time, the Government made a pledge to review the legislation and whether it should be extended to all large companies at a later date.

The Government recognise that for organisations to take action to reduce their energy use, they must have the appropriate tools and guidance. Measuring energy use and emissions is the first step to managing them effectively, and this legislation provides large organisations with a legal framework, creating the much-needed consistency in emissions reporting that aligns with the existing requirements for quoted companies. The importance of disclosure of consistent, comparable and clear energy and emissions information was also highlighted by the Task Force on Climate-related Financial Disclosures in June 2017, which the Government endorsed in September this year.

These regulations deliver what is known as streamlined energy and carbon reporting—part of a package of changes that were announced in the 2016 Budget with the aim of simplifying what stakeholders view as an overly complex tax and reporting policy landscape. They ensure that reporting on emissions will continue following the early closure of the CRC energy efficiency scheme, while further incentivising energy efficiency and thereby helping to improve productivity and reduce energy bills and emissions across the UK.

I turn now to the regulations. The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 brought in requirements for quoted companies to report their annual greenhouse gas emissions in their directors’ report, alongside an intensity metric, and to disclose the methodology used. The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018—these regulations—introduce a new obligation for these companies to report their underlying global energy use to reflect the true impact of their operations.

These regulations also introduce new requirements for large unquoted companies and large LLPs to report information about their UK energy use and greenhouse gas emissions in so far as it relates to electricity, gas and transport, and to disclose the methodology used in calculation of the relevant disclosures. Additionally, these regulations bring in a new requirement for all the organisations in scope to report on the principal measures taken to increase energy efficiency if any such action has been taken in the organisation’s financial year.

As per the existing requirement for quoted companies, these regulations require the disclosures for companies to be included in annual reports, specifically in the directors’ report. We consider that this will provide visibility of energy efficiency for senior management and transparency for investors and stakeholders, and will enable energy and carbon performance to be aligned with both financial and operational performance. These regulations introduce a new vehicle for reporting energy and carbon emissions information for large LLPs via a new report, the energy and carbon report, to be filed with Companies House alongside an LLP’s annual accounts.

To simplify reporting at group level, if a company or LLP is preparing group accounts and its report is a group report, the company or LLP must make the relevant disclosures on the basis of its energy use and greenhouse emissions and those of its subsidiaries—but only as far as those subsidiaries would themselves be in scope of these regulations. A subsidiary which would itself be required to disclose its energy and carbon information in its directors’ report will not have to do so if the group report meets certain requirements. These regulations apply to financial years that start on or after 1 April 2019.

The Government consulted widely on the policy behind this legislation, receiving responses from a wide variety of stakeholders including businesses, regulators and trade associations. The majority of respondents agreed that mandatory reporting was important and that it should apply UK wide, align with best practice in the UK and internationally and build on the existing mandatory reporting of greenhouse gas emissions by quoted companies and mandatory energy audits under the Energy Savings Opportunity Scheme. However, there was also a strong message that the Government should not be imposing unnecessary administrative burdens on UK business.

To balance these concerns with the overall objective of increasing transparency and improving consistency of energy and carbon reporting, the provisions contained in these regulations have undergone a number of refinements, such as the introduction of a minimum energy use threshold for the full disclosures, enabling organisations using domestic levels of energy to meet their obligations by simply confirming that they used 40 megawatt hours or less of energy in the reporting period.

We have also introduced the ability for unquoted companies and LLPs to state where they have not disclosed the information required under these regulations on the grounds that it would not be practical to obtain the information, or if, in what we expect would be exceptional circumstances, the directors or members think that disclosure would be seriously prejudicial to the interests of the organisation.

These regulations strike the right balance between disclosure of energy and carbon information by organisations and limiting the administrative burden. In line with the Government’s goal of enabling businesses and industry to improve energy efficiency and contribute to the goals of our clean growth and industrial strategies, consistent, transparent and comparable reporting will ensure that businesses make informed investment decisions in their preparations for a low-carbon future—an appropriate goal in Green Great Britain Week, which we are in at the moment, when we are showcasing the benefits of clean growth and what it will bring to all parts of society. I commend the regulations to the Committee.

--- Later in debate ---

[Lord Grantchester (Lab)]

I, too, thank the Minister for his introduction to the regulations. Although limited in scope and somewhat technical, they are crucial to highlighting and building energy efficiency into everyday activities. We greatly welcome that.

As the Minister said, the regulations introduce mandatory requirements on emissions, energy consumption and energy efficiency action for large, unquoted companies. They also extend the reporting requirements for quoted companies to bring both, along with large limited liability partnerships, in line with common reporting requirements. Such organisations must set out their activities and performance in each year’s annual report. The intention of the changes is to compensate for and extend the reporting requirements previously obligated by the carbon reduction commitment, which is to end in April 2019. The new reporting requirements are to be in place after that date.

I have always thought that an organisation’s annual report is a very important document that sets out its strategic direction and how it has performed against its objectives. It should be a good promotional tool for its activities. Last week, the Intergovernmental Panel on Climate Change brought out a special report to warn again of the dangers of climate change without serious corrective action being taken on emissions, decarbonisation and energy efficiency. Previously, Labour supported and advocated companies reporting their activities in a coherent regime.

Regrettably, although the new measures are welcome they do not exactly replicate all that was in place under the carbon reduction commitment. Primarily, there was a league table of companies’ performances alongside the report. In the regulations, there is no measure of comparative performance and no means of producing such comparisons other than by a time-consuming and expensive trawl through all company reports, which may—or, more likely, may not—be reported in strictly comparable terms. While the regulations are prescriptive regarding what should be reported and how, there appears to be some leeway in the regulations whereby reports could mislead or be non-comparable in their meaning, particularly in terms of the possible distribution of reporting among subsidiaries of the main company. Does the Minister recognise the deficiency that there will be a lack of full comparability of reports because of the absence of a mechanism to allow performance to be compared and graded?

As what gets measured gets attention, how are companies to understand how they compare to their peers? Surely the full impact of these energy use indicators in annual reports is not being utilised as a competitive challenge for improvement. As the clean growth strategy states, businesses need measures,

“to improve their energy productivity, by at least 20% by 2030”.

The CRC was due to run until 2043. Here I echo the questions asked by the noble Lord, Lord Teverson, in his analysis of the CRC and its workings. The impact assessment outlines that the policy will be reviewed in 2024. That is some time away, especially given the timeframe in which the intergovernmental panel stresses mitigating measures need to be taken. How will any comparative analysis take place under these regulations? Indeed, will the Government undertake any analysis of the results of this reporting prior to 2024, and how will they measure success? Will government incentives be brought to bear on poor performance, not merely on reporting?

While we are in favour of these regulations today, there are nevertheless serious issues to address in which these regulations have perhaps not been as constructive as they might have been. Climate change is one of the most pressing issues of our age. The intergovernmental panel issued a special report last week between its fifth and sixth reports to underline its most recent assessment that there could be a very limited number of years, may be as few as 12—that is, until 2030—in which the world’s increase in temperature could be limited to less than 1.5 degrees above 1990 levels. I thought it was strange that the Conservative Government came out with a Ministerial Statement on Monday extolling all the achievements that have been secured when we all know that greater progress was made under previous Labour Governments and even under coalitions. Indeed, under the Conservative Government from 2015 progress has slowed, with a litany of cuts and policy reversals that I need not list at length today. Suffice to say that the UK is possibly no longer on track to meet the fourth, but more definitely the fifth, carbon budget.

I have one question for the Minister on the Government’s Statement on Monday. Labour has a policy of net zero emissions above 1990 levels by 2050, subject to the advice of the climate change committee. On the back of the report last week the Government have asked the CCC to advise on when and how we could achieve a net zero target. Whether they have precluded the CCC assessing and issuing immediate advice, it must advise on actions to secure net zero emissions to start at the end of the fifth carbon budget. That carbon budget is set to conclude in 2032. So the CCC cannot issue guidance or recommendations to begin until two years after the IPCC estimates that the world will be in a dangerous condition, recording in excess of its maximum 1.5 degrees above 1990 levels. The CCC advice will need to work hard and fast to secure a net zero target by 2050. I ask the Minister to answer on this feature of Monday’s announcement. Do the Government have some strategic assessment by which they have decided to limit the CCC’s advice until after 2032? The Government’s self-congratulatory words must be met by coherent and comprehensible policies. Winning slowly on climate change is the same as losing.

[Lord Henley]

My Lords, I thank both noble Lords for their interventions. I rather regret the unnecessarily party-political line that the noble Lord, Lord Grantchester, took. Perhaps he could instead have taken that by responding to Monday’s Statement, which we offered to the Opposition but they did not wish to have it repeated in this House.

I welcome the fact that the noble Lord, Lord Teverson, highlighted that it is Green Week. I think the Government have been doing their bit to highlight the achievements that we have made in Green Week. I hope the noble Lord, Lord Grantchester, has received a number of invitations to some of the events that we have been holding to highlight the achievements of this Government, the previous coalition Government and—dare I say it, on this occasion, because, unlike the noble Lord, I do not want to be party political—the Labour Government who left office in 2010. In 2008 that Labour Government brought in the Climate Change Act, which had cross-party support. The noble Lord will find that Ministers—I am going way beyond the regulations, but it is worth getting this on the record—have been making it quite clear that over the past 10 years this country, again with cross-party support with the Labour Government, the coalition Government and the Conservative Government, has achieved great things on this front, particularly when he compares what we have done in carbon reduction with other G7 countries. Would he have liked us to have followed the route of Germany, which is now burning more coal than it has for many years while we are on the road to seeing coal disappear from energy generation by 2025? It is down to some 7% of our energy needs at the moment from 40% only a few years ago. The Government are very proud of those great achievements but we also pay tribute to the Labour Government who brought in the 2008 Act and the coalition Government, of which I was a part and the noble Lord, Lord Teverson, was a supporter. So in this green Britain or green UK week, whatever its long-winded title is, let us pay tribute to what we have dealt with as a country.

--- Later in debate ---

[Lord Teverson]

I do not want to prolong this, but will part of that be on supply chains and how the Government see they should be incorporated into carbon reporting?

[Lord Henley]

I notice exactly what the noble Lord says. It would be very difficult for these regulations to include supply chains, but it obviously is a relevant matter. If we close down one business and shift the thing overseas we do not achieve anything for the world as a whole. Obviously it needs to be considered how it could be done, but that is another matter. I will write in greater detail to the noble Lord.

I believe that what we are offering offers simpler, better energy and carbon reporting and will encourage compliance by companies and LLPs to support the transition to the low-carbon economy that we wish. It will deliver long-term benefits across the UK and throughout the world. I commend these regulations to the Committee.

Motion agreed.

Business Contract Terms (Assignment of Receivables) Regulations 2018

Lord Henley Excerpts

Wednesday 17th October 2018 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Business Contract Terms (Assignment of Receivables) Regulations 2018.

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

My Lords, this instrument has a simple aim. It seeks to free small and medium enterprises from onerous contract terms that currently restrict their ability to raise finance. The terms in question are found in many purchase contracts. They prohibit the supplier from assigning to a third party the value of amounts owed to them, referred to as receivables. The supplier is typically unable to negotiate any changes to these terms. Their bargaining position is weak. If they want the work, they had better accept the standard terms of purchase. The impact of such a contract term is to cut the supplier off from an option that would otherwise be open to them, which is to use invoice finance. The aim of this instrument is simply to restore that option.

There is some debate as to why these restrictive terms persist in ordinary purchase contracts. In some cases the intention is to prevent subcontracting, but the term is drafted so widely that it affects assignments of all kinds. Whatever the reason, the impact is the same: the denial of choice to suppliers, which may need to resort to expensive short-term credit to fund their working capital needs. There are, of course, legitimate reasons to prohibit assignment: for example, in financial services, in long-term project agreements and in contracts for the sale of a business. These cases are excluded from the scope of these regulations. Some of these exclusions were anticipated in the enabling Act and others have been added later, as I shall describe in a moment.

These exclusions ensure that the impact is focused, as intended, on invoice finance. This is an arrangement whereby a supplier receives an advance of funds on the invoices that they issue. The advance may be 80% or even 90% and is typically received within a few days. Invoice finance is not borrowing. The supplier is receiving advance payment for an asset—the receivable—that they already own. In this way, the supplier can pay their costs before the customer settles the invoice. Once this is paid, the finance provider deducts its fee and pays the remaining balance to the supplier.

There are currently some 40,000 businesses using invoice finance, of which the majority—38,000—are small and medium-sized enterprises. They account for roughly half of all advances drawn down, which is to say about £9.5 billion out of a total of £20 billion. There are 5.7 million businesses in the United Kingdom and your Lordships could be forgiven for thinking that this is a marginal issue. Yet that is precisely the point: the use of invoice finance is less than it might be, because of the restrictions to which I referred. In fact, the Government estimate that the number of businesses which could potentially use invoice finance is 10 times the current figure. The financial benefits have been calculated from survey evidence and follow-up research. In summary, this instrument brings both direct and indirect benefits, with a net present value to the economy of some £966 million—just short of £1 billion. This figure reflects savings to existing users of invoice finance and the additional growth and profit generated by new users. The underlying figures are available in the published impact assessment.

During the preparation of this instrument, concerns were raised about the impact on the attractiveness of English law. English law is one of this country’s most valuable exports and forms the basis for contracts in areas as diverse as aircraft leasing, project finance and infrastructure. The Government are determined to ensure that there will be no adverse impact from these regulations and undertook extensive discussions with the City of London Law Society and others. As a result, the regulations were substantially amended. I am glad to say that the draft regulations before the Committee incorporate changes and exclusions that meet the concerns raised.

In the debate in another place, the point was made that invoice financing is not the whole answer to the challenges of SME finance. I agree wholeheartedly; I also agree that invoice financing is no substitute for a culture of responsible payment. We should not expect suppliers to seek finance to subsidise their larger customers. That is why the Government have taken extensive and decisive steps towards eliminating late payment, including the appointment of the Small Business Commissioner one year ago and the requirement for all businesses to report on their payment performance. Earlier this month, we launched a call for evidence to invite proposals on further measures. It is not always appreciated that the value of late payments outstanding has halved in the past five years. The problem is obviously not yet solved but we believe that is a promising start.

These regulations will give businesses freedom to access invoice finance when they wish without being prevented from doing so by their customers. It will bring a worthwhile benefit to the economy with a net present value of just under £1 billion without imposing a burden of compliance or reporting and while preserving the attractiveness of English law. I commend these regulations to the Committee and beg to move.

--- Later in debate ---

[Lord McNicol of West Kilbride (Lab)]

I am grateful to the Minister for the introduction to this SI. This is my sixth week in your Lordships’ House and it is a pleasure to be speaking on my first SI. If I make any procedural or other errors, please forgive me. I am still learning and have a long way to go.

Invoice financing as set out in paragraph 7 of the Explanatory Memorandum is one way of securing working capital. More simply, it is the ability to borrow money against unpaid invoices to improve cash flow. We on this side agree that invoice financing has its place, but it is not always the solution to the problem. When laying these regulations, Her Majesty’s Government have missed a great opportunity to sort out the wider issue, which the Minister touched on, around payment culture. The recent consultation on prompt payment received some very good responses on the wider issue of late payment which simply must be addressed soon. In excess of £2 billion a year is owed to SMEs in late payments—payments past the agreed invoice payment date. Does the Minister agree that this is a far larger and more easily solvable problem?

I was general secretary of the Labour Party before coming here. The Labour Party led on this by example and had 30-day payment terms. More widely, there is the absurdity of having a voluntary prompt payment code. Many large firms are signatories but there is no enforcement, so in real terms the code is worthless, especially as many companies have 60-day terms.

What if a company breaches those terms? Let us not forget that Carillion was a signatory but then went on and changed its payment terms to 120 days. Does the Minister agree with me that a sensible term for the code, even in its voluntary state, would be 30 days? Why has the prompt payment code not been made compulsory? Why has consideration not even been given to making it so? These reforms would help to solve the problem that IF looks to solve.

The correspondence with the Secondary Legislation Scrutiny Committee touched on the question of implementation dates. I note the Government’s response supporting the status quo, but do they still believe that there is any point in having common commencement dates? The CCDs of 1 October and 6 April each year are introduced to help businesses to plan for new regulations and increase awareness of the introduction of new or changed requirements, yet these regulations are to be introduced 21 days after they are passed. As the correspondence with the Secondary Legislation Scrutiny Committee reveals, it is not as if there has been a great rush to get these regulations in. As we can see from the Explanatory Memorandum, the first discussion paper was published in 2013, so I am sure that another few months’ delay to ensure better regulation would not have hurt.

I congratulate the Business, Energy and Industrial Strategy team on their detailed and helpful work on the impact assessment and the Explanatory Memorandum. Having said that, I think the committee has done a brilliant job of sorting out the documents before us and holding the Government to account for a certain amount of confusion. It might have taken time, but I believe it would have been better if the Government had issued new documentation following the consultation. As the Minister said, substantial amendments to the regulations were made, so was the impact assessment carried out after they were made or before, in 2013?

I turn to the substance of the regulation. Could the Minister satisfy me that no problems or unintended consequences of these regulations may arise in the accounting treatment following the introduction of these regulations? I am thinking particularly of when income from invoice financing is to be recognised in the accounts of a trading company when that is not done through factoring. If the Minister is unable to give me a direct answer today, I am more than happy for him to write to me.

Paragraph 7.4 of the Explanatory Memorandum states that this regulation will help diversify finance markets and encourage competition. Could the Minister expand a little on how exactly that will happen? The bit that confuses me is the exclusion of large companies from IF. Could the Minister explain why they have been excluded, especially as paragraph 10.7 of the Explanatory Memorandum, as he touched on earlier, outlines the problem with large commercial contracts, not large commercial companies or businesses per se? Paragraph 10.8 then outlines the solution of banning large companies from IF. This appears to be a completely different answer to a completely different question. Maybe the Minister could explain what the persuasive arguments by the legal profession were and how these led the Government to exclude large companies from IF.

In the Explanatory Memorandum, under the heading “Territorial Extent”, the paragraph following Paragraph 10.14 is labelled 10.1. I think that this is just a typographical mistake but it should be picked up on. The serious point here is that the regulations appear to interact with powers devolved to the Scottish Parliament. Is that right? If so, did the Government consider seeking a legislative consent Motion? If not, why not?

As I said at the start, the Opposition will not oppose these regulations on invoice financing, but it is a shame that the Government missed the opportunity to bring forward legislation to improve invoice payment practices within these regulations.

[Lord Henley]

My Lords, I offer my welcome to the noble Lord, Lord McNicol, on his first appearance at the Dispatch Box. I look forward to many more in the future. He will know that it was during the opening of the batting, as it were, of my honourable friend Kelly Tolhurst that she brought these regulations before another place some weeks ago. She was probably grateful for the noble Lord’s opposite number in another place for giving her a relatively easy run on them.

I think that I have broad agreement from both the noble Lord, Lord McNicol, and the noble Baroness, Lady Burt, that the regulations are doing the right thing, but obviously they have wider questions. Some of them are impossible to answer at this stage. For example, I think it was the noble Lord who asked whether I could give a guarantee that there would be no unintended consequences as a result of this. That goes slightly wide in that one never knows whether there will be unintended consequences until the unintended consequence hits one in the face. However, we certainly will, as with all matters, keep these under review as they develop.

I will start dealing with some of the more detailed questions. The noble Baroness, Lady Burt, asked a very sensible question as to why some companies have these contract terms. I think that I made it clear in my opening remarks that we were not absolutely sure. I think I quote myself in saying that there is some debate as to why these restrictive terms persist in ordinary purchase contracts. Some suppliers suggest that this is a deliberate attempt. I have to say that the evidence is mixed. Either way, these regulations will resolve this issue and those terms will be removed, but, to come back to the point that the noble Lord made about unintended consequences, and as the noble Baroness said with her detailed questions about I think paragraph 10.13, we consulted very carefully on these regulations and we want to make sure that we get them right.

On paragraph 10.13, there are situations where companies need long-term, trusting relationships. That is why, in that case, assignment can be undesirable. We do not know precisely and we will keep them under review, but we hope that these regulations will get to the heart of the matter.

However, that takes us on to the broader question that both noble Lords raised, particularly the noble Lord, Lord McNicol, about the wider problem of prompt payment. That is why I quoted the figures earlier. We have seen some improvement. The number of overdue debts outstanding has halved in the past five years, which is pretty good; it is down from 30 billion to 14 billion. I want to make it clear to noble Lords—this goes way beyond the regulations—that we are not complacent about this matter. Further action is under way to bring that number down further. We do not believe that companies having to make use of invoice financing is a substitute for prompt payment by those who owe them money.

--- Later in debate ---

[Lord McNicol of West Kilbride]

There was a specific issue with larger companies. I am still struggling to understand why they were excluded. What was the reasoning behind that? The impact assessment was carried out with the inclusion of large companies. If we look at the bottom of its front page, the assessment was signed on 4 July 2018 although it took place earlier, in 2015. That is three and a half years out of date. Is that normal? As I said, substantial changes were made; I would appreciate more information on that.

[Lord Henley]

Obviously with the larger companies there is less of the problem of what one might refer to as the imbalance of power between the two parties. For that reason, we thought it was easier for them to negotiate the appropriate terms. Whether we have got that precisely right in terms of the size, I do not know—again, these matters were consulted on—but I hope we have. There was the question of whether, where there is no imbalance, they might feel the need to keep these terms on those occasions. If I wish to add a little more to that, I will consider very carefully what I have said and write to the noble Lord.

Motion agreed.

Draft National Policy Statement for Geological Disposal Infrastructure

Lord Henley Excerpts

Thursday 6th September 2018 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee takes note of the draft National Policy Statement for Geological Disposal Infrastructure: A framework document for planning decisions on nationally significant infrastructure.

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

My Lords, I welcome the noble Lord, Lord Grantchester, to the deliberations. Our purpose here today is to debate the national policy statement for geological disposal for higher-activity radioactive waste. For 60 years, this type of waste has been produced from electricity generation, defence activity, healthcare, academic research and industrial processes. Most of this waste is low in radioactivity and disposed of safely every day. However, some materials remain radioactive for thousands of years and require more specialised disposal facilities. Currently, this waste is held safely in stores on the surface, most of it at the Sellafield site in Cumbria, but this is only an interim measure. A permanent solution is needed.

A geological disposal facility is internationally recognised as the safest and most secure means of permanently managing this type of waste, with countries such as Finland, Sweden, France, Switzerland and Canada also pursuing this option. Alternatives to geological disposal have been carefully considered and options are kept under review, and they will continue to be so. At present, they are not technically achievable or not as environmentally safe, or isolation cannot be guaranteed, or they are too dangerous to implement.

The geological disposal process involves the encapsulation and isolation of radioactive waste in a highly engineered facility deep underground, within multiple engineered barriers and suitable rock, to ensure that no harmful quantities of radioactivity ever reach the surface. Building a geological disposal facility will provide a permanent solution for handling the UK’s significant legacy inventory of radioactive waste. Without it, we will continue to incur significant storage costs. It will also support a new generation of nuclear power stations in the UK by providing a safe and secure way to dispose of the waste they produce. This is key to the future new nuclear build programme. The geological disposal facility project is also part of the Government’s modern industrial strategy supporting our ambition to deliver highly skilled jobs, investment in science and innovation, and regional growth, and to upgrade infra- structure. In addition, the project speaks to our clean growth initiative, where we are looking to grow the economy while at the same time reducing harmful emissions.

To deliver a permanent solution to this issue in 2014 we published the White Paper Implementing Geological Disposal. This White Paper committed to delivering a national geological screening exercise to: bring together existing information on geology relevant to the safety of a geological disposal facility across England, Wales and Northern Ireland; develop a policy for working with communities on the siting process for a geological disposal facility, involving interested local groups and organisations including local authorities; and bring the facility and the investigatory deep boreholes that will be needed to find out more about the geology at depth within the definition of nationally significant infrastructure projects. In support of this approach, it will designate a national policy statement for GDFs in England.

On this last commitment, legislation was passed in 2015 to bring the geological disposal facility and deep boreholes within the Planning Act. The central policy of any national policy statement is to help the Planning Inspectorate and the relevant Minister to make decisions on any applications for development. It provides clear and concise guidance on the issues that need to be considered to determine whether a particular development can go ahead. It underpins the delivery of planning decisions by the Secretary of State and enables the Planning Inspectorate to examine the eventual application before any recommendations are sent on to the Secretary of State for consent. This process also helps the developer with their application for development consent under the Planning Act and enables the developer to use the national policy statement as a framework to consider the impacts of their proposal.

This framework is evaluated by two supporting assessments: the appraisal of sustainability and the habitats regulations assessment. The appraisal of sustainability ensures that the likely national environmental and socioeconomic effect of the national policy statement are identified, described and evaluated so that, where appropriate, measures to mitigate any adverse impacts can be incorporated into the development. The appraisal assesses a number of topics ranging from nature conservation through human health and on to cultural heritage. The habitats regulations assessment identifies and assesses the likely effects of the national policy statement on European nature conservation sites, including Ramsar sites, special areas of conservation and special protected sites.

Earlier this year, the Government went out to consultation on both the national policy statement and the working with communities policy. The separate working with communities consultation set out a framework for a consent-based approach to finding a community willing to host a geological disposal facility. The consultations closed in April this year. The national policy statement has been scrutinised by the BEIS Select Committee in another place. Its report and recommendations were published on 31 July 2018. We are considering the responses to the consultation on working with communities and aim to publish our final policy in the autumn.

It might be worth saying a little bit at this stage about how we intend to work with communities. The White Paper sets out a framework for a consent-based approach to finding a community to host a geological disposal facility. The separate proposed working with communities policy has been developed to allow communities to learn about hosting a GDF without commitment until they are in a position to make an informed decision on whether this is the right option for them. We propose that communities constructively engaged in the siting process will receive up to £1 million per community per year; later, £2.5 million per community per year will be made available. This can be used for initiatives to support the development of the local skill base, investment in social and community infrastructure and environmental improvement. The Government will also make available additional investment which will be significant when compared to other international GDF projects, and capable of generating intergenerational benefits specific to the community that hosts a GDF.

A GDF is a key piece of UK infrastructure and will enable the Government to deliver their commitment on clean energy and their modern industrial strategy. Geological disposal facilities are internationally agreed to be the safest and most secure option and will create opportunities for skilled jobs. Innovation and local assessment, based on rigorous independent consideration of the options, will be supported by international consensus. The Government believe that the solution for the management of this type of waste is geological disposal. The NPS provides the framework for the planning decisions for that geological disposal infrastructure. I believe that it is the right way forward for those of us living in this country today and the right thing to do for those who follow us. I beg to move.

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[Lord Liddle (Lab)]

My Lords, it is a great pleasure to follow my noble friend Lord Judd, who speaks with great passion on this subject. I am also speaking in this debate as a native Cumbrian, and as a current member of Cumbria County Council—which, five years ago, ditched the previous attempt to locate this facility in Cumbria. I also have to declare a very personal interest. Where I live on the Solway plain was pencilled in on one of the maps produced in the last process as a possible site for this facility.

I may have one profound difference with my noble friend Lord Judd. I have always been a passionate supporter of nuclear power. I inherited this from my mother, who was a miner’s daughter. She was very much excited as a child by the opening of Calder Hall and the possibility that we might be able to generate all our electricity without lives being lost and health being damaged in the coal mines. I have stuck with that view of support for nuclear power throughout my life. But when this issue came to the fore in 2012-13, Cumbria County Council asked me to do a bit of bridging between it and DECC, when the noble Baroness, Lady Warsi, was the Minister. I tried my best to do that.

[Lord Henley]

It was my noble friend Lady Verma.

[Lord Liddle]

I am sorry, that is right. It was the noble Baroness, Lady Verma, who was the Minister. As a result of that involvement at the time, several things were brought home to me. It is clear that the problem of nuclear waste has to be addressed, but that the most urgent national problem we face is the one that my noble friend described at Sellafield. It is, I have to say, to the credit of the Government since 2010, and the coalition Government, that at a time of great austerity the amount of public money being spent on the clean-up of Sellafield has increased very considerably. As a result, it is hoped that progress is being made.

But, of course, with the clean-up, what is happening to that nuclear waste? First, it is basically being stored for decades to come, either above ground or just below ground, before there is any question of what happens to it then. Given that, dealing with the immediate problems at Sellafield is the most important priority. Secondly, what is always said about this is something that I think is true: we have not invested enough in research into how to deal with the problem of nuclear waste over the long run. I would have thought that, given the vast amounts of money we are spending at Sellafield—it is possible that I am getting the figures wrong, but it is something like £1.7 billion a year of public money; an enormous amount—alongside that we ought to be spending tens of millions on research into how to deal with the long-term problem of waste. Are we absolutely certain that if we invest during this interim period in a 10-year research programme, at the end of it we would still consider the only solution to be that of burying the waste in the ground? We might see advances in dealing with nuclear waste which would enable Britain to be at the forefront of nuclear clean-up activities.

Thirdly, there are very considerable geological questions as to whether burying the waste close to the Sellafield site in Cumbria is a sensible thing to do. It was said to me at the time that in fact the most suitable site is in the Thames valley under London because it has the best kind of geology to suit this development. We must not get ourselves into a situation where the only reason for locating the site in Cumbria is that part of the west Cumbria community would accept it because of the economic benefits.

Fourthly, on that point, I hope that the Government are not being cynical with west Cumbria about this. I know that for local authorities like Copeland, £1 million a year is a lot of money given that its budget is £8 million or £9 million—something like that, so that is the promise of a lot of money. However, the truth is that if we are to create a diversified economic base for this part of the world in the future, it has to be based on the Sellafield supply chain. If we are to build a Sellafield supply claim which is based locally and in Lancashire around Warrington and make that an internationally competitive cluster of activity that will bring great economic benefit in the future, the important thing we have to do with Cumbria is to invest in infrastructure and interconnectivity between the county and the rest of Britain and the rest of the world. That is the urgent priority for our part of the world.

What we cannot have is a situation where a terrible choice is forced on people between the future of the national park and our responsibilities to future generations—which my noble friend Lord Judd spoke of so eloquently, and which I support—and the economic future of the Sellafield area. This is a difficult subject. We have learned in the past few weeks that it seems that the Government are withdrawing their support for a new nuclear power station in Cumbria. This is the recommendation of the National Infrastructure Commission. This is a huge blow to jobs in the area. We also know that because of the huge investment at Sellafield the number of jobs there will decline over the next 10 years or so. There has been talk of 3,000 fewer jobs. There are huge economic pressures in west Cumbria. The Government must address them in a serious way. I hope that the new nuclear power station is not dead, but it would be wrong to try to bribe this local community into accepting something that is not right in the national interest for the sake of its economic future. That is my fear.

--- Later in debate ---

[Lord Henley]

My Lords, I thank all noble Lords for their contributions to the debate. In particular I start by thanking the noble Lord, Lord Judd, for acknowledging my officials in the department. He made it clear how useful he found the meeting. I offer something similar to all other noble Lords should they find it useful to come and talk to officials and hear more about this matter—just to get the issues better into their heads than might be the case as a result of the responses from me. I should also make it clear that despite my origins and those of the noble Lord, Lord Liddle, being in Cumbria, despite the noble Lord, Lord Judd, being a resident and despite the noble Lord, Campbell-Savours, being in his place, this debate is not about Cumbria and we are not making any decisions that the GDF that we are seeking should be in Cumbria or in any other part of the country. We are not targeting any areas or communities. It is very important to remember that all the way through the debate. Similarly, nor are we targeting development in national parks. No decisions have been made.

The important point to remember is that we believe that GDF is a suitable way ahead, but I accept the point that other noble Lords, in particular the noble Lord, Lord Fox, have made that further technological developments always come along and bring with them new answers that we cannot imagine. They might make it unnecessary, or in 100 years’ time they might provide a better solution, in which case we can extract what has gone down before it is finally sealed and do something else. There is the possibility that technology will provide the answer to the problems, as it often does. However, there can be no guarantee of that, so it is vital that we look to what things we can do at the moment. Again, no decisions have been made. I want to make it quite clear that we want to find a site that is suitable geologically and is where the community wants it. It is those two items that we must continue to address the whole way through these arguments.

Despite the interventions that have been made about Cumbria, the earlier debate and the various briefings that many of us, particularly those of us from Cumbria, have received from the national park and the Cumbria Trust, this is not about Cumbria. This is about finding the right site that people want, in the right place, and going ahead from that. From that point of view, I think that it was the noble Lord, Lord Judd, who complained that the county was being ignored and that we were listening to Allerdale and Copeland, the two districts that could be affected or were affected previously, and that the county, which made the decision on the previous occasion, was being ignored. This is not about taking away any democratic influence. The planning process we are looking at ensures that local communities, local authorities and statutory organisations will all be consulted before any geological disposal facility can be built. The consent-based siting process provides that further layer of protection, as the project will not go ahead without consent from the local community through a test of public support.

The noble Lord, Lord Liddle, made it clear, as did the noble Lord, Lord Fox—or the noble Lord, Lord Teverson—that this is a national issue. That is why we feel it has to be dealt with nationally. The Government are, after all, democratically accountable. On some occasions, things have to go beyond the county and be dealt with at a national level. I repeat that the county is not being ignored, but the decision has to be made at a national level. The process will give local authorities a key role while maintaining flexibility on the extent to which they choose to get involved. We consider that the role of local authorities will be critical in the process. They will give democratic legitimacy to that community partnership when making decisions that affect the local community.

There was a desire that we should automatically exclude all national parks. I understand that. I am not a resident of the Lake District National Park, but national parks are a national matter and we all have an interest whether we live in Cumbria or elsewhere. With the current legislation we already provide a very high degree of protection to national parks and permission for development will be granted in those areas only in exceptional circumstances and if it is in the public interest to do so. That is entirely in line with the Sandford principle, which was mentioned by the noble Lord, Lord Judd. I assure the Committee that this matter was looked at very carefully by the BEIS Select Committee in another place, which made it quite clear that sufficient safeguards are in place to protect our national parks.

I move on to the question of geology. I do not want to go into detail of the geology of the Lake District and I am not going to speculate, as did, I think, the noble Lord, Lord Liddle, that the best possible geology is in the Thames valley. We will leave other bodies to consider that matter. Nor do I want to speculate on the geology of other parts of the country. All noble Lords were right to say that it is important that we look at geology because we are not going to look at or put forward a site, whether in Cumbria, the Thames valley or wherever, unless the geology is right. I hope that all those who are more expert than me—all other noble Lords—will bear in mind what the noble Lord, Lord Fox, said about geology not always necessarily being the most exact science when he spoke about his experience of the evaluation of projects relating to lakes. Obviously, it is difficult and we will continue to look at it.

[Lord Judd]

I thank the Minister for the way in which he is summing up. Will he say specifically that when he says the geology must be right, he means the geology must be right and not that some engineered containment area within imperfect geology will be acceptable?

[Lord Henley]

I am not going to speculate on what exactly will be found to be suitable—I will give way in a minute if the noble Lord, Lord Fox, will let me answer the question. As the noble Lord made clear, it is not the most exact science. We have to find a suitable area and it might be that it can be adapted in some ways. I cannot speculate on that; it must be a matter for future processes. It is not only the community involvement that we are looking for; it is also getting the geology right. Then we can move ahead.

[Lord Fox]

I was actually rising to help the Minister. The answer is in the appraisal of sustainability report, which specifically states that the geology should,

“isolate and contain the radioactivity for a very long period”.

That wording is dropped in the national policy statement and is replaced merely by “stable”. Will the Minister confirm that the imperative to contain and isolate remains the Government’s definition of the correct geology?

[Lord Henley]

I am fairly sure that that will be the case. I congratulate the noble Lord on spotting a marginal difference in the two—the noble Lord speaks as a greater expert than I am. I would be grateful for the opportunity to write to the noble Lord in greater detail. It is important that we get these things right. That is why I have made it quite clear that no decisions have been made. This is not an attempt to impose something on Cumbria that it does not want; it is not something to impose on the Thames Valley—I am thinking of community involvement in Staines or Heathrow or wherever. It is not something that we are proposing. We want to find somewhere with the right geology and the right community involvement.

[Lord Campbell-Savours (Lab)]

In 1995, Nirex appealed against the decision of Cumbria County Council to refuse permission for a rock characterisation facility which would have led to the construction of what we are looking at today. Will that report and the evidence taken at that inquiry be fully considered when decisions are taken in dealing with this application when it comes?

[Lord Henley]

The noble Lord will be aware that I have been around for quite a long time and references to that were made earlier. I am not an expert on the Nirex report. I know that it did not rule out Cumbria as being unsuitable geologically, but again it would be right and proper if I wrote to the noble Lord on that point. I welcome him to this debate. Certainly, we will address the point in due course.

[Lord Campbell-Savours]

Will the Minister put a copy of the response to me in the Library?

[Lord Henley]

I will make sure that my response is available not only to the noble Lord but, as always, in the Library.

Community involvement and who the community should be were also matters of concern, particularly to the noble Lord, Lord Fox. The Working with Communities policy proposals state that those who have a say in whether the GDF is sited, once we have decided on geology, will be those who would be directly impacted by the construction and operation of the GDF. The noble Lord, Lord Fox, dismissed this as a bribe, but this is a multi-billion pound infrastructure investment—I shall say a little more about costs—that is likely to have a positive effect on the local community. Those benefits will not materialise for decades after the initial interest is shown and will benefit future generations rather than current residents. That is why the Government are making community investment funding available to those communities that participate in the siting process in order to demonstrate that we are serious about the opportunities and benefits that hosting a facility will have and to recognise the efforts of the local community early on in that process.

The noble Lord, Lord Judd, was, I think, worried that, although this might bring jobs, the number of jobs will diminish over time. That is true. In the very long term the number of jobs will go down, but I recommend that he looks at what has been happening at Sellafield with all the cleaning up that is going on there. On my last visit I was assured that the clean-up is going to continue for many years to come—I see the noble Lord, Lord Campbell-Savours, nodding—and it is quite likely that those who are going to be involved in the final clean-up at Sellafield have not yet been born. We are talking about a very long timescale on that front, and I think the same will be true of the development of this facility.

The noble Lord, Lord Fox, asked who exactly will be doing this and how we can be sure that they will be there for a long time. Radioactive Waste Management, a wholly-owned subsidiary company of the Nuclear Decommissioning Authority, is the body involved with the long-term clean-up at Sellafield. As he knows, the NDA is a non-departmental public body responsible for implementing a safe, sustainable and publicly acceptable geological disposal programme. Under the Energy Act 2004, the NDA is required to decommission and clean up designated nuclear sites and is responsible for the operation of the designated facilities for the disposal of hazardous material.

I think it was the noble Lord, Lord Teverson, who asked about costs. It is very difficult to speculate on what those long-term costs might be. One remembers the American senator with his “a billion here, a billion there and pretty soon we are talking about real money”. I have a figure—I do not know how accurate it is likely to be—of around £12 billion for legacy waste for the likely inventory that we can foresee at the moment. How long that will last and how accurate that will be will be a matter of speculation. We are in the process of updating the cost estimate in line with the wider update of the programme business case, in line with best practice, and that will need to allow for risk, uncertainty and optimism.

I see time is drawing on. There was one final point raised by the noble Lord, Lord Teverson, about post-2018 and the European Union (Withdrawal) Act and whether the spent fuel and radioactive waste directive will cease to exist after exit. The 2018 Act has gone through and preserves most parts of existing law, as the noble Lord will remember from the long discussions. Requirements in Euratom directives do not have direct effect—that is, they do not give rise to enforceable rights for individuals that are not directly preserved by the Act, and that is the case for the relevant part of the spent fuel and radioactive waste directive.

I hope I have answered most of the points that were put before me. I will go carefully through what has been said in the course of this debate and respond to points that noble Lords have made if I feel that I have missed them. I also repeat the offer I made at the beginning, and I hope my officials will bear with me repeating it. If any noble Lord wishes to talk further to officials on this, I am more than happy to make them available and I recommend that noble Lords get in touch with my office to arrange that should they wish to do so.

Motion agreed.

Committee adjourned at 3.24 pm.

Parental Bereavement (Leave and Pay) Bill

Lord Henley Excerpts

3rd reading (Hansard): House of Lords
Tuesday 24th July 2018 Lords Chamber

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

My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Parental Bereavement (Leave and Pay) Bill, has consented to place her interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

--- Later in debate ---

[Lord Knight of Weymouth]

That the Bill do now pass.

[Lord Henley]

My Lords, I thank the noble Lord, Lord Knight, for taking through this very important piece of legislation, which provides at the very least two weeks of guaranteed time away from work for those employees who have suffered the tragedy of losing a child before that child has had the opportunity to reach adulthood.

I am grateful to the noble Lord for ensuring the rapid progress of this Bill through this House. I am conscious that, in doing so, the Bill has overtaken the progress of the Government’s response to the recent consultation, which will now be published after the Bill completes its passage through Parliament. I had hoped to be able to set out in detail the response to the government consultation. However, important work is still ongoing with this. We have had a very welcome, large and detailed number of responses to the consultation —some 1,448 in total. I was pleased to see that high level of engagement on such an issue. We need to make sure that we get this right. If taking a little extra time is what is needed to achieve this, that is the right thing to do.

However, I assure the House that, once the Bill receives Royal Assent, we will work to bring forward the necessary regulations as soon as possible with a view to laying them before the House as early as possible in 2019. That would also keep us on course for our ambition for the new right to come into force in April 2020. I hope that that commitment today will reassure the House that the Government remain committed to delivering on this manifesto commitment.

[Lord Knight of Weymouth (Lab)]

I am most grateful to the Minister for that update and for his assistance and that of his officials, led by the assiduous Shelley Torey. I thank other noble Lords for their assistance and the MPs in the other place—and, finally, to Lucy Herd for her inspiration and assiduous campaigning ever since her son Jack died eight years ago.

Warm Home Discount (Miscellaneous Amendments) Regulations 2018

Lord Henley Excerpts

Thursday 19th July 2018 Lords Chamber

Moved by

[Lord Henley]

That the draft Regulations laid before the House on 14 June be approved.

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

My Lords, these regulations extend the warm home discount scheme until 2020-21, ensuring over 2 million low-income and vulnerable customers receive a £140 rebate on their energy bills in winter, when they need it most. This is vital support and a key policy for tackling fuel poverty.

The best long-term solution to alleviating fuel poverty is to improve the energy efficiency of a home, bringing down the cost of heating it. The Government are committed to tackling fuel poverty and improving energy efficiency. We have launched a number of interventions to help us achieve this. In the Clean Growth Strategy, we stated the aim to upgrade all fuel-poor homes to band C by 2030. In March, we consulted on focusing all of the energy company obligation funding—£640 million per year—on low-income and vulnerable households. We have committed to the continuation of funding for domestic energy efficiency until 2028, at least at current levels—an investment of £6 billion over the next 10 years—and we have consulted on proposals to strengthen the existing minimum standard regulations in England and Wales so that private landlords make improvements to F and G-rated homes before letting them. This is part of our wider, long-term aspiration to improve as many homes as possible to band C by 2035.

The energy efficiency improvement of homes takes time, however, and some properties, especially those that are harder to treat, may be left behind. Energy bill rebates through the warm home discount, therefore, continue to play an important role. Through the Domestic Gas and Electricity (Tariff Cap) Bill, which I hope will receive Royal Assent in due course, we are taking action to protect 11 million households currently on the highest energy tariffs. Under the warm home discount, around 1.2 million low-income pensioners in receipt of pension credit guarantee credit receive £140 as an automatic rebate on their energy bills. Over 1 million low-income and vulnerable households receive the rebate following an application to a participating energy supplier. In recognition of the success of the scheme, the 2015 spending review committed £320 million per year to the scheme— rising with inflation—until 2020-21. The current regulations underpinning this scheme expired in April and the regulations in front of us today extend the scheme until 2020-21. This extension to the regulations will not inhibit the reform of the scheme in future. We intend to consult later this year on a number of changes from 2019-20, including expanding the successful data-matching process and so removing the need for consumers to apply. We will want to look at ways in which we can achieve the most effective targeting of the scheme by making the best possible use of the data available to us. To do this, we needed primary legislation, and I am delighted that the data-sharing powers we needed under the Digital Economy Act 2017 are expected to come into force before Summer Recess.

Meanwhile, the regulations we are debating today introduce a key change to the scheme. More energy suppliers will be required to offer the warm home discount to their customers. We will give smaller suppliers enough time to put the right processes in place, while giving a clear signal to the market. So, the threshold will reduce gradually, from 250,000 down to 150,000 customer accounts between 2019 and 2021. The impact of the threshold will be reviewed and, should the scheme continue beyond 2021, we expect it to be reduced further.

It is important to note that these regulations do not make significant changes to the scheme eligibility for this coming winter. This winter we want to prioritise the safe and timely delivery of the rebates. That will mean that all eligible pensioners on pension credit guarantee credit will continue to receive £140 off their bills. These regulations make only small changes to eligibility for the broader group—the part of the scheme for which customers have to apply—by including universal credit recipients who are in work with low earnings, and to reflect welfare changes.

We believe there is more room for more innovative, industry-led projects to identify fuel-poor households and to provide the most suitable package of advice and measures. Recognising this potential, we are increasing the spending cap on industry initiatives from £30 million to £40 million. We are also expanding the list of activities allowed under industry initiatives to include the provision of financial assistance with energy bills for households not eligible under the core group or broader group. This could be households not on the benefits system but particularly at risk of fuel poverty, including those where someone has a long-term illness or disability. This will be limited to up to £5 million overall and up to £140 per household—equivalent to the value of the rebate.

We want to ensure that industry initiatives funding focuses on support to reduce bills for the long term, such as through energy advice and energy debt assistance. These regulations will continue to reduce the cap on the spending allowed on debt write-off from £12 million to £10 million—or 25% of the increased cap—and to continue to reduce it in future years, to £8 million in 2019-20 and £6 million in 2020-21.

In conclusion, the regulations extend the warm home discount until 2020-21. These affirmative regulations provide vital support for low-income and vulnerable customers to keep warm for the next three winters. The changes that we propose to make will mean that more suppliers will be required to provide assistance to their eligible low-income customers, and that suppliers can spend more on industry initiatives to provide innovative and long-term energy bill support to households in need. I commend these regulations to the House and beg to move.

[Baroness Featherstone (LD)]

My Lords, obviously, we welcome the extension of the warm home discount, which has been successful. It has been in operation for seven years, and it benefits those in fuel poverty, so a further three years is welcome.

I noticed what the Minister said about energy efficiency. We on this side could not agree more that energy efficiency is massively important, and we welcome all and any measures the Government might take. However, we also encourage the Government to reintroduce the zero-carbon homes standards. When you have the opportunity to build new homes, it seems a pity not to reduce the need for heating and expense in that way. Two million low-income and vulnerable households have benefited, and the main elements remain in place and intact. I do not know how widely this consultation is marketed, as there were only nine individuals out of a total of 60 respondents. While the changes are not earth-shattering, that is a very small number for an issue that affects every household in the country.

I was pleased to see that the Government took notice of the concerns, and although they have agreed to reduce the threshold for suppliers, in the end all suppliers should be able to offer it or should offer it. At the moment, people are having to choose between keeping the warm home discount and saving by switching, and it seems that people would rather keep the warm home discount, even though savings might be larger than £140 by not doing so. However, we welcome these regulations.

[Lord Grantchester (Lab)]

I thank the Minister for his extensive introduction. I am happy to approve the regulations. The warm home discount, which comes through ECO, is one of the instruments used to support households in fuel poverty. The regulations extend the WHD scheme after its seventh year through years eight, nine and 10 until 2021.

The scheme also comes as a subset of the renewable heat incentive, which the House approved in May this year. This is also set to expire, in many regards, in 2021. Therefore, I repeat what we said on that occasion: that plans must be made and signalled for a long-term solution for heat decarbonisation, to provide certainty and clarity beyond this looming cliff edge.

Meanwhile, it is to be welcomed that these regulations provide continuity for the next three years until 2021. I agree that the best long-term solution for reducing household fuel poverty and bringing down the cost of heating a home is through improving energy efficiency. In this regard, I recognise the ambition to upgrade as many homes as possible to band C by 2035—but that is quite some distance away.

The interlinking of these measures was referred to by the Minister in his opening remarks. Will he provide any update specifically on the supposedly major push towards decarbonisation following the end of these schemes in 2021 as part of the clean growth plan?

Turning to the regulations, there are a few adjustments and amendments to the scheme that we would like to understand better. The WHD scheme has suffered in recent years from applying only to obligated energy companies which have more than 250,000 customers. While competition can be encouraged through more entrants into the market, can the Minister confirm with any figures whether there has been a noticeable cluster of suppliers just below this threshold? In that regard, I welcome the amendment to reduce the threshold progressively. Has the Minister’s department looked into the impact of thresholds on companies to determine whether ameliorating measures could be introduced?

These arbitrary boundaries have produced other anomalies, which the noble Baroness, Lady Featherstone, drew attention to in her remarks. While encouraging switching as a way to increase competition and reduce customer bills, many households have fallen foul of the eligibility criteria of the WHD scheme when changing suppliers that are on either one side or the other side of the threshold. Sometimes households have become victims of companies gaming the threshold by being moved compulsorily from obligated to unobligated companies. Reducing the threshold is helpful but does not directly help households caught by this bureaucracy.

I suggest to the Minister that measures could be looked at to alleviate the problem. At least, will he look to commit price comparison websites and switching advisers to adding the calculations necessary for WHD to apply when displaying or promoting alternative tariffs? The loss of the right to WHD on switching could negate any benefit and would further undermine the public’s confidence that the energy market works for them. With these comments, I am happy to approve the regulations.

[Lord Henley]

My Lords, I thank both noble Lords for their general welcome for these regulations, and their recognition that they allow us to continue with what we have been doing over this winter for a further three winters, but also to consult on the changes I announced earlier.

The noble Baroness asked how the consultation was marketed and whether we had enough responses to it. We worked very closely with consumer organisations, including Citizens Advice, but I will look at what she had to say and see whether we can improve in future and reach out to more people.

I noted the comments that both noble Lords made about energy efficiency. I also noted their general welcome for our progress in this area and the fact that we want to push along. It is obviously the right thing to do to make all homes as energy efficient as possible, and we will continue to do that.

As regards their comments about the thresholds, I remind both noble Lords that under the scheme other suppliers below the threshold will continue to be able to volunteer. I gather that there were three voluntary smaller suppliers. As I said in introducing the regulations, we will continue to reduce the threshold and will review it again after 2020-21. If the scheme were to continue, there would be a view to potentially setting the threshold to a minimum level of zero if the evidence supported that approach.

I particularly noted the point that the noble Lord, Lord Grantchester, made about some companies gaming the system. Therefore, it might be right to reduce it to zero in the future. However, for the moment, if we continue with the gradualist approach that I announced in introducing the regulations and review it in the future, I suspect that that will be the better way of proceeding so as to give new suppliers time to prepare in terms of both processes and pricing. I hope that that deals with most of the questions that noble Lords asked.

Motion agreed.

Oil and Gas Authority (Offshore Petroleum) (Disclosure of Protected Material after Specified Period) Regulations 2018

Lord Henley Excerpts

Thursday 19th July 2018 Lords Chamber

Moved by

[Lord Henley]

That the draft Regulations laid before the House on 13 June be approved.

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

My Lords, the UK’s offshore oil and gas industry is one of the country’s great industrial successes, but it has faced numerous challenges, including ageing infra- structure and growing international competition. In this context, in 2013 the Government asked Sir Ian Wood to conduct a review of the sector, specifically looking at how the economic recovery of offshore petroleum could be maximised. One of the key recommendations from the Wood review was the need to ensure that industry has timely and transparent access to petroleum-related information and samples. These can include, for example, data about infrastructure or reservoirs, or pieces of strata acquired in the course of drilling a well.

The Government committed to implementing the Wood review and included various powers in the Energy Act 2016 covering information and samples related to the offshore exploration and production of petroleum. These included a requirement for relevant persons within industry to retain certain information and samples for a specified period, as set out in the Oil and Gas Authority (Offshore Petroleum) (Retention of Information and Samples) Regulations 2018. Information and samples plans were also introduced to safeguard information where licence events, such as termination, occur.

The Oil and Gas Authority was given powers to require relevant persons to provide it with petroleum-related information or samples which they hold and which the OGA might need to discharge its regulatory role and to deliver the objective of maximising the economic recovery of offshore petroleum. The regulations we are considering today form the final piece of the picture: once information or samples have been acquired by the OGA, the regulations enable it or a subsequent holder to make such material available after a specified period.

The Energy Act 2016 places a general prohibition on disclosure of protected material, subject to certain exemptions. One of those exemptions permits the OGA or a subsequent holder to make protected material available at such time as may be specified in regulations. The protected material to which these regulations apply includes information about geological surveys, wells drilled, petroleum production and other reports and computerised models of the subsurface or a reservoir. It also includes samples of petroleum, fluids or strata acquired or created when drilling or producing from a well. Other relevant categories include information about installations, infrastructure and pipelines associated with offshore petroleum development.

Following a recommendation of the Delegated Powers Committee, the Energy Act 2016 included a list of factors to which the Secretary of State must have regard when determining the appropriate period after which protected material may be made available under the regulations. In summary, the requirement is to consider: first, whether companies have had sufficient time to satisfy the main purpose for which they created or acquired the information or samples; secondly, the potential chilling effect of requiring disclosure on discouraging future activity; and, finally, the benefit to industry and the economy in making such information and samples more widely available.

Each of these factors has been taken into account when setting the period after which different types of information and samples can be disclosed. The periods vary from immediate disclosure of very basic information which is not deemed to be sensitive, such as the fact that a survey has been carried out of a particular area, to 15 years for raw information from such seismic surveys, reflecting the fact that they are carried out at significant cost for commercial purposes. While care has been taken to ensure that the specified time is set appropriately, there is no absolute requirement to publish the material, and the OGA could consider representations where there are particular justifications for keeping information confidential for a longer period. However, in doing so, the OGA would need to weigh up the impact on delivering the statutory objective of maximising economic recovery of the UK’s offshore petroleum.

These are very technical regulations and the proposals they are based upon were subject to consultation with industry and other interested parties by the Oil and Gas Authority. The OGA has published a consultation response detailing how feedback received had been reflected through making appropriate adjustments to certain proposals; for example, excluding more subjective information from immediate release. The OGA will provide guidance on its application of these regulations before they come into force.

As petroleum licence conditions permit publication of certain information and samples after set periods, the additional impact of disclosure under these regulations is expected to be marginal. As such, a full impact assessment is not required. Other costs on industry will be due to familiarisation with the new regulations.

In conclusion, the Oil and Gas Authority considers that improvements to information retention, reporting and disclosure processes, including through these regulations, are critical to achieving the statutory objective of maximising economic recovery of the UK’s offshore petroleum reserves. The changes are expected to make an important contribution to the OGA’s vision for the industry, which indicates that maximising economic recovery can create £140 billion of additional gross value for the UK. In addition, they could potentially facilitate the reuse of reservoirs and infrastructure for other purposes, including carbon capture, utilisation and storage. I commend the draft regulations to the House.

[Baroness Featherstone (LD)]

My Lords, the legal obligation to retain specified classes of information and samples and specifying when such obligation ends is important, and these regulations will deliver that obligation clearly. What it also indicates, I hope, is that it is important to make the samples and analysis public, as opposed to keeping them hidden. That means that the exemptions such as commercial sensitivity should be very few and should be monitored to check that they are not used inappropriately.

The principal objective for timely and transparent access to petroleum-related information and samples was, as the Minister said, one of the recommendations in the 2014 Wood review. Making access to information a better process—I have a very similar speech to the Minister’s—can only help the industry. It is estimated that a potential £140 million in additional revenue may result from the more timely management of samples and analysis. Is it million?

[Lord Henley]

Billion.

[Baroness Featherstone]

I was not sure; I have written “billion”, but I thought that was an awful lot.

[Lord Henley]

Someone said, “A billion here, a billion there, and pretty soon we will be talking about real money”.

[Baroness Featherstone]

It is an industry that probably works in billions—way above my pay grade. We have no particular comments on the regulations per se. They seem fit for purpose and the consultation responses appear to have been taken note of.

[Lord Grantchester (Lab)]

I am grateful to the Minister for his explanation of the statutory instrument before the House today. I understand that it is among the last necessary to commence the provisions of the Energy Act 2016, and I am happy to approve it. As the Minister said, the Act set up the Oil and Gas Authority following the 2014 Wood review into the future of the UK’s offshore petroleum industry with the objective of maximising economic recovery—MER—of offshore petroleum reserves. With powers to offer necessary information, the OGA, through these regulations will now be able to make this information public after a specified period.

I am grateful that, through this MER, the Minister can confirm—with the noble Baroness—that the petroleum industry could create £140 billion of gross value added for the UK and create many thousands of jobs. Most notably, information disclosure could facilitate the reuse of reservoirs and infrastructure most necessary for the development of carbon capture and storage, previously damaged through the Government’s cancellation of CCS projects. Remarks from the Minister in his reply confirming the Government’s commitment to help economically viable ways to develop CCS would be most welcome.

The success of these regulations is very much dependent on the OGA’s ability to assess the commercial sustainability and confidentiality of any pertinent information that it proposes to disclose. The memorandum gives confidence that the Government and the regulator have worked extensively together through consultations and reviews to reach a satisfactory point whereby companies can share and the OGA can publish information sensitively, in a balance between the objective of maximising economic activities and the company’s economic interests. I understand that the appeal mechanisms are included in further provisions of the Energy Act and, if the OGA and the industry can develop a modus operandi to the satisfaction of both parties, that is to be applauded. Will the Minister commit to reviewing and making a statement on this in due course as the success of MER is transparently demonstrated?

One aspect of this was not highlighted by the memorandum. Some information revealed—for example, in relation to seismic survey results—could be sensitive and relate to national security. Are provisions in place for the Government to instruct and advise against the disclosure of certain information by the OGA? In its objective to maximise economic recovery, the OGA will certainly make information available that is of much use and interest to academics, researchers and companies generally in the sector. How does the OGA propose to make this information available? Will it have one preferred method? Will the Government work with the OGA not only to ensure that the information is made easily accessible and well publicised, but that it is effective? Will this be on an international basis? I would be grateful if the Minister could outline how Parliament will be kept updated on the progress of MER.

With that, I am happy to endorse the remarks of my honourable friend and shadow Minister in the other place, Alan Whitehead, that,

“this is a well-crafted set of regulations that should greatly enhance the ability of the industry and the general public to understand what is happening in the North sea, and, where appropriate, to be supplied with that material in a reasonably timely fashion”.—[Official Report, Commons, Eighth Delegated Legislation Committee, 17/7/18; col. 6.]

[Lord Henley]

I thank the noble Baroness, Lady Featherstone, and the noble Lord, Lord Grantchester, for their comments, and in particular the noble Lord, Lord Grantchester, for repeating what his colleague said in another place. He made it clear that these are, as he put it, well-crafted regulations. It is always gratifying to those of us who move these instruments in either House to hear that, but it is equally gratifying for our officials, draftsmen and others. I will make sure that those remarks are brought to the attention of those who are responsible for producing these regulations.

I am also grateful to the noble Lord for stressing that the aim behind these regulations is to reinforce the aim of the 2016 Act of maximising economic recovery. I shall therefore repeat the figure: we think that there is the chance of creating some £140 billion of additional gross value for the UK, which is very important to us all. It is also important for the oil industry in the north-east of Scotland, as we discussed only the other day when a noble Lord on the Liberal Democrat Benches asked a Question about the oil industry in Scotland. Maximising economic recovery is important.

I shall deal with the points made about carbon capture and storage. The noble Lord will understand that this has great potential in terms of helping to decarbonise the economy and maximising economic opportunities for the UK. Obviously we want the UK to become a global technology leader in this area by working with global partners to reduce costs and accelerate deployment. We set out in the clean growth strategy a range of actions in both the domestic and the international arenas to unlock the potential for CCS. Again, we are investing quite large figures—£100 million; I stress that it is £100 million, not billion—in innovation in this area. We should do what we can in this area.

The noble Lord also asked about a review. I should remind him that the Energy Act put an obligation on the Government to review the performance of the OGA every three years, and obviously that will include the disclosure provisions. On whether the Government can stop the publication of certain things, the OGA can advise against disclosure using powers under the Energy Act if national security requirements come into play. On how information and samples will be made available when published, the OGA is progressing plans to set up a national data repository for digital data in 2019, which will enable this type of data to be stored securely and sustainably. It will allow access and disclosure to be controlled by the OGA with information becoming accessible to the public once published. Other summary information and production information will be made available on the OGA’s open data pages on its website. Again, that will be available to academics at the proper time.

I think that those comments deal with all the questions that were put to me. I can confirm that, as I made clear in my opening remarks, this is the last piece of the jigsaw in relation to these matters following the Energy Act. I think that this is also the last occasion before the Summer Recess on which those of us who either speak for BEIS or respond to energy or BEIS questions from the Opposition Benches will be likely to perform. I therefore wish the noble Baroness and the noble Lord a happy holiday, and beg to move.

Motion agreed.