The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)
The noble Lord, Lord Stephen, has spoken on a number of amendments which relate to the amendments put forward by the Law Society of Scotland. I echo what the noble Lord said about the role played by Michael Clancy and all his hard work. I can see that he is sitting in the Box this evening, and I met him last week to discuss these amendments.
Your Lordships will be aware that the context of this Bill is, as we have discussed many times, the implementation of the Smith commission agreement. The commission considered a range of areas for devolution, and the amendments spoken to this evening do not fall within the scope of that agreement. If noble Lords permit, I will briefly explain why, in addition to this, the Government do not support these amendments.
Principally, the UK Government are committed to ensuring that the UK is one of the best places to start up and run a business. To devolve legislative competence for the creation of new business entities or health and safety to the Scottish Parliament would add complexity and confusion to the business landscape in areas where we are already considered world-class. We are also committed to protecting consumers, and to devolve one aspect of the regulation of estate agents would lead to fragmentation of the approach across Great Britain. The Government consider that this would be ineffective and could harm consumers. We are striking the right balance of powers in the Bill while maintaining the strength and security and benefits for British business and for our consumers.
Amendment 59 would allow the Scottish Parliament to legislate for partnerships and unincorporated associations and allow the Scottish Parliament to create various new forms of enterprise in Scotland. The pressures that businesses face are generally the same throughout the UK and, therefore, when considering whether new business entities are appropriate, it is right that we should take a UK-wide view. It would not be right to have competing regimes of business regulations north and south of the border, and therefore I urge the noble Lord to withdraw the amendment.
Amendment 60 is unnecessary because regulation of the legal profession in Scotland is not a matter reserved by Schedule 5 to the Scotland Act 1998. However, the legal profession in Scotland advises on a diverse range of issues, including matters such as consumer protection, for which this Parliament retains responsibility for legislating. The Scottish Parliament does not have the legislative competence to make provision that relates to a reserved matter or modifies the law on reserved matters. This means that the Scottish Parliament cannot make provision specifically targeted, as the amendment proposes, at the regulation of insolvency practitioners, which is reserved by Section C2 of Schedule 5 to the Scotland Act 1998. Given this explanation, I urge the noble Lord not to press this amendment.
Finally, in addition to Amendment 61 being outside the scope of the Smith commission agreement, it is inappropriate. The Estate Agents Act 1979 is just one of the pieces of legislation that apply to the regulation of estate agents in order to protect consumers. Devolving this aspect of consumer protection policy while reserving other aspects, such as unfair and misleading practices, would lead to fragmentation of the approach across Great Britain. This would be ineffective and could harm consumers. Therefore, I urge the noble Lord to withdraw the amendment.
Lord Stephen
I thank the Minister for his response, although clearly he does not agree with me or with the Law Society of Scotland on this issue. He mentioned fragmentation. Another word for that is devolution. The same argument about areas that are considered to be world-class could apply equally strongly to health, education, transport or housing. I can see no inconsistency whatever in saying that throughout the United Kingdom we will have world-class health and world-class education but with differences—substantial differences in some cases—between the Scottish system and the system in other parts of the UK.
It seems to me that the point about business and partnerships was well taken by the Government of 1890 in this country, who made separate provision, as I said in my previous speech. Back in 1890 there was a Partnership Act—I am sure that the Minister will be able to get briefing on this in due course—that recognised the differences between Scotland and the rest of the UK, so what is being proposed here is in no way ground-breaking. It would be interesting to find out the colour of the Government back in 1890 when this measure was introduced, but it was long, long before the introduction of the new Scottish Parliament through the Scotland Act in 1999.
I also differ with the Minister in relation to going no further than, or implementing only, the Smith commission proposals. I think it is fair to say that that has been a pretty constant reference from the Government Front Bench. In quite a few respects the Government already have gone further—for example, the amendment in relation to abortion was not contained in the Smith commission report—so why not go further when it is a sensible measure, when it could be of advantage to Scottish consumers and Scottish business, and when it is something that is quite technical and detailed but has been given a lot of thought by the Law Society of Scotland and would make for sensible, better devolution?
I hope that the Minister might see sense and come back to us at the next stage with some amendments in this area but, for the moment, I beg leave to withdraw the amendment.
Lord McAvoy (Lab)
I am so used to my noble and learned friend Lord Davidson speaking for me that I almost mistimed rising to move this amendment, which would allow for the scrutiny and review of previous tendering arrangements. Amendments 63 and 64 in this group stand in my name and that of my noble and learned friend Lord Davidson of Glen Clova. They are minor but important amendments, which would alter Section 25 of the Railways Act 1993 by removing the prohibition on public sector operators bidding for a franchise in relation to a Scottish franchise agreement. They would also establish legislative review and evaluation procedures.
The Smith commission report states that,
“power will be devolved to the Scottish Government to allow public sector operators to bid for rail franchises funded and specified by Scottish Ministers”.
The amendment would go a small but significant step beyond that by allowing not-for-profit operators also to bid in the process, echoing what the right honourable Gordon Brown proposed prior to the referendum. The Scottish Government are already responsible for letting and funding the ScotRail franchise. The legal framework for letting the franchise is provided by the Railways Act 1993, the Transport Act 2000 and the Railways Act 2005. These collectively preclude state-controlled organisations from bidding for franchises.
The paradox is, however, that state-controlled bodies from other countries are not precluded from holding a franchise. Members of your Lordships’ House will no doubt be aware that as a result of this anomaly, Abellio, an offshoot of the Dutch national state railway, was recently awarded the ScotRail franchise by the Scottish Government. A number of concerns were raised in response to this decision, not least from trade unions because, given the forthcoming proposals outlined in the Bill, the tendering process could have been delayed, after which the franchise could have been awarded to a public or not-for-profit operator. There has been a number of problems, most notably the cancellation of services after pay talks with the train drivers’ union ASLEF stalled and staff being offered voluntary redundancy despite Abellio guaranteeing that this would not happen. As the general secretary of the RMT has said:
“Scotland could have taken control of its own railways”.
Labour has stated that it believes that:
“The best deal for Scotland is a People’s ScotRail, a railway company whose commitment is not to a group of shareholders or a foreign Government, but to the people of Scotland”.
In the light of this evidence it is vital that while we move forward in the devolution process we learn from the decisions that were taken in the past. The amendment would facilitate this by allowing the scrutiny and review of previous tendering decisions, not to cause any uncertainty or rock the boat in any way but to learn lessons from how things were conducted. I believe that this is a genuine opportunity to enshrine in legislation the value of critical evaluation in the decision-making process. I beg to move.
Lord Dunlop
It is nice to welcome back to the Dispatch Box the noble Lord, Lord McAvoy. Clause 54, to put it simply, will allow public sector operators to bid for and be awarded rail franchises specified and let by the Scottish Ministers. This will provide greater freedom to decide which organisations are eligible to bid for franchises in Scotland and fulfil the Scottish Government’s aspiration to allow public sector operators to participate in the rail franchising market in Scotland. At present, and as with the rest of the UK, not-for-profit entities are not precluded from being rail franchises under the Railways Act 1993. Once Clause 54 is commenced, not-for-profit entities, irrespective of whether they are public or private organisations, will be able to bid for rail franchises, just as other public sector operators will also be able to. As such, the Government do not consider that Amendment 63 is necessary.
Amendment 64 would allow discretion as to whether public sector operators, on commencement of Clause 54, can bid in respect of live procurements where an invitation to tender has already been issued. There are currently no live procurements for Scottish rail franchises. There are two current Scottish franchises: the Caledonian Sleeper services and the ScotRail services. It is the responsibility of the Scottish Government to manage the tendering of these contracts. The ScotRail franchise, for example, the biggest in Scotland, operates over 2,200 train services each day, delivering 92 million passenger journeys each year. In December, it announced a £475 million investment in its rolling stock over three years.
Baroness Quin (Lab)
I am listening carefully to what the Minister has to say. Under the arrangements that he has just described, would it therefore have been possible for the east coast main line to bid for running the east coast franchise, which of course it was disbarred from doing? That is, of course, a cross-border railway and it was operating very efficiently, although it was not allowed to submit a tender to run the railway into the future.
Lord Dunlop
Obviously the noble Baroness has stated the facts. I do not want to add to that because she is a great expert in these matters. I am simply talking about this amendment and what would be possible in the future.
To go back to what I was saying, both existing Scottish-related franchises have been in operation since April 2015 and their contracts are for 15 and 10 years respectively. The ScotRail franchise has a break clause after five years—
Baroness Quin
I am not clear about the implications of what the Minister is saying. He seems to be saying now that it is possible for not-for-profit and public companies to bid for tender to run a railway. Is that the case? It was certainly not the case recently when the east coast railway was not allowed to bid for the continuation of the east coast service. Is he simply describing the situation as it will be in Scotland or as it exists at the moment, not just for Scotland but for the UK? Is he also describing the situation for a cross-border service, which is what the east coast main line is?
Lord Dunlop
Just to clarify, the clause that we are talking about relates to Scotland-only franchises. As I said earlier, not-for-profit entities are not precluded from being rail franchisees under the Railways Act 1993.
To return to what I was saying, both franchises have been in operation since April.
Lord McFall of Alcluith (Lab)
If a not-for-profit enterprise is allowed in Scotland, could that not-for-profit enterprise bid for a cross-border railway to the Department for Transport, or would that be disallowed? That is the issue.
Lord Dunlop
I think we are talking about devolution to the Scottish Government and the Scottish Parliament. Therefore, we are talking about only rail services that are in the province of the Scottish Government, not ones that are let through the Department for Transport’s process.
Lord McFall of Alcluith
If that is the case, and given the potential decision-making for the Scottish Parliament, it is important for the Minister to go back and get clarification on this issue. This could become a live issue in a short period of time.
Lord Dunlop
I am happy to give the noble Lord the assurance that we will get clarification. I am happy to write to him on that.
To complete what I was saying, the ScotRail franchise has a break clause after five years, but in practice that means that a new competition for either Scottish rail franchise will not occur until 2020 at the earliest. For those reasons, the Government consider Amendment 64 to be unnecessary and that it would only add uncertainty to the clause. Therefore, I urge the noble Lord to withdraw it.
Lord McAvoy
I thank the Minister for that answer. I particularly welcome his indication of interest from the Scottish Government in discussions and negotiations. That shows that sensible and calm negotiations—not looking for aggressiveness on either side—will deliver to the Scottish Parliament and therefore the Scottish Government the powers that he just outlined. That is an important statement to come out tonight.
A couple of things tonight could almost have been interpreted as doubting the ability of the Scottish people to run the services proposed for devolution in the Bill and hopefully in the fiscal framework—time after time. It is a little insulting to the Scottish people to suggest that we cannot run services in a proper and efficient manner. Doubt has been cast on that, denigrating the ability to come forward and run these things. So I welcome the Minister’s statement and the positive notes coming from the Scottish Government. I beg leave to withdraw the amendment.
Lord Steel of Aikwood (LD)
My Lords, I shall speak to Amendments 68A and 69 in this grouping. They are quite different. Amendment 68A simply seeks to put into the Bill a reference to hydro-electricity. I mention this because it is the poor relation of the renewable energy sources. Solar and wind power are mentioned a lot; hydropower is hardly ever mentioned. I am talking about not the big hydro-electric schemes in Scotland, which have made a big contribution to our energy needs, but small hydro-electric schemes. For example, in none of the three big reservoirs that feed Edinburgh, from the old ones, Talla and Fruid, to the new one, Megget, which was built during my time as the local MP—I never thought to raise this at the time, so I plead as guilty as everybody else for overlooking this—was a turbine added to the dam outfall so that energy could be produced.
The argument is that these small schemes produce only enough energy for local consumption, but added together they can be very significant. I recently visited two quite new ones on the River Ettrick and the River Yarrow in my old constituency. I was very impressed by the contribution that they can make to local communities. It is true that, when the wind does not blow there is no energy produced from wind power and that when the sun does not shine solar power does not work, but the water is flowing all the time—rather excessively, as we have seen in recent days, but it is there all the time. Added together, small hydro-electric schemes can make a major contribution to the energy needs of the country. That is why I would like to see it in the Bill in the way I suggest in Amendment 68A. It is a modest amendment but one that I hope might find favour with the Government.
Amendment 69 is the same as the rather more sweeping one that my noble and learned friend has just put forward. Amendment 69 seeks to take out the extraordinary new subsection (3), which says that the Secretary of State does not need to consult Scottish Ministers about introducing any levies for renewable electricity incentive schemes. I simply do not understand why that provision is there. In my view, the more consultation we write into this Bill and the more we make it essential for the Scottish Government and the Secretary of State to consult, the better. I am surprised that this provision appears in the Bill at all and I support my noble and learned friend in seeking its removal.
Lord Dunlop
The noble and learned Lord, Lord Wallace of Tankerness, is very interested in these energy schemes and very knowledgeable about them, and has spoken on other pieces of legislation in this connection. He raised a number of specific points in the debate. I am, of course, very happy to meet him to discuss those further.
Clause 58 creates a formal consultative role for the Scottish Ministers in the design of renewable electricity incentive schemes that will apply in Scotland. Our aim is to ensure the Scottish Ministers are able to comment on the design of new incentives to support renewable electricity generation that will apply in Scotland, or the redesign of existing schemes as they relate to Scotland. The new arrangement provides for a general duty to consult the Scottish Ministers on the design of incentive schemes for renewable electricity which will apply with respect to the existing schemes as they relate to Scotland, and any new schemes that will apply in Scotland.
The noble and learned Lord has tabled amendments that would extend the scope of Clause 58 to heat incentive schemes. We have exchanged correspondence and discussed it further. He has put on the record the response that I gave in my letter, so I will not repeat what he has already said. However, we believe that these amendments would duplicate existing regulations and are therefore unnecessary.
Amendment 67 seeks to amend Clause 58 to require the Secretary of State to consult the Scottish Parliament, in addition to consulting the Scottish Ministers, on renewable electricity incentive schemes, treating the Scottish Parliament as a conventional stakeholder rather than a legislative body. The amendment requires the Secretary of State for Energy and Climate Change to statutorily consult all 129 Members of the Scottish Parliament when making changes to renewable electricity incentive schemes. In our view, this would lead to overly complex and time-consuming consultations that would affect the smooth operation of renewables schemes. For example, were the Scottish Parliament in recess, this could delay the conclusion of a consultation, delaying the implementation of UK government policy. The Government consider the inclusion of consultation with the Scottish Ministers is appropriate. However, Members of the Scottish Parliament are already able to make their views known during public consultations.
Amendment 68B seeks to amend Clause 58 to require the Secretary of State for Energy and Climate Change to consult the Scottish Ministers on amendments to renewable electricity support schemes which are of a minor nature or are made only for technical or administrative reasons and to consult the Scottish Ministers about any levy in connection with a renewable electricity incentive scheme. The noble and learned Lord took on board the de minimis aspect of the first part of that. As drafted, Clause 58 excludes the requirement to consult the Scottish Ministers on minor, technical or administrative issues. In general, this exclusion will apply to changes unlikely to have a significant impact on generators or potential generators, such as making changes to references to technical documents, or making changes to an application procedure. This amendment would, therefore, lead to overly complex and time-consuming consultations that would affect the smooth operation of the schemes.
Amendment 69 also seeks to amend Clause 58 to require the Secretary of State for Energy and Climate Change to consult the Scottish Ministers about any levy in connection with a renewable electricity incentive scheme. I note what the noble and learned Lord said about that and I am very happy to discuss this further with him. Levies on particular companies—for example, electricity suppliers—are sometimes created to sit alongside renewable energy incentive schemes as a way of funding them. An example is the supplier obligation which requires electricity suppliers to pay for the contracts for difference scheme. Levies to fund renewable support schemes are considered to be a form of taxation and taxation is generally a reserved matter. Devolution of specific tax powers is dealt with elsewhere in the Smith commission agreement
Lord Wallace of Tankerness
I am grateful to the Minister for giving way. My first question is: where in the Smith agreement is provision made for such an exception? Secondly, even allowing for what he says— and I would want to read it and consult on whether it is a legitimate point—does the Minister not think this is drafted very widely? It says “any levy”, and could completely negate what is set out in subsection (1).
Lord Dunlop
As I have said, I am very happy to meet with the noble and learned Lord to discuss this specific point and I undertake to do so.
Similarly, Amendment 68A is also unnecessary as the phrase “a renewable electricity incentive scheme” would include a hydropower incentive scheme. I met and discussed this with the noble Lord, Lord Steel, last week. I put on record the importance of small-scale hydro installations. Some 500 of these have been built in Great Britain since the start of the feed-in tariff scheme in April 2010. These installations represent a doubling in the number of hydro sites across the country but a significantly smaller proportion in terms of capacity, as none of these new sites is above 2 megawatts in size. The majority of these are in Scotland, where hydro accounts for 16% of the capacity of all feed-in tariff installations, with solar on 44% and wind on 39%. Going forward, the tariffs should still offer sufficient incentive for well-sited installations, with an estimated return of 9.2%, based on costs supplied by the industry. It is therefore estimated that around 500 further installations could be installed in the next three and a quarter years, to April 2018-19.
Clause 58 ensures that Scottish Ministers will have a formal consultative role on contracts for difference, the renewables obligation and feed-in tariff schemes, all of which incentivise the deployment of hydropower. Therefore, we do not believe it necessary to make specific provision for any of these amendments within the Scotland Bill and I ask that this amendment not be moved.
Amendment 73 would duplicate existing arrangements. The Energy Act 2013 already gives Scottish Ministers a clear, formal consultative role in the development of the Ofgem strategy and policy statement, which gives them an opportunity to influence its content. Section 135 of the Act makes the Scottish Ministers “required consultees” on drafts of the statement and Section 134 also requires the Secretary of State to consult them on the action that she proposes to take following any review of the statement. The current strategy and policy statement arrangements give effect to the Smith agreement and therefore the amendment is unnecessary.
Amendment 73A seeks to introduce a new clause to transfer powers to the Scottish Ministers to award contracts under the contracts for difference scheme and to set the level of feed-in tariffs in respect of electricity generation from renewable sources in Scotland. Publishing such proposals, as well as the transfer of any such powers, goes well beyond the Smith commission recommendations, as the noble and learned Lord himself said, which relate to consulting on establishing and amending schemes that apply or relate to Scotland. In addition, both contracts for difference and feed-in tariffs are Great Britain-wide schemes and do not currently operate in a regionally specific way. This is linked to the fact that we have a GB-wide integrated energy system on which those schemes rely, which has been shown to work well over many years and from which all energy consumers benefit.
Scotland has more than proportionally benefited from financial support from all GB bill payers under current energy policies. Around 9% of the UK population is in Scotland, but we estimate that just over 20% of the support under the renewables obligation as a whole—around £760 million of the total—will go towards funding Scottish renewables projects. For feed-in tariffs, Scotland represents over 10% of the renewable electricity capacity installed to date, particularly in the wind and hydro sectors. In conclusion, I urge the noble and learned Lord not to move this amendment.
Lord McAvoy
My Lords, I rise to congratulate my noble friend Lady Quin, who is a long-standing friend of Scotland, and tonight has epitomised concerns not only for her own north-east homeland and heartland but also of her fellow citizens in Scotland. She has been a great supporter of Scottish causes throughout the years and a doughty champion for her own north-east area. It is a tribute to her commitment to both these areas that she has been here so long waiting patiently—or maybe impatiently—as the night wore on.
As was the case on the first day in Committee, on the face of it a review is reasonable enough. I accept that these are probing amendments, but we have mild objections on the grounds that they afford no agency to the Scottish Parliament when it comes to the parties to be consulted and the general scope and remit of the review, and it is generally left to the discretion of Secretary of State. When there is a lack of parameters or involvement with the Scottish Parliament, that provides the Secretary of State with considerable scope to set the terms of any convention and what is reviewed.
We think that the answer, or at least part of it, lies in the constitutional convention that we support, which would involve every nation and region in the country being engaged in a dialogue with the people about how power needs to be dispersed, not just in Scotland, Wales and Northern Ireland but in England, too. Quite rightly, there are concerns, particularly in the north-east and Cumbria, and maybe in other parts of England as well, that there is no detriment to their areas with the passing of more devolution to the Scottish Parliament. It is quite right that these concerns are raised; they are representing their areas well in bringing these concerns.
I do not know the noble Lord, Lord Shipley, that well, but I certainly know my noble friend and know that she will be motivated. As the noble Lord, Lord Shipley, said, it is a concern not just for one side of the border but for both sides so that we can all come to a mutual way of working and find forums for agreeing matters of dispute or interest, or problems causing particular tension. I welcome the discussion from both my noble friend Lady Quin and the noble Lord, Lord Shipley, and I commend both of them for bringing this forward for discussion.
Lord Dunlop
First, I echo what the noble Lord, Lord McAvoy, said about the noble Baroness, Lady Quin, who I know to be a doughty champion for the north-east. I support the sentiment behind the amendment; Governments should always consider the impact on the union and, in particular, the economy, when they make decisions. Likewise, before and after making policy, Governments should as a matter of course assess whether any particular region is impacted disproportionately. That is not just my view; it is this Government’s stated policy and our approach in practice. Not only that, but there are opportunities for Parliament to scrutinise the Government as they do this and hold us to account. I welcome and encourage that scrutiny.
The UK Government have considered carefully the impact of devolution on the union as a whole throughout the development process for this Bill. The commission set up by the noble Lord, Lord Smith of Kelvin, had that at its heart. One of the principles under which the commission operated was to,
“not cause detriment to the UK as a whole nor to any of its constituent parts”.
As the Committee will be aware, the UK Government and the Smith commission rejected candidates for devolution—for example, the devolution of national insurance. I believe it is right that they did, precisely because devolution of such areas could undermine the union. However, the UK Government also believe that devolution to the Scottish Parliament will make it more accountable to the people who elect it. Our objective has always been to encourage that accountability without undermining the union. Let me reassure the Committee that this Government do not require a legal requirement in the Scotland Bill to ensure that we take these considerations into account.
I hope I can give similar reassurance on how the UK Government consider the impact of policy-making on specific regions and locations. This Government are committed to rebalancing growth across the country, from creating a northern powerhouse to strengthening our great city regions. A number of noble Lords mentioned this. To give a specific example, the UK Government are well aware of the potential impact of the devolution of air passenger duty. That is why we have issued a discussion paper and consultation to engage stakeholders and find a workable solution. There are procedures in place. These policies are scrutinised in Parliament and open to challenge, especially in the other place where MPs can represent their constituency interests in Parliament.
The noble Baroness suggested joint working on projects on both sides of the border. I entirely agree with that sentiment. The borderlands initiative is a good example of that sort of work. The noble Lord, Lord Shipley, raised reporting. I am very happy to look at it as a subject and at how it could be further improved. I am always happy to meet, and I would be very happy to meet him.
While I fully support the sentiment behind these amendments, I do not believe requirements in legislation are necessary. The UK Government are committed to this approach. The fiscal framework and how we put into practice the no-detriment principle were raised by a number of noble Lords. I am certain that we will return to them on our next day in Committee. I urge the noble Baroness to withdraw the amendment.
Baroness Quin
My Lords, I am grateful to the Minister for his reply and to noble Lords who spoke in favour of the amendments and their spirit. I am also grateful to my noble friend Lord McAvoy for his sympathetic reply to the concerns that have been raised. I hope that the Government’s commitment to the union and to cross-border projects and ventures will be translated into reality in many practical ways. We look forward to seeing the results of that in coming months and years.
The noble Lord, Lord Curry, mentioned concern that we sometimes have in the north-east that the northern powerhouse seems to be concentrating on areas to the south of us, particularly on Manchester and Leeds. I wish them every success, but we wish to be fully part of the initiative. I am glad that the noble Lord made that point. I am glad that these issues have been aired. I hope that the Government will take them to heart. I beg leave to withdraw the amendment.