Trade Unions

Lord Whitty Excerpts

Thursday 18th July 2019 Lords Chamber

[Lord Whitty (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Morris, and to commend the introduction to this debate by the noble Lord, Lord Jordan. On a personal basis, I was particularly touched that he mentioned Bill Brett’s contribution to the ILO. In the last few weeks of his life, Bill Brett was my roommate in Fielden House and I much respected him.

I declare my interests: I have been a member of the GMB for nearly 50 years—a bit longer than the noble Lord, Lord Goddard. I also share a role with the noble Lord, Lord Balfe, in relation to BALPA at this disappointing time.

This weekend, in my adopted county of Dorset, I shall be in Tolpuddle recalling the day nearly 200 years ago when a group of agricultural workers were imprisoned and deported for the simple reason that they had combined to discuss their wages. Regrettably, in some parts of the world, there are trade unionists and workers who are faced with even more stringent sanctions in this day and age. That is where the ILO and the international trade union movement need to play their role. In a globalised world, workers need to reach across frontiers, but so do institutions, such as the ILO, which support those workers. Over the two centuries since Tolpuddle, workers’ conditions and rights have not advanced in a straight line. Indeed, I would contend that here and in several other countries there has been a setback in recent years.

By the end of the 19th century, trade union and workers’ rights had prospered in a number of industrialised countries. At the end of the First World War, it was an important plank of the post-war settlement that the ILO was established and that workers’ rights were seen as part of that settlement to minimise conflict between the nations. A key part of this were the rules that governed not only the standards for workers but their right to associate and, at least to a limited extent, to withdraw their labour. Regrettably, almost immediately after that came a period of setback. In some countries, such as Germany and Spain, which had had strong trade unions, the fascist regimes suppressed them. In so-called workers’ states such as the Soviet Union, they were incorporated into the state and party apparatus. It took till after the Second World War for us to begin to rebuild an international trade union movement; for example, the British trade unions and the TUC helped rebuild the structure of trade unions in Germany and other countries on the continent.

Trade unions grew in strength in almost every industrialised country from the end of the Second World War until the 1980s. Since then, as others have said, there has been a decline; we need to examine the reasons for it, which I see as fourfold. First, there was a changing labour market, as has been referred to. The large places of work were destroyed in the 1980s, in this country and others, by technological change as well as political decisions. That made life for trade unions more difficult because not only is it harder to recruit in smaller workplaces but not having large bases can prevent them establishing their own local lay memberships and shop stewards on which they used to depend.

Secondly, more recently, we have had the move towards the gig economy, with irregular patterns of work, individualisation of contracts—if indeed there are any contracts—zero hours, minimum pay and so forth. For those workers, particularly the younger workers, the benefits of collective bargaining and trade union membership are not that obvious. This has been compounded by the outsourcing by large companies and the public sector of so much of their routine work, in particular. For example, just this morning I spoke to a social worker two miles away who is employed by a private company for Westminster Council. He works for 13 hours because he has to move between appointments but is actually paid for only six hours. That is the nature of the labour market in this country for millions of our workers. At the very rough end—we have just been talking about modern slavery—we saw only last week the impact in this country of European workers being gangmastered totally and utterly illegally, an increasing feature of parts of the labour market.

The third reason is, of course, globalisation, which has its benefits but also its setbacks. Here I focus on the situation in other countries as well: in the same way that we have exported carbon emissions, we have exported some of our bad labour practices. We have responsibilities as consumers here, because the cheap clothes and cheap food we get, which used to be produced in Europe, are now often made by those suffering appalling conditions in, for example, Bangladesh and China, yet we continue to buy them. Within multinational companies, which often pride themselves on standards, their own supply chains and sourcing also make use of those very poor workplaces.

However, there is a fourth reason: the failure of the unions themselves to successfully adapt. We must adapt to new technology and to some of the aspects of the changing labour market. Looking back in history, in the 1880s and the 1890s we saw the growth of new unionism, which created both my noble friend Lord Morris’s union and my own. It organised the manual workers who had largely been ignored by the craft unions. The unions needed to change and operate differently. They needed to accept different employment patterns and attitudes by the employers. We need a new unionism today. I hope the existing unions can adopt it but, if not, different organisations might have to do so.

The back-up to this is the role of the ILO and international standards. As we move away from the EU, with all its failings, we move away from an international labour standard-setting organisation. The ILO is the most important international one. It has its drawbacks and slowness, but it is vital. As we move to new trade arrangements around the world as so-called global Britain, the standards written into those trade agreements ought to be, as a minimum, those of the International Labour Organization, but they also need rather better enforcement. In this day and age it is quite difficult for the workers of the world to unite, and they need some support in uniting. The ILO has, for 100 years now, been that main support.

Competition and Markets Authority: Legislative and Institutional Reforms

Lord Whitty Excerpts

Wednesday 8th May 2019 Lords Chamber

[Lord Whitty (Lab)]

My Lords, I join in applauding very much the tone, and much of what was suggested, in the letter sent by the noble Lord, Lord Tyrie, to the Secretary of State. As has been said, the UK has a highly respected competition regime, and has been instrumental in devising the European regime—which has had some successes and some failures. As my noble friend Lady Crawley says, Brexit now presents us with some problems. My sub-committee of the EU Select Committee produced a report relatively recently on competition and state aid post Brexit. It means that the competition authorities here have to take on more resources, because they will have more cases—plus the state aid cases referred to by the noble Lord, Lord Turnbull. It also gives them an opportunity to rethink their role, which I think is what the noble Lord, Lord Tyrie, has done here. I hope that the Minister and the Secretary of State take his propositions seriously.

What is the end of this policy? That is the central point. As my noble friend Lady Hayter says, the end is consumer benefit. Like her, I recall us making that case at the Committee stage of the then Enterprise and Regulatory Reform Bill, which set up the CMA in its present form. We were not properly heard then. We need to be heard now. Even the reference to Adam Smith given by the noble Baroness, Lady Neville-Rolfe, was that the aim of competition is actually the welfare of all. It is a means, not an end. Therefore, it is right that the objectives of the CMA be written in those terms.

I have a number of points, and will also no doubt be tempted to respond to some of those already made. If we are to change the nature of the CMA in the direction that the noble Lord proposes, that has to be reflected in the totality of the regulatory regime on competition and related matters across the board. In other words, it also needs to affect the way we operate the sector regulators in terms of their competition function. That, I think, is an important point. Also, it has to be built into the structure of the CMA. It was, I think, six years ago—God!—that there were suggestions about a panel within the CMA or some other means of reflecting the consumer interest, and that needs to be part of the new thinking. The role of consumer organisations is also important here, not as part of the CMA but as its interlocutors—Citizens Advice, the National Consumer Federation, Which? and, of course, trading standards. I am even tempted to say that the Government should come back and rethink the unfortunate abolition of the statutory consumer basis made under the coalition. I have a slightly personal grudge here; nevertheless, it is sensible to reconsider those issues.

I will put one other thing on the agenda because I am presently conducting a commission looking at the effect of energy companies in their dealings with vulnerable consumers. While an increase in competition usually benefits most consumers, it does not necessarily benefit all of them. Some consumers get left out of whatever process we have. One thing that needs writing into the consumer protection role of the CMA, and the increase in its powers advocated here, should be to pay particular attention to the needs of those who are not quite able to engage with the market, particularly the sophisticated and digitally-driven market that we now have. Whether that comes from questions of capacity or income, we need to pay attention to it.

On the implications of Brexit, as I say, there are possibilities for changing the structure because we no longer have to quite conform with or mirror the European structure. We will need to ensure that the CMA has adequate resources. I am glad to say that its staff have been co-operating with my committee to indicate how they are progressing on that. The noble Lord, Lord Tyrie, referred to speeding up processes. Clearly, one of the complaints about European and national competition regimes is the issue of speed and he made a number of very sensible propositions there. In particular its power on market investigations is, in a sense, a jewel in the crown. Internationally, many other competition regimes do not have that power and it is an important part of its armoury but it is a bit clunky and needs speeding up. Early intervention and direction, and the undertakings sought by the CMA, would make that more effective.

I am not totally sure about the criticism implied in some of the noble Lord’s views on the CAT. I partly agree with the noble Baroness, Lady Neville-Rolfe, but the fact is that all regulators are judge and jury to a certain extent. The issue is whether they are subject to some form of appeal and what the nature of that appeal is. It is true that the CAT has become a bit litigious, or that companies which appeal to it have become over-litigious. Perhaps it could be focused down a bit but the aim should be to enhance and focus the role of the CAT, not make it less effective.

I will not repeat the points made by my noble friend Lady Crawley, and by the noble Baronesses, Lady Altmann and Lady Neville-Rolfe, about trading standards. The national-level activity on consumer protection and abuse of the market has to have a local arm. The reality is that, over the last 10 years, the resources available to local government trading standards have been cut by over 50%—in some places, it is far worse. Unless their local arm of trading standards operates effectively, any individual citizen or small company that feels that they are being abused by companies under consumer protection, or under things such as safety standards, cannot get redress. In most of the country, they are not. That needs to be addressed within the same timescale as we address the CMA’s own role.

The CMA has a number of new challenges. If I may advertise again the products of my sub-committee, in the glory days just before Brexit we produced a report on the challenge of online platforms and the ability of competition authorities across the world to deal with this new form of trading, which is now a dominant form. Markets are difficult to define and whether you are dominant in a market is difficult to define, as is whether you are abusing that dominance. The long-running saga of the European Commission and Google illustrates this. The digital giants are the new oil companies—the equivalent of the Rockefellers of the 1890s—and we need anti-trust legislation to be able to deal with them. Our traditional forms have not really managed to do so. The Googles, Amazons and Facebooks are not necessarily acting in the interests of consumers even though consumers may think that those companies are because, for the most part, they do not pay anything up front. The fact is that the data about consumers is both the product and a currency for that type of company.

The CMA will also need to return to some old issues. I have often thought that the terms “cartel” and “monopoly” do not entirely describe the most usual form of market distortion, which is effectively oligopoly. In so many of our sectors, whether it is in energy, banks, supermarkets, insurance or whatever, there are half a dozen or so companies determining 60% to 70% of the market. Our market laws have not really worked out how to deal with that situation, either in respect of the rest of the market and competition within it, or in respect of consumers.

My last point is simply this. We need to ensure that our competition authorities are up to speed, resourced properly and respected so that they have powers which they can use. The proposals of the noble Lord, Lord Tyrie, move a significant way in the direction of strengthening that intervention. I hope that the Minister will be able to reply today—we will hear from the noble Lord, Lord Tyrie, in a moment—in a very positive way to at least the gist of the direction in which the noble Lord recommends that the Government should go.

Reducing Greenhouse Gas Emissions

Lord Whitty Excerpts

Thursday 2nd May 2019 Lords Chamber

[Lord Whitty (Lab)]

My Lords, I am grateful to my noble friend Lord Rooker for introducing this debate so passionately, and we have heard an even more passionate speech from the noble Lord, Lord Deben, whose work on the Committee on Climate Change is absolutely central to us getting this right. Some 11 years ago, I served on the Joint Committee on the Climate Change Bill, which brought in the very first legally binding targets. Some 20 years ago, I was working with my noble friend Lord Prescott in his department when he went off to Tokyo and was so instrumental in delivering the Kyoto agreements. I am glad he will speak later today.

Some of those earlier promises have not been fulfilled, either nationally or globally. Globally, we are not yet on course to achieve anything like the 1.5 degrees constraint of growth; it will be significantly worse than that, even if we adopt some of the measures that will be advocated today. Nationally, we have had a number of successes, but some of those have been by default. We have also seen the abandonment of policies that were delivering many of those successes, such as the premature ending of subsidies to the renewable sector, the abandoning of some R&D in tidal power and carbon capture and storage, the end of an effective programme of energy efficiency through the insulating of existing homes, and a pulling back on the regulations for new builds in this country.

We have had some success, but we need to be a little cautious about this. My noble friend Lord Rooker referred to Greta Thunberg’s assertion. Some people derided it, but she is essentially right that some of our claimed progress is a bit dubious. In particular, we have essentially exported the carbon emissions from our manufacturing industry to the Far East. Part of China’s escalation is because Britain and the rest of the West have moved their dirtier industries to the Far East. Therefore, an assessment of demand—including demand for imports—needs to be taken into account when we congratulate ourselves on our achievements in this area.

The Government have been clear that we need to do something about this, but the reality is that it has gone down the list of priorities. Brexit has dominated our lives. Other things impinge—the housing and social care crises and so forth—but this is the central issue that any Government need to tackle. Yesterday, at last, following Extinction Rebellion, David Attenborough and indeed the report from the noble Lord, Lord Deben, the House of Commons declared this an emergency. It was pretty obviously an emergency 20 years ago. We now need to treat it as such and to upgrade the actions on climate change within our government machine, this House, Parliament and the national consciousness. It has been downgraded and it needs to be upgraded again.

I have not had the opportunity to read the climate change committee’s report yet—it is a bit long; I will have a go at it tonight—but I hope it gives us a blueprint as we go forward, and I hope the Government take notice of it. There are some big decisions on the immediate agenda, such as the decarbonisation of domestic heat and of our transport system; we have made some progress, but still a very small proportion of our transport system is decarbonised. We need to look at developing hydrogen for both those purposes, as well as at things that themselves have some environmental impact as they rely on current battery technology.

We also need effective government machinery. We need proper regulations and, above all, the effective enforcement of and compliance with those regulations. For all the good words from Michael Gove and others, which I support, when we come to actually proposing the future principles and governance of environmental policy, climate change is not centre stage and the proposed Bill, which is yet to reach this House, is completely insufficient to ensure that the whole public sector—let alone the whole economy—is prioritising the fight on climate change.

I will use my last two minutes to talk about two things that have been mentioned but are normally prioritised down. We talk about emissions into the air, but I want to talk about soil and water. The combination of poor water management, increasing heat, less water being available and the insatiable demand of individuals and businesses for water in our country means we have to take much more drastic measures to control our use of water, such as leakage controls, water efficiency measures and control of the energy content of water infrastructure. We need to retrofit our houses and businesses with energy efficiency appliances, and we need better water catchment management in the first place. That needs to be delivered with the industry and with effective government intervention.

On soil, three or four years ago, the noble Earl, Lord Caithness, who is not in his place, asserted that we had only 50 harvests left in northern Europe. That is the most frightening thing I have heard. It was the first time I had heard it, and I followed it up and read the literature behind it. It is truly terrifying. As the noble Lord, Lord Deben, described, if we do not do anything about it, all our grandchildren will face within their lifetime a situation in northern Europe, and probably the globe, where the soil does not deliver the food, the biodiversity and the environment needed for human life to continue. It is a frightening thought that, 50 or 60 years from now, we will no longer produce enough food from our soil because of climate change, to a large extent, and bad agricultural practice and land use over the years.

Let us put those two issues back into the equation. Let us ensure that the Government take the situation more seriously. It is an escalating emergency, and I hope that we act on the report of the noble Lord, Lord Deben.

Brexit: Protection for Workers

Lord Whitty Excerpts

Thursday 7th March 2019 Lords Chamber

[Lord Henley]

I have been in this House long enough to see what goes on. I think I have been in this House slightly longer than the noble Lord was in another place. Conservative Governments have brought forward a great many improvements. My right honourable friend listed those in his Statement earlier, starting with the Disability Discrimination Act 1995, brought in under John Major’s Government by my noble friend Lord Hague. Look at the national living wage. Conservative Governments have done a great deal. My right honourable friend went back as far as the Shaftesbury Acts two centuries ago. We have made improvements and will continue to do so, but we will make sure we get the right balance.

[Lord Whitty (Lab)]

My Lords, my noble friend talked about history, as has the Minister, but we also need to consider what the future will look like. Can the Minister understand why there are some suspicions in the labour movement and the trade unions about the intentions of a post-Brexit Conservative Government when so many of his colleagues have held out the vision of a low-regulation, low-cost economy competing with employers across Europe and the world? The whole point about European legislation is that employers cannot undercut each other on workers’ rights, yet the Minister himself briefly made a slip when he referred to the relative situation in France against that in Britain. That shows the psychology of some elements of his party in how they see the future. I should like an assurance that that is not likely to be the official policy of a Conservative post-Brexit Government, if such there be.

[Lord Henley]

Would the noble Lord like unemployment levels at the same rate we see in France, or would he prefer to see employment and unemployment levels at the rates we have in this country, where we also have the right sort of protections for workers but do not have inappropriate protections that prevent people getting jobs?

Discontinuing Seasonal Changes of Time (EUC Report)

Lord Whitty Excerpts

Wednesday 24th October 2018 Lords Chamber

Moved by

[Lord Whitty]

That this House takes note of the Report from the European Union Committee on the Commission Proposal for a Directive of the European Parliament and of the Council discontinuing seasonal changes of time and repealing Directive 2000/84/EC (COM(2018)639, Council Document 12118/18) (22nd Report, HL Paper 200).

[Lord Whitty (Lab)]

My Lords, I shall speak to both Motions in my name at the same time. In some ways, this is a slightly esoteric Motion, but the subject matter concerns every single citizen. I thank the members of my sub-committee and the Select Committee for their help in producing this draft reasoned opinion and presenting it to the House tonight.

It is important to recognise that the decision this evening relates to the issue of subsidiarity and whether this House wishes to submit a reasoned opinion. It is not on the subject matter itself. The subject of the report is obviously the Commission’s proposal to replace the obligation to apply seasonal changes of time—to turn the clocks back or forward—with an obligation to discontinue this practice. We have probably all heard over the years different views on whether that would be a sensible thing or not for different groups in different parts of the country. This House has debated the issue several times over the years. But the issue tonight is whether we consider that the Commission’s proposal is in order in terms of subsidiarity and in terms of the persuasiveness of the assessment that the Commission has made on single market grounds.

The timing of this proposal is important. It would see the end of changing the clocks. Member states would retain the discretion to choose which time zone they operated in, but there would be no seasonal clock changes. Effectively, member states would be required to opt for permanent winter time or permanent summer time—presented to the people, there is no choice between those, but in effect that is what it means. The Commission’s intention is that this would come into force in April next year. That means in the proposed transition period, which, if the UK and the EU reach a deal, means that it would clearly apply to the UK. Even without a deal, the proposal could have significant implications, particularly for the island of Ireland.

I come to the proposed reasoned opinion. Since the coming into force of the treaty of Lisbon, national parliaments have a formal role in the scrutiny of EU legislative proposals, notably through examining compliance with the principles of subsidiarity. Subsidiarity is defined in Article 5 of the Treaty on European Union like this:

“the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level.”

National parliaments then have eight weeks from the transmission of a proposal to issue a reasoned opinion. Each parliamentary chamber has the ability to do so. If the vote is agreed by more than one-third of all the votes allocated to national parliaments, the Commission is obliged to review its proposals. That is the so-called yellow card procedure.

The decision to send a reasoned opinion must be agreed by the whole House. That is a rare proposition. The last time that the House agreed to send a reasoned opinion was in January 2016 on a proposal on reforming EU electoral law. The House of Commons is clearly also considering this proposal. The appropriate committee has not yet reached its conclusion but will do shortly and, if it is agreed, the Motion will be put to the whole House.

I emphasise that the report and hence the decision are on the question only of subsidiarity and not of policy. The policy of summer time arrangements has been the subject of many domestic and parliamentary debates. Noble Lords may well have received even in the last few days representations from safety organisations and representatives of the agricultural and construction sectors. But because of the importance of this, our Select Committee has treated the question of subsidiarity as a preliminary matter. If this proceeds further, there may be a point for the sub-committee to consider the objective benefits or otherwise of the detailed policy, but the yellow card procedure, checking that the Commission has observed the principle of subsidiarity, is a very important first step.

The proposal’s subsidiarity statement, which is the first of the three main points, is that under Protocol 2 annexed to the treaties, draft legislation,

“should contain a detailed statement making it possible to appraise compliance with the principles of subsidiarity”.

The Commission’s proposal, in our opinion, does not meet that obligation. The subsidiarity statement is very limited and cites “increased questioning” of the current arrangements, although there is not much evidence of that, but we note that this mainly seems to arise because of an opinion poll conducted across the EU. The vast majority of responses came from three countries—indeed, 70% of the responses came from Germany, where for some reason it has been a live issue for debate in recent months. The proposal also referred to various studies and reports on the application of summer time arrangements, but none of those cited reports ended up recommending abandoning the current system.

The second issue is that Protocol 2 requires the Commission’s consultations to,

“take into account the regional and local dimension of the action envisaged”.

In the case of this proposal, the impact of losing summer time arrangements varies considerably between and within member states due to the interplay between longitude, latitude and time zones in determining daylight hours. That is particularly important for the UK, where it is well known that the benefits and drawbacks of permanent summer time or permanent winter time would significantly differ between the northern and southern parts of our kingdom.

The potential implications for the UK are exacerbated by the devolution settlement in Northern Ireland under which the setting of the time is a devolved matter, which is not the case for Scotland and Wales. Indeed, we note that in a no-deal scenario, if Great Britain as a whole decided to maintain summer time arrangements, Northern Ireland would separately have to choose between having a one-hour time differential for half the year either with the Republic of Ireland or with Great Britain.

My last point concerns the internal market objective. The Commission’s proposal points to the importance of harmonised summer time arrangements for the functioning of the internal market under Article 114. However, harmonisation is already provided for under the current arrangements. Very sensibly, a few years ago, the Commission proposed and it was adopted that where we switched time, the date of switching had to be co-ordinated for the same day, which is of great benefit to the transport sector and for those of us who, for a few weeks of the year, were completely confused as to what the difference either side of the channel was going to be. That was a sensible calling into question of the previous arrangements under internal market arrangements. But the Commission has not adequately explored in this context an additional option, which is the possibility of allowing member states to choose whether or not to observe seasonal clock changes, but requiring co-ordination for the date for those that do so.

Towards the end of the preparation of this report, we received an Explanatory Memorandum on the proposal from the Government. I understand that the Minister concerned is Sam Gyimah, a colleague of the noble Lord, Lord Henley. The committee was familiar with Sam Gyimah because we recently received a useful contribution from him in relation to the Galileo project. He is obviously a busy chap, as he is responsible for time as well as space. His Explanatory Memorandum agreed that the harmonisation was already provided for under the current arrangements, and that the Commission had not demonstrated how its proposals would enhance that. Therefore, the Government are broadly on the same side as us on this. The noble Lord, Lord Henley, will explain their position later. They also highlighted that the proposal would require a huge exercise to assess how a permanent switch to summer time or winter time would affect all sectors and regions of the UK’s economy. Given the timescale of this coming into effect, there would be very little time for that to be carried out.

For those reasons, the report concludes that the Commission’s proposal to discontinue seasonal changes of time does not comply with the principle of subsidiarity and does not sufficiently make the case under internal market rules. Considering that geographical and other factors come into play for the UK in particular, that leads us to the conclusion that the member states are best placed to determine whether seasonal changes remain appropriate within their jurisdiction. On this occasion, we conclude that the Commission has failed to observe the principles of subsidiarity and has exceeded its powers. I therefore beg to move.

--- Later in debate ---

[Lord Whitty]

My Lords, I thank the Minister for his support for the committee’s position. We have a high degree of unanimity in this Chamber. I thank all noble Lords who have spoken. I was very pleased to be present at my noble friend Lord McNicol’s appearance at the Dispatch Box. He seems as if he is going to do a decent job. He once took a job that I once had, and he was quite good at that too.

I hear what my noble friend Lord Rooker said that, effectively, this is the sort of proposition that gets the Commission a bad name. I agree with him that despite what we might individually think about the substance of this, this is not an appropriate way of proceeding.

I thank the noble Lord, Lord German, and the noble Baroness, Lady Randerson—who are both members of the committee—for their support on this and, indeed, in the discussion that we had on the committee. In particular, I thank the noble Lord, Lord German, for underlining the proportionality argument, which perhaps in retrospect I did not emphasise enough. That is an important dimension and probably answers some of the points raised by the noble Baroness, Lady Randerson. While this may potentially be within the remit of the Commission, subsidiarity requires that you adopt a proportionate approach and decide that this cannot best be pursued within the individual member states.

The noble Lord, Lord German, asked how we will pursue this with other parliaments. The timescale is short, but I assure him and the House that the noble Lord, Lord Boswell, the chair of the main committee, and I will try to ensure that our parliamentary contacts are aware of the importance of this issue to the United Kingdom and the difficulty of proceeding at the kind of pace that the Commission proposes, without trial and without notice. I hope we will get a response from our parliamentary colleagues. The Minister has indicated that he will pursue it with his ministerial colleagues in the other member states. I hope this is an occasion on which unanimity will be broader than within this House and another place and will actually prevail.

It is, of course, an historic occasion in that this could be the last reasoned opinion that this Parliament puts into the legislative process before Brexit. I congratulate all noble Lords present tonight for contributing to what I hope will be a significant intervention by Parliament, indicating that national parliaments do, indeed, have an influence on the way in which Europe operates. Having said that, my thanks again to them and to the staff who have helped produce this report.

Motion agreed.

Energy Policy

Lord Whitty Excerpts

Monday 25th June 2018 Lords Chamber

[Lord Henley]

My Lords, I cannot assist my noble friend with announcements about Sizewell C—but, as always, I shall say “in due course”. My noble friend is right to point out the costs of nuclear; that decision has been made. What we are talking about here is a potential decision to generate electricity at three times that price at a time when the cost of, for example, offshore wind had come down so dramatically. That is why we had to make that decision, and why we have made it. It is possible that for other nuclear power, in due course, if more work is done in the world of modular nuclear power stations, the cost could come down. But we have made the decision on Hinkley, and have now made the decision not to go ahead with Swansea—but we will continue to look at all possible sources of energy to make sure that we have green energy and secure energy.

[Lord Whitty (Lab)]

My Lords, like others, I find this decision depressing. On the other hand, I recognise the Minister’s dilemma. The figures that he quotes at us appear irrefutable, even though they are somewhat at odds with those from Charles Hendry’s report and any long-term view. This seems a similar decision to the closure of the carbon and capture elements in Peterhead. In effect, we are not looking over a long enough timescale.

I have two quick technical questions and two strategic ones. First, were the costs clearly incorporating the benefit of having attached to this not only tidal power but some offshore wind power, which was part of the project, and—as the noble Lord, Lord Teverson, said—a significant amount of storage of electricity, which would be of great benefit to future lagoon technology, were this to be proven?

Secondly, can the Minister really envisage a situation whereby, in 50 years’ time, these islands will not in part be powered by wave and tidal energy? We have a huge natural advantage and a huge relative benefit around our shores of having power that is predictable, not intermittent, as other technologies are not. We would be a world leader in this, and abandoning this project makes it more difficult. However, I take some comfort from the Minister’s reference to other projects. Which other projects does he have in mind and how soon, given the delay on this decision, can we get a decision on some of those? Are the Government still committed to looking at wave and tidal technology as part of our long-term future?

[Lord Henley]

I correct the noble Lord on just one thing. He said that tidal power was predictable—and I agree with him that it is predictable—but it is also intermittent because, as he knows, tides go up and down and there are slack periods as well. The intermittency is variable, so it is predictably intermittent, which makes for complications—but it also leads on to the noble Lord’s point about storage.

Obviously, with all these sorts of renewables, storage becomes very important, and developments on that front will change over the coming years. The noble Lord asked us all to look 50 years in the future. First, most of us will not be around in 50 years—but we can all remember 50 years back, and we all know just how much things have changed over those past 50 years. The point that I am making is that it would be wrong for me to predict what might happen over the next 50 years.

I want to make it clear that we have not ruled out tidal power. As the noble Lord says, we have some of the best tides in the world. I am reminded of those lines that noble Lords will remember from “Lochinvar”:

“Love swells like the Solway, but ebbs like its tide”.


It comes in very fast in those areas and goes out very fast. The variation in the Bristol channel is as good as anything that you will get anywhere else in the world, except I think in the St Lawrence estuary.

Much can be done, and we should certainly look at those in future. I cannot say which might then turn out to be suitable. Some of the other tidal power projects being looked at here could offer electricity somewhat cheaper—but only somewhat—than the Swansea bay, because the Swansea bay one is relatively small. We should look at any project on its merits. But I think that the noble Lord, who is as diligent as I am about the view that we must preserve taxpayers’ and consumers’ money, would not want to go ahead with a project that was going to cost three times as much as electricity from, say, Hinkley Point.

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Whitty Excerpts

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

Our two amendments ask that the level of protection in place for consumers with disabilities is also taken into consideration.

[Lord Whitty (Lab)]

My Lords, I apologise for not being here for the previous debate. Clearly, there are crossovers between that group of amendments and this one. I declare an interest in that I have been appointed chair of the commission on vulnerability set up by Energy UK. We have not started our work yet so I am not pre-empting that and I am not speaking on behalf of the commission. But it has caused me to look at the complexity of the vulnerability of consumers in this sector and how that is compounded by the difficulty that people experience in getting around to switching, despite the emphasis on switching in public policy, and the attempts—legislatively and by the regulator—to encourage people to find a better tariff.

The fact of the matter is that while we have had a significant increase in the competition at one end, the competition between and within companies to attract and retain vulnerable groups in their own best interests has not ended up being very effective. I am sure we all know of groups in our own community which have had grave difficulty, either by being stuck on a tariff or by attempting to change their tariff, with consequences that were detrimental or at least incomprehensible to them. That remains the position.

When we are talking about vulnerability, we need to recognise that not all of that is obvious. It is not just the elderly, or physically or mentally disabled people, who are vulnerable. It is also people on small incomes, particularly those on irregular incomes, who fail to pay at some point and suddenly become vulnerable because they build up debt and get into the company’s bad books.

The industry is well aware of all this. Indeed, in some ways, it has attempted to address it, but it has not come through. This top-down approach of a cap, which may be necessary at the moment to drive future competition will not help the differential impact on the more vulnerable members of our society. If it does, it will do so inadvertently. That is the not the central theme of this approach. The issue has to be explained to people in a way that does not make life more complicated and that will enable them, at least to a degree, to be more proactive in switching to a lower tariff.

Communication between energy companies and their consumers is therefore vital. The increase in competition through the number of companies in the field has not necessarily led to a dramatic change in this situation. It is important that not just the big six but all companies in the sector take steps to ensure that they take this into account after we have legislated for the cap to address the interests of different groups of vulnerable people. We will return to this issue—amendments have been tabled on it at various points in the Bill—but unless we somehow crack this and make it clear that the cap must address issues of vulnerability at the same time, the social problems that are the outcome of the current dysfunctional and inadequately competitive market will simply continue.

For a number of these groups of people, although I am in favour of smart meters, I do not think that the smart meters rollout will occur in the timescale to match what is in the Bill for a cap. Also, many of those groups will be the last to benefit easily from the information and techniques that smart meters ought to give to consumers. The benefit will be to those who have already made the switch and, quite rightly, stimulated a new market, but they are not necessarily the most vulnerable in the market—in most cases they are quite the opposite. Unless we cater for all aspects of this market, with central objectives improving the position of those various groups of vulnerable consumers, we as legislators, and Ofgem as the regulator, will have failed.

[Lord Henley]

I thank noble Lords for what they said on these various amendments. I hope to set out what we are doing to protect the more vulnerable and disabled consumers in due course, but I will start by dealing with the point made by the noble Lord, Lord Stevenson, about what is referred to as “tease and squeeze”. We believe that the best way to end this practice is the detailed work that Ofgem is undertaking to test better ways to secure customer engagement and make switching quicker and more reliable, as well as many other programmes to make the market work better. Recent changes mean that suppliers can make their default tariff a fixed-rate deal rather than a variable-rate tariff; many have done so.

The amendments would require Ofgem to have specific regard to vulnerable and disabled consumers when setting the level of the cap, but they are unnecessary because Clause 1(6) already places a duty on Ofgem,

“to protect existing and future domestic customers who pay standard variable and default rates”.

That of course includes vulnerable and disabled customers. Further, the amendments tabled by the noble Baroness, Lady Featherstone, to Clause 7 would require Ofgem and the Secretary of State to consider whether effective competition is in place in the domestic energy supply market as a whole, and again this will include effective competition for all domestic consumers, including vulnerable and disabled customers.

As noble Lords will be aware, in addition to the duty imposed on Ofgem by the Bill to protect all existing and future domestic customers on SVTs and default tariffs, the gas and electricity Acts place a duty on Ofgem to protect the interests of existing and future consumers. In carrying out this duty, Ofgem should have regard to the interests of individuals who are chronically sick, disabled or of pensionable age on low incomes, and those residing in rural areas. With the protections for SVT and default tariff customers in this Bill and the specific duties in existing legislation for vulnerable people, there is no need to place additional duties on Ofgem to protect the interests of those consumers.

Ofgem and the Government are taking a number of steps to support vulnerable consumers. For instance, Ofgem has extended the prepayment meter cap to around 1 million vulnerable consumers in receipt of the warm home discount, mentioned by the noble Lord, Lord Stevenson. The Government have laid regulations that, among other things, will enable data sharing between government bodies such as the Department for Work and Pensions and energy suppliers for the purpose of fuel poverty, including safeguard tariffs. Clause 3 of this Bill enables Ofgem not to apply the market-wide price cap to customers who benefit from another cap by reason of them being or appearing to be vulnerable.

I believe that these amendments broadly repeat the provision which is already set out in the Bill so they are an unnecessary duplication, but it is worth me going through some of the existing government support for vulnerable consumers. There is the payment of £140 a year to 2 million low-income households through the warm home discount scheme, along with £100 to £300 a year for all pensioner households through winter fuel payments. Some £25 a week is available to low-income and vulnerable households during a cold snap through cold weather payments. There is also the priority services register, which is a free service provided by suppliers for people of pensionable age, those who are sick or have a chronic medical condition, and those in vulnerable situations. That register includes priority support in an emergency by, for example, providing alternative heating and cooking facilities in the event of a supply interruption.

I thank the noble Lord for moving his amendment and I am grateful to the noble Lord, Lord Whitty, for his intervention. I note that the commission he is to chair has been set up by Energy UK and we look forward to seeing its work in due course. However, I believe that the Government are taking appropriate action, including through this Bill, which is all about making the market work properly, to protect consumers from paying too much for their energy. The amendment would therefore be an unnecessary duplication and I hope that the noble Lord will feel able to withdraw it.

Brexit: Competition and State Aid (EUC Report)

Lord Whitty Excerpts

Thursday 24th May 2018 Lords Chamber

Moved by

[Lord Whitty]

To move that this House takes note of the Report from the European Union Committee Brexit: competition and State aid (12th Report, HL Paper 67).

[Lord Whitty (Lab)]

My Lords, this inquiry was conducted by the EU Internal Market Sub-committee between September 2017 and January this year and was published in February. My thanks as ever go to the members of my committee, several of whom are going to speak today, and particularly to the members of staff and to our specialist adviser, Professor Erika Szyszczak. We were pleased also to receive a response from the Government within the deadline—a decidedly better record than many of our Brexit reports have received. So our thanks go to the BEIS Minister, who has also given us a reply on the CMA’s role as a post-Brexit state aid body. Congratulations to BEIS, and I hope that other departments will follow suit.

The speed of the ministerial response may be due in part to the fact that most of the report is relatively non-contentious in the sense that the Minister, broadly at least, agrees with us. This reflects the fact that the UK’s domestic competition framework has been closely modelled on the EU’s, but it is equally true to say that the EU model itself was based on the earlier precedent of British law and British experience. That does not mean that there is no dissent; witnesses were generally positive about the UK competition regime in its interaction with the EU, but concerns were raised about consumer protection and consumer rights, about tackling market dominance in new-fangled forms of markets such as online platforms, a topic on which the sub-committee had previously reported, and about delays and bureaucracy in the EU state aid approval process.

Repatriation of policy to the UK in these areas poses some complex problems in our relationship with the EU post Brexit and for the UK internally. A deep and comprehensive free trade agreement with the EU would undoubtedly retain some mutual arrangements on fair competition, state aid and public procurement. Indeed, any modern free trade agreement with any major economy would probably have some such provisions—as, to a degree, would trade on WTO terms. As in many areas, “taking back control” is therefore a relative term.

Nevertheless, the prospect of taking back control has raised some old arguments about these policies, especially on state aid, to which I shall return later. First, on the immediate short-term implications of Brexit, the Competition Act, under which UK procedures operate, sets out a consistency principle that obliges UK courts to ensure that there is no inconsistency between the application of domestic anti-trust prohibitions and EU law. That principle will clearly go after Brexit, but the Government apparently agree with the retention of some sort of duty on UK courts to take account of European competition jurisprudence. There is no clear indication what form that would take. I should be grateful if the Minister could give further detail on that: will it be “should have regard to”, “may have regard to”, “should take into account”, or whatever? Any comments would be helpful.

The domestic system of merger control currently operates alongside EU merger regulations. This arrangement is known as the “one-stop shop”. The loss of UK access to the one-stop shop at European level will lead to a need for separate notifications for markets that go beyond the UK to both the CMA and the European authorities. It will therefore mean not only an increased workload for the CMA but some businesses being faced with duplicate inquiries and costs.

The Government’s response says that they intend to limit the impact of the loss of the one-stop shop by increasing the efficiency of the CMA. I am not sure that goes far enough. Should the Government not seek an arrangement that would modify, reduce or, in some cases, abrogate the need for a UK merger review when a transaction has already, or in parallel, been notified to the European authorities?

Contributors to the inquiry set out a number of common transitional issues relating to anti-trust, merger control and state aid. They involve the status of cases still live at the point of exit, future cases that relate to pre-exit behaviour and pre-Brexit cases where remedies and commitments need to continue to be monitored by the authorities. That raises the whole question of the enforcement gap. Given the UK’s red line on the involvement of the European Court of Justice in these matters, has any further progress been made in negotiations on how such things would be dealt with after Brexit?

I will raise one tangential issue. There was discussion in the committee as to whether we should mention this, as it involves the employment of lawyers, and we were not quite sure whether it was relevant to the inquiry—but as we are a sub-committee that deals with non-financial services in the Brexit context, we thought that we should raise it. The UK is effectively the leading jurisdiction for private individuals or businesses seeking damages for breaches of EU anti-trust law. Litigants are attracted to the UK for the skill of its lawyers, the clearness of its procedures, et cetera. Many of those features may well continue. Nevertheless, there was anxiety that that substantial—and, indeed, remunerative—part of EU legal services may cease with Brexit.

The Government say in their response that the UK’s attractiveness as a jurisdiction should not be affected, but they acknowledge that the legal base for pursuing claims based on Commission decisions will be subject to negotiations about future civil justice co-operation. Again, does the Minister have any further detail on those discussions and negotiations so far?

Those are the transitional problems. The key issue is where future UK policy goes. While there was broad consensus from witnesses that there should be general continuity of policy in these areas, there was also recognition that we would have the opportunity and scope to look at policies again. This applies particularly to policy on mergers, for example—on attitudes to the public interest dimension and to overseas takeovers—and even more so to the most difficult area of state aid. Some of these are quite old arguments that are now posed in a new post Brexit context.

I shall take each of the main areas separately. First, on anti-trust, the global nature of competition has resulted in a broadly consistent international approach to competition policy. While it was made clear to us, and we agreed, that the UK should maintain the principles underpinning its competition policy, there will be some opportunities post Brexit to improve the regime, for example in the area I mentioned earlier in relation to the market dominance within digital areas such as online platforms. The Government say that they do not intend to fundamentally change the UK’s competition law and enforcement framework, but they have, for example, said that they are taking steps, independent of Brexit—allegedly—to strengthen this framework, including granting additional resources to the CMA and completing their review of UK competition policy by April next year. I ask the Minister whether there might be commitments in the future UK-EU relationship that could limit or prevent the UK in future from taking a more innovative, independent approach to enforcement.

Secondly, on the merger side, the discussions we have had on mergers policy in this country in the last few years has been overshadowed a bit by the Cadbury takeover by Kraft, which was one of the most controversial foreign acquisitions of a UK firm in recent years, and indeed one where the conditions imposed by the UK authorities were subsequently ignored by the acquiring company. That has rather coloured people’s views on the effectiveness of our merger policy, and some view Brexit as an opportunity to revise and strengthen the public interest criteria in merger control.

We, however, concluded that historically it has not been EU state aid rules that have seriously restricted the UK authorities looking at wider merger control criteria. However, it is the case that it is likely that Brexit will mean increased pressure internally to change current UK legislation and practice. The pressure on overseas takeovers could be in one of two directions—one from a protectionist view to defend UK-owned assets, and the other from the globalists who want to be more welcoming to international investment. Our general view is that we should keep things broadly as they are.

The Government recognise that a reliable merger control regime is important, but of course they themselves have opened the door a little by proposing some new public interest regimes in relation to security issues in the October 2017 National Security and Infrastructure Investment Review. This has amended the threshold tests for the military and dual-use sectors and parts of advanced technology—which could be quite a substantial part of the economy. How will the Government balance future changes in merger control because of these domestic pressures with their stated desire to ensure that we continue to be broadly aligned with European processes? In relation to resources, are the Government convinced that the additional resources provided to the CMA will be sufficient to cover the increased number and complexity of cases?

In terms of negotiations the UK and the EU start from a position of extensive mutual assistance on competition matters through what is known as the European Competition Network of national competition authorities. We would hope, and the Government would hope, that we will maintain that co-operation. What kind of role, if any, would the Government see for the CMA in the European Competition Network, which has provided us with a very substantial degree of benefit over the years?

The last area is state aid, and it is the most complex area that we considered. The EU is, of course, conferred with exclusive competence in this area, and its rulings are applied directly and enforced directly by the Commission. EU state aid rules have clearly been a source of frustration for some and, in some cases, have been painted as the central obstacle to government intervention—a particular example, allegedly, being the recent crisis in the steel sector. However, we concluded that, in general, successive Governments have found EU state aid rules flexible enough to provide support where they have wanted to provide assistance for major projects. Indeed, we found that other EU member states had managed to spend significantly higher sums on state aid, suggesting that it is not really EU rules themselves that are the barrier. To take a topical example, an incoming Chancellor—say, John McDonnell—could quadruple state aid spending in this country without matching the level of other leading economies such as Germany, and in most cases would do so without incurring EU state aid censure. That is not to say that he would not run into trouble with some other bits of EU legislation, but not on state aid provisions.

For post-Brexit state aid policy and institutions, we need a new state aid authority, which will have a dual perspective: first, to ensure that proposed state aid does not contravene our international obligations under our free trade agreement with Europe or, indeed, with anybody else, or indeed under WTO rules. It is likely that any significant free trade agreement will have some such provisions. The EU has been clear that it seeks an agreement that ensures a level playing field between parties on competition matters, and there will need to be co-operation between the CMA and the proposed trade remedies body that is going to be set up under the Trade Bill—if and when it makes progress in another place.

Secondly, as well as those international obligations—and, in a sense, for the first time—the new authority will decide whether state aid, including public procurement aspects, granted by UK bodies, is compatible and does not distort the European or international market or, indeed, the UK internal single market. That is a bit of a novel responsibility, which could cause significant internal political tensions. That is why we emphasised the need for the Government to act in concert particularly with devolved Administrations and local government when they draw up their post-Brexit state aid policy, and the CMA takes on that responsibility.

It is, of course, also true that under EU rules there are substantial block exemptions from state aid limitations, which includes most public services and agriculture, for example. In immediate terms, those will be transposed under the withdrawal Bill, but we would like to hear from the Government whether that is likely to be altered in future or whether we will continue to try to retain the same block exemptions that are in European law. More explicitly, will the £23.6 million additional finance for the CMA be sufficient for it to take on the state aid role, as well as providing resources for the substantial increase in the number of merger and anti-trust cases? Could the Minister report on the views of the devolved Administrations on establishing the UK-wide state aid regulator?

Building a coherent post-Brexit competition and state aid framework will be of vital importance to the UK and, throughout our inquiry, we were told that the UK has a robust and well-respected competition regime and that Brexit does not necessitate a fundamental revision. However, we see some pressures and opportunities for the UK to take a more innovative approach. The repatriation of responsibilities for state aid approval will be the fundamental change, and it is important that government works to involve and secure the support of local government and the devolved Administrations in that.

In determining the UK’s future approach to state aid, the UK will have the opportunity to address criticisms of the complexity and bureaucracy faced under the current EU regime, as well as related issues such as public procurement procedures. The UK will have the opportunity to create a system that is easier for small businesses, in particular, to understand and for consumers to appreciate and benefit from.

In general, this report and our relative consensus with the Government on it should indicate a way forward, but there are some issues that I would like the Government to address, which I hope I have spelled out in the course of my speech. I beg to move.

--- Later in debate ---

[Lord Whitty]

My Lords, I thank the Minister for those remarks. We definitely look forward to the competition review which is promised. I will keep my remarks reasonably short, if only to protect my throat.

I think there has been a reasonable degree of agreement around the Chamber, as there was on the committee, which I shall try to summarise. The principles of the European approach to competition and state aid will continue, with some degree of co-operation and alignment—quite what, we know not yet, but no doubt the negotiations will make that clear. We also have the opportunity to refine that and make it more relevant, and perhaps to look at related issues, such as public procurement, in the new era.

I take the point that the independence of the CMA, particularly given its enhanced role, is very important. Clearly, and particularly in relation to state aid, getting some degree of consensus and structure with the devolved Administrations and local government is vital. I think the issue of how broad the public interest criteria are will not go away, as my noble friend Lady Donaghy said, and there will be arguments from various sides as we go on, but it will be within UK control to decide, politically, how we manage that.

A number of principles were established by the report and have been largely underlined by this debate. I will treasure the new accolade that has been given to me by this House and will point to that accolade in Hansard to my grandchildren, I have no doubt. I repeat my thanks to all members of the committee.

The noble Baroness, Lady Noakes, raised an important point at the beginning, and I imagine the House will have to return to it. My own view is that, at the moment, the structure of the committees is coping with moving from focusing on scrutiny to the outcome on Brexit—keeping an eye on the outcome of those negotiations and holding Ministers to account. It may be that the structure is a bit clunky, but that is an important role. For when we get to the end of those negotiations and we are in the brave new world post Brexit, the House has already set in train a means of looking at the committee structure—which is above my pay grade, let alone the Minister’s—and I hope that the noble Lord, Lord McFall, will present us with some proposals on that front in the coming months.

Meanwhile, in relation to competition, state aid and mergers, we will expect some new kinds of cases and new markets which we will have to address as the UK, but the continuity is as important as the new freedoms. With that, I thank the House.

Motion agreed.

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Whitty Excerpts

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

[Lord Whitty (Lab)]

My Lords, the noble Lord, Lord Hunt, reminded us that the motivation for this Bill did not stem either from the industry or from the sector regulator but was based on the very substantial CMA report in 2016 on decisions by Ministers and indeed by the Prime Minister. He is correct in saying that some interventions by Prime Ministers have not turned out that well, including David Cameron’s intervention on the four tariffs. That was not a great success, to say the least, and had to be abandoned, as he says. The fact that this intervention seems to have united the election pledges of Mrs May and Ed Miliband —albeit in different elections—does not necessarily mean it is going to be any more successful. In passing, I also agree with the noble Lord, Lord Hunt, on the need for an appeal to the CMA. I think that is needed in the Bill: I agree with him and, prospectively, with the noble and learned Lord, Lord Mackay of Clashfern.

I need to declare an interest: I will be chairing a commission on vulnerable energy consumers set up by the industry. That body has only just started work, so nothing I say today should be taken as anticipating the commission’s conclusions or anything like it.

But I do have some immediate questions. My two queries are these: are we answering, or attempting to answer, the wrong question? And are price caps on their own ever enough to protect the most vulnerable consumers? The CMA report two years ago met a mixed response. For myself, I thought its analysis was very substantial and essentially sound, but I also felt that its detailed recommendations were, in some cases, weak and confused, and that lies behind the method that this intervention is intended to achieve—what the CMA found was wrong with the market.

The CMA did indeed find that the big six, in particular, were making excessive profits margins on their standard variable tariff customers, but the key finding, as implied by the Minister in his opening remarks, was that this is a somewhat odd market, in that energy consumers are broadly speaking split into two groups, with one group being exploited and another benefiting. Newer, more active customers—the switchers —were being cross-subsidised by the loyal, older customers who have never, or not recently, switched supplier or tariff. The CMA also identified, as has been said, that the most marked unfairness related to prepayment meter customers. On that, the regulator has now moved and I support that in principle.

But if the problem is that long-term customers, often customers of the big six who have actually not switched since privatisation, are effectively cross-subsidising switchers, company by company—in other words, there is a sort of negative loyalty bonus—then surely the remedy is that the relativity between the tariff with which long-term customers pay, which is normally the default tariff or the standard variable tariff, and the tariff and package for newcomers is the most important metric in this approach. In other words, as my noble friend Lord Stevenson implied, we should perhaps be regulating by differential or by margin between the two, rather than, or possibly in addition to, an absolute cap. I appreciate that this could be complex, because many of the starter rates which entice new customers and switchers are time-limited and in practice revert to something very close to the standard variable tariff after a year or two. That is another practice that perhaps the regulator should look at. But the issue of whether a relative cap is more appropriate than an absolute cap needs returning to. I am not sure that the Government gave an adequate reply to that in the Commons. I would like to hear more clearly the rationale for that today.

My second point is that the price needs to be seen together with the broader issue of customer service, customer choice and consumer protection—for all but particularly for those who are the most vulnerable, either temporarily or permanently. Let us face it: most households do not understand the energy market or the choices within it. For many people, price comparison sites can be more confusing than helpful and in some cases are downright misleading. Any tariff intervention, therefore, needs to be accompanied by greater care for the consumer, for example on the choice of method of communication between the supplier and the consumer. The insistence on electronic or telephonic communication disadvantages certain subgroups of consumers, who prefer paper. Noble Lords may well have received the information on the Keep Me Posted campaign, which spells this out. The additional help that companies appear to offer consumers is often very limited and does not really help the individual consumer to navigate the complexity of tariffs; rather, they revert to the default position of staying on the rate that they have always been on.

It is no use simply putting a cap on the price, valuable though that can be in certain circumstances, if the consumer does not understand how and why they are being charged that rate and what the alternatives are. At a minimum, therefore, the Bill needs to have some provision on customer service and support and help for vulnerable consumers—perhaps I should say the more vulnerable consumers, since most of us are at risk at some point in our lives and sometimes struggle with our energy bills. The Bill would be better for such a clause, even if it were put in the most general terms. I repeat that I would like a clearer answer to why the Bill is, on the face of it, about a temporary absolute cap, when it has clearly been shown that a relative control would reduce unfairness and deliver a more just relative treatment between long-standing customers and the small, active proportion—it may be 20%—of frequent switchers.

The Bill requires a further CMA investigation of the market. I am not against another detailed study. I find tying it to the timetable for smart meters slightly odd. At best that needs to be kept reasonably flexible. The point is that neither price caps nor competition is sufficient to ensure that all consumers benefit from the market. Treatment of the more passive and the more vulnerable consumers requires much more specific interventions by companies and a better consumer service from all suppliers. It is true that all markets require switchers to make them work, but in a market as central to our lives as energy the market price and the structure of tariffs need to reflect fairness and justice for all consumers, certainly, but between different groups of consumers as well.

Smart Meters Bill

Lord Whitty Excerpts

2nd reading (Hansard): House of Lords
Tuesday 13th March 2018 Lords Chamber

[Lord Whitty (Lab)]

My Lords, like the noble Lord, Lord Teverson, and my noble friend Lord Grantchester, I am a bit schizophrenic about this Bill. On the one hand, I welcome some of its provisions, but on the other I look at the history of the rollout of the smart meters programme with deep depression. It has had mixed results, to put it mildly.

On the other hand again, some of the benefits of smart meters have been realised and a significant proportion of consumers have changed their behaviour as a result, so that gives us some cause for hope. I also have some fairly substantial strands of sorrow and anger about this, some of which goes back to proceedings on the Energy Bill 2008. This, I am afraid, is the “I told you so” bit in my speech. I took quite an active part in those proceedings and told the then Government of my concerns. Some of them have already been mentioned; they relate to the very limited interoperability of the first generation of smart meters, which meant that the ability of consumers to switch was greatly restricted and they were left with stranded assets—and smart meters were pretty dumb in many respects.

I also mentioned the inadequate relationship between this massive £11 billion programme of installing smart meters and actually getting them into every household in the country. That programme should have been accompanied by more general advice, direction and help on installing energy efficiency equipment in the home.

I also was deeply perturbed by the basic premise of the delivery of the smart meters programme: requiring that it be carried out by the supply companies. That led to behaviour based on self-interest and to inefficient delivery. It would have been far better if the state itself—although I could not really have expected this of even the coalition Government, and certainly not this one—or the network companies had proceeded street by street, instead of every building in every area having to have a meter installed by different suppliers.

The way in which different suppliers have done it has varied significantly. I thought at the time that the central strategic decision to give responsibility of delivery to the supply companies was the wrong one, although it is probably too late to change that now. It has also helped to increase consumer distrust in the programme itself, over and above the natural resistance of some consumers to new technology.

I was also perturbed and somewhat baffled by the exact responsibilities and status of DCC. I remember asking the then Minister to explain exactly what this body would be. It was only after we had finished with the Bill that the contract was given to Capita, which alarmed me even more. Following the Carillion collapse, the Bill must ensure that, if Capita similarly collapses, which looked possible a week or two ago—I of course hope it will not—provision is made for dealing with its insolvency. Its performance, as noble Lords have pointed out, has not been that great, but the possibility of its insolvency undermines this whole process. The cost of that is going to fall, once again, on the consumers, who, through their bills, are already paying for the programme as a whole.

That is the end of the “I told you so” part of my speech—but I did tell you so. Some fairly wrong strategic decisions were taken at the beginning of this programme. Partly as a result of that, we are of course behind on the timetable.

On a more positive note, however, we are now moving to the next generation of smart meters. I hope we can do so rapidly, and that there will be no performance problems. The Minister should spell out clearly the timescale. A concomitant point is that we will need at some point to replace the first generation with a second and a third generation. Otherwise, some 8 million to 9 million people will effectively have fairly dumb meters which, although they can induce some change in behaviour, will not do the full job that the cutting-edge technology could deliver. Therefore, we need to speed up the process. I would like the Minister to spell out somewhere in this Bill the process for the retrofitting and replacement of the first generation, as well as the timetable for introducing further metering in the next generation.

More positively, some significant research has shown that even some of the dumber smart meters have enabled people to take a greater interest in their energy consumption and make related decisions on light bulbs, switching off washing machines and changing the time at which they operate appliances, thereby saving energy. So the outcome may well eventually be very positive. The downside, though, is that there has also been some negative reaction to smart meters. I hope we will be able to overcome that.

I very much welcome the move to half-hourly billing. That brings its own problems in terms of privacy and security but I hope that we will find a way to reassure consumers in that respect. Once we move to half-hourly billing, consumers could well get on top of making serious improvements in their energy efficiency behaviour and the energy performance of their homes. I am very much in favour of that so long as the privacy downsides are addressed in the Ofgem regulations.

I still have problems with how this programme is being delivered in premises in multiple occupation that have multiple suppliers, in both the social housing and the private sectors. There has been some progress on the relationship between smart meters and prepayment meters, but the phase we are discussing ought to turn that into something much more positive because some of the most vulnerable consumers are prepayment consumers and smart meters should help them. We have some good examples of that. We need to build on those and make this process more systematic.

I have mentioned the situation with DCC. I recognise that the Government had to move on that. It was a bit of a panic move which did not reflect the original concept of the Bill, but it was probably necessary. However, it underlines what my noble friend Lord Haskel said at Question Time about the reliance on single, near monopolistic outsourcing companies for the delivery of key elements of our infrastructure. I hope that we will address that in broader terms as well as in relation to this specific programme.

I still think that there is an insufficiently close relationship between the installation of smart meters and other energy efficiency measures. However, we should perhaps look at the totality of energy efficiency interventions as we move away from the ECO, as we have known it, and consider all the current programmes so that we can maximise energy efficiency house by house and company by company.

So far there is a very mixed picture with a lot of downsides. We have the opportunity to move to the next stage in a more positive vein. However, while the Bill introduces some useful provisions, in particular half-hourly billing, they are not sufficient to ensure the full delivery of the programme and the full step-change in our energy efficiency performance which those of us who supported the concept in the first place looked for.