Electricity Capacity (No. 2) Regulations 2019

Lord Stunell Excerpts

Wednesday 17th July 2019 Lords Chamber

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

My Lords, the capacity market is a key element of the Government’s strategy for maintaining the security of electricity supplies in Great Britain. This instrument will help maintain a strong security-of-supply position into the future. The capacity market secures the capacity required in Great Britain during periods of peak demand through competitive, technology-neutral auctions normally held four years and one year ahead of delivery. These are known as T-4 and T-1 auctions. Those who win capacity agreements—known as capacity providers—commit to providing capacity during periods of system stress in exchange for receiving capacity payments.

I will briefly provide some context before expanding on the provisions of this draft instrument. On 15 November 2018, the General Court of the Court of Justice of the European Union annulled the European Commission’s state aid approval for GB’s capacity market, introducing a “standstill period” until the scheme can be reapproved. The judgment means that the UK Government are not able to award capacity agreements or make capacity payments unless and until state aid approval is obtained. The Commission is currently conducting a state aid investigation for the capacity market, and we are working with it to ensure it can reapprove the scheme as quickly as possible.

We have taken steps, through an earlier instrument—the Electricity Capacity (No. 1) Regulations 2019—and associated changes to the capacity market rules, to maintain the operation of the capacity market, to the extent possible, while state aid approval is obtained. The steps we have taken to put in place these interim arrangements are currently subject to judicial review proceedings, which we are robustly defending. The House of Lords Secondary Legislation Scrutiny Committee has highlighted the continuing uncertainty for the capacity market resulting from these judicial review proceedings and from the Commission’s state aid investigation.

This second instrument put before the House today focuses on future auctions, which will not proceed unless and until the capacity market has state aid approval. This means the instrument is unlikely to be impacted by the judicial review. First, the instrument makes changes to enable the T-4 auction for the 2022-23 delivery year, which was postponed following the state aid judgment, to be replaced by a one-off T-3 auction. It will only be held if state aid approval has been received and would be held in early 2020. Secondly, this instrument makes changes to remove or reduce what might otherwise be unnecessary burdens on business in relation to credit cover.

Applicants seeking to enter certain types of capacity market unit—for example, those that are unproven or not yet constructed—into a capacity auction are required to provide and maintain credit cover. The instrument adjusts the credit cover requirements for a CMU entered into both the upcoming T-3 and T-4 auctions, to enable the credit cover obligations for both auctions to be satisfied jointly rather than separately.

It also extends the existing suspension of credit cover obligations, provided for by the Electricity Capacity (No. 1) Regulations 2019, to the three upcoming capacity auctions likely to take place in 2020. It makes changes to ensure that when the suspension of credit cover is lifted, following state aid reapproval, existing exceptions to credit cover requirements still operate as intended. Finally, the instrument makes changes to support the participation of certain unsubsidised renewable technologies in future auctions.

The capacity market was always intended to include all unsubsidised technologies. Some types of renewable technology, such as biomass, have always been able to participate provided they are not receiving other specified low-carbon subsidies. However, when the capacity market was conceived, wind and solar required subsidy, so were not included in its technical rules. With unsubsidised renewables now a prospect, the capacity market rules have recently been amended to allow wind and solar to participate.

This instrument supports this change by requiring state support for new-build renewable CMUs, which has been declared under the rules to be deducted or repaid from capacity payments. This enables renewable technologies in receipt of subsidies—other than those which exclude them from the scheme entirely—to participate without cumulation of state aid received through the capacity market and other schemes. Alongside these regulations, we have also laid complementary amendments to the capacity market rules, which govern the technical and administrative procedures relating to capacity market operation.

These regulations are necessary to ensure the smooth running of the capacity market in the period after state aid approval is received, and to broaden the participation of renewable technologies. I commend the draft regulations to the House.

[Lord Stunell (LD)]

My Lords, I will ask the Minister some questions, and I express some surprise that, in his presentation to the House, he did not mention demand-side response, which was the subject of an intervention I made on a previous occasion, and the reason why the state aid ruling was made by the European court. As it is absolutely at the centre of the reason why this matter has not been settled and the UK Government’s proposals were rejected, the Minister owes the House a little more detail about that, particularly because, as I understand it—he made the point himself—all the paperwork in front of us today is conditional on implementation on receiving state aid approval from the EU. At the moment, that is still outstanding.

That arose from an action taken at the European Court back in 2015 by a small company called Tempus Energy, which claimed that the system was discriminatory against those who sought to reduce electricity consumption as opposed to increase electricity generation. The outcome of that was that its claim led to the UK’s scheme being sent back for a rethink.

The way it is supposed to work is that firms bid into the auction at the price they need, either to keep existing plants open to generate electricity or to create new capacity from scratch. It does not deal adequately with the situation of companies which have come forward with a commercial proposition that they will reduce overall electricity consumption. That is surprising because, in fact, overall electricity consumption is falling, not rising. The Government itself recently took account of that, having for a long time somewhat denied the relevance of it to the whole question.

Having said all that, it is surprising that the Minister has not referred to the ECJ judgment, in particular to paragraphs 203 to 207 of it, and paragraphs 27(e) and 69 of the official guidance put in support of that judgment. Has the Minister read those paragraphs, and if he has, does he think that the plain and ordinary meaning of them could in any way be construed as a simple technical reprise as opposed to an outright rejection? How certain is he that the judgment of the European Court was not, as the Minister in the House of Commons alleged it to be,

“a challenge to the nature of the UK capacity market mechanism itself”?—[Official Report, Commons, 19/11/18; col. 1090WS.]

It seems that it is not very easy to make that stand up, and as regards our taking a decision today, it needs at least a little amplification and clarification.

The allegation put to the European Court was that our UK system was discriminating against those who had a commercial appetite to reduce electricity consumption as opposed to having proposals to provide generation. I hope the Minister will say that is not true and contradict the advice I have been given that, the way the system is designed at the moment, those who want to reduce consumption—the capacity supply industry—have to make sure they have a payback period in 12 months, whereas those on the demand side are given 15 years. That inequality is leading to discrimination, which means that DSR is extremely difficult to bring within the scope of the support that these regulations are intended to provide.

I hope the Minister will be able to give us some reassurances about the amount he has read and the legal interpretation of it he has, as well as something about demand-side response and getting that playing field level for all those who want to contribute to carbon reduction in the UK via the electricity market.

[Lord Teverson (LD)]

My Lords, I know the Minister always likes to hear optimism and congratulations on energy policy from these Benches. I will start with that, in that I am pleased that renewables—I understand the caveat about unsubsidised renewables—will be able to bid for the capacity market in future. The irony, somewhat, is that the form of renewables that costs the least and is most likely to be unsubsidised—onshore wind—has been banned by the Government. I think others will speak about that area later in this debate.

The capacity market came into operation in about 2014, which to us in this House probably sounds like yesterday, but in the development of the energy market—decarbonisation and the way in which variability, storage technology and all those other areas have moved forward—there has been a big change. The question we should come back to—as well as many of my noble friend Lord Stunell’s excellently made points—is: where do we need to go with the capacity market at this stage?

In this statutory instrument we have more of the same, to catch up with what we have not been able to do because of the European Court of Justice decision. I suggest that the capacity market, which was essential back when the Energy Act put it into place, is more questionable at the moment. I ask the Minister: what has the cost of the capacity market been to date? In recent years, what percentage of annual electricity consumption has the capacity market contributed? I am trying to get an idea of the scale of this instrument’s use and how important it has been. One thing is quite obvious: I understand that there has been an auction during this period of standstill. Given that there is no panic about this, do we need this capacity at all?

I repeat my noble friend’s points about demand-side management. It has been a characteristic of energy policy that we have always prioritised supply and capital investment, following demand, rather than trying to reduce demand and looking at the demand side rather than the supply side of the equation. Will we be in a position where demand-side response—the aggregators and that side of the industry, so important to our future —is able to compete not just in the one-year bids but in the three- and four-year bids? Will that now be the case? Where are we on storage? I believe that it is still not included as a sector that can bid for the capacity market. I hope that I am wrong on that, but I would be interested to hear that from the Minister.

So my real question is: how does the Minister see the capacity market moving in the future? I would love to see in the new energy White Paper—I hope the Minister will tell us this evening when it will be published—onshore wind coming back on to the system.

In terms of this particular statutory instrument, yes, it does the business, but we need a far more strategic approach to this part of the market than we have at the moment.

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[Lord Henley]

I might have to write in greater detail, but both T-1 and T-4—the short term and longer term—deal with the point about discrimination. I might be wrong, but I will think about that and come back to the noble Lord.

[Lord Stunell]

I am sure that the Minister is aware that for the cost of a gigawatt of generation capacity, you could have a great deal more demand reduction capacity, but only if the right trading environment is in place. If I can offer support to my noble colleague on the Front Bench, it does mean that by the time you have built the generating capacity, the case for the demand-side reduction shrinks. The noble Lord’s argument that six months was therefore justified in the one case, and 15 years was necessary in the other, is precisely the point that the European Court of Justice felt was evidence that the European Commission had not looked thoroughly enough at the UK Government’s scheme. I would have expected him to be saying that this aspect had been reviewed in bringing forward alternative regulations to the House.

[Lord Henley]

Again, it might be better if I write to the noble Lord on that point. He is aware that the Commission—which we support on this—is not happy with that judgment. It needs to be looked at and, as I made clear earlier, we are working with the Commission to ensure that it has everything it needs to continue considering that wider state aid approval for the regime as quickly as possible. I will write to both noble Lords on that point. I made it clear to the noble Lord, Lord Teverson, that I will also write with a more detailed letter on the cost of capacity auctions and the amount of capacity that has been used in the past.

The noble Lord, Lord Teverson, also asked about storage. Both he and I have stressed on other occasions that we see storage playing a great role in the world of energy in the future. I can give an assurance that storage is able to compete in the capacity auctions and has been able to since the outset. I have dealt with the question from the noble Lord, Lord Grantchester, about when we will publish the five-year review; as I said, we hope to do so shortly. That will not be the end of the process, which will identify areas of the capacity market’s design where further amendments may be necessary.

The noble Lord, Lord Grantchester, also asked about support under some schemes preventing renewables participating in the capacity market altogether, where other schemes simply deduct from the capacity market payments. It remains appropriate to exclude CMUs which benefit from contracts for difference, the renewables obligation and feed-in tariff payments, as those are the most likely and significant alternative support for CMUs participating in the capacity market. That prevents the accumulation of state aid. Less significant forms of support do not exclude renewable CMUs from the capacity market. Instead, the rules require new-build wind and solar generation to declare this support, so that it can be deducted from capacity payments. What a capacity provider is authorised to receive under state aid, in addition to its capacity payments, does not need to be declared or deducted.

I turn to a matter rather beyond this debate: our general policy on onshore wind. I can tell both noble Lords who raised the subject that I know of no plans to change that policy. We have seen great improvements in offshore wind, which has the great benefit over onshore wind of being in windier, flatter places where it is possible to build even bigger windmills than are possible on land, as I think even the noble Lord would agree. I therefore cannot offer him any hope that our policy is about to change on that.

Lastly, the noble Lord asked about the energy Green Paper, which we still hope to publish before we break for the summer. He will have to be patient for only another four or five days.

I have dealt with most of the points raised and offered to write on others. I beg to move.

Electricity Capacity (No. 1) Regulations 2019

Lord Stunell Excerpts

Wednesday 3rd April 2019 Lords Chamber

[Lord Tope (LD)]

My Lords, I am grateful to the Minister for a full and clear explanation of both the regulations and the need for them, which arises from the CJEU ruling. As he has said, the majority of the industry clearly supports these regulations, they are necessary, and they go a considerable way to reduce uncertainty. Therefore, we certainly will not oppose them and will support them.

First, on the theme of uncertainty, the Secondary Legislation Scrutiny Committee, to which the Minister referred, concluded its report to your Lordships by referring in paragraph 18 to the “considerable uncertainty” and suggesting that we might wish to explore further how the Government propose to deal with it. I will be brief, because this is not my subject. Can the Minister tell us specifically how the Government will continue to engage with the industry—I am sure they will wish to reassure the industry that that will be the case—and what steps they will take to try to perhaps restore and certainly to keep the confidence of the industry and investors at what is inevitably a very uncertain time?

Secondly, probably the greatest uncertainty at this precise moment, which is not particular to this industry, is our place within the European Union. The regulations are brought forward at this stage on the assumption, quite rightly, that we are members of the European Union and that we will remain members of the European Union during the implementation period of a negotiated withdrawal agreement. The inevitable question comes: what if that is not the case? We may all hope—I certainly do—that that is the case; indeed, I hope that we remain members of the European Union, full stop. But at this moment, many would argue that the most likely scenario is a no-deal withdrawal, not in weeks but days. That may happen. Can the Minister give us any guidance as to what preparations have been made and how ready the Government are to deal with that scenario if, unfortunately, it actually happens?

My third point was raised in the other place when it debated the regulations yesterday. There was strong doubt whether the CJEU ruling was based solely on procedural grounds, as the Minister said and the documents on the regulations state. It was suggested that other grounds were included in the ruling; it would be useful to know whether the Government recognise that to be the case and, if so, what steps they are taking to deal with those other concerns.

I thank the Minister again for bringing the regulations to the House. They are necessary in the light of the ruling and the uncertain times we are in, and I wish them a fair way for such time as they are needed.

[Lord Stunell (LD)]

My Lords, first, I support what my noble friend said and pick up in particular his final point about the scope of the judgment in the European Court.

I thank the Minister for his reply to my Written Question last week. I am pleased to have had the Answer, although not so pleased with what the Answer was. The point I was raising, which I want to raise now, is that in looking at the capacity market, the UK Government have not made sufficient allowance for demand reduction strategies. They have looked purely at providing capacity to fulfil forecast future electricity demand.

We know from the predictions made over the past decade and the reality of electricity consumption that those predictions have, year after year, been wrong, assessing an electricity demand that has not been reached. In other words, electricity demand is not rising as rapidly as the predictions, and the calculations being used by the Government in drawing up state aid do not provide a level playing field between cash available to those delivering additional capacity and cash available for those who have strategies to reduce the demand for electricity.

My Question sought to explore that point, but the reply I had was that that was not the case: there is an allowance for demand reduction and, if I understood the reply, it would be possible, at least in theory, for those with a strategy to reduce demand to draw on the same aid as is available for those who would provide additional capacity to meet demand. Is that the case? In particular, is the calculation of the time period over which a capacity building strategy is calculated and over which a demand reduction strategy is built the same?

The point being made to me by those who might be willing to provide a strategy to reduce demand is that it is not a level playing field. My understanding of the European court decision is that it was not just a technical and procedural point: the court believes that the British Government are fiddling the figures and not providing a level playing field for both sides of that equation. I would like the Minister to provide a more complete answer than the one he gave me last week and perhaps he will explain to noble Lords how in the future the requirements of the European court judgment will be met and how the calculations will be put on a more even footing so that we can do what is surely more sensible, which is to spend taxpayers’ money on reducing demand rather than spend it on fulfilling capacity commitments which are in fact unduly onerous and pessimistic.

--- Later in debate ---

[Lord Henley]

I am grateful to the noble Lord, Lord Grantchester, for his support for this instrument, and I look forward to that support in a few minutes when I conclude my words. At the same time, he called for a halt. Since we are talking about security of supply, I simply cannot go along with him. It is the Government’s view, widely supported by the industry, that the capacity market is the best way to deliver security of electricity supply at the lowest cost to consumers. We will debate this matter tomorrow at Question Time. It is important that we have security of supply and that we have it at the best price. As I said in my opening remarks, our current security of supply positon is robust. I cited the figure that we reckon the margin this winter will be— over 11%, the highest for five years. That shows that the market works.

A number of concerns have been raised and a number of questions put, and I hope I can deal with them. I will first get on to the question of uncertainty and engagement that the noble Lord, Lord Tope, raised, echoed by the noble Lord, Lord Grantchester. It is important to recognise that there is uncertainty. We appreciate that any judgment of the Court of Justice of the European Union creates uncertainty and potential difficulties for the industry.

As I made clear, the Commission is investigating the scheme, and recently confirmed that it is moving on to the next phase. This is an important step as we work to reinstate state aid approval for the capacity market as soon as possible. We are working with the Commission to ensure that we have everything necessary to reconsider the scheme as quickly as possible. I assure the noble Lord, Lord Tope, that we will continue to engage regularly with stakeholders; we will provide them with updates on progress and the re-notification process, and clarity on arrangements during and following the standstill period.

We are confident that the Commission will approve the scheme following its investigation. We hope that that investigation will conclude ahead of October 2019, the start of the 2019-20 delivery year. We consider it very improbable—although it is possible—that the decision will be delayed into 2020. In the unlikely event of a negative state aid decision, or no decision, by October 2020, the instrument will terminate capacity agreements and, as I said in my opening remarks, any entitlement to receive capacity payments. Supplier payments then held by the settlement body will also be returned, which will ensure that supplier payments cannot be held indefinitely.

The noble Lord, Lord Tope, asked about the position after a no-deal Brexit. The Government have made it clear that no deal is exceedingly unlikely. However, while the UK remains a member state or is subject to an implementation period following a negotiated withdrawal, the current state aid regime will apply and the Commission will need to approve the scheme. The Government intend there to be a domestic state aid regime after the UK leaves the EU. The draft State Aid (EU Exit) Regulations 2019 are currently before Parliament. In a no-deal exit, the UK will be subject to a domestic state aid regime, for which the Competition and Markets Authority, rather than the Commission, will be the regulator. This assumes that the draft State Aid (EU Exit) Regulations are agreed by both Houses and made. If, at the time the UK leaves the EU, the Commission has not yet approved the scheme, it will then be a matter for the CMA to investigate and approve that scheme.

The noble Lord, Lord Tope, asked whether the decision of the court itself was purely procedural. This question was echoed by the noble Lords, Lord Stunell and Lord Grantchester. The court gave examples of where the Commission should have had doubts and should have investigated them, but it did not rule that the design was incompatible with state aid requirements. We have carefully considered each issue raised through that court judgment and remain confident that the design of the capacity market is compatible with the state aid requirements. We cannot pre-empt the outcome of the Commission’s investigations, but we are confident that the scheme will be approved by the Commission following investigation, not least because it has approved six other capacity markets since 2014.

The noble Lord, Lord Stunell, asked whether the capacity market did not sufficiently support demand-side response. As I made clear, the purpose of the capacity market is to ensure security of supply, at least cost, for the consumer—something we all desire to achieve. It is technologically neutral and allows all types of capacity, including DSR, to participate without discrimination.

The design of the capacity market provides for features that support demand-side participation, including lower credit cover, participation as price takers and three metering options. The Government are also taking broader action to support DSR, as set out in the smart systems plan. The five-year review of the capacity market, which the noble Lord, Lord Grantchester, asked about, will also explore further ways in which DSR participation can be supported.

The noble Lord, Lord Grantchester, also asked about the judicial review and the case raised by Tempus. We are confident about our position. The Government will robustly defend this challenge and, as I said, we are confident in the steps we are taking to reinstate the capacity market and to operate the scheme to the fullest extent possible during the standstill period within state aid constraints.

Turning to renewable generation and carbon reduction, the noble Lord, Lord Grantchester, implied that we were not serious about switching to low-carbon electricity generation. As he will be aware, we are committed to switching away from coal. We have announced that we will be giving up coal in 2025 and increasing the share of renewables and gas in electricity generation while reducing the cost of renewables. We have seen a dramatic reduction in the cost—I recently cited the figures for offshore wind—and we have invested £92 billion in clean energy since 2010. We have quadrupled our renewable electricity supplies since 2010 and the share of electricity generated from low-carbon sources reached a record high of 56% in the third quarter of 2018, with 33% from renewables. I hope the noble Lord will accept our commitment in that area.

[Lord Stunell]

I thank the Minister for what he has said so far and for his shopping list of money well spent. I do not wish to challenge that but is he satisfied that the Government’s investment is rightly balanced between generating new capacity—renewable or otherwise —and demand reduction? He said that the system takes account of DSR but he did not answer my point about whether there are equal investment opportunities to reduce a kilowatt hour as there are to increase capacity by a kilowatt hour.

[Lord Henley]

My Lords, I am satisfied but I will consider carefully what the noble Lord has said and look again at the Written Answer to which he referred, which I sent to him last week. If I can elaborate on it and provide him with further examples of how we have taken DSR sufficiently into account, I shall write to him on that if I feel it necessary. However, I do not accept his basic premise that there is not a level playing field.

I believe I have answered all the questions put to me. This is an important statutory instrument and I commend it to the House.

Climate Change

Lord Stunell Excerpts

Thursday 24th January 2019 Lords Chamber

[Lord Stunell (LD)]

My Lords, it is a great pleasure to take part in this debate. It is timely and important and I strongly endorse the many excellent contributions that have been made so far. I intend to focus my remarks on the UK’s domestic policy response to the formidable challenge of climate change. It is—literally—domestic policy: what is it doing about houses? We have to face up to the fact that we have 20 million homes in this country and the Government would like to be building an extra 200,000 a year, and the standards of the existing and new ones are absolutely crucial to tackling climate change. So I am afraid that my remarks will not be quite as positive as those of the noble Lord, Lord Bethell. Perhaps he will provide the carrot and I will provide the stick to the Government to persuade them to get on with some of the things that need to be done.

The built environment contributes 30% of the carbon dioxide emissions of the United Kingdom, so any policy that we have to reduce carbon emissions has to take tackling emissions from the built environment deeply seriously. Better energy efficiency for our buildings, especially for our homes, reduces carbon emissions, saves energy consumption, reduces the amount of power we need to generate in the first place, lowers the cost to the consumer and improves their health, and reduces costs to the NHS. There are so many different boxes that you have to tick once you start on it that it is perhaps very surprising that we do not take improving energy consumption in the built environment with anything like the seriousness with which we treat improving energy consumption in the transport sector—which actually produces fewer CO₂ emissions.

I am afraid that the present Government have a very poor record of inaction and of making things worse as far as the built environment is concerned. They blocked the introduction of zero-carbon homes energy standards for new homes in 2016, they have frozen and diverted a lot of the energy company obligation payments which were due to be supporting improvements to the existing housing stock and they have abolished feed-in tariffs. At present, 51% of homes with cavity walls still do not have insulation in those cavities, 63% of the roofs of homes in England have less than 200 millimetres of insulation, which is regarded as the minimum to ensure sensible living standards, and 44% of those on the gas network still have older boilers with up to twice the gas consumption of up-to-date condensing and combined boilers.

Those figures come from the ironically titled Progress Towards the Sustainability of the Building Stock in England: Sixth Parliamentary Report, which was published in July last year. It may be characteristic of the problems that its publication date was delayed by 15 months and came only after I had asked three Parliamentary Questions about when it was going to be published. It contains many well-hidden gems, including that the average efficiency of new homes fell in 2016 compared with 2015.

The Government try to deflect responsibility for taking action on to others and to rely on transparency and peer pressure in order to achieve progress. That is why I asked a Question in December about the proportion of public buildings that display energy performance certificates and what the Government were going to do to improve those figures. The Answer I got was interesting.

“We have no estimate of the proportion of publicly-owned buildings to which the public has access which display an Energy Performance Certificate”.


It goes on to state that responsibility for enforcement rests with local weights and measures authorities—LWMAs. They have guidance issued by the department. The Answer states:

“This guidance has been updated periodically since 2008, most recently in March 2016”—


and it is for them to get on with it. I looked at that guidance, but obviously the person who drafted the Answer to the Question did not.

I am very aware of the time here. The guidance makes very clear the duties of those authorities, and that their duty is to report annually to the department, which will,

“publish each year the outcome of their submissions”.

If that is true, the Answer I received to my Question was clearly false, because the Government do have an estimate of the progress being made and of the proportion of public buildings. It might have been more truthful to say, “We haven’t actually bothered to look and we really don’t care that much”. The impression is that slowly, stealthily and insidiously the Government are backing out of their climate change commitments. I will be more charitable: I think that they have just completely lost focus on the easy wins of CO₂ emission reduction in the built environment.

That brings me to my final point. A briefing from Oxfam alerted me to the fact that the UK Government are currently considering offering to host COP 26—the Conference of the Parties 26—in 2020. Oxfam wants the UK to do so in order to,

“ensure that the international community honours their commitments”.

My plea to the Government is that, while we weigh up the options of hosting that event and of pulling splinters out of other nations’ eyes on their carbon emissions, we should also urgently start to pull the planks out of our own.

Off-site Manufacture for Construction (Science and Technology Committee Report)

Lord Stunell Excerpts

Wednesday 12th December 2018 Lords Chamber

[Lord Stunell (LD)]

My Lords, it is a great pleasure to take part in this debate and to follow the excellent speeches so far. I thank the noble Lord, Lord Patel, and the committee for producing an excellent report: it is wide-ranging, has a set of very balanced and sound recommendations and is founded on sound, solid analysis of the situation. We need to reflect on the fact that the construction industry is the most important and strategic of all the industries in this country. We sometimes talk about aerospace or the car industry being strategic, but the fact of the matter is you can buy cars or aeroplanes from somewhere else. You cannot buy new factories from somewhere else—or new houses or hospitals, for that matter. If the Government want to see a booming economy and solid, well-supported social services, it always comes back to something that has to be provided by the construction industry. That is reflected, to some extent at least, in the Government’s response to the report and their action in establishing the construction sector deal and strategy. I will come to that in a moment.

However, it is not just a question of maintaining an industry and improving it marginally; it is being given a much bigger job. Getting housing up to 300,000 units a year by 2020 is a formidable task, when we are struggling to reach 200,000. That involves a huge expansion of capacity. One could say the same about the health service, major infrastructure projects and a whole range of things. The report went to the Select Committee in the other place, which received details saying the industry would need to expand its capacity by 35% over the next 10 years. That is a huge challenge and, no doubt, the Government will want to engage with the industry in delivering it.

At the same time, there are 70,000 retirements each year from the workforce, and only about 30,000 to 40,000 people are being recruited into the industry from within the United Kingdom. Until now, that gap has been filled at all levels of the industry by the recruitment of workers from overseas—from architects, engineers and other professional workers to the skilled workers on-site. At the time the referendum was held, there were 200,000 EU 27 workers in the construction industry. It is a signal of the direction of travel that there are now, according to the ONS, only 156,000—in other words, a drop of 40,000 in that migrant pool of workers in the construction industry.

With the workload increasing and the labour force availability decreasing, there are clearly some major pressures and challenges. It could well be that off-site building, modern methods of construction—there are about five different ways of expressing it—can certainly contribute a great deal towards filling that gap.

However, there are other problems. It has already been mentioned that the report identifies a skills gap as well as a personpower or manpower gap. The problem is that, in a fragmented industry with a very large number of single-person or two- or three-person small-scale subcontractors, their capacity to provide training is somewhat limited. I think the report has let the Minister off quite gently on the ineffectiveness of the levy and on the current way in which apprenticeships are supported in the construction industry. I hope we can return to it in a more considered way on another occasion.

The Government’s response says that they have now approved 50 apprenticeship modules. That is intended to deliver 25,000 new apprentices into the construction industry by 2020. So 25,000 new apprentices are going in when the workforce is shrinking at 20,000 a year from retirements and another 20,000 a year from the reduction in EU migrants. It is not nearly enough. The Minister has approved 50 modules. How many more are stuck in the in tray, with the levy unspent, because it is just not possible for firms to get apprenticeships started?

Reference has been made to the T-levels, but I notice that the figures are pretty meagre. Courses in the construction sector are planned to start in 2020, and the response boasts—I think I can use that word—that there will be 1,000 people taking them up. Well, that is an extra 1,000 apprentices added to the workforce in 2022. It is a drop in the ocean. The Select Committee report also mentions that the type of skills needed is expanding in the construction industry; the noble Baroness, Lady Young, made the point about digital skills.

There is no doubt at all that taking manufacture off-site and putting it under cover provides opportunities and possibilities which are difficult to provide in the traditional industrial model that we have in the construction industry. That is good. But the report says that, to do that, it is essential to have a consistent pipeline of investment and of building. The problem is that, although we have a National Infrastructure Commission and an infrastructure development authority, the reality is that, rather than a pipeline, we have some sort of tangled-up hosepipe. Every time somebody is ready to spray the water on the flowerbeds, someone else steps on the pipe and no water comes out. You look down the pipe to see what has happened to the water, then someone turns it back on again and you get sprayed. That is what the industry feels like as far as consistent investment goes. I hope the Government will be prepared to say something about how they will do some countercyclical investment, particularly in housing, to make sure that that consistent pipeline is there.

The report also mentions research and development. The figures are awful because the Government think the industry spends £370 billion a year. They have obviously captured more than the report, which refers to £138 billion a year. Whatever the number is, the figure the Government have produced for the amount of R&D tax credits given by HMRC is £45 million. For the smaller figure that represents 0.04% of turnover going into research and development. The Government’s comment in their response to the Select Committee is that this,

“is low compared to some other sectors”.

I have no idea which other sector could manage to get less than 0.04%, but maybe the Minister has some information. Quite clearly it should be 2% to 3%—it should be a significant number. That really will be important if we are to move to a new model off-site.

What is the machinery for delivering this and to knock down the barriers? The construction sector deal is a very good step forward. We have certainly welcomed it. We believe it is an essential way for the Government to interpose in this. The way to deliver it is through the Construction Leadership Council. That is how things are mediated between the Government and the industry. I think it is something of a phantom body. There is a lot of “will do” this and “will do” that, rather than “have done” this and “have done” that. What actual spend has there been to date on the strategy? We are a quarter of the way through the time period. How far are we through the spending period? The noble Baroness, Lady Young, talked about cycles and election cycles. The current election cycle could do with having a stabiliser fitted to it, but leaving that point aside we need to know and understand what the Government intend to be the rate at which the strategy will develop. When will that first annual report be published? As the Select Committee asked, when and what is the timeline for that?

Many other vital points appear in the report, but in my last couple of minutes I will raise important issues that could do with more emphasis. Only 9% of the construction industry workforce are women. Off-site provides a chance to reset the image of construction and the environment in which construction is carried out to be far more appealing to those who are not attracted to the industry. I hope the Government and the Construction Leadership Council will work together to change the perception and the reality.

I have to agree with the noble Baroness, Lady Young—it is not just about getting the quantity right; we have to get the quality right. Some 93% of new homes handed over to their new owners last year were reported as having defects. The fact is that existing standards are not complied with and they are too low. Sustainability and durability are not taken seriously by the current construction industry—put it up, walk away. We have to have a model that understands that it is a whole-life process, with whole-life costing and sustainability. I was pleased to see that there will be some evaluation projects for sustainable homes, paid for out of the strategy, but we should immediately move to put zero-carbon homes standards in place. I do not think that there is any excuse for putting it into the long grass any longer—just do it.

Overall, this is an excellent report. It highlights that a huge amount of work has to be done if we are to create a fit-for-purpose industry with the capacity and skills to build a long-term, sustainable environment and infrastructure to serve the whole country. I look forward to hearing that the Minister recognises that, without that, practically all the other policy aspirations the Government have, whether housing, health, education or economic growth, will not happen without a viable, strong construction industry.

Buildings: Energy Performance

Lord Stunell Excerpts

Tuesday 11th December 2018 Lords Chamber

Asked by

[Lord Stunell]

To ask Her Majesty’s Government what steps, if any, they plan to take to improve the energy performance of buildings as a contribution towards reducing carbon emissions and achieving the United Kingdom’s climate change obligations.

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

My Lords, the Government are committed to improving the energy performance of buildings—with some speed, I hope. In the clean growth strategy, we set out our aspiration for domestic properties to achieve energy performance certificate band C by 2035, to reduce business energy use by 20% by 2030, and for the public sector to achieve a 30% reduction in carbon emissions by 2020-21.

--- Later in debate ---

[Lord Stunell (LD)]

I thank the Minister for his Answer. He will know, of course, that the UK’s performance is falling well below the targets set in the clean development strategy and, indeed, in the figures he just gave. Buildings account for 30% of the UK’s energy emissions. Is it not time to start a major programme of retrofitting existing buildings, particularly homes, thereby saving people’s energy costs and meeting our carbon targets?

[Lord Henley]

My Lords, I accept the importance of buildings in achieving our carbon reduction targets. But I remind the noble Lord, as I have previously, that since 1990 we have reduced our emissions by some 43%; that is the fastest decarbonisation of any G20 country, which is something we can be proud of. As the noble Lord correctly states, it is important that we do this particularly for buildings. The clean growth strategy set out our aspirations for as many homes as possible to be upgraded to an energy performance certificate of band C by 2035, and we will continue to pursue that.

Industrial Strategy

Lord Stunell Excerpts

Monday 8th January 2018 Lords Chamber

[Lord Stunell (LD)]

My Lords, it is a pleasure to take part in this debate. I also welcome the production of the industrial strategy. I am pleased to follow the noble Earl, Lord Lindsay, with his strong emphasis on the need for quality infrastructure—a point to which I shall return in just a moment or two. I shall also draw in from one of the other threads of the debate what my noble friend Lady Randerson said, when she identified the 4 million shortfall in skilled workers that the UK economy faces in the near future. I also pick up what the noble Lord, Lord Maude, said, when he said to remember to talk to the small companies. I shall just weave in that social enterprises will not, I hope, be left out of that consideration as well.

Some of the strands of this debate have looked at whether the strategy is just repackaging or whether it is chasing the moon—but I shall take it at its face value as being a new and very important contribution to setting the UK economy in the right direction. The foundations set out are broad but sensible ideas, with much more to come on research, innovation and people, to develop a world-class skills training to match higher education. That is a very big objective to achieve, as many speakers have pointed out. There is to be an enhanced business environment so that companies can start, grow and prosper, as well as investment in infrastructure, particularly in transport, housing and the digital environment—and, in places, levelling up growth and providing job opportunities in every part of the kingdom. Those are very big and broad objectives.

The report talks of the grand challenges of artificial intelligence and big data, green growth and mobility, and of an ageing society. I suggest to your Lordships that as well as those four big challenges there is one missing challenge necessary to be met before the five foundations can be delivered, the challenge of a shrinking labour force and a reducing capacity to deliver in the one industry that is central to the delivery of all of that—the construction industry. That is not just a nice-to-have industry, but a vital one. If you want the ideas foundation, you will need laboratories and workshops, and they will need to be built. If you want world-class skills training to match higher education you will need buildings to conduct it in, and you will need laboratories, workshops and, possibly, a revamping of many of our colleges of further education. If you want a business environment where companies can readily start, grow and prosper, you will need the construction industry to deliver.

I could go on—but let us just take housing. If you are going to double housing production, in very broad terms you need to double the construction force building those homes. I am sure that the Minister will talk about modern methods of construction, but not I think a 50% improvement in productivity in the next two years. If you want to level up growth across the country, whether it is with the northern powerhouse or any other of the regional development strategies, that also requires the construction industry. I labour that point because I welcome the planned construction sector deal as far as it goes, but I put to the Minister that it lacks urgency and a means of delivery, and it underestimates the size of the task.

Page 24 of the strategy states:

“There will, inevitably, be uncertainty while we determine the precise nature of our future trading arrangement with the EU. To minimise this, we are seeking to agree an implementation period, of around two years, to allow business time to adapt to the new arrangements”.


The bit of that that I take issue with is the suggestion that there is any uncertainty. Actually, there is a considerable degree of certainty about what will happen in relation to the construction industry. We know, for instance, that 8% of its workforce is currently from the EU 27 and, in London, 50% of the workforce in construction is from the EU 27. The ICE, supported by KPMG, produced a report submitted to the Exiting the European Union Committee in the Commons, which showed that, if the kind of infrastructure investment which I have just outlined and which is outlined in the Government’s strategy is going to be delivered, the construction industry needs an increase in capacity of 35%, whereas, if Brexit goes ahead and the Government are successful in reducing inward migration, as they clearly intend they should be, the capacity of the industry may shrink by 8% and by much more in London.

It is instructive to read the Government’s own impact assessment, so-called. Obviously, I cannot reveal in this place what I read when I went there; I am sure that the Minister will have read it and will be familiar with it. It is a very good primer on what the construction industry does, how it is organised and how the legislative framework runs round it. That is section 1—section 2 outlines the sector’s fears over what will happen with Brexit, and what will happen with labour. Then section 3, where the analysis, proposals and alternatives come, is absolutely and completely blank. I apologise for revealing that to the House when I swore that I would not do so. But I make it clear that the Government’s own assessment of the industry makes it clear that these are real problems. In case that is not sufficient, there is the construction industry’s own Brexit manifestos and the Construction Industry Training Board White Paper—and, of course, just before Christmas, the Home Builders Federation produced a report along the same lines.

I think that the Minister will say, “Yes, we’ve listened to all that, and we’re working with the Construction Leadership Council to make construction one of the first sector deals of this industrial strategy”. That is okay, as far as it goes, but the industry is now, this year—or last year, anyway—losing 70,000 people from its labour force by retirements, and is recruiting from UK residents fewer than 40,000 people per year. It is topping that up by inward migration, predominantly, at 90%, from the EU 27. People might think, as a caricature, that it is bricklayers and plumbers—but the RIBA says that 25% of the registered architects practising in London are from the EU 27 countries. So this is a problem that will affect the construction industry and the Government’s capacity to deliver their whole industrial strategy from top to bottom.

The Government have a problem, because they want to do two things. They want to stop inward migration. Perhaps the Minister does not want to—and there may be some caveats about that—but it is a fundamental driver to reduce inward migration. At the same time, the strategy will increase the need for the construction industry to deliver by 35%. Slowing down the flow in and expanding the delivery, all in time for the next general election, sounds like a pretty tall order to me. The measures here, and the construction deal in its embryonic form, are no match for the task of supporting an expanded and strengthened construction industry that could deliver on the industrial strategy’s five foundations or meet the four grand challenges.

What is needed first is world-class skills training. Let us suppose that this can be begun in September this year. It surely cannot start earlier than the new autumn term. That means that the first apprentice from this will be available on site and in the design offices in June 2022. The first engineers and architects will be available in June 2023 and 2024. Assuming that everything goes to plan and people can be recruited, people with the high level of skills needed will not be available until 2022, 2023 and 2024. This means that the absolute priority for the construction industry has got to be retaining the existing EU 27 workers who are currently in the workforce and making sure that there is a long-term, simple and cheap transition period for the industry to fill the gap in the meantime. The possibilities of expanding the workforce both by volume and by period of time are vital issues to be addressed.

Having, I hope, convinced the Minister of the need for that long transition deal and easy access to EU 27 labour, the second need is for a strong and stable pipeline of public investment. Picking up on what the noble Lord, Lord Maude, said, 90,000 small companies are delivering almost half the output of the construction industry. Some 86% of those are very small companies with fewer than two employees. They have low incentives to engage in training. They have an unworkable apprenticeship levy to handle. If you are a bigger company, there is no incentive to spend on research, innovation or modern methods of construction or to build productivity unless there is a long-term commitment of public investment in the construction industry.

Thirdly, we clearly have to double skills training. That means retaining trainees in the existing training programmes. Eight out of 10 building trade apprenticeships which start do not result in people going into the construction industry; only two out of 10 of them do. This is, of course, because other offers come along and the construction industry is not seen as very high status. We have to appeal to the whole workforce, only 9% of whom are women. As my noble friend Lord Addington very ably demonstrated, a significant slice of people are excluded from ready entry to such apprenticeships because they do not have the statements to which he referred or the capacity to participate in the standard tests which apply at the moment. Interestingly, one of the largest building contractors that I have been speaking to said that his recruits last year were gamers. They are now looking for people who understand three dimensions and artificial environments when they are designing.

Finally, it is good that the Government have got an industrial strategy and that construction features in it. However, the Minister needs to recognise that construction cannot deliver what the strategy sets out without a huge step change. It cannot deliver 1 million homes and the infrastructure for that export-led boom will remain unbuilt unless the Government pick up the challenges to the construction industry which should have been in this report.

Better Regulation

Lord Stunell Excerpts

Thursday 7th December 2017 Lords Chamber

[Lord Stunell (LD)]

My Lords, it is a delight to respond to this debate but first I need to declare two interests. I was a member of the Liberal Democrat negotiating team that ensured that “one in, one out” was inserted into the coalition agreement back in 2010. I then went on to become a Minister in the Department for Communities and Local Government with responsibility for, among other things, building regulations, which have been mentioned in this debate.

I congratulate the noble Baroness, Lady Neville-Rolfe, who has done the House a service by bringing this debate forward. It is not, perhaps, one of the sexy, high-profile issues that we might see in the press. I do not think that a debate on regulation is going to be reported on the front page of the newspapers in the current news environment, but it has been extremely important and will have a major impact on the way that events will pan out should we leave the European Union. Many contributors to the debate have illustrated the point that being for or against regulation is not a sensible point of view; rather, it is about making sure that regulations are pragmatic and proportional. I noticed that the noble Baroness said she was in favour of good regulations and against bad or poorly enforced ones. I should have thought that that was not very controversial.

I want to pick out one point from the noble Baroness’s case, relating to Grenfell Tower. It would be a great mistake for this House to second-guess what inquiries might or might not say about that, but I have already asked the Minister a Question and have had a reply about the failure to implement one part of the current building regulation regime which would have allowed there to be a signed person on-site with responsibility for saying that there had been compliance with regulations. That, perhaps, would have made the process of finding out who was responsible quite a lot easier.

I drew out from what the noble Baroness said that independent certification was a clear need. She said that in relation to Volkswagen, and she said it in relation to drying machines. Some of us might say that about Brexit. On Tuesday I shall see whether my experience is the same as my noble friend’s when I look at the construction industry in particular. Regulations need to be understandable and enforceable.

The noble Baroness, Lady Andrews, posed some of the key questions to the Minister in this debate. If we are to have regulations that are proportional and effective, preventing them coming before the RPC seems an extremely strange way of going about it. I hope the Minister will find time to give some answers that the noble Baroness and a large number of other speakers have raised in the debate.

I particularly commend the noble Lord, Lord Curry, whose experience is probably unmatched in this House as a former chair of the BRE executive. I think he brought a dose of realism, based on practical experience, and he also said that there was not enough independent challenge in the system. That, again, raises the question of what is happening to the RPC.

The noble Baroness, Lady Henig, in a good contribution on security, listed all the occasions when she has received firm assurances from Ministers in this House that she should not worry and things will be fine in the end. I hope that in his reply today—when he tells us that everything is lovely and we should be satisfied that Ministers will always use their best judgment and best endeavours—the Minister will bear in mind some of the problems that the noble Baroness, Lady Henig, set out.

Good regulation should be about limiting the capacity to do harm—harm by individuals and harm by corporate bodies. That includes physical harm as well as the financial cost to a person who would otherwise be a victim, hindering their capacity to thrive. It is therefore not sound to talk of regulation as simply putting right market failure. We have traffic regulations which say which side of the road we can drive on, but that is not about market failure. We should also understand that the costs to those who are regulated is often easily offset by the savings to those benefiting from the regulations. The House of Lords briefing has drawn attention to the NAO report in September and to the Competition and Markets Authority. The latter has been commented on a little unfavourably in this debate. However, for every pound it spends, it saves consumers £10. We need to understand that proportionality is not simply about cost and not simply about markets. There cannot be mileage in a mindset that dismisses all regulation as the work of the devil and the enemy of growth. On the other hand, neither can it be said that all regulation is good, proportionate and fair and works exactly as it should. As a former Minister and someone who received advice from civil servants I know that regulations are easily generated but that their downsides are often difficult to predict, particularly for those who stay inside the departmental bubble.

That is why successive Governments have pushed hard to get things costed and checked out in advance. That is why we have impact assessments—and as someone who signed a number of those in my ministerial career I can say that they ask many questions, such as: “Have you looked at alternatives? Why are you not following the alternatives? Has there been a consultation? What was the outcome of the consultation?”. Moreover, nothing goes forward—in my time, at least—without the RPC putting its imprimatur on it. It was not a trivial process at all.

What is going to come in its place is something that is gutted and stuffed. The threshold is going to be raised from £1 million to £5 million. Perhaps it is also important to note that that is £5 million net, so bearing in mind that this is self-certified, a department could say, “Well, it might look like £10 million but actually there’s £5 million on the other side that you can’t see, so it comes in below the threshold”. The RPC will have no capacity to call that decision in or to challenge it in any way at all. That is perhaps one foretaste of the risks we run if this system goes ahead. We had another foretaste yesterday in the debate on the Sanctions and Anti-Money Laundering Bill where, as the noble Lord, Lord Ahmad, said from the Dispatch Box, the proposition is that Ministers should be left to fill in all the blanks in accordance with their overall duties as Ministers. Naturally, all that will go absolutely fine.

That certification is not so much self-certification as self-satisfaction. I listened to some members of the RPC this week, and it is clear that business does not like the loss of that monitoring process. It fears uncosted and untested changes that are made by well-meaning civil servants and nodded through by busy Ministers who are only too happy to cut a month’s faffing-about with the RPC to get something done quickly. The consumer watchdogs do not like it either because of the risk to standards, about which a number of noble Lords have spoken. Surely the move towards a self-certified, unmonitored and unsupervised process in the hope that the overall duty of care or fitness for purpose rules will be sufficient is shot down in the light of banking regulation and Grenfell Tower regulation. In different ways, those two catastrophes were prompted by a failure of regulation. It was left to the good intentions of people who did not put things into practice.

There are therefore some strategic points for the Minister to consider. As I hope the noble Baroness, Lady Neville-Rolfe, will agree, he needs to understand that pragmatism, proportionality and risk should be taken into account rather than an ideological aversion to regulation or, indeed, ideological commitment to a precise number of regulations. There should be holistic costings of all the measures that government proposes and this House considers, with rigorous testing of the propositions by either the RPC or a better and stronger alternative. We also need to make sure that taxation and other matters are clearly taken into account. Finally, and for immediate action, will the Minister please tell us what the Government will do to reverse the drastic cuts to the RPC and the damage that that will do to the capacity of Ministers and this House to keep track of where regulation exists and what it is doing to our country?

--- Later in debate ---

[Lord Henley]

I think the noble Lord is referring to another letter. The postal service has been quite busy. I will come to the comments of the Public Accounts Committee in due course. I am referring to what amounts to a leaked document.

[Lord Stunell]

The Minister talks about coming back to this in due course, but I understand that the new regime is in place now. Is there a hiatus between the new regime and him coming back to consider matters?

[Lord Henley]

The noble Lord is correct that the new regime is in place, but that does not mean that all proposals are finalised; these matters can always be considered in the light of representations made, even by the noble Lord. He and I were in the coalition Government together; we worked together in the past. I am sure we can take account of comments made here, and I would be more than happy to listen to him.

I want to make it clear—not commenting on leaked documents—that our proposals actually increase scrutiny by bringing significant deregulation measures into scope. They focus the system on measures with large impacts. This brings me to the Public Accounts Committee, whose recommendations it is worth commenting on. The 2016 report said:

“The Better Regulation Executive’s rules for assessing and validating the expected impact of a regulation are the same, regardless of the scale of the regulation’s impact. The Better Regulation Executive … has established a complex bureaucracy across Whitehall that diverts departments’ resources away from potentially more productive efforts … Of the 95 regulations that the Regulatory Policy Committee has scrutinised during this Parliament, 64 of them have an individual expected net impact of less than £5 million”.


The committee then recommended that we should change the rules to allow a more proportionate approach whereby significantly more effort can be applied to the assessment and validation of the small number of regulations with the greatest impact. That is what we are doing with the de minimis rule.

That is why we took this action and why I wrote to the Public Accounts Committee only last month to inform it that we intended to follow its recommendations and adopt a more proportionate and efficient better regulation system by introducing that threshold. Obviously, we can always reconsider those matters, but that is why I wrote. It will allow the RPC to focus on the measures that matter most. If it had been in force in the last Parliament, 90% of the costs would still be subject to independent scrutiny.

It is only right that regulation should be kept under constant review as products and technology change. Where regulatory requirements are not clear or easily understood, it can lead to confusion and potentially an increased risk to the public. Over the last 20 years, Governments have been working on getting the delicate balance or proportionality right and the costs and benefits of regulation right. That has included the establishment of the Regulatory Policy Committee, as I mentioned earlier, which gives independent scrutiny of the evidence for regulatory changes when they are debated in Parliament.

There were previous government initiatives to review the stock of legislation. Going back to the beginning of the coalition Government, which the noble Lords, Lord Stoneham and Lord Stunnell, will remember, there were the Red Tape Challenge and the cutting red tape reviews. The noble Lord, Lord Stunnell, took credit for introducing the one-in, one-out measure, which I think he accepted served a useful purpose in encouraging the process, even if another noble Lord—I think it was the noble Lord, Lord Whitty—did not like the idea and said that it led to getting rid of something purely for the sake of it. But it encouraged the others and served a useful purpose.

Those reviews sought views from the public to help identify outdated, unnecessary or overly complex legislation and led in due course, as both noble Lords and others will remember, to the Small Business, Enterprise and Employment Act 2015. My noble friend will remember that because she took the legislation through the House. It introduced a requirement for the Government to set a business impact target, focused on the economic impact of regulatory change on business activities, and the need to report annually on its achievements against that target.

These initiatives have delivered some real improvements in how people, businesses and public bodies are regulated, and have also encouraged a cultural shift in government departments towards more appropriate and smarter regulation. The one-in, one-out or one-in, two-out proposals played a part in that. For example, my own department’s business perceptions survey last year showed a decline in the proportion of businesses that believed that the overall level of regulation in the UK was an obstacle to their success. It went down to 49% in 2016, from 62% in 2009.

As I said earlier, the Public Accounts Committee produced a number of recommendations about how we can further improve our regulation system, following the report from the National Audit Office last year. We have been reflecting on those conclusions, including ideas about how to make our approach more proportionate.

Deregulation: Public Services and Health and Safety

Lord Stunell Excerpts

Thursday 13th July 2017 Lords Chamber

[Lord Stunell (LD)]

My Lords, I start by declaring that I was a Minister in the Department for Communities and Local Government between 2010 and 2012, and had responsibility for building regulation policy during that time. I alert the Minister to the fact that a week ago today, I asked a Written Question which is somewhat relevant to my latter remarks, and he may want to prompt officials to brief him on that. I do not believe I have yet had a reply.

I very much welcome the debate and thank the noble Baroness, Lady Andrews, for her very well structured introduction. She painted a particularly bleak landscape, on which, to some extent, the noble Lord, Lord Patten, shone a light. I guess that my views are somewhere in between those two different perspectives. In respect of the remarks of the noble Lord, Lord Patten, there is a good deal of agreement across parties about getting rid of red tape. All parties think that unnecessary red tape should be got rid of. The problem is the subsequent discussion about when red tape is making a safety net. That tension between red tape and safety net is at the heart of our discussion today.

I pick up another point from the noble Lord’s remarks. He said that he welcomed one in, one out—and so did I. I was one of the negotiators of the coalition agreement that included that precise wording. One in, two out and one in, three out is not based on any sound reasoning process at all, particularly when one considers how the Treasury interprets the in and the out. I had a particularly strange example in relation to the energy performance of buildings, which I was keen to upgrade during my time as a Minister. Savings in energy by commercial buildings was countable as a reduction in business costs. Savings in energy consumption in domestic buildings is not counted, because the beneficiary is the householder or renter, not the developer. That is an example of the Treasury applying a sensible rule in a completely foolhardy and stupid way, which actually slowed down the capacity of the Government to deliver better housing for people in tenures of all sorts being built at the present time.

The noble Lord, Lord Whitty, made a very important point about the opportunities that there are to put right anything that may be wrong, and the risks of making it a great deal worse with the great repeal Bill. My party leader has already made it clear what the Liberal Democrats feel about that.

The noble Lord, Lord Patten, with his remark about spads, needs to reflect on how many noble friends of the pair of us are former spads before he takes his purge too much further.

I want to focus on some of the interaction between the horrific and terrible tragedy at Grenfell Tower and the issue of regulation. We need to recognise that it was the worst fire disaster since World War II, and when a fire like that evolves you can be pretty certain that it was not one thing but four or five things that went wrong at the same time. All those things will have contributed to the tragedy, and I hope that the inquiry will be diligent in assessing what they are and what remedies there might be.

My remarks will focus on building regulations, and the impact that they may be said to have had, or not. I want to keep in mind the fact that it is extremely unlikely to be the sole or even the main cause of the huge loss of life. Building regulations are issued under the Building Act 1984, which prescribes matters about which regulations can be made and by its silences limits the regulation-making powers to those topics alone. Fire prevention is certainly one of the areas where building regulations can be, and are, made.

As well as a ministerial background, I had 20 years’ work in the construction industry, and during that time I had many occasions on which to refer to the building regulations and satisfy myself that the drawings that I was making and the buildings and products I was supervising were compliant with those regulations. That brings me to my first main point. It was my job as a building designer and supervisor to comply with regulations and my job to get it right. It was not a question of seeing whether the building inspector catches us out and carrying on merrily until he does. I remember on one occasion taking it as far as testing a fire door of an unusual size and design. I learned plenty of things that day, including never to wear your best suit to a fire test.

The key obligation here is on the installer, applicant or client to comply with the relevant regulations. Some of the press and media comment may have missed that important point. I see a parallel between the Road Traffic Act and the Building Act. If you travel at 45 miles an hour where there is a speed limit of 30 miles an hour, you are committing an offence. If you kill somebody, you have certainly committed an offence. In mitigation, you may say that the signs were obscured or there were no signs, but one thing you cannot say is, “I was relying on the police to stop me”. We need to remember, in relation to what may or may not emerge as far as Grenfell Tower is concerned, that nobody should say, “I was relying on the police to stop me”. It is well established under the Road Traffic Act that the vehicle keeper gets the rap; it is no good saying, “I don’t remember who was driving the car on the day”. There are no excuses or evasions.

A decade or two after my last construction projects, I drew first place in the Private Members’ ballot at the other end of the building. My Sustainable and Secure Building Act 2004 was the first—and so far only—amendment to the original Building Act 1984. I thank my noble friend Lord Dholakia for steering it through at this end of the Palace. One provision in that Act amends the 1984 Act to empower the Secretary of State to require an applicant for building regulation approval to provide a named individual who would take responsibility for the building’s compliance with the regulation—in other words, the equivalent of the vehicle keeper under the Road Traffic Act. My Written Question last week asked what assessment has been made of the costs and benefit of introducing this provision in the light of the emerging findings from Grenfell Tower.

At Grenfell Tower, there was a client—the tenant management organisation, supervised at arm’s length by the Kensington and Chelsea council—and, underneath, there was the main contractor and a second, third and fourth, possibly even a fifth, tier of subcontractors. When we come to the crucial question of who was driving the car on that day and who ran away after the crash, it is quite likely that the inquiry will have to spend a disproportionate amount of time finding that out. If there had been a named building regulation compliance officer, which is thoroughly within the scope of the Building Act, as amended by my 2004 Act, several things would follow. First, the person appointed would have the skills and knowledge to do the job—they would be mad to accept it without. They would want indemnity and professional insurance, and the people providing the insurance would want to be satisfied that the person was doing that job in a diligent way and not going to cost them a packet of money. If that were the system applying to all buildings, there would be far fewer breaches of regulation and far better quality of buildings and homes. It is much less likely that there would be another Grenfell Tower incident. I very much look forward to the Minister’s response to my original Question.

I have another question for the Minister. In the House of Commons on 22 January 2015—in cols. 459-64 of Hansard—my honourable friend Stephen Williams, who was the then Under-Secretary of State at DCLG and responsible for building regulations, replied to a debate that I had initiated following a fire in my then constituency, which had destroyed three newly built homes. He told the House at the other end that the department was putting in hard work with BRE to look at fire-stopping—the technical stuff that goes in between floors to stop fire spreading through cavities from floor to floor. It had been defective fire-stopping in those three houses that had led to their destruction during a repair process, and this seems quite likely to have been a contributory factor at Grenfell Tower as well. Can the Minister say what progress has been made or what conclusions have been reached by that BRE study, which my honourable friend announced was to start back in January 2015? I hope that it did not fall through the cracks of the change of Government and Minister that happened five months later.

Nothing that we do or say today can undo the harm and grief of Grenfell Tower, nor can it lessen the anger and frustration of those who survived, but I hope that my contribution may point the Minister to a simple and ready-made measure that would make a catastrophe far less likely to occur.