Draft Contracts for Difference (Sustainable Industry Rewards and Contract Budget Notice Amendments) Regulations 2026

Kit Malthouse Excerpts

Tuesday 17th March 2026 General Committees

[Kit Malthouse (North West Hampshire) (Con)]

Notwithstanding the comments from my hon. Friend the Member for West Aberdeenshire and Kincardine, I am a little alarmed by this statutory instrument and its implications for my residents in North West Hampshire. I have a number of questions for the Minister.

My understanding is that this scheme was originally established in the aftermath of the disruption to supply chains caused by the conflict in Ukraine. There was significant concern about the ability of the offshore industry to continue, so the subsidy was put in place on a supposedly temporary basis. That was to allow for the uninterrupted development of an industry that had hitherto been working quite well, but was suffering at that point.

This statutory instrument, however, turns that temporary subsidy into a permanent feature of the landscape. We are voting through, colleagues, a permanent subsidy to the wind industry. [Interruption.] Well, there is no sunset clause; that has been taken out. There is no review mechanism—there is nothing. If the Minister wants to intervene on me, I am quite happy to be corrected, but as far as I can see this is an open-ended subsidy scheme through the CfD system. My questions are configured around that assumption.

First, could the Minister confirm that there will be no annual parliamentary vote on this subsidy? Normally, a subsidy to an industry would expect to come through direct expenditure from the Department for Energy Security and Net Zero, the Department for Business and Trade or whatever it might be. This is being funded through the supplier obligation levy, which is a direct levy on consumer bills. There is no approval by the House of the budget. In fact, I think it is just approved administratively—it is what it is. The consumer will pay, whether we like it or not. If the Minister could confirm that, that would be great.

As I understand it, the budget for AR7 was about £544 million. Could the Minister confirm for us the projected budget that the Government expect for AR8, and therefore how much my residents in North West Hampshire can expect to be added to their electricity bill to pay for this statutory instrument?

Much of the Government’s case for extending what is—let us be clear—an industrial subsidy is that there is a very high leverage. I looked at the maths, and the leverage of private sector to public sector is about 16:1. How was that number reached? I could not see in the impact assessment what the maths was, what assumptions had been made or whether this had been independently verified. Is there some kind of National Audit Office examination of that number? I have been a Minister myself, and I was always very sceptical about these public-private leverage numbers. They are often promoted by the industry looking for the subsidy, and make their way into these sorts of impact assessments without any kind of checking. I would be grateful to understand what the assumptions were.

Could the Minister also confirm that this is now a permanent feature of the landscape—that there is no sunset, statutory timeline, let or control? People will effectively just bid through the CfD system, the subsidy will make up the difference, they get to build their onshore, floating offshore or whatever wind it might be, and my constituents and I have to pay no matter what.

Then I wanted to ask a bit about this fair work charter. I understand that the Government are very keen on employees’ rights. We should all make sure that people are treated with respect in employment, but using a statutory instrument effectively to extend employment regulations seems very odd. I wonder whether that will be an ongoing feature of the landscape for statutory instruments such as this and whether we can expect a kind of extension of regulation by stealth.

I am sure these regulations are perfectly amenable, but their being contemplated in a small Committee of Members, rather than on the Floor of the House, as the Employment Rights Act 2025 was, or indeed going through both Houses in all their pomp, seems to me a slightly sneaky way to get around proper Government scrutiny. I would be very interested if the Minister could point me, please, to the specific statutory authority that permits the use of CfD contracts to impose employment standards on developers and their supply chains. If he cannot point me to that, what is the legal authority, please, for that being included in this statutory instrument?

Finally, CfDs were designed originally to bring down the cost of alternatives. That was the original plan. Yet what we are voting on today will do precisely the reverse: raise the cost for me and my constituents. I wonder how the Minister can justify that at a time of difficulty for so many of our constituents with the cost of living. If this industry is as attractive to the private sector as he says it is, why does it need the subsidy in the first place?

[Michael Shanks]

I will address a few things. There were some contradictory comments from different Members of the same party: on the one hand, we should support the supply chains, but on the other, the Government should do nothing to actually build them up. I will come to that point, because—

[Kit Malthouse]

We think for ourselves.

[Michael Shanks]

That is how we end up with absolutely no industry left in the country. That is what we are trying to rebuild after 14 years of it falling apart.

I will turn to the specific points. First of all, the shadow Minister, the hon. Member for West Aberdeenshire and Kincardine, made a good point about the strength of supply chains in the north-east of Scotland; I will be in Aberdeen again on Thursday. One of the key things that the North Sea Future Board has taken as a real priority is how we map those supply chains, not just over oil and gas but over what could come in terms of offshore wind, decommissioning, hydrogen and carbon capture. For too long, the pipeline of future projects that that supply chain could be redeployed on has not been clear enough. As a result, we have been losing out on contracts that could be dealt with here in the UK. We are determined to try to fix that, because there are significant supply-chain opportunities, but we need to make it easier for companies to take those up.

The shadow Minister and I always agree on new nuclear, although we slightly disagree on how much he achieved when he was the Nuclear Minister—but I will not mention that, because I want us to work co-operatively on nuclear. New nuclear is incredibly important. As he is right to say, the supply-chain benefits in the UK from nuclear are substantial: thousands and thousands of jobs in communities right across the country, not just in proximity to Sizewell or Hinkley, are contributing in different ways to building what are phenomenal engineering projects here in the UK.

The small modular reactor fleet that the Government not only consulted on but have actually delivered—and are delivering—will result in even more supply-chain jobs across the country as well. The shadow Minister and I also agree that we would like to see some of those SMR projects being built in Scotland, with even closer supply chains in Scotland as well, but we first need to change the Scottish Government in May; I am glad that he will be supporting a vote for Scottish Labour on 7 May to do that.

The shadow Minister also raised a number of other points about the supply chain that I think are right. It is absolutely right to say that floating offshore wind is an expensive technology, but we are at the cutting edge of its development. We have a real opportunity to do something differently on deep-sea wind, which we were not able to do on fixed-bottom wind, to have the supply chain here in the UK. We have the biggest pipeline anywhere in the world; we have one of the biggest projects in the world. That is an opportunity for us to deliver on that innovative supply chain, but it takes investment for that to happen.

The right hon. Member for North West Hampshire asked a number of genuine questions, which I appreciated. First, the regulations themselves very clearly set out the sunset clause as 31 December 2028. This will be eligible for the allocation rounds before that date; if we wanted to continue the scheme beyond that, we would have to come and update these regulations again, but it is not an unlimited fund.

On the projected budget for AR8, I cannot get into projected budgets because they are driven by the initial allocation that is set, and then by the bids that come in. In AR7, we reformed the process so that we could see the bid stack in order to see what projects were in that option round, although they were anonymised. That resulted in the budget getting us the output of offshore wind that we did, at a price that was 40% cheaper than new-build gas. That is what we should hold on to: the AR7 option round was cheaper for consumers than the equivalent would be.

I remind right hon. and hon. Members that there is no option to not build new energy infrastructure in this country. We have two choices: we either double down on gas, and the world as it stands right now is a reminder of why that would be a mistake; or we build renewables. There is no option to build nothing. There is a cost for consumers, regardless of what we choose to do. There is also a huge cost for consumers of building the grid that the previous Government failed to build for 14 years, which we are now determined to do.

On the fair work charter, there is no compulsion on any developers to bid into the clean industry bonus. If they want to participate in the contracts for difference auction, they are very welcome to do that. If they want to participate in the clean industry bonus and have public support for supply chains here in the UK, then they should conform to the requirements of that scheme. We think it is absolutely fair to say that if the hard-working people of this country are putting money into building those factories, fair work should be at the heart of it. I am surprised, frankly, that in 2026 anyone would think that fair work is something that we should not support by any means necessary.

[Kit Malthouse]

As I think I said, I agree that people should be treated with respect; my question was more about why it is being done through this particular route. For the Government to legally have grounds to include what we are discussing as part of, effectively, a procurement process, there has to be a statutory basis on which they are doing that; it cannot just be shoved through on a non-universal basis. I was asking for the authority on which it is included.

I am sorry if I misread the time limits regulation. Could the Minister confirm that, if the Government give notice before 31 December 2028 for 12, 15, 19 or 120 more rounds to come, they will then be able to continue post that deadline? So they can in fact manufacture a deadline.

Finally—rather than my having to intervene again; I hope you will bear with me, Ms Jardine—could the Minister confirm to colleagues what he said: we are being asked to vote today for higher energy bills for our constituents in perpetuity, or certainly for the next few years, as a result of this instrument? Just so everyone is clear: you are voting for higher bills.

[Michael Shanks]

I thank the right hon. Member for his second speech in the debate.

--- Later in debate ---

[Kit Malthouse]

I was trying to save time; I can intervene more if the Minister wants.

[Michael Shanks]

I understand the point. First of all, I have been really clear. This regulation, as it clearly sets out, comes to an end on 31 December 2028. We will come back to the Committee to update the regulations should we wish to continue the scheme. We have run AR7—it was a successful scheme. Obviously, we want to monitor what happens in AR8 and AR9. We may be able to devise other schemes. It may be that by then that our industrial strategy has delivered the supply-chain benefits across the UK and that that is not necessary, but supply chains do not come out of nowhere.

The shadow Minister, the hon. Member for West Aberdeenshire and Kincardine, made one other point that I wanted to come back to. When we left Government, two supply chain companies were building solar in this country. When we took back Government in 2024, there were none. If we want to have supply chains in the UK, we have to support and invest in them. That is not just a cost. It also delivers good jobs across the country, and our energy security.

On the question about raising bills, the right hon. Member for North West Hampshire is quite wrong. The outcome of building the clean power system is that we will bring down bills, but we have to be able to build it and that means supply chains here in the UK as well, because the rest of the world is also in a race to build clean energy infrastructure.

[Kit Malthouse]

So is that a yes about voting for higher bills?

[Michael Shanks]

It is a no, because the counterfactual, of relying on gas, as his party is so determined to do, would put up everyone’s bills significantly. We are the ones bringing down bills, and on 1 April all our constituents will see that the decisions this Government have made will reduce their bills by 7%.

There are a number of points in this statutory instrument that I could go over again; in the interests of everyone’s time, I will not. I reinforce the point that we believe that if we are building an energy system for the future here, we should deliver the good jobs and industrial benefits that come with that. That should not be a controversial argument, but it seems that it still is. If we want to have an industrial strategy, we cannot be agnostic, sit on the sidelines and hope that someone else will do it—we have to drive it forward. If we want our constituents to have good, well paid jobs across the country, helping build the energy system, we have to do something about it. This Government are doing that, and I commend the regulations to the Committee.

[Kit Malthouse]

On a point of order, Ms Jardine. I do not mean to be difficult, but the Minister has not answered all the questions I posed—not least about the assumptions of the 16:1 leverage, which is apparently the big bonus coming in. I also do not know whether it is appropriate for us to vote on what is effectively an open-ended budget. Fundamentally, the impact I am most worried about is the one on my constituents—that I am not going to be able to tell them how much this will cost them; that is quite a significant hole in the Government’s argument. I am not aware of other statutory instruments where we vote for an open-ended budgetary allocation that our constituents will have to pay for, whether they like it or not.

I have time this afternoon. If you, Ms Jardine, want to suspend the sitting while the Minister goes and finds the answers to those questions, I am quite happy for that to happen. It seems to me disrespectful for us to rattle through something that will have an impact quite soon on people’s electricity bills.

[The Chair]

Thank you. That is not a matter for the Chair but the right hon. Member’s comments are on the record, and I have taken note of them. It is appropriate now for us to move on.

Question put.