Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Healy of Primrose Hill) (Lab)
My Lords, the hybrid Grand Committee will now begin. Some Members are here in person while others are participating remotely, but all Members will be treated equally. I ask Members in the Room to respect social distancing, which remains in place in Grand Committee. If the capacity of the Committee Room is exceeded or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes.
Fisheries Act 2020 (Scheme for Financial Assistance) (England) Regulations 2021
(2 years, 9 months ago)
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Lord Benyon
That the Grand Committee do consider the Fisheries Act 2020 (Scheme for Financial Assistance) (England) Regulations 2021.
Relevant document: 7th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)
My Lords, this statutory instrument will provide the long-term legal foundation for the payment of grants to the English seafood sector. It has been specifically designed to support the needs of the sector and to give full control and accountability for the delivery of financial support. It expands the previous domestic fisheries financial assistance powers, which were a domestic implementation of European funding provisions, and forms part of our commitment to replace European funding in this area. It is also in line with government policy to, where possible, utilise specific spending powers for long-term public spending in specific areas.
The passing of this instrument will allow us to finalise our transition towards the powers of the new Fisheries Act. The Act gives the UK full control of its fishing waters for the first time since 1973 and provides the legal framework for policies to be tailored to the needs of industry while still protecting the marine environment. Now that we have left the EU, this will ensure a more responsive and autonomous scheme that better supports our newly independent coastal state.
Leaving the EU has also empowered us to develop as a world leader in fisheries management. Global leadership in this space means placing sustainability and innovation at the forefront of government policy-making, ensuring healthy seas for future generations of fishers. These regulations, by utilising the powers in the Fisheries Act, support that ambition. They ensure that the framework for delivering financial support to the fisheries sector is in line with Act’s objectives, and they empower the Government to deliver a new fisheries management plan to benefit both the fishing industry and the marine environment. They also support the delivery of the Government’s manifesto commitment to maintain the level of financial support provided to the fisheries sector.
Fisheries is a devolved policy area and the Fisheries Act 2020 provides corresponding financial assistance powers to each of the four fishing administrations of the UK. This has empowered each administration to develop schemes that are tailored to the needs and characteristics of their sectors. In line with the devolution settlement, this instrument will provide a legal foundation specifically tailored towards our English scheme to give much-needed financial support under Section 33 of the Fisheries Act 2020.
The instrument sets out the regulations for the payment of grants by the Marine Management Organisation (MMO) to the seafood sector in England, including the provisions and payment conditions that must be adhered to. This approach will ensure clarity for both applicants and grant delivery managers. One point to note with the establishment of these new funding powers is that funding may now be provided, under the scheme established by this instrument, to recreational sea fishers—an important area to support the levelling-up agenda that previously has not been able to receive support.
We have also extended the types of funding that can be provided to include activities such as training and business diversification. The instrument has been carefully developed to ensure that future grant schemes have the flexibility to meet new policies and the needs of the English seafood sector as they change over time. The passing of this instrument will not make any significant policy changes to the scope of grant funding for the seafood sector. It will ensure that we are using regulations specifically designed to support the English seafood industry.
I turn now to how the instrument will be used to deliver support to England’s seafood sector through the fisheries and seafood scheme. The scheme opened on 6 April 2020 to provide financial assistance to projects that enhance the marine environment and support sustainable growth in the catching, processing and aquaculture sectors. At present the scheme is using the wide-ranging spending powers in the Natural Environment and Rural Communities Act 2006 which, unlike this statutory instrument, does not set specific conditions on activity restrictions.
This SI will provide a more detailed framework for the scheme to operate within and allow more certainty for applicants and administrators about the legal scope of the scheme. This scheme replaces funding previously available to the UK through the European Maritime and Fisheries Fund. The subsequent European fund is not yet available to our European counterparts as the details are being developed, whereas in England we ensured there was no gap in funding and the scheme was available in early April.
The scheme will provide £6.1 million of funding for the current financial year. In the short term, this will provide stability and continuity to industry by supporting businesses to take advantage of opportunities outside the EU and recover from the impacts of Covid-19. In the longer term, the scheme will drive meaningful change to increase sustainability, provide world-class fisheries management, and deliver a significantly decarbonised sector and a thriving marine environment. The scheme will develop flexibly over time to accommodate the development of new policies, data and emerging priorities.
The scheme has been developed to be consistent with wider governmental objectives to support the levelling-up agenda, clean growth and carbon net zero. It addresses the current needs of the sector by supporting the development of new domestic markets and the diversification of businesses to support new income streams. The scheme has been informed by stakeholder engagement and aims to support the issues highlighted by industry, including investments to enhance mental well-being. The opening of the scheme has been welcomed and demand for financial support has been high.
This instrument is one of the first regulations proposed under the Fisheries Act 2020 and will ensure that a responsive and autonomous scheme can be delivered within England which better supports our seafood sector. This support is vital to deliver our vision for clean, healthy, productive and biologically diverse oceans and seas. I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I welcome the regulations and would like to pay personal tribute to my noble friend for all he has achieved for the country during his many years conducting fisheries negotiations when we were a member of the European Union. I particularly welcome the fact that, as he highlighted, there will be no gap in funding in the UK. That is greatly welcomed by the recipients, and by all of us as legislators.
I would like to press the Minister on a number of issues. As he said, this is one of the first set of regulations made under the Fisheries Act 2020. Will the total received be the same as under the previous funds administered through the EU scheme? Does my noble friend think that it might be expanded in due course? He is aware of my particular interest in and concern for inshore fishermen. Paragraph 7.3 of the Explanatory Memorandum states that, as my noble friend said:
“There will be benefits for coastal communities across England”.
I am sure that many, particularly in Whitby, will be keen for the recreational sea fisheries to which my noble friend alluded to be helped in this way.
The Minister is aware of my interest in inshore fishermen, who were disadvantaged under the previous fisheries policy. They hope to be advantaged greatly under the new arrangements not just by having more scallops but by having a quota for fish such as cod. I would be delighted to hear if that will be the case.
I welcome my noble friend’s saying that sustainability and innovation measures will be supported under the regulations. In the debate we had on fisheries in the previous EU Sub-Committee—my noble friend will doubtless have read the report—we looked at innovation and sustainability in some depth and reached a conclusion regarding the benefits of remote electronic monitoring. Will fishermen be able to apply for these funds and use them to install and operate remote electronic monitoring equipment on their boats?
We are obviously grateful to the Secondary Legislation Scrutiny Committee, which broadly welcomes the instrument, for its report. It received a submission from ClientEarth criticising the instrument for not including provisions to make the payment of financial support conditional on the sustainable management of fisheries. I am slightly perplexed by the response from Defra, which is very general and not entirely specific. Exactly how will the Government deliver on their policy to drive meaningful change to increase sustainability, provide world-class fisheries management and support thriving marine management? My noble friend is better equipped than anyone else I can think of to deliver on that, and I would just like a little more meat on the fish bones this afternoon. I am grateful to him for bringing this instrument before us, so that we can ensure its safe passage before the Recess.
Baroness Jones of Moulsecoomb (GP)
I thank the Minister for his introduction, which was very clear. However, I do have some problems with this whole process. I support the idea of the funds going to remote electronic monitoring; that is very sensible and might be the only way that some smaller fishers are able to manage.
I would like to be able to say that UK fishing is in good health, and I would like to believe that the Government are world-leading on this, but I am afraid that that is a rather tired and overused phrase at the moment. This is not world-leading. Admittedly, I do not know much about what other countries are doing but I can say that, from a green point of view, this is not sustainable.
Fishing is an important part of our economy, particularly for coastal areas and for our food supply. Really, what we should have been hearing by now is that the potential environmental disaster on the horizon is going to be fixed. Quite honestly, this situation is tolerated only because it is largely unseen; most people do not know what goes on. For example, disturbance of the bottom ecosystem, caused by beam trawlers, is disastrous. I would be interested to hear whether there is any recognition of that. Then, there is marine plastic pollution from the sacrificial ware of beam trawlers—a huge issue that I have yet to hear be discussed. Moreover, turning to fuel consumption, a typical large boat averages about 2 litres per kilo of fish landed, making it two or three times worse than airfreighting vegetables from Kenya, which we all know is a very bad thing.
I am curious as to why day-boats get so little of the quota; that really does not seem fair. For example, in the south-west the huge majority of beam trawlers are owned by just two companies—Carets in Brixham and Stevens in Newlyn—and I just do not understand how that can possibly help smaller, local companies. Are the Government thinking about them at all?
I am also interested in what is really meant by a marine reserve and what is banned there, because sometimes it does not seem like very much. Reserves are obviously incredibly important. Of course, this is all without taking into account the sustainability or otherwise of the catches. That is why the remote electronic monitoring will be so valuable.
Turning to the regulations, I want to thank Green Alliance and ClientEarth for pointing out their concerns, which I share. While I welcome the exclusions set out in Regulation 5, including that grants may not be used to increase the fishing capacity of a boat, there is a missed opportunity to transform the way we support the fishing industry financially to deliver climate-smart fishing. These technologies are available and should be very high on the Government’s “to do” list. It is about more sustainable fishing practices and ocean recovery.
Section 33 of the Fisheries Act permits the Marine Management Organisation to place conditions on the payment of grants. However, as the noble Baroness, Lady McIntosh, pointed out, there are no environmental conditions on payments. That seems astonishing, given that the climate emergency is a very urgent issue.
In order for financial assistance to promote positive fishing practices, the regulations should be amended to include conditions on the provision and use of grants—for example, to encourage investment in more sustainable fishing gear that does not damage the wider marine environment, to help fishers adapt to technologies for efficient data collection, and for restoration schemes and the collection of marine waste by fishers.
The Minister talked about clean, healthy, productive biodiverse activity, but it has to be sustainable as well. At the moment, sustainability cannot be predicted or guaranteed through these measures.
Baroness Gardner of Parkes (Con) [V]
My Lords, I welcome the introduction of these regulations and their first use as the fisheries and seafood scheme. Although I fully support the intentions behind them, I have several issues to raise that I hope the Minister can address.
When the regulations were debated in the other House last week, concerns were raised about the transparency and openness of decision-making by the Marine Management Organisation, which determines these applications, and the absence of any mention of an appeals process. The Minister referred to the fisheries and seafood scheme guidance, but on reviewing it, I can see no mention of an appeals process. Section 7 of the guidance simply states:
“We will assess your application within 8 weeks of its receipt and notify you if any further information is required. Once we have all the required information to make a decision, we will contact you to tell you if your application has been successful or not.”
This seems remarkably vague, and I suspect I am not alone in worrying about how many cases get to seven or eight weeks, only to be told that information is missing and a decision has been delayed. In fact, the guidance does not actually say that a decision will be made within eight weeks, merely that the application will be assessed within that time.
Given the challenges that the fishing industry has been enduring following Brexit, with many people seeing their catches go to waste due to red tape, and given the financial impact on them and their livelihoods, I hope that the Minister can presume on the MMO to ensure that all applications for grants, particularly those for smaller businesses, are expedited in the current climate and not left until eight weeks or beyond. Also, could the decision-making process be made clearer and timelier, and reference to this and to the appeals process be added to the guidance?
Finally, it appears that applications can be made only through the FaSS E-system. Given the digital divide that still exists across generations, sectors and even the provision of the internet, can the Minister reassure us that this scheme and applications for grants will not solely rely on advertising and applying online?
Lord Teverson (LD) [V]
My Lords, first, I very much welcome the Minister to his post; I have not been in a debate or Question Time with him since his appointment. I congratulate him on his work on highly protected marine areas, which I hope we will see progressed quickly through this Parliament.
I have a few brief questions for the Minister. First, can he confirm that this is just a one-year commitment at present? How long do the Government intend the scheme to last? On finance, the EMFF for England was £92 million over seven years, which comes to a round number of about £13 million per annum, whereas this scheme, as he said, provides only £6.1 million. I do not understand where the idea of equal funding, as before, comes from. I should be interested to understand that.
We are all used to the old European match-funding schemes, and I am interested to understand what the rules for this one will be. We should remember that the larger fisheries sector has been extremely profitable and does not necessarily need public money. That is not true of many of the smaller boats and operators. One of the good, well-tried parts of the old EMFF, as it was rolled out in England, was the so-called fisheries local action groups. They were a way to disburse money in relatively small amounts—and quickly, to come back to the point made by the noble Baroness, Lady Gardner of Parkes—to the smaller fishing operators and owners. I very much hope that that system will be replicated in distributing funds for this programme. It would be interesting to know the answer to that.
One thing I do not get at all is Regulation 12, which states:
“The Marine Management Organisation may, at any time before the grant has been paid in full, suspend or revoke the approval, or vary a condition of the approval.”
That seems completely unfair. If such a regulation were in consumer law, it would be struck out. It graciously then says that the MMO has to let the person know if it is going to do that—great, but they might already have spent money under the scheme, only to find that the MMO has decided to revoke approval. I do not understand why Regulation 12 is there and why it is so draconian. I would certainly be concerned about that if I were applying for funding.
I welcome the Minister’s constant referral to decarbonisation, but perhaps he could give us some examples from the fisheries and seafood scheme, which has been in operation since April last year under a different category. Can he give us one or two examples of decarbonisation awards, so we can understand a little more about what those applications might be?
Finally, I reiterate what others have said, not least the noble Baronesses, Lady McIntosh and Lady Jones of Moulsecoomb, about remote electronic monitoring. I should be delighted if the Minister could nudge his department to support my amendment to the Environment Bill requiring that REM be applied, just to make sure that we get much more and better data and information about marine ecology.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank the Minister for his introduction to this SI today and for the helpful briefing beforehand. The new scheme is welcome as far as it goes, as it will put extra funds into a sector that has been badly impacted by the loss of the EU markets. While I appreciate that this is not primarily what the funds are for, any extra cash is welcome, clearly. However, I have some specific questions about how this scheme will be administered and the rules applied, which I would be grateful if the Minister could address.
First, the SI and the guidance note on the fisheries and seafood scheme use the phrase “sustainability” on a number of occasions. For example, the Explanatory Memorandum states in paragraph 7.2 that
“the scheme will drive meaningful change to increase sustainability”.
However, as we discovered during consideration of the Fisheries Bill, the word sustainability is often used to mean economic sustainability of the industry rather than sustainability of the fish stocks. This seems to be the use here, and the truth is that this can run counter to the objective of increasing the environmental sustainability of the fish stocks in our waters. This is why we tried to argue, unsuccessfully, during the debates on the Fisheries Bill that environmental sustainability should take precedence over other objectives.
As noble Lords have said, and as the Secondary Legislation Scrutiny Committee reported, ClientEarth wrote in to challenge why the SI does not make financial support conditional on more sustainable management of fisheries—in other words, more environmental sustainability. I agree with the noble Baroness, Lady McIntosh, that Defra’s reply as reported to the committee really did not address that question or give a detailed answer. So I ask the Minister again why greater environmental sustainability is not made a precondition of grants under the scheme? I understand that the scheme will be finessed and improved over time, as the Minister said, so will he agree to take this proposal away and consider introducing it for future years?
I agree with other noble Lords that using some of the money for remote electronic monitoring would be a good step forward, and I echo the bid from the noble Lord, Lord Teverson: it would be helpful if the Minister agreed to support the amendment to the Environment Bill that would deliver support for REM. Perhaps he could reflect on that. Furthermore, I agree with the noble Baroness, Lady Jones of Moulsecoomb, that we need to have climate-smart fishing, which needs to be financially supported.
Secondly, paragraph 5(c) of the SI specifically excludes applications for activities which the applicant has a statutory duty to undertake. Can I ask the Minister to clarify what is meant by this exclusion? For example, fishers have a statutory duty to uphold health and safety standards, and indeed to comply with the powers on conservation of stocks under the Fisheries Act. So why are grants to provide better health and safety equipment, or more selective fishing gear, specifically excluded? Perhaps the Minister could clarify that wording in the SI.
Thirdly, the total sum allocated to this scheme in this financial year is £6.1 million. This seems a very small sum for the rather grand ambitions set out in paragraph 7.3 of the Explanatory Memorandum:
“it is hoped the scheme will contribute towards the Government’s levelling up objectives in order to increase the economic prosperity of coastal and rural communities”.
That sum of money is not going to go very far in bringing the vital regeneration money which coastal communities urgently require, and this claim seems to be a mockery of the seriousness of this challenge. I hope the Minister can reassure us that significantly larger sums of money are in the pipeline that will genuinely raise coastal communities out of the poverty and unemployment they currently endure.
Like other noble Lords, including the noble Lord, Lord Teverson, we are interested in the sums available in the longer term, and I hope that the Minister can give us some reassurance on that matter. As my colleague Luke Pollard said in the Commons debate on the SI, according to paragraph 12 of the Explanatory Memorandum, no impact assessment has been carried out as there is
“no, or no significant, impact on business”.
In that case, what is the point of an initiative of this nature?
Furthermore, I ask the Minister for more details on the separate £100 million which was announced earlier this year by the Secretary of State. As I understand it, since that announcement no more has been said about when it will be available, how it will be deployed or what impact it is expected to have on the fishing sector. The fishers are anxious to have more information about this, so perhaps he can use this opportunity to clarify when that money will be available.
Finally, I want to ask about oversight of the MMO’s activities, an issue about which the noble Baroness, Lady Gardner, also asked. These proposals give the MMO complete authority to allocate these funds. Will the Secretary of State take responsibility for monitoring the performance of the MMO in administering these grants? How transparent will the allocation process be? Will there be an appeals mechanism—another point raised by the noble Baroness, Lady Gardner—and can we be assured that it will be independent of the MMO? Will small-scale fishers in particular be encouraged to apply, and will there be a presumption in favour of their applications, since they are the ones who have suffered most since we have left the EU? I look forward to the Minister’s response.
Lord Benyon (Con)
I thank all noble Lords who have contributed today, and I will respond to all the questions as best I can. I apologise if the order in which the answers come does not reflect the order in which the questions were asked.
My noble friend Lady McIntosh asked some important questions, which were echoed by other noble Lords. Remote electronic monitoring is very important. Defra-funded trials are ongoing; they are funded through the data control framework and are separate to this. As a former Fisheries Minister, and having returned to the department, I am impressed by how this has moved forward. I first saw cameras being placed on vessels in Scotland back in 2008, I think, as part of the cod recovery fund. We have come a long way since then. Now, we can manage some of our most remote marine protected areas around our overseas territories with a network system called Catapult, which is a remarkable way of assessing exactly what a vessel is doing at any one time, using satellite technology.
Our domestic fishing fleet now has vehicle monitoring systems: a skipper can receive a text from the MMO automated text system to say when they are approaching the boundary of a marine protected area. Others have been developed—in conjunction with the fishing sector, rather than being imposed on it. Things are working very well in that respect.
My noble friend and others also asked about the benefits to coastal communities, particularly the inshore fleet. The historic bias against the inshore fleet arose because, when it was unregulated, the offshore sector snaffled most of the quota under the EU. That gave rise to the very unfortunate circumstance whereby some 96% of the quota was in the hands of the over-10-metre fleet, while the inshore fleet, on which many coastal communities depend, had to make do with very small or still unregulated areas of fishing capacity. That has been changed. The Government were taken to the Supreme Court by certain fishing sectors when we tried to reallocate some of that, and the Government won. This has now been further changed, with new fishing opportunities being offered to the inshore fleet. It is hoped that this statutory instrument will assist some of the smallest fishing businesses to access the funds they need not just to be sustainable, but to reflect the changing world in which we are demanding that they operate, and the Government’s determination to hit, for example, net zero by 2050.
The Marine Management Organisation ensures that small-scale fishers are supported through the application process—this also addresses the point made by the noble Lord, Lord Teverson. Preferential funding rates have also been put in place to lower the match funding required from them. The FaSS application process has been simplified and clear guidance has been provided to encourage and support applications from a diverse range of applicants. Defra is looking to make further improvements to streamline the application process in future.
In line with best practice and better regulation principles, an assessment was made that the costs of applying to the scheme would be outweighed by the benefits of receiving funding. This was assumed to be the case for all businesses applying for funding. An impact assessment was therefore not necessary in this instance.
In response to the noble Baroness, Lady Jones, the MMO is an NDPB of Defra. It is monitored, its performance is rated and how it delivers the Government’s marine policies is carefully monitored. The role of the MMO was challenged by some in respect of delivery. It is responsible for processing all funding applications and we want to make sure that its decisions are transparent. Higher-value projects of over £150,000 are assessed through a full financial and economic appraisal before a panel comprising third-party economists and the MMO finance team.
We have defined the objectives of the scheme and developed the robust eligibility criteria used to make funding decisions. I have the scars on my back from assessing the old EMFF, whereby vessel owners from countries such as Spain and France were able to buy newer and better vessels that harvested the seas in much more efficient ways. Our taxpayers’ money was being put towards unsustainable fisheries; that has changed in this country—it has also changed in the EU—through the development of this system of funding.
The £6.1 million being delivered through the FaSS this financial year is equivalent to the average annual amount delivered through the English portion of the European maritime and fisheries fund over its seven-year timeframe. I think that addresses the point made by the noble Lord, Lord Teverson. The FaSS will support the Government’s levelling-up agenda by providing financial assistance to projects that support the resilience and sustainable growth of the catching, processing and aquaculture sectors. This will benefit coastal businesses and the wider communities that depend on them.
In addition to the FaSS, the Government are providing financial support to the sector through the £100 million fund which will support investment to modernise and rejuvenate the seafood sector across the UK. I will give some more statistics on that now. On 24 December, the Prime Minister announced this sum to develop the seafood sector and help rejuvenate an industry that has suffered from underinvestment and which is working towards both having sustainable businesses and fishing sustainably. I understand that the dual use of that word could cause some confusion, but it is vital to recognise that we are moving as fast as we can towards some degree of sustainability.
My noble friend Lady McIntosh and the noble Baroness, Lady Jones of Moulsecoomb, asked about highly protected marine areas. I can speak on this issue with some authority as before entering the Government, I chaired a review—embarrassingly referred to as the “Benyon review”—published last June, which recommended the inclusion in the suite of spatial measures the Government have introduced, such as marine conservation zones and other European designations, of a highly protected marine area network. The Government are taking this forward and piloting schemes. It would be embarrassing if they were not, as then I would have to stand at the Dispatch Box, under ministerial co-responsibility, and defend their intention not to follow the recommendations of a report which I wrote. Luckily, they are taking it forward, and it is very long overdue.
We tried to introduce things called reference areas as part of the Marine and Coastal Access Act, but they did not work. Still, I learned from that process, and it was great to be able to take this forward in a detailed review using panel members from right across the marine interest sectors. This will be part of a process.
To address the point about being a world leader, what I think I said in my speech—in fact, I know I did—is that Britain wants to develop as a world leader in sustainable fisheries. We are not so arrogant as to say that we have achieved that. There are still problems of sustainability, and that factor has been the curse of northern European fisheries for decades where we have fished stocks unsustainably. The stocks that exist in our seas today are a fraction of what existed before. We want to go back to a situation where we are able to fish a harvestable surplus under proper scientific guidance that can reflect a growing biomass. That is good for all our health and well-being, it is good for our ability to lock up carbon in our oceans, which is a massive opportunity, and it is vital for the coastal communities and the people that we want to encourage to go into the sector to catch a sustainable source of protein that the country wants as part of a balanced diet.
My noble friend Lady Gardner asked how the £13.5 million fund was used in England. Grant payments to the industry account for £6.1 million, data collection £4.6 million and control and enforcement £1.9 million. The remainder of the £13.5 million will go towards scheme administration and evaluation.
I have already explained how the scheme will be delivered. I confirm that those eligible to apply include: individuals or businesses engaged in commercial or recreational sea fishing, aquaculture or processing activities—we think it is important to add the recreational sector, which is important for coastal communities; those in the sector are the eyes and ears of sustainability, they have been monitoring the areas that they have been fishing and very often they are an important part of fisheries management—a public body or local authority that has a focus on fishing or aquaculture activities; a university or research institute; and a new entrant to the industry that could benefit from developing skills in fishing or aquaculture activities.
I will move on to other points that were raised. I think I have answered the point made by the noble Baroness, Lady Jones of Moulsecoomb, about us wanting to develop as a world leader, and I have talked about HPMA. Plastics from fishing are very important. There is a lot of work going on with the industry to limit the loss of plastic from vessels, usually from losing nets, and to see what can be done to improve that. Fuel consumption is also an important issue. Getting the sector to be, as the noble Baroness says, climate-smart fishers is something that the Government are very much working towards.
The noble Lord, Lord Teverson, asked about the power of the MMO to revoke payments and whether that was a proportionate measure to have. The power ensures that the MMO has the legal protection to suspend or revoke funding approval in the event of a severe infringement—that is important wording. This has been brought forward from the previous EU scheme to ensure that public money is not used illegally or inappropriately. It will be used only in exceptional circumstances.
A number of noble Lords asked about the £100 million. I have covered most of that, but it is there to support investment to modernise and develop the seafood sector. It covers the whole UK, not just England, as this scheme does.
The noble Lord, Lord Teverson, also spoke about the breadth of the scheme and its necessary need to support all fishing activities and the entire supply chain. I can confirm that the scheme will support individuals and businesses across the supply chain. This includes catching, processing, aquaculture and the marketing of seafood products.
The noble Lord asked how long the scheme will last and whether it will be maintained. The £6.1 million has been allocated to deliver grant funding through the FaSS during this financial year of April 2021-22. Given the Government’s manifesto commitment to maintain funding for the seafood sector, we are confident that the FaSS will continue to deliver financial support over the coming years. Obviously, we will monitor it and that will be available for parliamentary scrutiny.
The Fisheries Act offers comparable powers to each of the four nations of the UK to develop their own domestic schemes tailored to the needs of their sectors. As a devolved area, it is up to the relevant Administration to design and deliver their own funding scheme. Both England and Scotland have developed financial assistance schemes that are live and open to applications.
I am conscious that I am going on for a long time and we are running out of time, but I will give one final piece of inspiration that has come into my head. I thank the noble Lords who have contributed to this debate. In summary, this instrument will provide a long-term foundation to deliver the payment of grants to the English seafood sector. It has been specifically designed for this purpose and will ensure that we have full control and accountability for the delivery of the fisheries and seafood scheme, through which transformative support is being made available to the English catching sector. This instrument is key to delivering the Government’s manifesto commitments and securing a thriving and sustainable marine environment. I commend these regulations to the House.
Arrangement of Business
The Deputy Chairman of Committees (Baroness Healy of Primrose Hill) (Lab)
My Lords, the hybrid Grand Committee will now resume. Some Members are here in person while others are participating remotely, but all Members will be treated equally. I ask Members in the Room to respect social distancing, which remains in place in Grand Committee. If the capacity of the Committee Room is exceeded or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes.
The time limit for the next debate is one hour.
European Union (Future Relationship) Act 2020 (References to the Trade and Cooperation Agreement) Regulations 2021
(2 years, 9 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister of State, Cabinet Office (Lord True) (Con) [V]
My Lords, I beg to move that the Grand Committee do consider the draft European Union (Future Relationship) Act 2020 (References to the Trade and Cooperation Agreement) Regulations 2021, which were laid before the House on 16 June. Of course, I am grateful for the opportunity to discuss the regulations presented before the House, but I apologise again as a Minister that I cannot be present in person as I am currently isolating.
The purpose of this instrument is technical; it does not introduce any new policy. Rather, the main purpose is to update references made in the European Union (Future Relationship) Act so that they match the legally revised trade and co-operation agreement, helping to ensure a clear and coherent statute book.
The trade and co-operation agreement, along with the security of information agreement, and the nuclear co-operation agreement, was provisionally applied, as noble Lords will remember, from 2300 on 31 December 2020, in time for the end of the transition period and pending ratification.
In the UK, it was necessary to pass the future relationship Act, which implemented the agreements in domestic law before provisional application was possible. As I am sure noble Lords will recall, it received Royal Assent on 31 December last year. It was our expectation that the European Union would ratify in turn, in line with its own procedures, the treaty ratification in the European Parliament and the Council. The original deadline for provisional application was 28 February. The Government subsequently agreed to the EU’s request to extend the original period of provisional application to 30 April 2021 to give it more time to complete its processes. We are pleased that the European Union completed these processes before the end of April, and the agreements therefore entered into force on 1 May.
Due to the short period of time available between concluding negotiations and the end of the transition period, it was not possible to complete the necessary legal revision process before the agreements were provisionally applied on 31 December. Instead, the agreements have undergone a final process of legal revision since provisional application. The legal revision process provided for by Article FINPROV.9, now Article 780, of the trade and co-operation agreement resulted in typographical and other errors in the agreement being corrected, and the articles being renumbered from Article 1 to Article 783. I underline for your Lordships, however, that the substance and policy content of the agreement has not changed.
As a consequence of this revision to the trade and co-operation agreement, some of the corresponding numbering and references in the European Union (Future Relationship) Act must be updated, which is why this statutory instrument has been drafted and laid. If the instrument is not made, some references in the European Union (Future Relationship) Act, including numbering and annexes, will not match what is contained in the legally revised agreement. It could be the cause of undue confusion for businesses and citizens, potentially making it difficult for them to ascertain what their legal status is and what their legal obligations are. It is therefore crucial that we provide clarity so that businesses and citizens can pursue the opportunities of our agreement with confidence.
This statutory instrument was laid by my noble friend Lord Frost, following the affirmative procedure in exercise of the powers provided for in the future relationship Act. These powers allow Ministers to make amendments that they consider appropriate in pursuit of coherence and clarity following the legal revision process envisaged by the trade and co-operation agreement. The main changes to the European Union (Future Relationship) Act as a result of this instrument are the renumbering of the articles and the correction of cross-references to the TCA in the Act. For example in Section 8(1)(a) of the Act, Article LAW.PRUM.15 will now become Article 537 to reflect the legally revised version of the trade and co-operation agreement. Similarly, in Section 14(1)(a) of the Act, Article TBT.9 now becomes Article 96. I can assure noble Lords that I do not intend to go through all the examples, but they are set out in the instrument.
I can confirm that there was engagement with the devolved Administrations prior to the laying of this instrument, and they are content. I take this opportunity to note my gratitude to the devolved Administrations for their constructive collaboration on this matter.
I hope therefore that noble Lords can agree with me that these draft regulations perform a simple but valuable role in helping to ensure certainty and clarity in the UK’s statute book as we take full advantage of the opportunities available to us in the new era. I beg to move.
Baroness Wheatcroft (CB)
My Lords, I thank the Minister for introducing these regulations in such a straightforward way, and I thank him even more for not going into any more examples of the effect that they will have. Given the fact that they moved from 780 articles to 783, there was clearly scope for him to have at least filled up his full allocation of time with examples that we really do not need. As he said, this is a technical regulation, and I am sure that noble Lords will support it. However, I fear that it will not provide the clarity and do away with the confusion that exists in matters of the TCA that the Minister referred to. I will highlight a couple of issues.
First, on the product conformity rules, at the moment, the UK largely recognises the CE designation on UK and EU products but will not continue doing that after January 2022. Can the Minister assure me that businesses are being made fully aware of the fact that, come January 2022, products bearing the CE designation will not be acceptable in the UK and will have to have the UK designation for safety requirements upon them?
Secondly, I will go into the issue of the Northern Ireland protocol and the how it affects UK trade and the TCA. When that TCA was introduced, the British Government, in a statement updated this month, said that the TCA, agreed in December,
“changes the basis of our relationship with our European neighbours from EU law to free trade and friendly cooperation.”
Today we are told by the Minister, the noble Lord, Lord Frost, that we are seeing a relationship which is punctuated with legal challenges, characterised by disagreement and mistrust. That sounds rather different from what was envisaged when we went into this business.
Now that we have embarked on a new attempt to try to restructure what was always destined for failure—the Northern Ireland protocol—and negotiations are going to be extremely difficult, does the Minister believe the time may have arrived for us to change negotiators and have a fresh start for a fresh relationship that might be based on trust rather than the mistrust which the noble Lord, Lord Frost, says exists at the moment? Might he also bear in mind, when those renegotiations take place, something the German Government said on 5 July of this year when referring to the trade and co-operation agreement? They said that
“Although the European Union would have wished it, unfortunately the agreement does not contain any provisions on cooperation in the sphere of foreign and security policy.”
That seems a significant lack, and I know that others in the House agree. Might the Minister consider whether this is the opportunity to try, in a spirit of co-operation and trust, to reinstitute co-operation in the sphere of foreign and security policy?
Baroness McIntosh of Pickering (Con)
I am grateful for the opportunity to speak to the regulation before us and to follow my noble friend Lady Wheatcroft. I thank my noble friend Lord True for introducing the regulation and I sympathise with him having to isolate in what is meant to be freedom week, which has not gone quite according to how everyone had hoped.
I take the starting point that my noble friend set out, that this is purely technical in nature and that it came about from the fact that the process of correcting and checking all the cross-references for consistency usually takes place before signature. However, I wonder whether, for example, if there has been an extension of the grace period already for goods travelling not just from Great Britain to Northern Ireland but also in some cases goods travelling from the UK to the whole of the EU and the reverse, there will be any consequential changes if that grace period is either extended again or if further changes are made? As I understand it, that goes to the heart of what was agreed in the trade and co-operation agreement. The sooner we make the changes, the better, but I would just like to know that there are no further consequential changes in part.
I am hearing a lot from the food industry that it is particularly concerned that we do not seem to be on track yet to making the changes by the deadline—I honestly cannot remember whether it is 1 October or 31 October. So I would like confirmation from my noble friend that either the grace period is going to be extended again or we are going to have a revision to the trade and co-operation agreement to try to soften the blow.
The figures that I have from the food industry were issued in the third week of June. They make the point that the reduction in trade is due not just to the fact that we have left the EU but to the ongoing impacts of the Covid-19 pandemic. The fact that a number of Ministers and others are having to isolate makes the point, not just that there is a shortage of lorry drivers already but that lorry drivers and deliveries are being severely challenged at this time because of the further requirements to isolate because of the ping pandemic as opposed to the Covid pandemic.
Does my noble friend share the concern that all the UK’s top 10 products exported to the EU have fallen significantly in value in the period 2019-21? Whisky has dropped by 32.3%, chocolate—although I do not think many of us will be eating chocolate in the present heat—has dropped by 36.9%, lamb and mutton have dropped by the lesser amount of 14.3% and dairy products have been severely impacted. I would be interested to see whether the figures are expected to revive, if my noble friend has access to the figures, in the third quarter in the run-up to September.
I share the concerns expressed most eloquently by my noble friend Lady Wheatcroft regarding the ongoing procedures under the Northern Ireland protocol. Coupled with our reduction in trade with the EU, the pandemic and the shortage of lorry drivers, a mood is arising that we are going to have a very difficult run-up to Christmas. I say that as I have the honour to be the honorary president of the United Kingdom Warehousing Association, whose members are being impacted by the fact that they do not have enough drivers to empty the supplies that they have in their warehousing. Obviously, perishable foods are a particular concern, given the heat at this time of year.
I take the point made by my noble friend in introducing this instrument so thoroughly and taking great pains to say that this is purely technical. I just want to be convinced that there have not been any consequential changes to the initial grace period—as I imagine there would have been, since it was enshrined pretty definitely that the grace period was meant to end on, I think, 1 March or 1 April—or to be told if there will be any consequential changes to the trade and co-operation agreement through an extension of the grace period from October. With those remarks, I welcome this opportunity to address the changes set out in the instrument.
Lord Wigley (PC) [V]
My Lords, I am delighted to follow the noble Baroness, Lady McIntosh. I too have had some representations from the food industry, which has expressed the concerns that she has outlined. From what the Minister has said, and from the background notes available to us, this order represents minor and technical changes to instruments that have already been discussed and endorsed. If that is so, there is hardly scope for an extended debate.
I have three questions. First, did the errors and inconsistencies that we are correcting today come to light purely as a consequence of the Government’s operation of them, or did they come to the Government’s attention through some outside body, company or trading organisation that might have found themselves in difficulties arising from the original wording? The Minister referred to the danger that if we do not pass the order then there could be uncertainty. Might there already have been some uncertainty facing business as a consequence of the wording as it stands?
Secondly, if that is so, did the original wording cause any material negative impact on any commercial organisation? Indeed, has such an eventuality lead to any court action or any dispute with the EU authorities or any commercial body within the EU, or could it conceivably do so in future?
Thirdly, to the extent that these regulations have particular significance for Northern Ireland—I noted the points made by the noble Baroness, Lady Wheatcroft, a moment ago—have the Government discussed the workings of these regulations in detail with the devolved Government in Northern Ireland? Have they asked them whether any aspect of the original order, beyond what we are discussing, caused problems for Northern Ireland? If so, might we expect to have further amending orders, perhaps on more substantive issues, when we return in the autumn, and is that not inevitable in the wake of today's Statement by Brandon Lewis? Will we not have to visit all this again if there is progress on a comprehensive veterinary agreement with the EU?
Finally, I was delighted to understand from the Minister’s comments that the Government have, in this instance, consulted with the devolved regimes and that they have been positive in their responses. I would say in passing that, if they are consulted in advance, then their responses will almost always be positive and warm. They only get stroppy when they feel they have been left out of the loop. Can the Minister clarify whether, as a matter of routine, the Government always give all devolved Governments an opportunity to comment on proposed orders of this sort in case there is some unforeseen aspect which impacts on their devolved responsibilities? Having said that, I am happy to support the order.
Lord Berkeley of Knighton (CB) [V]
My Lords, I am very pleased to follow my friend Dafydd, the noble Lord, Lord Wigley. We move from one part of Wales to another for what I am about to say, which will be mercifully brief. I, too, thank the Minister for not bombarding us with every single change. I am happy with the process he has outlined.
We have heard a bit from previous speakers about drops in trade. We have heard about co-operation and trust, coherence and clarity; these are things we simply have to build with the EU so that our various sectors can prosper. Although this is slightly off the point, I hope the Minister will give me a moment of indulgence to mention that in terms of trade, as he knows, musicians have been hit appallingly hard and there is a little lack of clarity about how we are going to overcome this.
The noble Lord, Lord Frost, with whom I have had private and public meetings, and the noble Baroness, Lady Barran, at the DCMS, have explained that we will try to find bilateral agreements with countries. I am extremely grateful that they are doing that, but we were hoping that this could be sorted out at least at a TCA level, because the problem for people building a tour in Europe is that, if all or an awful lot of the countries are different, it is an absolute nightmare. I bring this back to trade now. People are seeing their livelihoods pulled from underneath them. I make that point, but I am happy for the Minister to proceed as he outlines.
Lord Wallace of Saltaire (LD) [V]
My Lords, this takes me back to when I first started to work on the European Community. The EU is a legal construct; clauses, subclauses, chapters and treaties all matter a great deal—usually in French and English, with others to be carefully compared.
I remind the Minister that, when I started to work on this, Margret Thatcher, the then Conservative Prime Minister, was pushing hard to create a single market by removing non-tariff barriers, which she rightly saw as bigger barriers to trade than tariffs. All Conservative Ministers learned and well understood this. I find it very sad that so many Conservatives and current Ministers appear to have forgotten that a mere 25 to 30 years later.
One of the many things that this Government have declared and then had to go back on is that Brexit is done. We are learning that Brexit is far from done; there is a great deal more to be sorted out. That is of course partly because of the chaotic way in which the TCA was negotiated at the last minute against the deadline—in the clear hope from the Prime Minister, Boris Johnson, that this would leave very little time for Parliament to scrutinise or find holes in it.
Now we have a technical SI on the negative basis to correct some aspects of it. Can the Minister confirm whether he expects there to be further SIs that will deal with minor—or indeed major—amendments to the TCA and, if so, may I warmly suggest that they should in all cases be affirmative SIs? We are trying to redesign our relationship with the European Union and we all have an interest in that relationship not becoming a hostile and ill-tempered one. If we are to achieve that, however, it requires a good deal more to be sorted out, including foreign and security policy co-operation, as the noble Baroness, Lady Wheatcroft, said.
In this respect, the very 19th-century view of the noble Lord, Lord Frost, of sovereignty as much more fundamental than international law is clearly a barrier to reasonable negotiation and reasonable arrangements. We all understand that the greatest difficulty with the Northern Ireland protocol is that, for ideological reasons, the British Government have refused to negotiate a phytosanitary agreement—or veterinary agreement, as the noble Lord, Lord Wigley, called it—on the grounds that this would impinge on British sovereignty, not that the British Government have said, so far, that we wish in any way to move away from existing European regulations. That seems to me to be a triumph of ideology over national interest—and, incidentally, it begins to threaten the union and peace in Northern Ireland.
I have some sympathy for the Minister in his position. Honest Conservatives now working for a chaotic Government—I hope not quite as chaotic as Dominic Cummings claims—must find themselves in some difficulty defending the position of a Government who often deny responsibility for what they negotiated less than three years ago. The Government must take responsibility for their future relations, however much they may wish to tilt towards the Pacific. I have to say that I was very amused to discover the other day that the Government are planning to send fishery protection boats to the Pacific in order to enforce fishery protection there, while we are so short of fishery protection vessels in the UK that we could do with another dozen or two here.
There are a number of illogical elements in this Government, which I am sure the Minister quietly regrets as he loyally continues to serve. Can he assure us that further amendments to the TCA, which we unavoidably expect, will be presented, whenever possible, as affirmative SIs and debated on the Floor of the Chamber? We all have strong interests in this relationship becoming a stable and friendly one, and we are some distance from that yet.
Baroness Hayter of Kentish Town (Lab) [V]
I too thank the Minister for such a succinct introduction—although in this case it possibly was not difficult as the SI is only about changing the numbering of paragraphs. When we remember that old refrain, “We’re here because we’re here because we’re here”, we can respond “We’re here to renumber”. But at least, unlike the troops, we can ask, “Why are we here to renumber?” The answer, of course, has been suggested by other speakers: the treaty had not been “scrubbed” when the Bill went through.
So anxious was the Prime Minister to hit his self-imposed date that nothing else mattered—not legal certainty nor careful drafting, nor clarity for businesses, their advisers and even enforcers working on behalf of the Government. Indeed, the Government have admitted that the document was signed too late to allow the lawyers to take a proper look at it. That is the cause of us all being here today.
The Minister may recall that we warned again and again of the discomfort of business, which was told to prepare for the end of transition when it did not know what the rules would be. The final hurried signing and implementing of the TCA—no matter how good its content—meant that mistakes and gaps were the order of the day. The errors being rectified at this moment are slight and inconsequential, and the Minister will be pleased to know that they give us no problem, but we fervently hope that future trade deals will not be signed off in this cavalier way. Parliament and stakeholders, as well as lawyers, must have time to scrutinise before treaties are signed and ratified.
This Monday, I heard the noble Lord, Lord Grimstone, reassure our International Agreements Committee that future FTAs would be given plenty of time for that committee, and the new Trade and Agriculture Commission, to interrogate the texts. Perhaps the Minister would like to repeat that commitment for the sake of this Committee, so that we can be confident that all the legal checks will in future take place before any ratification of a treaty. Could he also indicate whether he foresees the proposed parliamentary partnership assembly being able to review how negotiations with third countries interact with the TCA? He might, incidentally, also nudge his colleague, the noble Lord, Lord Frost, about getting a move on in establishing the civil society forum and the domestic advisory group, so that they are able to consider exactly such issues.
It is interesting that the question was raised whether this, albeit very small, technical and necessary change was noticed by the Government’s own lawyers or by outsiders, be they business or other users of the particular paragraphs. It is always that outside pair of eyes that makes the better deal. However, for the moment, we are very content with this SI and assume it will go through smoothly when it gets to the Chamber, presumably tomorrow or when we come back.
Lord True (Con) [V]
My Lords, the computer is trying to remove the answer to one of your Lordships’ questions—if it does, I shall have to reply in writing.
I am very grateful to all noble Lords for their contributions. As I set out, the purpose of the instrument is to help ensure that the statute book works coherently and effectually following the legal revision of the trade and co-operation agreement. I will not get drawn into a detailed debate about historical periods; indeed, it being a hot afternoon—and being I think in a minority on this Committee in the views I took on the events of 2016 to 2019—I excised from my brief all political points.
I will not go into them, except that I must respond to my noble friend Lady Wheatcroft’s comments on my noble friend Lord Frost. I repudiate those comments and disagree with her that the country would be better served by another person engaging in negotiations at this time. My noble friend Lord Frost, as a civil servant and as a Minister, has been and continues to be an outstanding servant of his country. I also submit that anyone who was present in the House today or who followed its proceedings could not but agree with the measured, restrained and realistic tone in which he presented the Government’s proposals to the House. They were everything one would expect of a diplomat and Minister.
The protocol is not strictly germane to these arguments, but my noble friend has laid out proposals before the House which we wish to negotiate and consider in good faith with the European Union. It is idle to deny that the protocol has caused problems in Northern Ireland; it has done so—and it behoves all of us in a spirit of comradeship, amity and diplomatic endeavour together with responsible institutions, such as our partners in the EU, the Government of the Republic of Ireland and ourselves, to seek to solve the problems that we all agree have arisen to help the good people of Northern Ireland. We wish for the best possible relations with the European Union. We have long enjoyed those, and I pray for the day, if they are not as satisfactory as we would wish—although I do not say that they are not satisfactory—when good relations between us should ever thrive.
A broader question was raised about exports and imports. That is an important question, and the Government are monitoring closely, as I can assure my noble friend Lady McIntosh, the movements and changes in trade, in exports and imports. It is obviously particularly complex at the moment because of the complicating factors of the Covid emergency, which have distorted so many things in international life over the last few months. However, I assure my noble friend that we have monitored those things extremely closely and will continue to do so.
I was asked by the noble Baroness, Lady Wheatcroft, about CE markings. My computer has not been able to provide me with the answer, but I absolutely undertake to the noble Baroness to get that answer to her and copy that to other members of your Lordships’ committee.
I was asked about touring musicians—another broader issue. I dealt with this matter when responding on the European Union in your Lordships’ House. It is a matter of concern and one which the Government have taken and did take very seriously. As the noble Lord will know, we made proposals to the European Union that were not acceptable at the time. At the first UK-EU partnership council on 9 June, the UK raised the issues faced by touring performers and noted work under way with member states, as he says, on trying to ease or clarify the barriers presented by visa and work permit requirements. I promise him that we will continue to discuss these issues with all member states to find solutions to this work for our great creative industries. It is a matter of concern, and I assure him that that is the case.
On the question of affirmatives, it is always a bad thing for a Minister to give an absolute categorical guarantee if he is not entirely sure of his ground. What I am sure of is that the Government believe that decisions are made stronger through scrutiny and debate, and in that respect I respond positively to what the noble Baroness, Lady Hayter, said. We are committed to facilitating scrutiny wherever possible.
In this case, the FR Act requires the Government to use the affirmative procedure. Because the power which the Government are using, as today, to make the SI is inherent in that Act and because the SI is being made after IP completion date and amends primary legislation, it is necessary for such a procedure to be affirmative. In reply to the noble Lord, Lord Wallace of Saltaire, my assumption, if not my undertaking, is that because of that legal position, if any further regulations of this kind were to be brought forward—our current expectation is that we are not aware of further, similar statutory instruments in the pipeline—my expectation, as well as that of Parliament, is that they would come forward as affirmatives under the Act.
I was asked whether there had been any complaints or court action as a result of the numbering difficulties—the noble Lord, Lord Wigley, raised that. I am not aware of any. Obviously, the Act made provision to enable this kind of renumbering to happen. If I am wrong on that score, I will correct the issue and let him and other noble Lords know, but I am not aware of such proposals in the pipeline.
I accept the general construct of the remarks from the noble Baroness, Lady Hayter. Parliamentary scrutiny is and will be important going forward in our relations with the EU. I think it is right to place on the record—this is not only my personal view—that the Government are very appreciative of input from the scrutiny committees in both Houses as we consider what shape scrutiny should take going forward. I am informed that our officials are having fruitful discussions about this with committee officials in both Houses, and I am sure that that is the case. Obviously, arrangements for long-term scrutiny must be proportionate and focused on areas where the United Kingdom has direct legal obligations under the new relationship. However, the Government will facilitate transparencies of the withdrawal agreement and TCA governance structures to the extent that we are able.
With regard to consultation with the devolved Administrations, I referred to that in my opening remarks. The DAs were engaged on this. The Government wish to have a constructive relationship, which is why the Prime Minister called the Covid summit after the elections in the devolved Administrations—my right honourable friend the Chancellor of the Duchy of Lancaster is a conspicuous example of this; noble Lords will have heard him before your Lordships’ committee yesterday. In this particular case, the Northern Ireland Executive were indeed involved and confirmed that they were content with the SI. Because of its technical content their formal consent was not required, but they were certainly fully involved.
I apologise for not being able to give a detailed answer on the CE marks to my noble friend Lady Wheatcroft. I hope I have not missed anything out. I passed over a few references to Mr Cummings—it is always tempting to mention him to me. As I say, it is a rather hot afternoon and I decline to be drawn on that subject. I hope this has been at least some kind of response to your Lordships. I am grateful for all the points raised, and we will reply to those that I mentioned which we have not replied to. I thank all noble Lords for their contributions and appreciate all those who have come to improve our discussion today. I commend the regulations to the Committee.
Arrangement of Business
The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)
My Lords, the hybrid Grand Committee will now resume. Some Members are here in person while others are participating remotely, but all Members will be treated equally. I ask Members in the Room to respect social distancing, which remains in place for Grand Committee. If the capacity of the Room is exceeded or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes. The time limit for the next debate is one hour.
Environmental Authorisations (Scotland) Regulations 2018 (Consequential Modifications) Order 2021
Viscount Younger of Leckie
That the Grand Committee do consider the Environmental Authorisations (Scotland) Regulations 2018 (Consequential Modifications) Order 2021.
Viscount Younger of Leckie (Con)
My Lords, this order will ensure that radioactive substance activity in Scotland is controlled by a single regulatory framework, as opposed to the two different frameworks currently in existence for onshore and offshore areas.
For clarity, the onshore area is devolved to Scotland and comprises the internal waters and territorial sea of the UK that are adjacent to Scotland. The offshore area is reserved to the UK and comprises areas beyond the territorial sea. An example of activities that will be better regulated through the order is the regular movement of contaminated components, such as pumps and valves, which are transported from offshore to onshore for cleaning, maintenance and/or disposal.
The order, known as a Scotland Act order, is made in consequence of the Environmental Authorisations (Scotland) Regulations 2018, which I now refer to as the environmental authorisations regulations. Scotland Act orders are a form of secondary legislation made under the Scotland Act 1998, which forms the foundation of the devolution settlement with Scotland. This type of secondary legislation is used to update, implement and adjust Scotland’s devolution settlement. The most common type of order is a Section 104 order, which allows for necessary or expedient legislation or legislative provision in consequence of any provision made by or under any Act of the Scottish Parliament or secondary legislation made by the Scottish Ministers. In this Section 104 order, provision is required in consequence of the previously mentioned environmental authorisations regulations.
Some noble Lords may remember that I recently debated another Section 104 Scotland Act order, which was in consequence of the UK Withdrawal from the European Union (Continuity) (Scotland) Act 2021. Just like the continuity order, this Section 104 order has been agreed by both Governments. Officials from both Governments have been working together for over a year on this order and it stands, as do all Scotland Act orders, as an example of close co-operation between Scotland’s two Governments on issues of shared interest.
The environmental authorisations regulations repealed and replaced the Radioactive Substances Act 1993 in Scotland. That Act remains in place for the offshore area. As such, there are two distinct regulatory regimes in operation for the offshore and onshore areas of Scotland in relation to activities involving radioactive substances. As I explained earlier, the offshore area is reserved, so the Scottish Parliament is unable to amend the legislation that would extend the scope of the environmental authorisations regulations to the offshore area. It is for that purpose—to bring Scotland’s onshore and offshore areas under one regulatory regime—that we need this Scotland Act order.
I turn to the purpose and details of the order and what it does. Amendments are sought to the Continental Shelf Act 1964 and the Civil Jurisdiction (Offshore Activities) Order 1987. The aim is that both should reference the environmental authorisations regulations where they have previously read “the Radioactive Substances Act”. This change will ensure that installations in the Scottish offshore area—that is to say, fixed installations such as oil rigs and mobile installations such as floating production storage and offloading vessels—are considered to be part of Scotland for the purpose of the environmental authorisations regulations in so far as they apply to radioactive substance activities.
To put this into perspective, let me offer an example of the real world changes this order seeks to make. This year the Scottish Environment Protection Agency, known as SEPA, has received 16 applications under the current regime for Scotland’s offshore sector, which is dictated by the Radioactive Substances Act. In some instances, operators undertaking onshore and offshore activities will require authorisation under both the environmental authorisation regulations and the Radioactive Substances Act 1993. This creates unnecessary bureaucracy for operators that a single regulatory framework would avoid. Therefore, through the changes made by this order, there will be a single regulatory framework for activities using radioactive substances in Scotland.
The order will also fully implement important safety measures from the Euratom basic safety standards directive. These safety measures are transposed by the environmental authorisations regulations but do not yet apply to the offshore area in Scotland. This order must be passed to give the measures full effect.
I turn now to enforcement. SEPA has been enforcing the environmental authorisations regulations onshore since they came into force in September 2018 and will enforce the regulations in the same way in relation to the offshore area once this order is made and comes into force. SEPA’s enforcement includes ensuring that radioactive substances activities are appropriately authorised and inspected, and that enforcement measures are applied if necessary.
Under the environmental authorisations regulations, SEPA has enforcement measures including a regulatory notice, which allows SEPA to place additional temporary conditions on a person whether they are authorised or not, an information notice and an increased maximum penalty of £40,000 on summary conviction.
In summary, this instrument will ensure that the environmental authorisations regulations have the same scope as the Radioactive Substances Act had in relation to the offshore area. We believe this order is a sensible and pragmatic step to ensure that there is one framework for environmental authorisations in Scotland in relation to radioactive substances, which also includes the offshore area. I commend the order to the Committee.
Lord Bruce of Bennachie (LD) [V]
I thank the Minister for his very helpful introduction and clarification of the purpose behind this order, which is obviously mutually agreed. It appears to be sensible, reduce bureaucracy and simplify the framework. However, may I clarify one or two issues?
As a member of the Common Frameworks Scrutiny Committee, I ask the Minister: how does this order relates to the common framework process? We are in the process of finalising the radioactive substances one; we are not there yet and I think the next stage is in October. How do these two processes interact—this order and the common frameworks process going through at the moment? It would be helpful to see how they fit together.
It was interesting that the Minister made reference to the Euratom standards and the incorporation of those, given that the undertaking has been that the UK will maintain all radioactive standards at EU level or above. I would be grateful for an assurance from the him that that remains the case.
For the offshore oil and gas industry in particular, but others as well, it would be helpful to have some indication of how SEPA will apply these powers. It is implementing what it calls a “radical new approach”: the “three planets” approach. In other words, we should have environmental standards that recognise we have one planet, not three. It states:
“Our approach is ambitious. It spells out how we will use traditional regulatory tools, such as permits and enforcement, in clearer and more powerful ways, and also sets out some completely new ways, such as novel partnerships that we will develop and use to support innovation in the sectors.”
That is obviously a very noble ambition, but for people in the sector it may raise concerns of potential complication or the risk of non-compliance. Again, it would be helpful to have some idea of how this will be approached.
There is an awful lot of detail in the instrument—I have tried to go through it. There is clearly a lot of discretion, a lot of scope for negotiation and a lot of process, which should meet all circumstances—it seems to be extremely thorough. Nevertheless, reassurance that the process will not create bureaucracy and burdens that were not there before would be helpful—although the Minister has made it clear that the one disadvantage of the previous regime was that two applications could be necessary where now only one will be.
The other question is whether there is a role for the UK Government if SEPA or Scottish Ministers take a view which may not be consistent with what is happening elsewhere in the UK—for example, with what is happening in the southern North Sea. In that context, is it entirely a matter for the devolved Administration, or is there any role for the UK Government to intervene, comment or even be consulted?
Specifically, there is an exclusion for matters of national security and, again, some clarification of how this might apply would be helpful. It states that, subject to the provision of this regulation, these regulations “bind the Crown”. It does not apply, obviously, for naval, military or Air Force purposes, but presumably other Crown agencies could be impacted by it. Again, it would be helpful to have clarification of whether there is a clear line of communication, whether there is any overlap, or whether the relationship is entirely between the participants participating agency and SEPA and, where necessary, Scottish Ministers.
It is said that the process of these environmental authorisations is taken step by step. This one relates to radioactive substances, but others will be introduced on water, waste management and pollution prevention and control. Can the Minister give any indication of when and how it will be extended to those other sectors—whether it will be through the same process that we are undertaking today or through a different route?
That said, from the consultation that has taken place and from what I have seen and heard, all parties seem to be clear that this is a simplification, a necessary step, one that people have been consulted on and, as far as I can tell—I may have missed something—have not expressed any serious reservations about. However, change can always lead to misunderstanding or complexity, and I would welcome any assurances that the Minister can provide to assure me that those have been consider and eliminated—in particular, on my questions, to whatever extent he can answer them, either now or in writing after the debate.
Lord Falconer of Thoroton (Lab)
First, I thank the Minister, the noble Viscount, Lord Leckie, for his very clear exposition of the regulations. I apologise to him. Last time we appeared in Committee together, I repeatedly referred to him as “Viscount Leckie” rather than “Viscount Younger of Leckie”, but he made no complaint whatever, which is a measure of the man. I apologise for that on this occasion.
Like the noble Lord, Lord Bruce, I indicate that we on this side support the regulations. They seem sensible; we have a number of questions. The first is: my understanding is that the Environmental Authorisations (Scotland) Regulations 2018 do not have the same extent as the Radioactive Substances Act 1993 and that the purpose of these regulations is to ensure that they do.
The Environmental Authorisations (Scotland) Regulations came into effect on 1 September 2018, and my understanding is that these regulations will come into effect tomorrow, which will be 22 July 2021. Am I right in saying that some other body, apart from the Scottish Environment Protection Agency, had responsibility for authorising the use of radioactive substances in areas offshore of Scotland during that period? Can the Minister identify who it was, and whether that body acted completely in concert with the Scottish Environment Protection Agency?
I may have misunderstood what the Minister said, but I think it was that the effect of these regulations is to treat those offshore installations that deal with radioactive substances as covered by the environmental authorisations regulations. Under the devolution settlement at the moment, they would not be covered because those offshore installations are not covered, presumably, by the Scotland Act 1998. How is it—he explained but it was too fast for me to pick up—that we are making a change in what is reserved and what is devolved by secondary legislation?
Separately from that constitutional issue, can the Minister give us some examples of the sorts of activity involving radioactive substances that will be caught by this new regime, which brings the radioactive substances use offshore into the ambit of the Scottish Environment Protection Agency? What risks do those sorts of activities generally involve and what resources does the Scottish Environment Protection Agency have to deal with these issues?
Finally, the Scottish Environment Protection Agency was, not that long ago, subject to a cyberattack. Should we have any anxieties about cyberattacks in relation to SEPA when dealing with radioactive substances and, if we do, what steps are being taken by SEPA to ensure that this does not happen again? My reading of the Explanatory Notes for these regulations suggests—this is not a complaint; I just want clarity—that there have not in fact been consultations on these regulations, so they have not been the subject of comment in relation to, for example, those people who use radioactive substances offshore or green and environmental organisation that might have issues in relation to that. Have either the Scottish Government or UK Government consulted either with people involved in the industry informally or with green and environmental charities as to their view in relation to this? In particular, has the Scottish Environment Protection Agency indicated, formally or informally, what sort of process it will set up to ensure that there is a fair process for getting the necessary authorisations? By a “fair” process, I mean in the sense that it is fair to the people who seek the authorisation but also properly effective in protecting the environment.
I give a further apology to the noble Viscount, Lord Leckie, in that I gave him no notice of any of these questions and therefore I would quite understand if he wishes to write. I am obliged to have this opportunity.
Viscount Younger of Leckie (Con)
My Lords, I start by thanking the noble and learned Lord, Lord Falconer, and the noble Lord, Lord Bruce, for their general support for this order and for their interest and questions.
I guess it is fair to say that, having spent 11 years in the Lords, I am quite used to having questions that come out of left field. It is true that I may well have to write to noble Lords on certain aspects, but I shall do my best to answer all the questions. I realise that I should say that I rather milked the opening statement, it is fair to say. I felt that I was saying the same things twice, but I wanted to be quite clear that we might want to give some clarity to the order in opening.
In no particular order, to answer a point raised by the noble and learned Lord, Lord Falconer, on whether the order pushes the boundaries of the devolution settlement, I can reassure him that no, the order is a sensible and pragmatic step on the part of the UK Government to ensure that provision required in consequence of the Environmental Authorisations (Scotland) Regulations 2018 is made. As he will probably know, a Section 104 order is a mechanism provided by the Scotland Act 1998 to ensure the effective working of the devolution settlement.
The noble and learned Lord, Lord Falconer, raised the good question of whether consultation exercises have been undertaken. He may well know that orders taken forward under Section 104 are not usually consulted on, as they are made in consequence of Acts of the Scottish Parliament, which have previously been the subject of separate consultation exercises. Consultation was carried out in 2017 on proposals for the Environmental Authorisations (Scotland) Regulations 2018. The Scottish Government engaged with the Scottish Environment Protection Agency—SEPA—as mentioned earlier, during the development of the regulations and, for both the framework consultation and the draft regulations, I am pleased to report that consultees were supportive.
The noble Lord, Lord Bruce, asked about timing and when the order will come into force. The target in-force date for this order is 1 November 2021. That is subject to parliamentary approval; as he may well know, the order is subject to the affirmative procedure under the Scotland Act 1998 and has been laid in draft for parliamentary approval before it can be made.
I think it is fair to say that the noble Lord, Lord Bruce, asked among his questions how the framework would be enforced. SEPA has been enforcing the environmental authorisations regulations onshore since they came into force in September 2018 and will enforce the regulations in the same way offshore once this order is made. To reassure him, SEPA’s enforcement includes ensuring that radioactive substances activities are appropriately authorised and inspected, and that enforcement measures are applied as appropriate if necessary.
The noble Lord, Lord Bruce, asked further about how SEPA works with its counterparts in the rest of the UK, which is a very fair question. It engages routinely with the relevant regulatory bodies and industry groups across the UK, including the other environmental agencies and offshore regulators. As SEPA has already been enforcing the environmental authorisations regulations onshore for several years, its counterparts are aware of the regulations that will be applied offshore by the Environmental Authorisations (Scotland) Regulations 2018 (Consequential Modifications) Order 2021.
The noble Lord, Lord Bruce, also asked about the movement of radioactive substances between offshore areas in Scotland and England. Again, to give a bit more detail, the concordat on the co-ordination of intergovernmental working on radioactive substances policy, which is due to be published shortly, will establish a mechanism for consensus on matters relating to the movement of radioactive substances between the four Administrations of the UK. It is a very important question, because this is inclusive of all sectors, nuclear or non-nuclear, which utilise or produce radioactive substances. It will include ensuring that, in some cases, there is agreement to proceed with common policy across the UK, including the movement of radioactive substances between the four nations. That might go some way to answering the point about security, raised, I think, by the noble Lord, Lord Bruce.
The noble Lord, Lord Bruce, also raised a point about Euratom and maintaining the standards post our exit from the EU. Euratom is already being implemented with the environmental authorisations regulations 2018 onshore; this order will ensure that Euratom standards apply across the board, which, to reassure the noble Lord, includes offshore.
To extend the answer to the question that the noble Lord, Lord Bruce, raised about security, for example, if an authorised operator moves from one offshore area to another, a new authorisation would be required. However, this is not a new requirement. It is the same position as when the Radioactive Substances Act 1993 applied across the whole UK.
It is fair to say that, in practice, it would be rare for an operator to move between jurisdictions; most installations are fixed. It would be a consideration only for floating production and storage and offloading installation facilities, which usually move only permanently at end of life, or for maintenance.
I am very aware that I have not managed to answer the question from the noble and learned Lord, Lord Falconer, on risks or his important points about cyber, so I shall certainly have to write a letter on that. I hope that I have attempted to answer most of the questions raised. With that, I thank both noble Lords for their general support for this order.
Arrangement of Business
The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)
My Lords, the hybrid Grand Committee will now resume. Some Members are here in person while others are participating remotely, but all Members will be treated equally. I ask Members in the Room to respect social distancing, which remains in place for Grand Committee. If the capacity of the Committee Room is exceeded or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes.
Electricity Capacity (Amendment) Regulations 2021
(2 years, 9 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Callanan
That the Grand Committee do consider the Electricity Capacity (Amendment) Regulations 2021.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, before outlining the provisions made by this draft instrument, I will provide the Committee with a brief reminder of what the capacity market is and does. The market is at the heart of the Government’s strategy for maintaining security of electricity supplies in Great Britain. It secures the capacity needed to meet future peak electricity demand under a range of scenarios through competitive, technology-neutral auctions, normally held four years and one year ahead of the relevant delivery year. Those who win capacity agreements, known as capacity providers, commit to providing capacity during periods of system stress in exchange for receiving capacity payments. Capacity payments are funded by electricity suppliers, which recover this cost from electricity consumers.
Since its introduction in 2014, the capacity market has succeeded in ensuring secure electricity supplies at a low cost to consumers. Furthermore, it has a proven track record of facilitating investment in new-build capacity. To date, the capacity market has supported investment in over 13 gigawatts of new capacity, including smart technologies such as battery storage and demand-side response.
The most recent auctions, which took place in March this year, were successful in securing all the capacity needed to meet peak demand through to 2024-25. This year, for the first time, as a result of the carbon emissions limit introduced to the capacity market in 2019, coal-fired plant did not participate in the four-year-ahead capacity market auction, nor will it be able to participate in any future four-year-ahead auctions. This is just one of the steps that we are taking to help to align the capacity market with our broader decarbonisation objectives on the road to net zero emissions by 2050.
In 2019 we published our five-year review of the capacity market. In it, we found that the capacity market was fundamentally meeting its objectives. However, we identified a number of areas that could be improved through incremental change, many of which have since been implemented through subsequent amendments. That has ensured that the capacity market remains the best way to ensure security of supply at the lowest cost to the consumer. Most years, we also make adjustments to the legislation based on our day-to-day experiences of operating the capacity market in order to ensure that it continues to function effectively.
In that context, the draft instrument before us today makes three technical improvements that will address issues in the functioning of the capacity market that we have encountered over the past year. Specifically, a number of capacity providers had agreements terminated last year but were unable to transfer their obligations to other providers through the capacity market’s secondary trading market. To reduce risks to security of supply, the draft instrument aims to remove the barriers restricting the trade of obligations following termination. This will improve the flexibility of the secondary trading regime and make it easier to replace capacity that closes prematurely and at short notice.
The past year also saw a large number of appeals by prospective capacity providers whose applications to participate in the capacity market had been rejected, often for minor administrative errors. The draft instrument aims to make clearer that the capacity market delivery body—the organisation that delivers the capacity market—can accept information that corrects such errors when determining these appeals. That will help to reduce the risk of applicants being rejected due to minor or administrative errors that could otherwise have a detrimental impact on the level of competition in the auction.
Finally, the draft instrument aims to allow capacity providers who have had the duration of their agreements reduced as a sanction for non-compliance with certain requirements the option to appeal a decision to the Secretary of State. We acknowledge that a reduction in agreement length could have significant impacts on the viability of projects, and we therefore believe that it is right that capacity providers in such a situation should be given the right to appeal.
To complement this draft instrument, we have put forward an amendment to the capacity market rules, which was laid before the House on 5 July 2021. The amendment rules make a number of additional technical improvements. Notably, they update the carbon emissions limits to introduce new formulae that allow for a better reflection of the actual carbon emissions of certain generators, such as those equipped with post-combustion carbon-capture technology.
The rules amendments also extend some of the coronavirus easements which were introduced and debated in this House last year, in recognition that coronavirus has impacted the ability of capacity providers to meet some of their obligations under the capacity market. The extension of some of these arrangements will help providers in coping with the continuing impacts of the pandemic.
In conclusion, this draft instrument introduces a number of technical provisions which are intended to address issues that we have identified over the past year through our experience of managing the annual delivery cycle of the capacity market. Therefore, these technical provisions are necessary to enable the continued efficient operation of the capacity market in delivering on its objectives. I therefore commend this draft instrument to the House.
The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)
I call the noble Lord, Lord Bradshaw. Lord Bradshaw? We seem to have lost the noble Lord. We will therefore move to the next speaker and then return to the noble Lord, Lord Bradshaw. I call the noble Lord, Lord Bhatia.
Lord Bhatia (Non-Afl) [V]
My Lords, I thank the noble Lord, Lord Callanan, for explaining this instrument, and I fully agree with what he has said. In view of this very important matter, can the Minister explain whether this capacity system will create more emissions?
The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)
I think that we can now try to return to the noble Lord, Lord Bradshaw. Lord Bradshaw? We will move on to the noble Baroness, Lady Bowles of Berkhamsted.
Baroness Bowles of Berkhamsted (LD) [V]
My Lords, this is a set of changes to the capacity market system following a consultation. As a serial responder to consultations—although not in fact to the one relating to this—I must say that I am surprised by how few responses some get. In this instance, there were 38, although some were from trade associations, so, collectively, it covers more than 38 entities. But it still seems a low number, although, if I remember correctly, there have been fewer on some other electricity generation SIs.
I do not expect that the Minister can easily do anything about that, and there are so many consultations that I can understand if there is consultation fatigue—I have suffered from that myself—but it worries me if responses are obtained only from directly interested parties, important though they are. They are public consultations and the clue is in that name. The consultation informing this instrument seems to have received only one potentially non-industry submission from an individual respondent. Yet, as the Minister has explained, the capacity market is an important part of maintaining a secure and reliable electricity system and even this instrument is not devoid of public interest, as against producer interest, points.
Our capacity auction system is neutral in that all types of generation are included and, as the Explanatory Memorandum says at paragraph 7.2, and as the Minister has alluded to, the purpose of the payments is to,
“incentivise the necessary investment to maintain and refurbish existing capacity,”
and in some instances to support new-build projects. However, there is also a secondary market in capacity agreements and this instrument now breaks the link between the continuing existence of the original capacity agreement owner and the ongoing validity of capacity agreements that they have sold on.
I have some reservations about that change in that it might have perverse incentives to encourage overbidding for the purpose of secondary trading. It could be counterproductive to encouraging investment and, more to the point, knowing where that investment is to be made, and makes trading for cash more likely, which is not really what it was all meant to be about. For example, what pressures might there be from shareholders for certificates to be sold rather than for investment to be made?
Therefore, I am not entirely convinced that the public interest, which is substantial in terms of security of supply, is served by this. I can see that there may be arguments on the other side about maintaining the capacity that has been auctioned, and I should be interested if the Minister elaborated on those more fully and on what other mechanisms compensate for the fact that what was originally a kind of safeguarding mechanism has been removed.
Not surprisingly, the consultation responses agreed with the proposition. However, as I have pointed out, given that all those responses, bar one, have been entirely from industry and therefore from those who would benefit by it, either by way of enhanced secondary-market value of an agreement or from ongoing value irrespective of the status of the original owner, that is hardly a response that can be said to have the public interest uppermost.
I turn now to the reductions in the length of capacity agreements when a provider has breached obligations. I have no objection to the basic fairness of allowing appeals. I cannot help wondering how that might interact with a potentially lively secondary market and keep up with the obligations that attach to the traded certificates. I would welcome more explanation as to how that works. For example, can the Minister assure me that purchasing an agreement and obligation on the secondary market does not give, of itself, an excuse for non-performance or leniency?
The third change relates to allowing the delivery body to take into account changes in non-material errors in pre-qualification applications during appeals. This seems to be eminently sensible and I wonder whether that is, or can be, part of a wider approach within BEIS to a whole range of matters where non-material points or presentation prevent access to grants and other assistance, in particular for smaller entities. I note the value of the change to smaller entities, as explained in the memorandum. I would welcome that becoming a more general approach in BEIS.
I am interested to hear what the Minister has to say about the issues that I have raised and especially whether the effects on the trading changes will be monitored for any detriment and whether that may have been necessitated because of Covid, rather than the previously-existing steady state?
The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)
I will now call the noble Lord, Lord Grantchester, and after that I will call the noble Lord, Lord Bradshaw, again. It would be helpful if he could remain muted until he is called after the noble Lord, Lord Grantchester.
Lord Grantchester (Lab) [V]
I am grateful to the Minister for his introduction to the regulations before the Committee today. He looks a little isolated in the Committee Room today, but I hope our words will buoy him up. We are conducting very successful deliberations today. As he remarked, these regulations are non-contentious and provide sensible revisions to strict interpretations to the letter of the previous regulations by the capacity market delivery body. I agree that the three amendments will enable a better dialogue between capacity providers and the body to enable corrections of non-material errors in pre-qualification applications to enable secondary trades to be better maintained and to enable appeals to be heard to extend compliance periods or withdraw reduction decisions. All these should enable a more competitive capacity market to operate, so I am content to approve the regulations today.
Although they are uncontentious, I must comment that I found the Explanatory Memorandum rather scant. While I note from paragraph 15.3 that the Explanatory Memorandum meets the required standards, which I am sure will have been set and agreed with your Lordships’ Secondary Legislation Scrutiny Committee, nevertheless it would have been helpful to me if the memorandum had offered an overview of the main pertinent elements of the consultation respondents’ comments. I realise that the Minister will reply that further information can be gathered through the link to the consultation document and the Government’s response, but some indication of which minor amendments were put forward that have been taken into account where sensible would have given better assurance that respondents were broadly supportive of the proposals. Indeed, the noble Baroness, Lady Bowles, spoke about consultation and its importance with interpretation.
Furthermore, at paragraph 6.2 the Capacity Market (Amendment) Rules 2021 are specifically mentioned as additional to these regulations, but without explanation. The Minister said a little about the background details to that in his opening remarks, and I am grateful to him for that.
Having made these remarks, I merely add that the capacity market has worked well in bringing forward investments and innovations necessary to the electricity market reforms that are now appearing more and more to be merely providing free money to provide generation that either will not be called on or would be provided in any case, should there be a need. The most obvious example of this is nuclear power, where a plant is not subject to being switched on and off. Does the Minister consider this an issue, or does he believe that the price mechanisms adjust to this situation? Certainly, the initial operation of the capacity market has contended with and avoided the potentially huge volatility of price movements should various future energy needs predictions of marginal shortages have proved accurate. As we know, the cut-backs consequential to the Government’s austerity programme meant that there was no danger of the lights going out.
As the next review considerations begin to arise, can the Minister confirm that a full appreciation of the capacity market mechanisms to meet potential powers shortages will be part of that review and that it will not be limited to focusing merely on technical, operational measures? Will the review undertake more fundamental appraisals, such as considerations to replace the capacity market mechanisms with alternatives, such as strategic reserve capacity?
The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)
I now call the noble Lord, Lord Bradshaw. I will try one more time, before turning to the Minister, to call the noble Lord, Lord Bradshaw. As we are unable to reach the noble Lord, Lord Bradshaw, I now call the Minister to respond.
Lord Callanan (Con)
Perhaps I could say to the noble Lord, Lord Bradshaw, who has obviously had a problem coming in, that, if he has any specific questions about these regulations and wants to write to me directly, I will be happy to provide him with answers to any concerns he might have. I thank other noble Lords for their valuable contributions to this debate.
The Government continue to believe that the capacity market is the right mechanism for delivering security of supply at the lowest cost to consumers, and we continue to take steps to ensure its ongoing efficient and effective operation. The capacity market is tried and tested. The fact that it has supported investment in over 13 gigawatts of new-build generation and interconnectors since its introduction demonstrates that it can bring forward the capacity needed to meet future peak demand and replace older capacity as it retires.
Furthermore, the introduction of carbon emissions limits and the fact that coal-fired generation was unable to participate in the recent four-year-ahead auction shows that we are taking steps to ensure that the market is in alignment with our decarbonisation objectives. We acknowledge that further work will be required to ensure that the capacity market is aligned with our net-zero target and we intend to issue a call for evidence that will engage the industry on potential actions for delivering this objective. The Government are committed to ensuring that the right policy tools are in place for delivering a secure and affordable electricity system as we transition to net zero. This includes regularly assessing the performance of the capacity market.
In line with our statutory obligations under the electricity capacity regulations 2014, we have recently begun work on the next five-year review of the capacity market, which will be published in 2024. This in-depth review will scrutinise the objectives and design of the capacity market. It will take account of how the energy landscape has changed since the market was first introduced, in particular our net-zero ambition and changes to wider energy policy. We will also identify and implement changes to the design of the market to ensure that it remains able to deliver security of supply.
Returning to the draft instrument before the Committee today, the changes respond to three technical issues that we have encountered over the past year and will increase flexibility for both market participants and the capacity market delivery body. Ultimately, it will help ensure that the capacity market continues to deliver on its objective of guaranteeing secure electricity supplies at the lowest possible cost to consumers.
In response to the noble Lord, Lord Bhatia, and his brief intervention asking whether the market would create more CO2 emissions, I can tell the noble Lord that the capacity market helps to maintain public support for net zero by ensuring secure electricity supplies as we decarbonise the power sector. Furthermore, as I said earlier, we have introduced emissions limits to the capacity market to help align it with broader decarbonisation objectives.
The noble Baroness, Lady Bowles, was concerned about the low number of responses to the consultation. We held a series of stakeholder workshops during the consultation to gather additional views, including an open invite session which had around 100 different attendees. The noble Baroness also asked what the rationale was for secondary trading. This has been an important part of the capacity market since it was implemented in 2014. It supports the security of electricity supplies by enabling the transfer of agreements which cannot be fulfilled. In addition, the noble Baroness wanted assurances that secondary-trading agreements do not give the transferee a free pass on obligations and safeguards. They do not; capacity providers are subject to the same obligations whether or not they secured their agreements through secondary trading.
The noble Lord, Lord Grantchester, asked whether the market was simply providing payments for capacity which is already there. Existing plants can be the most cost-effective and efficient way of delivering reliable capacity. Including existing capacity in the capacity market auction drives competition and thus reduces the total cost of the scheme for consumers. The noble Lord went on to ask whether alternatives to the capacity market would be considered in the 10-year review. The answer is yes; the review will consider the case for government intervention in terms of security of supply, which scheme is best for this and what the objectives of such a scheme should be.
I think that deals with all the questions I was asked during the debate. So, with that, I commend these draft regulations to the Committee.
The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)
My Lords, that completes the business before the Grand Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving the Room. The Committee is adjourned.