UK Internal Market: White Paper

Lord Mackay of Clashfern Excerpts

Wednesday 29th July 2020 Lords Chamber

[Lord Mackay of Clashfern (Con) [V]]

My Lords, can my noble friend say whether an Act of a devolved legislature could set up an internal market in the United Kingdom, and secondly, whether a fair committee structure will advise the United Kingdom Parliament on the views of the devolved Administrations on that subject?

[Lord Callanan]

My noble friend makes an excellent point, as he so often does. These proposals are designed to ensure that devolution can continue to work for everyone while ensuring that seamless trade in the United Kingdom can continue. From 2021, the devolved Administrations will have power over many more issues than they have ever had before as policy areas formerly managed by the EU flow back to them for the first time. Our proposals would do nothing to stop those Administrations introducing rules and regulations for their own businesses operating within their region, as long as those proposals were not applied discriminatorily.

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Mackay of Clashfern Excerpts

Report stage (Hansard): House of Lords
Wednesday 27th June 2018 Lords Chamber

Moved by

[Lord Mackay of Clashfern]

3: Clause 1, page 2, line 20, at end insert—
“(8) Subject to subsections (9) to (12), sections 11C to 11H of the Electricity Act 1989 and sections 23B to 23G of the Gas Act 1986 apply to modifications of the standard supply licence conditions made under this section.(9) Any appeal against modifications to the standard supply licence conditions made pursuant to this section—(a) may not challenge the decision to impose a price control in principle; but(b) subject to paragraph (a), may relate to—(i) the principles applied in setting the tariff cap conditions in question,(ii) the methods applied or calculations used or data used in setting the tariff cap conditions, or (iii) what the provisions contained in the tariff cap conditions should or should not be (including at what level the tariff cap control should or should not be set).(10) The decision of the Authority to modify the standard supply licence conditions to include tariff cap conditions is to have full effect pending the determination by the Competition and Markets Authority (CMA) of any appeal.(11) Paragraph 2 of Schedule 5A to the Electricity Act 1989 and paragraph 2 of Schedule 4A to the Gas Act 1986 do not apply to modifications of the standard supply licence conditions made under this section.(12) Notwithstanding section 11G(1) of the Electricity Act 1989 and section 23F(1) of the Gas Act 1986, the CMA must determine an appeal against modifications of the standard supply licence conditions made under this section within the period of 4 months beginning with the day on which it accepts the appeal.”

[Lord Mackay of Clashfern (Con)]

My Lords, we considered this amendment in Committee. My noble friend Lord Hunt of Wirral will be here in a moment, I think, but the noble Lord, Lord Carlile of Berriew, has let me know that he cannot be here because he is appearing in court in Birmingham. He thinks it is probably his last appearance in court, so it is an occasion for congratulating him on a long life of very great success in the courts.

I move this amendment, which is, as I say, the same as was moved at the previous stage. I want, first, to deal with a technical matter that my noble friend raised when he said that we needed 11 or so new clauses in the Bill. My understanding is that the cap will apply to electricity and gas and therefore that it is right that the electricity appeal provisions and gas appeal provisions are referred to and incorporated in relation to this matter in the Bill and that the appropriate procedures will apply in relation to that.

Your Lordships will recall the argument that I presented along with my colleagues last time on the relative suitability of the two possibilities for appeal against the decision of the authority to put the cap at a certain level. We were very much of the view that the technical nature of the appeal was such that it would be much better as an appeal to the CMA rather than a judicial review. One reason for that was that we were able in the amendment to control the form and timing of that appeal in a way that you cannot do for judicial review, at least not very easily—and some would say not at all. At any rate, it is much easier to do it through the CMA.

We dealt with all the main objections that the Government had to the CMA appeals. However, my noble friend undertook to write to the CMA to see what it thought about this. I am not absolutely clear to what extent the CMA considered our amendment in detail, but it returned a pretty negative answer to the question of whether it would be appropriate for it. It thought that, on the whole, judicial review was more appropriate. The motivation is not entirely clear to me; the letter is not one of the most lucid that I have ever read, but the decision that the CMA has taken is lucid enough: it does not want anything to do with this particular process, if at all possible.

In that situation, my colleagues and I had a meeting with the Minister—my noble friend Lord Henley—and the Minister in charge of this Bill in the House of Commons. We had a very full meeting and they have persuaded me that the chances of this amendment being accepted by the House of Commons are such that we should not press it here, because it would just be a waste of time to press it here if we were sure that it would come back. All that would happen is that we waste time and money. We have therefore decided together that we will not press this amendment to a Division.

However, we emphasise that, although we have departed from our suggestion for a CMA appeal, there is still the possibility of judicial review, which is particularly important with regard to the procedures that are used. It is therefore very important that the authority, in conducting the consultation and the decision-making with regard to its task, does so in a procedure which properly takes account of the various matters that are put to it. Therefore, although we are sorry that the CMA appeal is not to go ahead, we believe that an effective appeal on matters that are important exists in the shape of judicial review. I beg to move the amendment and, as I say, I will withdraw it in due course.

Amendment 4 (to Amendment 3) not moved.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I will briefly address the substantive motion and explain why we are not moving Amendment 4. It is not from any wish to exculpate us from the needs that should apply to bodies which represent consumers in relation to appeals; it is simply that, given the news that the noble and learned Lord wishes to withdraw his amendment, there seems little point in moving an amendment that will have to be withdrawn in turn.

I congratulate the noble and learned Lord again on introducing his amendment with considerable skill and clarity. He made his case comprehensively. Like him, I am completely bemused by the Government’s response to this, which seems to be more to do with protecting Ofgem than with the merits of the case he made. We are in a situation where the only appeal that will be available in this area is JR. We understand the defects in that and we think that it is probably wrong, not just because of the case that was well made by the noble and learned Lord but because it is an open invitation to seeing a greater amount of judge-made law rather than statutory law, which is a wrong thing. Nevertheless, we respect the decisions being taken by the movers of the amendment, and look forward to hearing a response from the Government.

[Lord Mackay of Clashfern]

My Lords—

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

I think my noble and learned friend would like me at least to respond before he seeks to withdraw his amendment. I echo his congratulations to the noble Lord, Lord Carlile, on his last appearance in the courts after many years. I hope that as a result we will see him in this House—but perhaps speaking to amendments where he might want to support the Government.

I hope that I can set out the Government’s arguments in responding to my noble and learned friend and that in doing so it will be useful to the House to get our views on the record. As we discussed in Committee, Amendment 3 would insert a right of appeal regarding the price cap to the Competition and Markets Authority. As I said in Committee, we believe—as did the BEIS Select Committee when it looked at this, and others—that judicial review provides a sufficient means of challenge to ensure the provision of a fair and public hearing within a reasonable time by an independent and impartial body established by law. As I understand it, the belief is that the decision of Ofgem when it puts the cap in place should be reviewed by another body of experts—specifically the CMA—because Ofgem could get something wrong.

As my noble and learned friend made clear, in Committee I undertook to write to the CMA to seek its views on his amendment. I felt that it would be prudent to see what the CMA had to say about creating what would be a new right of appeal to that body relating to a decision taken in exercise of Ofgem’s powers under the Bill.

The CMA’s chief executive has been kind enough to respond with a letter, which I have already shared with some noble Lords, and I would be more than happy to make it available to your Lordships more widely if necessary. The letter makes three things clear. First, the CMA shares the Government’s view that judicial review is an appropriate means of holding Ofgem to account and providing parties with a right to challenge. Secondly, the CMA shares the Government’s view that judicial review is the appropriate means of holding Ofgem to account and providing parties with a right to challenge. Thirdly, the CMA makes it clear that it does not consider itself best placed to conduct such a review and questions whether doing so would benefit consumers.

--- Later in debate ---

I am grateful to my noble and learned friend for moving the amendment—on which we have had useful discussions—and to the CMA for writing in response to my request and making its views clear. My noble and learned friend brought forward his amendment to hear again for the record what the Government’s position was, and I am grateful to him for making it clear that he does not intend to press it.

[Lord Mackay of Clashfern]

My Lords, I wish to withdraw my amendment.

Amendment 3 withdrawn.

--- Later in debate ---

[Baroness Vere of Norbiton (Con)]

My Lords, the amendments in this group tabled by my noble friend Lady Neville-Rolfe would ensure that the price cap comes to an end in 2020 with no provision to extend it. The Bill allows a temporary and targeted price cap on poor value, standard variable and default tariffs. Fixed tariffs that are not default tariffs will not be affected by the cap as these are where the most competitive rates can be found. The price cap is only necessary to protect consumers on poor value tariffs until the conditions for effective competition are in place.

The Bill has a sunset clause at 2023 and the cap would fall at the end of 2020 if, at that point, the conditions for effective competition are in place; I think that my noble friend wanted a response on that issue. The Bill is constructed in this way because the Government do not want an open-ended intervention, which would not be good for competition and, therefore, consumers.

At this point, I want to address the communication received by many noble Lords about the way the Bill is drafted, potentially preventing the cap from being removed, as the cap itself may have an impact on competition. That point was not lost on the Government when the Bill was drafted, which is why the judgment on removing the price cap, as set out in Clause 7(5), depends on whether,

“the Secretary of State considers that conditions are in place for effective competition for domestic supply contracts”.

In its recent consultation, Ofgem stated:

“We interpret ‘conditions for effective competition’ as meaning that the right market framework is in place for competition to be effective for currently disengaged consumers once the cap is removed”.


In assessing whether the conditions for competition are in place, Ofgem said that it would expect to analyse both the demand side and the supply side of the market, consider whether the market structure will promote good outcomes for disengaged consumers and consider whether there are remaining barriers to engagement. It refers to market conditions, not current market outcomes, for example on the rate of switching.

Coming back to the amendment, it is clear that the Government want the cap to be in place for as short a time as necessary. Ofgem will report on the conditions for effective competition and make a recommendation. Ofgem’s recent consultation points towards a number of factors that might indicate that the conditions for effective competition are in place. On the supply side, these include more innovative business models and the rollout of smart meters. On the demand side, they include making it easier for customers to share their data securely with third parties—meaning that they do not have to look up and enter lots of data on websites when they want to switch—and promoting engagement to help customers identify the best deal. These measures will need time to be established but it is right that we ensure protections are in place until the conditions for effective competition are in place. That is why the Bill enables the price cap to be extended, one year at a time, up to the end of 2023 at the latest.

I am grateful to my noble friend for her amendments. I can confirm that, all being well, the price cap will fall away in 2020—but as we have noted, if all is not well, it will not. With that, I hope that my noble friend is assured and will withdraw her amendment.

[Lord Mackay of Clashfern]

It seems that the Secretary of State has to make a decision before the end of 2019, in respect of 2020. At that stage, it must be assumed that the price cap will not continue because, unless the Secretary of State continues it, it will stop at the end of that year. There is an extra argument, as it were, to the argument about the cap stopping then: the cap will not be in contemplation in examination of the situation because we will have to assume that it has stopped. Therefore, any effect that it has on reducing competition is out of the equation at that juncture. I hope that noble Lords follow me.

[Baroness Vere of Norbiton]

My Lords, I was doing really well until the last sentence. I tried to follow my noble and learned friend. Of course, there will be a period leading up to the point at which the Secretary of State has to make the decision on whether to keep the cap. At that time, he will look at the information that is available to him and make a judgment on whether the conditions for effective competition are in place.

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Mackay of Clashfern Excerpts

Committee: 1st sitting (Hansard): House of Lords
Monday 11th June 2018 Grand Committee

Moved by

[Lord Mackay of Clashfern]

5: Clause 1, page 2, line 20, at end insert—
“(8) Subject to subsections (9) to (12), sections 11C to 11H of the Electricity Act 1989 and sections 23B to 23G of the Gas Act 1986 apply to modifications of the standard supply licence conditions made under this section.(9) Any appeal against modifications to the standard supply licence conditions made pursuant to this section—(a) may not challenge the decision to impose a price control in principle; but(b) subject to paragraph (a), may relate to—(i) the principles applied in setting the tariff cap conditions in question,(ii) the methods applied or calculations used or data used in setting the tariff cap conditions, or(iii) what the provisions contained in the tariff cap conditions should or should not be (including at what level the tariff cap control should or should not be set).(10) The decision of the Authority to modify the standard supply licence conditions to include tariff cap conditions is to have full effect pending the determination by the Competition and Markets Authority (CMA) of any appeal.(11) Paragraph 2 of Schedule 5A to the Electricity Act 1989 and paragraph 2 of Schedule 4A to the Gas Act 1986 do not apply to modifications of the standard supply licence conditions made under this section.(12) Notwithstanding section 11G(1) of the Electricity Act 1989 and section 23F(1) of the Gas Act 1986, the CMA must determine an appeal against modifications of the standard supply licence conditions made under this section within the period of 4 months beginning with the day on which it accepts the appeal.”

[Lord Mackay of Clashfern (Con)]

My Lords, I want to raise a very specific point about the possibility of an appeal against the decision to fix the tariff at a particular level. I declare an interest: I have a minute shareholding in Centrica, which I think is a residue of Mr Therm, and of course we are all participants in the market in that we get gas and/or electricity.

The question that the amendment addresses is whether there should be a statutory form of appeal against the level at which the tariff is set by the authority. I think it is agreed that some kind of judicial challenge is available. Judicial review is said to be the challenge. It is interesting to see how the Select Committee approached that. I do not think it was a fundamental or central point of the committee’s consideration. It asked something like 500 questions, of which four were about the appeal provision. The committee’s main interest in appeal was to prevent delay in bringing in the tariff. I can see the very cogent reason for that. We want the tariff to come in as soon as practicable. If it is to be valuable, it certainly must come in in time for the next winter.

I will show that what I am proposing is a good deal better from that point of view than what the committee thought. The committee seemed to have been concerned mainly that there would be no effective legal challenge of the judgment. In a way, I am rather sad about that because it rather suggests that legal challenge does damage to a decision. My belief is that the aim of legal challenge is to improve a decision; if necessary, to make it fairer than it is already. I need not elaborate on that, because both the Government and those noble Lords who support this amendment agree that a judicial challenge of some kind is available.

I will go through our amendment in a little detail, to show what we are trying to do. First, the sections referred to are a code which allows for appeals in the particular situation of modifications of the licence conditions. That is a general code, introduced by the words:

“An appeal lies to the CMA against a decision by the authority to proceed with a modification of a condition of a licence under Section 23”.


Of course, that includes price variation and that is clear from Section 23E, where a price control decision is effectively mentioned. The committee said that judicial review was a reasonable way of challenging a price control. If that is the point of view of the Government—and of preceding Governments, many of whom contributed to this code—it is strange that they have a code for price control at all. This is quite an elaborate code, with provision for rules and all that kind of thing, and with the CMA experts—who know something about this area—dealing with the matter.

The Government appear to be questioning the idea of an appeal on this level, on the ground that it might cause delay. The amendment seeks to deal with all these things. It makes it clear that there is no question of attacking the principle of the cap. That is a political decision to be made by Parliament and, therefore, the appeal decision may not challenge that point. However, it may challenge the principles applied in setting the tariff up. As I pointed out at Second Reading—I shall not repeat myself—it is quite a difficult decision. The conditions the authority has to satisfy in reaching a decision are quite difficult. I can see that there is certainly room for a difference of opinion on exactly what emphasis there should be on these various matters.

The Government made a point about the possibility of delay and that question concerned the Select Committee. The amendment deals with that by proposing new subsection (11), which takes out the power in the existing code to set aside a price control decision until a decision is taken by the CMA. To make it thicker, proposed new subsection (10) says:

“The decision of the Authority to modify the standard supply licence conditions to include tariff cap conditions is to have full effect pending the determination by the Competition and Markets Authority (CMA) of any appeal”.


There is, therefore, absolutely no question of any delay in this procedural matter. Of course, if it was successful, it might have an effect in respect of settling matters afterwards, but the tariff will come in on the date when the authority decides that it should.

We have thought about the possibility of delay in relation to the decision-making of the authority. The authority has the usual limit of six months. In view of the urgency of this matter, although it is not absolutely vital, we have suggested four months for the authority’s decision. These are perfectly simple matters, I think, and they answer all the Government’s objections to this form of appeal.

The noble Lord, Lord Grantchester, has tabled an amendment on costs. Perhaps your Lordships know already that there is a provision about costs in the scheme under the existing Act, and it may be that some modification of that is required. The other point that comes out very forcefully from his amendment is that appeals are made not just by the licence holders. The appeal is there also for the consumer. When you look at the conditions, you see that there is certainly a possibility that the tariff might be too high. I am not saying for a minute that the authority will not do its best to get the right tariff—I am assuming that it will—but appeals are perhaps intended to review that kind of decision. Therefore, it is vital that the consumer representative, which is the citizens advice bureau, Citizens Advice Scotland or a combination of both, has the right of appeal.

I do not think there is any possible answer to this as against judicial review. Apart from anything else, judicial review is not a very technical type of review, in the sense that the judges are extremely skilful and talented but not many have a detailed knowledge of the gas and electricity industry. That is part of the scope of an appeal, as is set down under the statute: that the appellate authority is already equipped with the kind of expertise that is needed to decide this question. The Government kindly wrote me a very full letter saying that, in a judicial review, the judge could appoint assessors. As you can imagine, I am rather aware of that. However, it tends to show exactly what I am saying: that you should have an appeal that is supported by the relevant expertise. The very need for an assessor, which is suggested as a possibility—although I concede that the judge might not require it—goes a certain distance in that direction. That the Government have said it shows that this is an extremely useful and appropriate form of appeal.

We put the four-month period in to make sure that everything is looked at. I do not necessarily say that it is absolutely essential, and it may be that a correct decision is worth more than a hurried one. Still, we are showing our certain desire to have this disposed of as soon as possible. For that reason, in my submission to your Lordships, this amendment is eminently reasonable and one for which the Government so far have produced no reasoned alternative. I beg to move my amendment.

Amendment 6 (to Amendment 5)

Moved by

--- Later in debate ---

[Lord Henley]

My Lords, as I made clear, they would be using the CMA to delay this process, and we do not think that that would be right. I do not think that that would be the case with judicial review, but, as I said, I am more than happy to discuss these matters later. We have set out our position here and in the letter that my right honourable friend sent to my noble and learned friend.

[Lord Mackay of Clashfern]

My Lords—

--- Later in debate ---

Amendment 6 (to Amendment 5) withdrawn.

[Lord Mackay of Clashfern]

My Lords, I find it difficult to know exactly what the basis is on which the Government now stand in relation to this. I would be extremely happy to have further discussion involving as many of us here as would wish to take part. I am sure that the Government would welcome that.

The situation is that an appeal under these provisions requires the permission of the CMA. The idea that some tariff licence holders would try to exploit this in some way is well met by the procedures that are laid down in this scheme. My noble friend began with the rather frightening suggestion that I needed to add something like 12 clauses to the Bill. It may be wrong, but subsection (8) of our proposed new clause states that:

“Subject to subsections (9) to (12), sections 11C to 11H of the Electricity Act 1989 and sections 23B to 23G of the Gas Act 1986”—


my noble friend’s production, with modifications, of course—

“apply to modifications of the standard supply licence conditions made under this section”.

That seems to put all the conditions in the tariff arrangement into the Bill for the purposes of dealing with the tariff. I cannot understand what more is required. I am in favour not of prolixity but rather of trying to be brief. That seems to me to do it briefly.

The whole procedure is involved. The only thing we are doing is modifying the procedure to take account of the concerns that the Government have expressed about delay and the power that the CMA has to postpone the coming into effect of the tariff under appeal. That is what we have tried to deal with, to resolve the issues that seemed to concern the Government in the letter that the Minister kindly sent me a little time ago.

I am extremely happy, as I said, to be involved in any discussions about this. At the moment, I find it very hard to see why the Government should want to have judicial review more than this, because some people think that exploitation can happen under judicial review. I remember some time ago reading out a passage from a colleague’s book about this and his experience of judicial review in relation to his education policy. I am not saying whether that is right or wrong, but I am saying that this procedure we are proposing is as protected against any kind of exploitation as it could be, because the permission of the authority is required and it will be very astute to know if it is just exploitation for the sake of some big member of the licence holders group. So I do not honestly think that that is a very serious objection.

As I said at the outset, I do not think the Select Committee was really concerned about anything except the delay that it thought would be involved in any kind of procedure. It would apply to judicial review—indeed, probably more than any other—because I doubt it would be right to try to remove the power of the judge to suspend the thing if he thought that that was required, whereas we expressly remove the statutory power of the CMA to put that in.

I think we have answered, as best we can, every possible concern that the Government have, so I would be glad to explore this—I was just about to say “exploit this”—at a meeting between now and Report. I am very keen that we should get ahead with this. We do not want to delay the passage of the Bill through this House, not at all—the sooner it gets through, the better, and the sooner the cap is in place the better, if it is going to be worth while.

Amendment 5 withdrawn.

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Mackay of Clashfern Excerpts

2nd reading (Hansard): House of Lords
Tuesday 22nd May 2018 Lords Chamber

[Lord Mackay of Clashfern (Con)]

My Lords I shall confine myself to the Bill. I think my noble friend Lord Ridley’s submission is that it should not get a Second Reading. That is rather wide of the real mark, so I shall not go down that road. I ought to declare an interest. I am a dual account customer of an energy company and I have an absolutely minute holding in Centrica.

Apart from these, my main interest is trying to understand what this Bill does and what it imposes on the regulator. It is significant that the Government have not tried to set the cap themselves. That is probably wise because the difficulties are quite substantial. We need only read what the authority has to have in mind to realise that. The principal object of the Bill is to protect existing and future domestic customers who pay standard, variable and default rates. I understand that the other customers are people on time-limited contracts. One of the difficulties that I have found as a customer is finding out exactly what the variable contracts you can have are likely to result in long term. One thing is certain: to do that, you have to make sure that you look at the account pretty regularly to see whether the contract term has run out, because if that happens without having done anything, you find yourself in the area that needs protection.

Protection is designed to prevent people being overcharged. If that is the primary responsibility of the authority under Clause 1(6), it is interesting to see what the conditions are that have to be satisfied—or that the authority “must have regard to” rather than satisfy. First, in subsection (6)(a), there is,

“the need to create incentives for holders of supply licences to improve their efficiency”.

I am slightly at a loss—I am not at all technical in this matter—to know how you create incentives for holders of supply licences to improve efficiency by imposing a price cap. My noble friend will explain that when he replies, I am sure.

The next one is,

“the need to set the cap at a level that enables the holders of supply licences to compete effectively for domestic supply contracts”.

Again that strikes me as quite a difficult thing to do if you are aiming to protect customers.

The next one is,

“the need to maintain incentives for domestic customers to switch to different domestic supply contracts”.

As far as I am concerned, the main incentive to switch to a fixed-term contract is because, on the whole, the rate is usually less than in any of the other variable options that require protection. That perhaps is not too difficult, but on the other hand, if it is meant to relate to switching to other suppliers and not just switching to fixed-term contracts with the same supplier, I find it difficult to see how the price cap can help to maintain that.

Finally, subsection (6)(d) refers to,

“the need to ensure that holders of supply licences who operate efficiently are able to finance activities authorised by the licence”.

One need only look at these provisions to see how difficult fixing this tariff will be.

One thing that struck me on reading the Bill was that the Government accept that fuel costs are an essential part of life, but the difficulty associated with the fact that houses are rather leaky is an important aspect. There is not much that a consumer can do to prevent that, at least quickly. I had thought that there might be a reference to the benefit rates that people get. Presumably the universal credit system takes account of the fact that people are required to pay for fuel. In considering the level of the cap, that would be quite important. All this is just designed to show how difficult it is to fix this particular cap.

Then I come to the fact that there is no appeal provision in this Bill. As forecast by the noble Lord, Lord Stevenson of Balmacara, I am going to say something about that. The details are a matter for Committee, because one would want to put a fairly detailed proposal forward. No appeal system means that we have judicial review, because that is not excluded, and I do not think that it could be. It means that, if the companies or the people proposed to be protected feel that either of those things is not working as it should, they have to go to court on judicial review. I wrote a fairly detailed letter to the Minister in the Commons on this matter, and after some time I got a fairly detailed letter back. I do not propose to weary your Lordships with examining them just now, but I shall attempt to take account of these in framing our possible amendment for discussion in Committee.

One thing is certain—that the courts are not very equipped for dealing with the detail of this cap. Apart from the difficulties that I have just highlighted, which seem fairly difficult theoretical problems, the courts have very little in the way of help. In the letter to which I referred, I am told—of course, it was not news to me—that the court could appoint assessors. Of course it could, but that is not a fixed arrangement such as is supplied by the Competition and Markets Authority. Therefore, my view is quite strongly that a proper appeals system to the Competition and Markets Authority is something that we should consider very carefully indeed. The idea that it could defer the introduction of the cap is, of course, not really a fact. In any case, our amendment could make sure that that did not happen.

That is the primary purpose of what I have to say. I think that there is some difficulty about the matter of when the people or authority fixing the cap are not required to take account of the benefits system and the rates of benefit in fixing the cap. That suggests to me that the purpose of the cap is a somewhat difficult concept to grasp and therefore difficult for the authority to fix—which, no doubt, is why the Government did not fix it themselves in the first place.

Higher Education and Research Bill

Lord Mackay of Clashfern Excerpts

Report: 4th sitting (Hansard): House of Lords
Wednesday 15th March 2017 Lords Chamber

Amendment 176 is about changing the name of research councils or reconfiguring their remit, and in the past we have seen many changes in the research councils. The 1993 White Paper and the legislation that followed it introduced a complete reconfiguration of the councils and we have seen a number of changes since then. We all accept that both the remit of individual councils and indeed the names and the configuration may change. What is important is that changes are the result of wide consultation taking into account the views of the scientific community. Therefore I welcome Amendment 176 too.

[Lord Mackay of Clashfern (Con)]

My Lords, I thank the Minister for Amendment 178. The point was drawn to my attention by the Prospect trade union. I am glad to say that it is also satisfied with this amendment.

[Lord Sharkey]

My Lords, I will speak to Amendments 177A and 178A. Amendment 177A in my name and that of my noble friend Lord Willis of Knaresborough returns to the subject of the ability of research councils to enter into funding partnerships. We discussed this extensively in Committee. We had two key questions. The first was, under UKRI, would there be any additional requirements above those already existing for research councils in forming these partnerships? The second question was, are there circumstances in which such partnerships would require explicit prior approval from UKRI?

The Minister addressed the partnership issue in his letter to us all of 8 February. He acknowledged that the councils currently engage in many partnerships, nationally and internationally, to significant effect. He quoted from a letter that Sir John Kingman had written to me in which he had said:

“The individual councils of UKRI will of course have delegated autonomy and authority to agree these arrangements within their areas of expertise”.


This was helpful but did not quite seem to answer our two questions explicitly.

I explored this further in a subsequent meeting with the Minister and his officials. The essence of our discussion was over the meaning in practice of “delegated autonomy and authority”. In particular, I was anxious to have an explicit answer to the two questions. I thought that it would be helpful for everyone involved, especially the councils, to have maximum clarity. What differences, if any, would the councils see under the new regime when it came to forming partnerships? Amendment 177A allows the Government to answer these questions and to put the matter beyond doubt.

Amendment 178A is in my name and that of my noble friend Lord Willis of Knaresborough, who regrets that he cannot be present today, having urgent family business to attend to. As with Amendment 177A, this amendment looks for clarity and confirmation from the Minister. The context is set out in the letter of 8 February that the noble Lord, Lord Prior, sent to us all. On the penultimate page, the Minister addresses the concerns of the noble and learned Lord, Lord Mackay of Clashfern, over the employment by UKRI of the “relevant specialist employees” to which Clause 9 refers. Government Amendment 178 deals with that matter.

However, in his letter to us, the Minister also referred to the research councils’ role in appointing some relevant specialist staff in line with the principles of autonomy. As he reminded us:

“A package of flexibilities for research council institutes was approved by Her Majesty’s Treasury at the 2015 Budget”.


There were five flexibilities. Two of them are of concern to my noble friend Lord Willis, who is a member of the NERC, and to the CEO of the NERC. These are the exemptions concerning pay and the rollover of commercial income.

The CEO of the NERC has pointed out that neither of these exemptions is in practice available to research councils. They do not form part of the councils’ agreed delegations and there is no mechanism within BEIS for their approval, so they do not happen. For example, to address the 20% pay gap that now exists between NERC institutes and the HEIs requires a multiyear strategy. NERC as an employer must have confidence that this can be adopted without being placed in annual jeopardy by being subject to annual BEIS approval. There is no real sense in which the councils have the freedom to manage payroll within existing budgets as agreed at the 2015 Budget. Neither does the rollover flexibility work. In practice, an offer is made to HMT to consider a rollover of commercial income in January. NERC did this but had received no reply by the second week in March. If no answer is received, the money will be lost. Accordingly, NERC has now committed the relevant expenditure in this year. That means that in reality the rollover flexibility does not work either.

Our amendment addresses this problem. It seeks to impose an obligation to have regard to the agreed package of flexibilities and it seeks to give the Minister an opportunity to explain if the freedoms granted to the research councils in the 2015 Budget will in fact be available after the introduction of UKRI and the reorganisation of the councils.

I acknowledge that we are raising these rather complex matters at a late stage. I apologise for that. I should entirely understand it if the Minister preferred to write to us in response.

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[Lord Smith of Finsbury (Non-Afl)]

My Lords, I rise to move Amendment 194A, standing in the name of the noble and learned Lord, Lord Mackay of Clashfern. I remind the House of my interest as master of Pembroke College in Cambridge.

The Bill has been substantially improved over the course of recent weeks, and we are very grateful for many of the amendments the Government have brought forward. But one aspect of the Bill still gives rise to concern: its basic failure to understand the essential interrelationship between teaching and research. Research is not only important in universities of and for itself in pushing ahead the frontiers of knowledge and understanding, and vital for our economic future and success as a country; it is also important for the way it enriches, enlivens, illuminates and deepens the teaching universities undertake. Having postgraduate students alongside undergraduates enhances the undergraduate experience, provides added value to their learning and benefits the overall academic atmosphere of the university community.

The recognition of research degree-awarding powers is therefore of critical importance but the Bill fails to recognise that. It ultimately places the authority for the awarding of such powers solely in the hands of the Office for Students. As a result of government amendments, the Bill now helpfully requires the OfS to seek the advice of UKRI before granting, varying or revoking degree-awarding powers. That point was reinforced in the letter the Minister helpfully sent us this morning.

However, seeking advice is not enough. In Clause 108, the phrase “may co-operate” is not enough, nor are “may provide information” and,

“must, if required … by the Secretary of State”.

Our amendment seeks to put this right very simply by saying that the decision to grant, revoke or vary research degree-awarding powers should be made jointly by both the Office for Students and UKRI. The body that knows about students and the body that knows about research should both be intrinsically involved in that decision. It would be daft to leave open the possibility, as the Bill does at present, that the OfS could ignore the advice, knowledge, expertise and research experience of UKRI in deciding whether a university should be able to grant research degrees. Worse, if a decision to vary or revoke has been made, the university can make representations but only to the Office for Students. The OfS could deal with these representations unilaterally. An appeal could then be made to the First-tier Tribunal. At the moment the Bill envisages only an appeal relating to an Office for Students decision. Surely an appeal should be able to be made in relation to the views and decisions of both the OfS and UKRI. If it is a joint decision, there will rightly be subsequent joint accountability for that decision.

It is also worth pointing out that UKRI will be a major funder—post Brexit, quite possibly the major funder—of postgraduate research study. Are we seriously saying that it should take only a minor advisory role in ratifying a university’s degree-awarding status? I urge the Government to think again, support research, intertwine research and teaching to the fullest possible extent, bring clarity and firmness to the process and ensure that the best decisions are taken with the full expertise of UKRI intimately involved. This must surely be a joint process. I beg to move.

[Lord Mackay of Clashfern]

My Lords, I have my name on this amendment. I am grateful to the noble Lord, Lord Smith of Finsbury, for moving it so fully and eloquently, and I entirely agree with everything that he said.

It seems extraordinary, and I thought this at Second Reading, that the research knowledge and capability is at UKRI but—so far as I know, and I will be corrected if I am wrong—there is no requirement of any sort that the Office for Students should have any particular knowledge or experience of research or, for that matter, research degree-awarding powers. Therefore, the decision is to be taken by people who profess no particular knowledge of the subject matter of research degree-awarding powers. That is to be left to a matter of advice. The difficulty with that, as the noble Lord, Lord Smith, has pointed out, is that when it comes to accountability all that the Office for Students can say is, “Well, we got this advice from UKRI. That’s our defence”. Surely, the people who should defend the advice that is the essence of the matter should be the people who give it. There is a difference between decision-makers and advisers, as we were authoritatively informed some years ago: Ministers decide, advisers advise. In this context, the decisions are to be taken by the Office for Students while UKRI, with all its expertise, is relegated to being an adviser.

I have interests in the University of Cambridge, in the sense that I am an honorary fellow of two of the Cambridge colleges and I am a member of the Council for the Defence of British Universities. However, my view, which I have expressed consistently since Second Reading, is that UKRI’s research capabilities mean that it should be involved in the decision-making process as a decision-maker, not merely an adviser. As the noble Lord, Lord Smith of Finsbury, said, we got a letter this morning, which was followed up by an invitation to telephone. Naturally, I accepted the invitation to telephone as soon as I was free to do so. We had a considerable discussion, and I was asked whether the second part of the amendment was as important as the first, the second part being about research students. I said, “Not for me”; I thought the essential part was the first part. I thought, “This sounds good”. Your Lordships will no doubt wait with bated breath to hear what the answer is to that. Anyway, I expressed the view that the second part was not so important. Therefore, if at some stage the amendment is subject to further consideration, I would be perfectly happy—I think this goes for its co-mover as well—to forget about that. The essential part is the decision-making. Surely the Government recognise that there is a difference between a decision-maker—a person with some responsibility for decisions—and an adviser. I strongly support the amendment and feel rather disappointed that the Government have not seen the logic of its position.

[Lord Bilimoria]

My Lords, I support what the noble Lord, Lord Smith, and the noble and learned Lord, Lord Mackay, have said.

I shall read out the mission statement for the University of Cambridge, which is very short:

“The mission of the University of Cambridge is to contribute to society through the pursuit of education, learning, and research at the highest international levels of excellence”.


That came home to me when I was a student there. We finished the last supervision of term in my favourite subject with a brilliant supervisor, and he said, “Have a good holiday. Now I can get on with my real work, which is research”. That is the importance of research to our top academics.

At the University of Birmingham, where I am chancellor, I chaired the annual meeting earlier this month. We announced that Birmingham had won three more Nobel prizes, taking our total to 11, because of our research.

The University of Cambridge Judge Business School, where I chair the advisory board, has in just over a quarter of a century become fifth in the world in the global FT MBA rankings. One of the main reasons for that is the absolute priority placed on research.

Anything we can do to make sure that we have robust support for our research—not just through advice but taking the expertise of UKRI along with that of the OfS, jointly—would be good for the future of research and the excellence of our universities.

Higher Education and Research Bill

Lord Mackay of Clashfern Excerpts

Committee: 7th sitting (Hansard): House of Lords
Monday 30th January 2017 Lords Chamber

[Baroness Garden of Frognal (LD)]

My Lords, I support the noble Lord, Lord Mendelsohn, in his introduction to this part of the Bill. He commented on the danger that some universities may ditch research, but there are also concerns, following the first part of the Bill, that some universities may look rather critically at their undergraduate provision and wonder whether that is all worth while.

I have added my name in support of Amendment 508C in this group, which was suggested by a number of higher education organisations, including MillionPlus. Holistic oversight of the higher education sector is essential for its continuing success; the Bill must have measures in it that will ensure that the two major bodies, UKRI and OfS, do not work in silos. The work of each organisation is, after all, complementary to the other. A joint committee and an annual report would help to achieve this and deliver a closer working relationship between the two organisations, which would benefit students, providers and employers and provide parliamentary oversight.

Universities thrive through close collaboration between teaching and research, and in the previous part of the Bill we have already proposed that UKRI’s research expertise should be brought to bear in co-operating with the OfS in awarding research degrees. The other areas identified in this amendment are also key to the health of the sector. These issues are too important not to have some specific measures in the Bill to ensure that such co-operation and oversight takes place.

[Lord Mackay of Clashfern (Con)]

I have an amendment in this group, Amendment 509, which suggests a somewhat more vigorous role for co-operation than the amendment that has just been referred to. It appears to the noble Lord, Lord Smith of Finsbury, who cannot be here today, that the Office for Students is dealing with matters concerning research, but the whole object of this part of the Bill is to set up UKRI as the great authority on research. It seems extraordinary that the Office for Students should deal with research questions—the awarding of research degrees and the integration and teaching of research students—without utilising the resources of UKRI.

The Bill has very remarkable provisions on joint working. I do not want to examine the detail just now, except to say that joint working is permitted only in respect of UKRI in very restricted circumstances, which have nothing to do with the general power to award research degrees or deal with research students. It is about a particular kind of funding. That suggests to me that the idea of joint working seems very restricted in the Bill, and it is a matter of extreme importance. As I tried to say in my speech on Second Reading, it is a fundamental unity in many of the great universities in this country that they both teach and do research.

Some of the best teachers, in my experience, are those who are at the very forefront of research, because they usually have an enthusiasm for the subject which on lecturing they can transmit to their pupils. I think that I have some experience of that myself. People who really are at the heart of research are the best possible teachers, so to divide up the organisation of the university between the Office for Students and UKRI goes to the very heart of a fundamental unity which has been part of the strength of many of the great British universities for many years.

Therefore, I propose, in conjunction with my noble friend and with the noble Lord, Lord Mendelsohn, that the arrangement should be that, when research matters are an issue, the decision should be a joint one between UKRI and the Office for Students. The arrangements for having observers or members across the divide are no doubt worthy of consideration, but we need to go to the very heart of this matter to ensure that research matters are considered by people with expertise in research, chosen for that purpose as the leaders of the research establishment, if you would like to call it that, in this country.

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[Lord Mackay of Clashfern]

My Lords, I strongly support the thrust of these amendments, which would bring the charitable sector into an important position in UKRI. The contribution of charitable organisations to the research effort of this country has been extraordinary, and I have no doubt that a great deal of its success has flowed from that support. The idea that it should be missed out of the qualifications possible for the board of UKRI strikes me as extraordinary.

The feeling I get—I am sorry to get it—is that commercial and financial interests have taken over, which, in a sense, was the thrust of the amendment passed in the opening sittings of this Committee. The universities are not simply commercial or financial organisations, they have a much wider role. Whether or not one agrees with the full terms of that amendment is another matter, but so far as its thrust is concerned, that is what it was about. I have no doubt that I will be corrected if I have got that wrong. Why should the charitable sector be left out of the definition of those being sought for positions on the UKRI board?

Another problem which needs to be taken into account was mentioned by the noble Lord, Lord Sharkey. There is a good deal of participation at the moment between charitable institutions and universities in the carrying out of research. The research councils generally are open to participation in research with charitable organisations. Surely it is important that that strong and so far successful connection should be continued in the new organisation.

I am not completely happy with the reply to my Amendment 509 and I shall move it formally when we come to it later on. At the moment, the idea that the Secretary of State will arrange all this through guidance and so on leaves out of account the responsibility of this Parliament for one of the most successful parts of our national effort. We have a responsibility to see that the arrangements are certainly in accordance with what is best for these institutions.

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[Lord Prior of Brampton]

My Lords, I think I shall duck that to some extent and write to the noble Lord, if I may. Where money changes hands in these partnerships, there has always been some control from the Secretary of State. Is that not right for a new partnership or a joint venture? Rather than ad lib on this, I had better consult officials and write to the noble Lord.

[Lord Mackay of Clashfern]

I think it is reasonably clear that the research councils will cease to exist as bodies. They will become committees of UKRI. Therefore, it will be impossible for them to form any kind of partnership. What will happen, I assume, is that UKRI will form partnerships, perhaps resembling the partnerships that were there before, but there will be no question of the research councils having any right to form partnerships of any sort whatever. UKRI will have to do all of that.

[Lord Patel]

Perhaps I might expand on that. I had always assumed that the research councils will be able to form partnerships. If what the noble and learned Lord, Lord Mackay of Clashfern, just said is true, the Minister needs to emphasise that because it changes the whole working relationship between the research councils and UKRI.

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[Lord Mackay of Clashfern]

I support the amendments proposed by the noble Lord, Lord Patel. I agree that consideration needs to be given to the points raised by the noble Lord, Lord Liddle, but one must not forget that there are regions of the United Kingdom south of the Scottish border which may require special attention.

I am hopeful that the reflection, which I am sure that we will have on these amendments, may result in good outcomes. Officials in the department have given me a copy of the application invitation to non-executive members of UKRI, which says:

“We welcome applicants with a range of experience from within the different nations of the UK, the charity sector, and with international experience”.

[Lord Stevenson of Balmacara]

My Lords, this has been a very interesting debate, and I am grateful to the noble Lord, Lord Patel, for introducing it so well, because he covered all the nuances. We have one amendment in this group, Amendment 500A, which complements the points that he was making. It reflects the need to make sure that Research England, in its functions, which would be very narrowly focused on England—including, of course, the north of England—could have the capacity to consult other bodies that perform the same functions in Scotland, Wales and Northern Ireland. That goes with the general grain of what is being discussed.

I have a fantasy that this area was probably dreamed up in the good old days before Brexit was on the horizon, in the confident assumption that there would be no separate Scotland—and certainly no separate Wales and Northern Ireland, if these issues are still in play, as I am sure they are. That reflects a relatively straightforward analysis of what had to be done to pay lip service to the need to ensure that those people not physically located in England were seen to have some influence on the levers that generated the money. But that is such a naive view of what is now such a complicated world that I wonder whether what is in the Bill is sufficient to take that trick. It is one area in which reflection will be required, as the noble and learned Lord hinted, because I do not think that what we have here will do.

I take it as axiomatic that UKRI is not a representative body and that there would be no advantage in making it so—so we are not talking about ensuring that the representation on it is in some way reflective of the various agencies and constituencies that need to be served by it. However, there are optical issues—it has to be seen to be representative in a way that would not have been the case two or three years ago. The idea that, as we heard from the letter of invitation, it has an acknowledgment of the need to recruit from people with obvious experience in an area will probably will not be sufficient. We are talking about the allocation of resources getting scarcer as we go forward, despite the Government’s reasonable largesse, in an environment where it would be very difficult for those bodies that have been funded to seek alternative matching funding. The institutions we are talking about are not all universities, because research is carried out outside the universities—although much less than in other European countries—in research institutes and similar places. Up until now these have been very reliant on external funding and, as we will hear in later amendments, they are feeling a cold wind coming. In this very complicated area we have to ensure that the funds will reach the institutions which are best able to provide the research services which UK plc is looking for and in a way that is seen to be fair.

We have not touched on the fairness issue. The noble Lord, Lord Patel, talked about the need for firewalls to make sure that the funding streams were not absorbed by other pressures and under other arrangements. That is probably a necessary but not sufficient condition and does not need to be in the Bill. However, the idea exists that England, because of the golden triangle effect, has a pre-eminent chance of getting all the funding and that, despite the way in which these funds will be allocated—through the Haldane principle and others—there will be enough room left for those who wish to make trouble about this in, say, Scotland or other places. This is a worry and it will need to be looked at very carefully before the Minister comes back. I do not have a solution to it, but we are not necessarily in the right place at the moment.

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[Lord Mackay of Clashfern]

My Lords, before I come to the amendments in my name in this group, I will just mention first that Clause 105, a definitions clause, says that “‘science’ includes social sciences”. So that is in the Bill, in a way. It may be that my noble friend Lord Willetts or the noble Lord, Lord Blunkett, would like it to be more prominent, but it is certainly there already. Clause 105 is also the source of what I said about the councils. It says:

“’Council’ has the meaning given by section 86”.


Clause 86 is where “Councils” become “committees” of UKRI.

My amendments are inclined to emphasise the importance of basic science. I very much take what has been said by the noble Lord, Lord Judd, and others about developing knowledge for its own sake. That was a very clear statement of a very distinguished mathematician in my youth, GH Hardy of Cambridge. He was a theory of numbers man, which had no very obvious application to anything much at that particular moment, except that he brought the wonderful Indian mathematician Ramanujan to this country and made him prominent. GH Hardy’s view was that mathematics, particularly the theory of numbers, should be researched, investigated and developed for its own sake.

Amendments 484A and 484B relate to Clause 87, which defines UK Research and Innovation’s functions. I am glad that I have already had support from two speakers for these amendments before I had the opportunity to mention them myself. Clause 87(1)(a), which is mentioned in the provision referred to by the noble Lord, says:

“UKRI may … carry out research into science, technology, humanities”—


which includes the arts by definition, although I am not sure what else it includes separately from the arts other than perhaps languages—“and new ideas”. UKRI has the important function of promoting research into new ideas, which is distinct, apparently, from research in the earlier listed subjects of science, technology or the humanities. I am not absolutely clear what that adds to the whole function, but no doubt the Minister will be able to explain it to me with his usual clarity.

I want to emphasise the need for basic science to be remembered, which is why I have sought to add to UKRI’s functions as listed at subsection (1)(a) research into “basic, applied and strategic” science. That seems to me to be essential if UKRI is to carry out the kind of function that we expect from it of enlarging knowledge for its own sake as well as for the benefits that it may have to others. Enlarging knowledge will benefit people, even if you do it for its own sake. It is also important for the development of science itself that too much emphasis is not placed on applications, as the theory and development of the basic structure of the science is extremely important.

I noticed in today’s paper a comment on the research into dementia. A particular medicine or drug had been developed that was thought to be helpful in relation to dementia but, unfortunately, it did not work. It must have taken a little time to find that out, but it did not work. The comment was that the research was too narrowly focused on an aspect of the disease. This is a very topical example of what I am trying to say.

I hope an amendment such as the one I have proposed will be incorporated. I do not necessarily say that mine has the best ever wording—it could be improved, I am sure—but it is the best that I have so far been able to offer. No doubt the Minister’s reflections may improve it further.

[Lord Oxburgh (CB)]

My Lords, I had not intended to speak today. I declare my membership of the Foundation for Science and Technology, chaired by the noble Earl, Lord Selborne, and my honorary professorship of the University of Cambridge. The comments I wish to make cut across many of the amendments that we have discussed, both now and earlier.

Reading the Bill as it stands, you could believe that from a research point of view the UK was an island sufficient unto itself. There is almost no reference here to any international work. I think the noble Lord, Lord Willis, made a passing reference to that in one of his interventions in today’s debate, but it is crucial. There are whole areas of science in this country where we would not have a presence without successful international collaboration. A very good example is marine work. Marine research ships are very expensive to run, and frequently they have been run in collaboration with other countries. One could also mention big science facilities.

My concern with the Bill as it stands is that paragraph 16(3) of Schedule 9, which deals with supplementary powers, says:

“UKRI may not do any of the following except with the consent of the Secretary of State: … enter into joint ventures”.


Does this mean that if one of our research councils or other parts of UKRI wish to set up a collaboration with one of their opposite numbers, be it on the other side of the Atlantic, in mainland Europe or anywhere else, they have to go to the Secretary of State before they can do so? I hope that that is not the case, and that the importance of international work can be a little more clearly expressed in the Bill before we finally approve it.

Higher Education and Research Bill

Lord Mackay of Clashfern Excerpts

Committee: 7th sitting (Hansard - continued): House of Lords
Monday 30th January 2017 Lords Chamber

[Lord Mair (CB)]

My Lords, I support Amendments 482C, 490A, 495C and 495D, to which I have added my name, and support what has been said by my noble friends Lady Brown of Cambridge and Lord Broers.

The noble Lord, Lord Liddle, referred earlier to the industrial strategy. This is highly relevant to the Bill and to Innovate UK. The industrial strategy has 10 pillars. The first is:

“Investing in science, research and innovation”.


The Green Paper clearly acknowledges the serious problem we have in the UK with commercialising our outstanding science. It states that,

“historically, we have not been as successful at commercialisation and development as we have been at basic research … We have already taken action to address the UK’s … relative weakness in commercialisation, through the establishment of new, more industrially focused institutions such as Innovate UK”.

This group of amendments addresses the freedom of Innovate UK within UKRI to operate successfully and with full autonomy—otherwise there is a danger that it will not be as effective as it should be. I fully support the point made by my noble friend Lady Brown of Cambridge. Paragraph 16(1) of Schedule 9 states:

“UKRI may do anything which appears to it to be necessary or expedient for the purpose of, or in connection with, the exercise of its functions”.


However, paragraph 16(3) states that UKRI may not,

“form, participate in forming or invest in a company, partnership or other similar form of organisation”,

except,

“with the consent of the Secretary of State”.

That seems unnecessarily restrictive on Innovate UK. It should not have to obtain the consent of the Secretary of State whenever it wishes to make an investment in a company, partnership or similar organisation. A very similar point was made earlier by my noble friend Lord Oxburgh in relation to forming joint ventures. Innovate UK should have the freedom and flexibility to invest as necessary to promote research and innovation to the greatest economic benefit of the UK—although, clearly, financial limits should be set periodically by the Secretary of State. That is the purpose of our Amendment 482C.

The world is changing very rapidly and it is therefore vital for the economy to have a high level of UK R&D investment in science and engineering. The UK must continue to be world leading in innovation. We cannot afford to slip behind, and UKRI must be made to work really effectively. Innovate UK, with its strong business-facing focus, along with the science and engineering community, must therefore be allowed to continue to play a key role in promoting research and innovation. Innovation is an inherently risky process with an uncertain outcome. To be really effective, Innovate UK must be allowed to promote high-risk and disruptive innovation.

This House’s Committee on Science and Technology, chaired by the noble Earl, Lord Selborne, and of which I am a member, heard in evidence that many businesses have concerns about the status of Innovate UK in the proposed UKRI, especially in relation to risk and the backing of new companies. Innovate UK must be allowed to invest in commercial arrangements, including companies or partnerships, if it is to be fully effective in promoting innovation and commercialising research—and this should be in the Bill.

Innovate UK operates in a quite different way from a research council, so I urge the Minister to reflect on and give careful consideration to this matter, and to ensure that the proposed structure of UKRI is not unnecessarily restrictive on the crucial activities of Innovate UK.

[Lord Mackay of Clashfern (Con)]

My Lords, it is perhaps important to point out that Innovate UK is to be henceforth merely a committee of UKRI. The scope of its work is set out in Clause 90(1), which states:

“UKRI must arrange for Innovate UK to exercise such functions of UKRI as UKRI may determine for the purpose of increasing economic growth in the United Kingdom”.


So I do not think that there is any sense in which UKRI is autonomous. Innovate UK will have no employees of its own—they will all be employees of UKRI—and it certainly will not be autonomous in any sense that I can understand. The question may be whether the result that these amendments are aiming at can be attained only by taking Innovate UK out of UKRI and giving it a separate status. There may be disadvantages in that as well, but, as presently set out in the Bill, Innovate UK is a mere committee of UKRI—and that is not a particularly elevated status. In many aspects—not all, because I have just referred to a special aspect in the clause that I mentioned—it is being treated pretty much as a part of UKRI.

[Baroness Neville-Jones (Con)]

My Lords, I support Amendments 482C, 495C and 495D. I note what has just been said about the committee status of Innovate UK, and many noble Lords—I include myself—do not regard that as a satisfactory way of running things. We would much prefer it to be a separate entity. If the Government are unable somehow to strengthen the role of Innovate UK within the present structure that they have chosen, there will be a real problem that we will have to tackle on Report.

The noble Lord, Lord Mair, said many of the things that I wanted to say, but much more eloquently. He made the absolutely vital point that the functioning of Innovate UK is crucial to the attainment of the Government’s industrial strategy. If that is the case, it will need the powers to enable it to do that. The purpose of Amendment 495C is to give Innovate UK the right initiative that is needed if it is to achieve its objective. Amendment 495D emphasises the central role of Innovate UK in promoting the commercialisation of research. It has to be able to enter into business relationships which underpin that; thus we come back to the problem that has been identified.

The Minister’s remarks will obviously be very important here. If the language is not right, perhaps it can be fixed, but this is an issue of fundamental importance on which I would like to hear what the Minister has to say.

--- Later in debate ---

Moved by

[Lord Mackay of Clashfern]

492: Clause 89, page 57, line 13, after “scientist” insert “, or other person whose knowledge or experience is important to the operation of that Council,”

[Lord Mackay of Clashfern]

My Lords, this is a short but important point. Schedule 9 paragraph 8(1) states:

“UKRI may … appoint employees, and … make such other arrangements for the staffing of UKRI as it considers appropriate.


Sub-paragraph (2) states:

“The terms and conditions of appointment as employees are to be determined by UKRI with the approval of the Secretary of State”.


That is the general provision. However, there is an extraordinary provision in Clause 89. After listing the research councils—it is interesting that the arts and humanities are separate although the arts include humanities, although that does not matter too much—subsection (2) states:

“Arrangements under this section may, in particular, provide for the exercise by the Council concerned of UKRI’s functions under paragraph 8(1) and (2) of Schedule 9”—


those are the paragraphs I have just read—

“in relation to relevant specialist employees”.

In other words, the council is going to get, possibly, a chance to make arrangements in regard to relevant specialist employees. Who are these?

“A ‘relevant specialist employee’, in relation to a Council, means a researcher or scientist employed by UKRI to work in the field of activity of that Council”.


It is quite obvious that the term “scientist” is fairly ambiguous. For example, would it include a specialist doctor working for the MRC?

The other obvious question is whether this applies to technicians in laboratories. Is a technician a scientist? I would think they certainly are, but it cannot be taken as a certainty that the construction of the term “scientist” in this Bill would necessarily include a technician because sometimes we distinguish between them in the terminology. So far as researchers are concerned it is, vague in the extreme. Is a person who organises research but does not do any himself or herself qualify as a researcher? I thought that there must be some principle behind the selection of the terms “researcher” and “scientist”, and that is what my amendment ventures to suggest. It provides that, for a specialist employee,

“after ‘scientist’ insert ‘, or other person whose knowledge or experience is important to the operation of that Council”.

That is the only way to avoid ambiguity.

I have the impression from my discussions with the department that the general view is much in accordance with mine, but the officials seem to think that the terms “scientist” and “researcher” would include them all. I would like to say that they do not, but it is certainly not clear at all and I see no reason why it should not be. The easiest way to put it clearly is not to set out a list of all the people we can think of, because there would quite a number; rather, it is to set out the principle on which the relevant specialist employee as a characteristic is determined. That is what I have tried to do in my amendment, and I am happy to seek a better formulation if the Minister wishes it. I raised this point when I wrote to my noble friend’s predecessor and to the Minister in the Commons. I hope that we might be able to get an answer to this question tonight and I beg to move.

[Lord Stevenson of Balmacara]

My Lords, this is an interesting amendment and it has been well trailed since the noble and learned Lord made it clear in a couple of our Committee sittings that he intended to speak on this issue. We are glad finally to get the benefit of his words expressing concern about the current drafting and the need to unpick it. I think the Minister will be at a slight disadvantage because we have been making this point throughout the six days of our deliberations in Committee. We have tried to draw the attention of the noble Viscount to the fact that wherever there is an opportunity, in our view, for the Bill to inflect a sensibility within the structures and operations of the various bodies being established under the new architecture, towards an inclusive way of treating those employed within these structures, it has always been rebuffed. That might be too strong a word, but although it has been played back to us as something the noble Viscount would think about, we have not even managed to get him to reflect on it.

So the Minister is not able to take responsibility for the omissions of the earlier sittings of the Committee, but this is a great opportunity to pick up the point. Given that he has come from a department which must have responsibility for employees—indeed, in his last outing he was dealing with trade union reform and related issues—he will be well aware of the sensitivities that these matters can give rise to. He might want to reflect on the need to respond positively to the noble and learned Lord, who has made such a fine point.

--- Later in debate ---

[Lord Mackay of Clashfern]

If I thought I had received an answer I would be happy to do so, but surely we need to defend these people. I quite understand that this will carry on and I hope it will, but I should like to know what it is that will carry on.

[Lord Prior of Brampton]

To quickly interject, I will look at the issue my noble and learned friend raises. As the noble Lord opposite said, I will reflect further on the matter and write to my noble and learned friend.

[Lord Mackay of Clashfern]

I am grateful for that. I am just sorry that the reflection has not taken place between the time I raised the issue and now, but there we are. We cannot do anything about it.

My noble friend mentioned a letter. I was at a meeting last week with a number of people interested in the Bill and its progress. They mentioned the letters referred to in Hansard. They asked where they could see them. I was not certain, but I assume they are in the Library.

[Lord Prior of Brampton]

I understand that they are.

[Lord Mackay of Clashfern]

I am persuaded to withdraw my amendment.

Amendment 492 withdrawn.

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Moved by

[Lord Mackay of Clashfern]

509: Clause 106, page 64, line 16, at end insert—
“( ) Where a decision to be made by the OfS or UKRI relates to—(a) the power to award research degrees; or(b) research students;the OfS and UKRI must make the decision jointly.”

[Lord Mackay of Clashfern]

My Lords, I mentioned this amendment in an earlier group. However, because of the way these things are structured, I did not get an opportunity to reply to the Minister. This is a vital matter. I cannot see why the Office for Students, with no particular qualification in relation to research, should be solely responsible for the decision to award research degrees.

The Minister indicated that there is a general power for the Secretary of State to order co-operation and so on. In the Bill the power to make a joint decision is very restricted indeed and would not apply in this connection to the power of the Office for Students to award research degrees. It certainly would not enable UKRI to take part in that.

I can see that there may be a difficulty about research students. I do not mind too much about that. It seems to me that that is also a question about research, but it may be that it is very routine and therefore the Office for Students would need to be involved in that. But giving the Office for Students the power to award a research degree power to a higher education provider while there is a body standing by—created by the Bill, with all the expertise of research—but not taking part at all, does not make any sense. I say this with the greatest possible respect.

The Minister suggested that it might work against the interests that were being talked about but I really cannot see why these research degree-awarding powers should be a matter for the Office for Students alone. I can see that it may have a legitimate interest in the provider as a whole but it certainly does not have the full expertise of research that UKRI can give. This seems to be an ideal situation for joint decision-making. I beg to move.

[Baroness O'Neill of Bengarve (CB)]

My Lords, I add my support to the amendment. It seems extraordinary to imagine the Office for Students unilaterally making a decision that an institution should have the power to award research degrees. Surely it is quite essential that a research organisation—particularly, in this case, UKRI—should be heavily involved. Equally, I do not think that UKRI can make the decision alone because it relates also to the capacity of university departments to receive and look after research students.

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[Lord Prior of Brampton]

I thank my noble and learned friend Lord Mackay for raising this important matter. I hope that I do better in response to this amendment than I did in response to his earlier amendment. It is absolutely right that UKRI and the OfS should work together in relation to research students and research degree-awarding powers.

Let me first reassure noble Lords that, while the responsibility for all degree- awarding powers will sit with the OfS, UKRI will play an active role in matters relating to research degree-awarding powers. It will be instrumental in developing the criteria and process by which applicants for these powers are assessed. For example, it will work with the OfS to identify suitable expert scrutinisers of RDAP applications. This collaboration will safeguard standards and ensure that assessors with the appropriate skills are core in decision-making. Likewise, on research students the OfS will be the regulator for all students, including postgraduate students, but UKRI will of course work with it when appropriate to provide expert advice in relation to postgraduate students.

As an example, as I said previously in this debate, each year thousands of research students in the UK are supported by research council funding. Putting a legislative requirement on the OfS and UKRI to make such funding decisions jointly would not add value; it would add only bureaucracy. However, having both organisations working together to develop a strategy that ensures that the pipeline for good research students is healthy would add value. The current legal provisions, subsequent government guidance and a healthy co-operative culture within the organisation will ensure that this happens. As the noble Lord, Lord Mendelsohn, mentioned earlier, one cannot sledgehammer a culture into shape between two organisations through legislation. That is why the joint working provision in the Bill has been drafted to be permissive. It will be a key aspect of UKRI and the OfS’s missions to co-operate with each other.

The Government will issue guidance to both organisations that will set out where we expect them to work together. There will be a memorandum of understanding between UKRI and the OfS to set out the detail. The executive teams and the boards will be responsible for ensuring that this important joint working is achieved. The advert for the UKRI board includes the duty of,

“ensuring strong, collaborative relationships are put in place to aid joint working with the Office for Students, the devolved HE funding bodies and other key partners”.

I recognise the strength of feeling on this matter and the Government have listened carefully to the issue raised by noble Lords here today. It is with the assurances that I have given that I ask my noble and learned friend to withdraw his amendment.

[Lord Mackay of Clashfern]

Yes, I certainly propose to withdraw the amendment now, but this is an extremely important point and I do not really think that government guidance can take the place of an Act of Parliament. The idea of granting research degree-awarding powers is an important matter for the national interest. I do not think that it can be left to guidance from the Minister, however wise that guidance may be. It is the responsibility of Parliament to set the structures under which that should happen. I cannot see at the moment how it can be right that the responsibility for that should be in the Office for Students when, standing alongside it in the administration, is UKRI, with all the technical qualifications for research which that implies. I will withdraw the amendment with happiness but in the hope that we can progress this matter further before we have the next session on the Bill. In the meantime, and with regard to the time, I am glad to finish.

Amendment 509 withdrawn.

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[Baroness Deech (CB)]

I shall speak to this amendment although my name is not on it. As we got to the end of this Committee stage, this group of amendments struck me as a chance to give Parliament more oversight into fleshing out the Bill. The Bill—and now we are nearly at the end—is not much more than a framework, albeit a very heavy framework, on which later policy is to be hung. We have no detail on the metrics in the teaching excellence framework or the detailed criteria that the Office for Students may use to establish or abolish universities. It is not clear how a lot of this Bill will work in practice. Over and over again we have been asked to take matters on trust and have been told that details will follow. We do not know how much of a light touch or not the Secretary of State will be using in guidance to the UKRI and the OfS. We do not know what providers will do to the market or how the status of the sector will hold up. We do not know how much there will be a fracture between teaching and research to the detriment of both. Now that we have reached the end of the Committee with so many gaps in the Bill, can the Minister assure us that there will be some process of post-legislative scrutiny to ensure that this experiment is working? I beg to move.

[Lord Mackay of Clashfern]

I take this opportunity simply to congratulate the Minister on having taken over this intricate and important part of the Bill. He has discharged his responsibilities with great skill.

[Viscount Younger of Leckie (Con)]

My Lords, as this is the last group of amendments, most of which were not moved by the noble Lord, Lord Stevenson, I shall respond briefly and particularly take note of the general comments made by the noble Baroness, Lady Deech. I shall make a short concluding comment. If there are matters in this group of amendments that require some writing, I will write to all noble Lords and put a copy of such letters in the Library of the House.

I shall make some concluding comments about this quite long Committee stage. I record my appreciation of the whole Committee and of all noble Lords who have taken part in all the debates for the quality and constructive nature of the discussions we have been having in the past few weeks. I am very pleased that noble Lords recognise that Committee stage is about discussing the Bill, probing the detail and, importantly, giving all sides an opportunity to listen to other noble Lords’ points of view. As a result, noble Lords have not felt the need to divide the Committee beyond the first amendment on the first day. For that, I am grateful.

Now we have some time before the Bill enters its Report stage. The noble Lord, Lord Stevenson, has challenged me on the meaning of different verbs used on occasion by me on and around the word “reflect”. I hope I can leave a smile on his face—or perhaps not—by saying that I am actively working with my honourable friend in the other place, Jo Johnson, to reflect on these discussions and consider the best way forward. On a serious note, I hope the noble Lord and the noble Lords, Lord Watson and Lord Mendelsohn, realise that I have given much warmer words than that at certain points. In that spirit, I want to be sure that he understands that we are looking very carefully at Hansard and reflecting generally on all the debates. I am looking forward to Report. In the meantime, I would just say that I have very much appreciated the debates and look forward to future ones.