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The Deputy Chairman of Committees (Baroness Fookes) (Con)
My Lords, if there is a Division in the Chamber, the Committee will adjourn for 10 minutes.
Financial Services and Markets Bill
Wednesday 25th January 2023
(1 year, 10 months ago)
Grand CommitteeRead Full debate Financial Services and Markets Act 2023 View all Financial Services and Markets Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 80-I(a) Amendments for Grand Committee (Supplementary to the Marshalled List) - (24 Jan 2023)
Lord Sharkey
“(1) The Treasury may by regulations revoke any legislation referred to in Schedule 1 provided that—(a) the regulators have drafted and, where necessary, consulted on rules that are ready to be enforced, where it is appropriate, to replace the legislation, and(b) any such revocation or replacement which represents a significant divergence from current rules or practice has had the opportunity to be scrutinised by the relevant Parliamentary select committee and the views and recommendations of that committee or those committees have been taken into account.”Member’s explanatory statement
This is a probing amendment to allow debate on possible means of Parliamentary scrutiny of the changes generated by the implementation of Clause 1 and Schedule 1.
Lord Sharkey (LD)
My Lords, the purpose of the amendment is to allow debate on the possible means of parliamentary scrutiny of the many legislative changes that will be brought about by the implementation of Clause 1 and Schedule 1.
The question of meaningful parliamentary scrutiny was frequently mentioned in all parts of the House at Second Reading. There seemed to be consensus that there is nothing in the Bill that would enable proper scrutiny of the changes proposed by the Bill. The whole wider question of parliamentary scrutiny was debated at length in the Chamber on 12 January. That debate was on the report from the DPRRC called Democracy Denied? and the report from the SLSC called Government by Diktat. The titles of the reports accurately represent their urgent concerns.
The debate was led by the noble Lords, Lord Blencathra and Lord Hodgson of Astley Abbotts, the respective chairmen of the Select Committees. There were 35 speakers, 34 of whom were sympathetic to the notion that our system of dealing with delegation is defective and does not provide effective scrutiny. Regrettably, there is plenty of evidence that that is the case, and much of it is presented vividly in those two reports. There is also plenty of evidence to support the view that Governments try, when they can, to bypass real parliamentary scrutiny, and plenty of evidence that the balance of power between Parliament and the Executive has been shifting in favour of the Executive.
I noted at Second Reading, as did the noble Lord, Lord Hodgson, that the Bill seems likely to generate more than 250 pieces of secondary legislation or binding rules. That might seem like a lot, but, in reality, it is just a very small and very important subset of the estimated 4,000 pieces of legislation to be revoked, amended or substituted in the Retained EU Law (Revocation and Reform) Bill, and it may be more than that if the National Archives find any more down the back of their sofa, in addition to the 1,300 which the Government have already overlooked. The scales of 250 to the retained EU law Bill’s 4,000 plus may be very different, but the underlying problem is exactly the same: how can parliamentary scrutiny be effectively and proportionately applied to those proposed legislative changes?
As things stand, the Bill provides that some of the proposed changes will be subject to the negative procedure and some to the affirmative procedure; for others, it is not clear whether they will be subject to any procedure at all. In practice, that amounts to no parliamentary scrutiny at all. The negative SI procedure is not scrutiny of any kind, nor is the affirmative procedure. If SIs cannot be amended and are not voted down, they are not scrutiny. In reality, our SI procedures are legislative theatre. Our recent debates and comments at Second Reading have shown a strong feeling across the House that, as a means of scrutiny, our current SI procedures are simply not fit for purpose. It does not help to have the Government insisting, as I am certain the Minister will, that they do in fact provide meaningful scrutiny. I am equally certain that she will not provide us with any evidence that that is the case.
The amendment suggests a way of achieving a modest amount of parliamentary scrutiny over the regulation-making powers in the Bill. The first part of the amendment simply places in the Bill the exact text of an important commitment made by the Treasury in paragraph 16 of its memorandum to the DPRRC. It says that, as a condition of the Treasury’s power to revoke, the regulators must
“have drafted and, where necessary, consulted on rules that are ready to be enforced, where it is appropriate, to replace the legislation”,
and so on. I am not certain of the force of a Treasury commitment made in a memorandum to a parliamentary committee, and that is one reason why I think it should be in the Bill: to put beyond doubt that the commitment is legally binding.
However, there is another reason for inserting the memorandum text: that is, to be able to ask the Government what the tests are for “necessary” and for “appropriate”, who decides, and how, whether the tests have been satisfied, and how much of this will be transparent. Without such detail, the commitment may be completely meaningless. I would be grateful if the Minister could address those points when she replies.
The second part of the amendment says that before the Treasury can, by regulation, revoke any legislation in Schedule 1:
“any such revocation or replacement which represents a significant divergence from current rules or practice has had the opportunity to be scrutinised by the relevant Parliamentary select committee and the views and recommendations of that committee or those committees have been taken into account.”
That is a rather broad-stroke first attempt at triage and at inserting a scrutiny mechanism. It is intended to identify a subset of changes that represent significant alterations in policy or practice and to provide the opportunity for the relevant committees to scrutinise these if they choose and to require the Treasury to take into account any views or recommendations expressed by the committees. The word “significant” is obviously key. We will need some specified tests for significance or perhaps leave it to the discretion of the relevant committees to decide for themselves. The amendment is not prescriptive about what form any committee scrutiny might take; that seems best left to the committees themselves.
I am sure that debate will generate improvements on Report or entirely different and better methods of ensuring that Parliament can play a meaningful scrutiny role with respect to the provisions in the Bill and perhaps make a contribution to addressing the similar but numerically much larger problem presented by the Retained EU Law (Revocation and Reform) Bill.
I conclude as I did at Second Reading by saying that the structure of our financial services regime is far too important to be left to the Treasury and the regulators alone. Real parliamentary scrutiny is vital, but it is entirely absent from the Bill. I look forward to hearing the contributions of other noble Lords. I beg to move.
Baroness Noakes (Con)
My Lords, as this is the first day of Committee, I declare my interests as recorded in the register, in particular that I hold shares in listed financial services companies. I will not comment on the government amendments in this group; I am taking those on trust.
I share the desire of the noble Lord, Lord Sharkey, for Parliament to be involved in the new rules that will replace retained EU law, but this is part of the larger issue of how there will be parliamentary accountability of the regulators. A number of us have tabled amendments of slightly different varieties on how to achieve that in the Bill. I for one will not contribute to that issue in this debate, because it is better saved until the various mechanisms that some of us have proposed are debated later in Committee.
I have two amendments in this group: Amendments 244 and 245. At Second Reading I acknowledged that the replacement of retained EU law on financial services would take some time, but I felt that the process needed the discipline of a hard stop along the lines of the Retained EU Law (Revocation and Reform) Bill. I have not copied that Bill, with its deadline of the end of this year, but I have instead proposed one three years later: that is, on 31 December 2026.
That will doubtless disappoint some hardliners among my Brexiteer colleagues, but I see that as a pragmatic compromise between getting the issue fixed and letting the regulators do a proper job in turning EU rules into something that works for the UK or indeed, whenever possible, removing the rules entirely.
I am not convinced that, left to themselves, the FCA and the PRA will prioritise the task of dealing with the full corpus of retained EU law, especially once the first batch of relatively easy issues has been dealt with. A deadline is a simple device in order to incentivise them to get on with it or risk losing the related law entirely.
If my noble friend resists the notion of a statutory deadline, even though it is government policy for retained EU law generally, perhaps she will explain what sticks and carrots the Treasury has at its disposal to get the job done within a reasonable timeframe. I do not think it reasonable to have this large body of EU law left in limbo for any considerable period of time.
Viscount Trenchard (Con)
My Lords, I share the views of the noble Lord, Lord Sharkey, to a large extent, but I agree with my noble friend Lady Noakes that the question of parliamentary scrutiny is better dealt with when we come to that part of the Bill to which her amendments are tabled.
I declare my interest as a director of two investment companies, as stated in the register. On the whole, I welcome the Government’s amendments in this group and look forward to hearing my noble friend the Minister explain them. Insofar as they increase the powers of the regulators, I welcome the improved clarity and transparency, but we need to improve the method of scrutiny and degree of regulators’ accountability to Parliament, as I have said.
I support my noble friend Lady Noakes in her Amendments 244 and 245. While the task of reviewing, revoking and replacing retained EU financial services law is monumental, it is important that there be a time limit to this process. Ideally, it should be completed this year, because more than four years have passed since the passage of the withdrawal Act and more than two years since the end of the transition period. We have not acted as fast as we should perhaps have done in moving to exploit the opportunities available to make bold moves away from the cumbersome, expensive and anti-competitive regulatory regime that has progressively constrained the competitiveness of the City of London and its innate ability to innovate. There has been some inbuilt resistance to making any changes, and I am glad that this Bill takes some significant steps in that direction.
I would have preferred the Bill to be more radical and to require that certain EU regulations automatically be repealed without replacement, such as the whole regime around the alternative investment fund managers directive and its subordinate legislation. That directive was opposed by the whole City establishment and has served merely to divert new and innovative fund managers wishing to launch new products for professional investors away from the City to other jurisdictions. However, too little work has yet been done, and I think that my noble friend’s suggested latest revocation date of 2026 is a reasonable compromise. I look forward to discussing that later, and I hope the Government will accept my noble friend’s two amendments.
Lord Hunt of Kings Heath (Lab)
My Lords, I want to lend some support to the noble Lord, Lord Sharkey, for raising the issue of parliamentary scrutiny in relation to this clause and Schedule 1. Clause 1 and Schedule 1 are an extraordinary exercise in executive powers through regulations and the regulators. In a later debate some days down the line, we are coming on to that issue, but it is appropriate that we start this debate with a reminder to the Minister that the issue of parliamentary scrutiny is very important.
I just want to reflect on what the noble Lord, Lord Sharkey, said about regulations. The Minister will no doubt pray in aid the fact that Parliament has processes for dealing with regulations. In your Lordships’ House, praying against a negative SI leads to an affirmative debate, unlike in the other place, and we debate it in full—but to what end? I have tabled a Motion today in the Chamber relating to an affirmative Motion on a completely different issue, data use in the NHS. I have no doubt that we will have a very good debate, but the Government will just plough on without having to take account of any debate that has taken place.
Baroness Altmann (Con)
My Lords, I too congratulate the noble Lord, Lord Sharkey, on his amendment. I agree with his explanation of why parliamentary scrutiny is so important and his interesting explanation of the choice of words he has used in his amendment. I accept that later on, as my noble friend Lady Noakes said, we will debate parliamentary scrutiny once again, but in my view it is absolutely vital that we in this House recognise the dangers coming at us from various legislation that is taking away Parliament’s future ability to oversee and scrutinise important legislation.
I also understand what my noble friend Lord Trenchard said about the importance of allowing competition. However, we must not lose sight of the fact that what is sometimes called regulation may of course be inconvenient for the financial services providers and hamper the ability for innovation and free-for-alls to try different things, but it is also relevant to think of regulation as consumer protection. These are rules that will stop financial services companies taking advantage of consumers.
Asymmetry of information in financial matters is obviously something we are all too aware of, but just doing away with regulation, rushing to get rid of all the EU regulations without proper scrutiny and saying that the Financial Conduct Authority must work to a deadline, otherwise it will drag its heels, misses the point. If there is a forced deadline that precludes scrutiny and consideration of what these regulatory changes will mean for the general public or even more informed investors, without considering those risks, one has to ask whether it is resourced enough to do that. If not, which most of us would probably suggest is the case, what other elements of its duties will not be attended to while it is rushing to perform this job to an artificial deadline? It is a massive task—I respect that.
We need to take seriously the thrust of the remarks by the noble Lord, Lord Sharkey. I also look forward to hearing my noble friend’s remarks about the Government’s own amendments.
Lord Naseby (Con)
My Lords, I was one of the 34 who took part in the debate on secondary legislation, and I previously had the privilege of being on the Public Accounts Committee for some 12 years.
The debate on those two reports was an absolute watershed. Here is a golden opportunity to ensure that this Bill, which is so fundamental to the growth of our country, particularly the City of London, at a particular time can be pioneering. I am sorry to load that on to my noble friend; at any other time it might not be loaded on to her.
The key elements are there: secondary legislation basically means that those of us here in Parliament, in both Houses, have an opportunity to debate any changes made to a Bill. If I had to take issue with the noble Lord, Lord Sharkey, it is that he has in his amendment, at proposed new paragraph (b), the word “significant”. One company’s “significant” might be insignificant to another, and vice versa, so I do not think that is quite the right word to use.
We will go through this Bill in detail. Others have made their points, but for me—I did previous work with two quoted companies and a friendly society in the role of chairman—this is an opportunity. We must recognise that growth for our country is fundamental. That fundamentality is, to a fair degree, influenced by the Bill before us.
Baroness Bowles of Berkhamsted (LD)
My Lords, for the purposes of Committee I declare my interests in the register, in particular as a non-executive director of the London Stock Exchange.
I will comment only briefly in this debate because, as others have said, it touches on some issues that run throughout the Bill. This is a matter of great importance: how we transpose the legislation and get the benefits of that transposition into UK law. If we have the flexibility, we ought to be able to use it, but financial services are our largest-earning industry, and I believe it is right that Parliament has to be able to keep track of what is going on and why when there are changes, and, as has already been pointed out, to have its attention drawn to significant changes.
If this amendment comes round again on Report, I would also like to see in it a report on the resulting change to the regulatory perimeter. Quite a lot of change is already going on and it is not necessarily something that we have had our eye on. Some of this change will be entirely at the behest of the regulators rather than in the hands of government. We will come across this later. It was always clear with EU legislation—maybe irritatingly so, in some instances—that the regulator “shall” do something, which did not give it any room for manoeuvre if it thought something did not need to be done. It looks like we will give our regulators the bits of wriggle room and the flexibility that we want, but it is wholly right that there should a report back to draw to the attention of our House and those who scrutinise this the intended difference in the regulatory perimeter, among other things, so that we can watch it and see how it goes.
I will return to the regulatory perimeter in many ways, because one of the problems is that once something is inside that perimeter, a whole truckload of things that were not really necessary might come along. AIFMD might be a good example of that. It is a whole load of extra reporting: where has it gone, what has happened to it, and has it done anything?
At the same time, if bad things are going on, you want there to be some kind of powers of intervention. It should not be a whole caboodle, with lots of rules and regulations and reporting on one hand but nothing on the other. We need to be able to do the things that are in the middle and bridge that gap. Given the way the edges of what is or is not a financial service are getting more and more blurred, what with the big tech industries and so on as well as the more nimble fintechs, we need that ability to ensure that where there is harm there is a route for action, without it having to mean that the whole kitchen sink of reporting is thrown at it across the board.
Lord Davies of Brixton (Lab)
My Lords, I thank the noble Baroness, Lady Noakes, for pointing out that the process here differs from that in the retained EU law Bill. Could the Minister in her response set out more clearly the differences between the process here and the process in the other Bill, and the reasons for the differences?
Lord Thomas of Cwmgiedd (CB)
My Lords, I have just one brief point. I agree with the comments so far made that this may not be the appropriate place to deal with the whole problem of delegation, because this deals with revocation, although the amendment sensibly deals with what is inevitable, which is the replacement. It seems to me that parliamentary scrutiny is essential. We need to come back to this time and time again.
It is essential because, unlike the position of a Minister or that of a Government, we have, first, the issue of the accountability of regulators and, secondly, we do not want to politicise regulators. That is Parliament’s job. Therefore, we have to scrutinise this whole area, where we are moving financial services to regulators and away from being dealt with largely through a political process in the European Union. We are hoping to make great improvements, but the one thing we are losing is the input of the political process. One cannot pretend that the direction of financial services policy is not a political question as well as a regulatory question. Politics should be for this House and, although I hate to use this word, we should not taint the regulators with politics.
Baroness Kramer (LD)
My Lords, I must agree with every word that the noble and learned Lord, Lord Thomas, has just said. I thank my colleague and noble friend Lord Sharkey for putting this amendment where it is, because the fundamental constitutional issue that underpins this Bill is probably one of the most crucial that we will address, not just in the next days of debate but, frankly, as a Parliament. I think that if the public had any sense of the authority that is now, in a sense, being passed to regulators without accountability—and to some extent to the Treasury without accountability—frankly, they would look at us and say to Parliament, “That is a dereliction of duty. We expect you to be responsible”.
This is not just a political process but part of a fundamental democratic process. As others, including the noble Lord, Lord Naseby, have said, what could be more fundamental than framing an industry that not only determines so much of our national economy but, when it goes badly wrong, can completely undermine that whole economy. I very much support the amendment brought by my noble friend. I know that it was tabled to trigger discussion and I look forward to the further debate that we will have later.
Lord Tunnicliffe (Lab)
My Lords, I too thank the noble Lord, Lord Sharkey, for tabling his amendment and provoking this discussion. It is interesting to find such a wide consensus on the general direction. I support the general direction which has emerged in the debate, but I question whether this is the right solution.
Nobody could be more sensitive to the meaningless process of the scrutiny of affirmative SIs; I have done hundreds over the years. It is a very nice little club. It is usually me and the Minister—and, I have to admit, the Liberals often provide the third person in the room, as it were. It is ridiculous at that level. There is a great attraction in saying that the House should consider secondary legislation as a whole and produce some solutions, but the problem is that that would take for ever.
We have a particular issue with secondary legislation in this Bill. As those of us who ploughed our way through the last financial services Bill will remember, there is a big chunk of EU legislation which, whether we like it or not, went through the democratic process in Brussels and was then put into UK law. That has been, effectively, removed and in this Bill we are creating the processes to substitute it. We are pretty well agreed that substituting 500,000 pieces of law—whatever the figure is; I do not know—through primary legislation is impossible, and that it has to be done by secondary legislation. However, because that intermediate level of legislation is so important, we must, for the purposes of financial services regulation, have a better scrutiny process than we do at the moment.
As the noble Baroness, Lady Noakes, pointed out, she, a number of other noble Lords and I have tabled a lot of amendments and we will have a good discussion. I see myself working with others, both in this Room and further afield, to see whether we can produce a consensual set of amendments to improve scrutiny in this area. In the meantime, I hope the Minister will listen to this debate and those that will follow and see whether the Government can come up with their own proposals to address this problem of scrutiny. Whether we like it or not, it is unfortunate that when the amendments we pass in this House get to the other end, they get chopped. If we can achieve some sort of consensus with the Government, that would be the best way through. If we cannot, I think we have to send something pretty powerful back to the other place, saying that this scrutiny process must be improved.
As an aside, I think it was yesterday when my colleagues at the other end said they had done an SI. I asked, “How long did you take?”, and of course the answer was, “Under 10 minutes”. Their level of scrutiny is worse than ours. At least we make useful points—not that anybody really listens to them.
I am pretty agnostic about the amendments in the name of the noble Baroness, Lady Noakes. My experience of deadlines is that they are real only in retrospect: you know of a deadline for real only when you have passed it. If you motor up to an impossible deadline—which is what these amendments may produce—you introduce a law to change it. I can see the benign nature of her intent but not what good it would do, in practice, somehow to punish an organisation that has missed a deadline by saying, “You won’t be able to make the rules, but we have to make the rules because we need the rules,” and so on. I am not going to get carried away about it, but I am not that seized of it.
The Minister will no doubt give us an appropriate assurance about her bucketful of amendments—that they are technical, minor and all that sort of thing—and I will listen. One is left wondering how many amendments will emerge from down the side of the sofa between now and Report, and even perhaps thereafter, because it seems there has been a failure to find all these amendments by the due date for the original procedures in the Commons. It is unfortunate that so many were missed that they have to be introduced now, but we will have no opposition to them.
The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
My Lords, I will speak first to Amendments 1, 244 and 245, before turning to the government amendments in this group.
With respect to Amendment 1, the Government are seeking the agreement of Parliament to repeal all retained EU law in financial services so that the UK can move to a comprehensive FSMA model of regulation, whereby the independent regulators make rules in line with their statutory objectives as set by Parliament and in accordance with the procedures that Parliament has put in place.
As the noble Lord, Lord Sharkey, noted, it is not the Government’s intention to commence the repeal of retained EU law in financial services without ensuring appropriate replacement through UK law. That commitment was made by the Economic Secretary to the Treasury, including to the Treasury Select Committee and, as the noble Lord noted, in our memo to the DPRRC. His Majesty’s Treasury will commence a revocation only once appropriate secondary legislation and rules are in place.
Parliament will therefore play a key role in scrutinising any replacement secondary legislation. Where the Treasury replaces retained EU law through the powers in the Bill, this will almost always be subject to the affirmative procedure, with some limited exceptions specified in the Bill.
I recognise the wider debate in the House of Lords about secondary legislation and its scrutiny. I will resist the invitation from my noble friend Lord Naseby for this Bill to be the place where we address that wider debate. I point out to noble Lords that, in its report on the Bill, although the DPRRC did not bring to the attention of the House the delegated powers related to retained EU law, it did report on one specific issue regarding hybrid instruments, which I will respond to shortly. The committee commended the Treasury for
“a thorough and helpful delegated powers memorandum.”
That is not to say that the question of parliamentary scrutiny of the provisions in the Bill and the regulations that will be made under it is not important. I know that we will return to it many times during this Committee.
The Government have made efforts to set out how the framework provided by the Bill will work in practice. As part of the Edinburgh reforms, the Government published their approach in a document entitled Building a Smarter Financial Services Framework for the UK, which makes it clear that they will carefully sequence the repeal to avoid unnecessary disruption, and there will be no gaps in regulation. The Government have also recently published three illustrative statutory instruments under the powers in the Bill to facilitate scrutiny of the powers under which they will be made in Parliament.
It is also worth noting, as the noble and learned Lord, Lord Thomas of Cwmgiedd did, that large parts of retained EU law will be replaced by the regulators through their rules. The regulators have the tools and expertise to make rules at pace, in line with their statutory objectives, within a model of appropriate parliamentary scrutiny and oversight. Clause 36 of the Bill supports Parliament in that scrutiny and oversight, requiring the PRA and the FCA to notify the Treasury Select Committee when they consult on rules and to respond to any representations made by that Committee. That is a specific element of the provisions to which we will return at a later stage in Committee.
Ahead of considering the Bill, the Treasury Committee itself considered the appropriate model for parliamentary scrutiny of regulatory rules, concluding that effective scrutiny of regulatory proposals should be carried out through a targeted approach, with Parliament scrutinising proposals in more detail where there is a public interest in its doing so. The Government consider that the provisions of the Bill are consistent with the recommendations of the Treasury Committee.
I turn now to Amendments 244 and 245 tabled by my noble friend Lady Noakes. I can assure her that the Government intend to act at pace to complete the repeal and replacement of retained EU law, but we must also act in a way that allows everyone to adapt to the new model. That will often require the regulators to make replacement rules, which must be done in line with the appropriate procedures for consultation and engagement, as noble Lords have pointed out. As my noble friend Lady Altmann pointed out, there is a balance to be struck between the pace at which we undertake that work and the proper processes for consultation and scrutiny that that will need to be subject to.
Baroness Kramer (LD)
I am sorry to interrupt, but perhaps the Minister could clarify something we discussed before. What she describes puts Parliament in the position of a consultee, which I do not believe is the appropriate role for a democratically elected Parliament. Can she confirm that that is exactly what she is saying?
Baroness Penn (Con)
No, that is not what I am saying; I am saying that we will have procedures in place to allow Parliament to scrutinise legislation. We will also have procedures in place to ensure that, as part of that, relevant parliamentary committees can be notified of work by the regulators. That is just one aspect of how Parliament will conduct its role in the scrutiny of financial services, legislation and regulation. While the notification of consultations is one aspect, there are many others, such as the procedures for secondary legislation, the other procedures that Select Committees have to scrutinise the regulators’ work, the procedures for the provision of annual reports laid before Parliament, and others. So Parliament will be notified of consultations, but that does not imply that the Government view Parliament simply as a consultee in the process.
Lord Tyrie (Non-Afl)
The Minister has said that the use of Treasury powers under this Clause will normally be subject to affirmative resolution by Parliament. In the Minister’s experience—she could offer her personal view if she feels unable to offer a government view—does she think that that scrutiny is usually relatively effective or ineffective?
Baroness Penn (Con)
My Lords, standing here at this Dispatch Box, I would offer only a government view. I view it as entirely appropriate for the model we have set out today. I acknowledged the wider debate being had within the House of Lords on different mechanisms of scrutiny and lawmaking. As I have noted, the approach we have taken in this Bill has not been drawn to the House’s attention by the Delegated Powers and Regulatory Reform Committee.
In the model of financial services regulation that we seek to put in place, a large number of the rule-making powers flow to the regulators. We are delegating that further to the independent regulators that have the expertise to make rules in this area. This is the right model for the UK. We have consulted on it carefully and extensively, and we received broad support in that consultation. It reflects the careful approach we have taken and the choice we have made as to the model for the regulation of our financial services.
Baroness Noakes (Con)
I was interested in what my noble friend said about a forward look. Can she explain a little more what this forward look is and where one might find it?
Baroness Penn (Con)
In short, the approach is set out in Building a Smarter Financial Services Framework for the UK, which was published alongside the Edinburgh reforms. A number of those reforms set out where our priorities are. They set out where we have already done consultations and will be ready to move forward with new secondary legislation or regulator rules. They set out where we are starting consultations or calls for evidence in a number of areas where we seek to make changes. They also give a forward look at some of those other areas where we seek to make changes but have not yet published our consultation or call for evidence.
Baroness Noakes (Con)
Does that represent a comprehensive analysis of what the Government expect to happen to all the retained EU law covered by the powers in this Bill?
Baroness Penn (Con)
No, it does not. This comes back to the point about prioritisation. It represents the Government’s initial prioritisation of the measures where they think that making amendments or using the powers under this Bill to repeal the retained EU law and put in place regulator rules under our new model would have the biggest or most important effect. There will be subsequent work to do after what is set out in that vision, but in sequencing it is important that we direct our efforts and resources to measures that will make the most difference.
My noble friend asked how the regulators and the Government can be incentivised to complete the replacement of EU law in a timely way. We are working closely with the regulators to co-ordinate the programme to deliver the rules and legislation that will be necessary to enact the repeal of retained EU law. Where necessary, the Treasury could use the power under Clause 28 of this Bill, which sets requirements on the regulators to make rules in specific areas of regulation. So there would be that option within the powers in the Bill.
The noble Lord, Lord Davies of Brixton, asked about the difference in approach in this Bill from that in the Retained EU Law (Revocation and Reform) Bill. Unlike the approach taken in that Bill, this Bill repeals retained EU law in financial services, as set out in Schedule 1. The Government will continue to repeal and replace the contents of Schedule 1 until we have an established a comprehensive FSMA model of regulation. It will take time for regulators to make, and for industry to adapt to, technical and less important rules, as well as delivering major reforms. The Treasury developed a bespoke approach to financial services, given the existing role of the regulations to preserve that and bring the regulatory regime into line with the FSMA model.
I hope I have addressed the points about the desire to complete this work in a timely way, the need to balance that with resources for regulators and, indeed, industry to adapt to this change, and the importance that the Government place on therefore prioritising the work so that those reforms that have the biggest impact will take place earliest.
I turn to the government amendments in this group, Amendments 20, 28, 29, 242 and 243, which are all in my name. The Treasury undertook an extensive exercise to identify retained EU law relating to financial services to be repealed by this Bill, listed in Schedule 1. Late last year, the National Archives identified additional pieces of retained EU law across the statute book, some of which relate to financial services. The Government have also, through their own work, become aware of a small number of additional pieces. Amendments 2 to 20 make changes to Schedule 1 as a result of this. Government Amendments 2 to 16 and 18 add a number of statutory instruments, and Amendments 19 and 20 place three provisions in FSMA into Schedule 1 to be repealed. Amendment 17 removes one statutory instrument from the schedule, which was included in error, due to containing a small amount of retained EU law alongside largely domestic legislation.
I reassure the noble Lord, Lord Tunnicliffe, that every effort has been made to identify all legislation that should be repealed though this process. If he looks at the balance of what we have identified and what is in these amendments, it was a comprehensive job. None the less, to be as transparent as possible, when we find further measures that would be provided for under this Bill, we have sought to include them by way of amendment.
Amendment 28 clarifies the legislative effect of Clause 3, ensuring that the Government have the necessary tools to create a comprehensive FSMA model of regulation. It does so by clarifying that the Treasury can use the powers in Clauses 3 and 4 to create powers to make further regulations. Under the FSMA model, the Government are responsible for setting the regulatory perimeter via secondary legislation. There may be times in future when, for example, the Treasury will need the ability to update key definitions that sit within legislation restated under Clause 4, to clarify what sits within the UK’s regulatory perimeter.
Amendment 29 makes a technical fix to the explanation requirement in Clause 6, requiring the Bank of England to explain how updates to its rules are compatible with its new regulatory principles, introduced by Clause 45.
Baroness Kramer (LD)
May I ask again for a bit more clarification, which I specifically asked for on Amendment 28? Is the Minister saying that this is a power for the Treasury to amend primary legislation outside the Bill through secondary legislation designed to enhance the powers of the regulators? Is that what this is? I tried reading the letter but it did not get me any further.
Baroness Penn (Con)
My understanding is that Amendment 28 contains powers to provide for amending secondary legislation, not primary legislation. I will seek a fuller explanation and I suggest that we briefly degroup that amendment, if we reach it today, to provide that explanation for the noble Baroness, so that she has further clarity. I do not think I will provide it for her at this point.
Lord Tyrie (Non-Afl)
That would be very helpful. Before the Minister leaves Amendment 28, can she say whether she discussed with officials whether to add a sunset clause to what otherwise will be a very open and extensive power in the hands of the Treasury?
Baroness Penn (Con)
No, that discussion was not had. The powers are constrained in that they relate to the provisions in place to transition away from and replace retained EU law, rather than going beyond that.
Amendments 242 and 243, put together, enable provisions subject to the negative procedure under an Act other than this Bill to be included in affirmative regulations made under the Bill. This is a procedural change with well-established precedent. Where any element of a statutory instrument is subject to the affirmative procedure, the combined instrument would also be subject to the affirmative procedure, so there will be no reduction in parliamentary scrutiny.
To conclude, the Bill will repeal retained EU law to establish a model of regulation based on FSMA. It will do so in a way that prioritises growth while moving in a sequenced and measured way, and through scrutiny, engagement and consultation. At this stage, I hope the noble Lord, Lord Sharkey, will feel able to withdraw his amendment and that other noble Lords will not move theirs when they are reached. Subject to providing that extra clarification to the noble Baroness, Lady Kramer, I intend to move the government amendments when they are reached.
Lord Sharkey (LD)
I thank all noble Lords who have spoken. I did ask the Minister about the Treasury’s assertion, or guarantee, that it will have replacements where necessary for the stuff that gets repealed, and about the tests for what is “necessary” and what is “appropriate”, how they will be applied and how transparently. I would be grateful if the Minister could write to tell me the answer to my question.
If we are to rely on SIs as a means of scrutiny of the measures in the Bill, that is the practical equivalent of having Parliament largely bypassed in this discussion. We need two fundamental mechanisms for effective parliamentary scrutiny: an effective means of triage and an effective means of revision. I am sure we will return to those issues either later in Committee or on Report. In the meantime, I beg leave to withdraw the amendment.
Baroness Penn
“Official Listing of Securities (Change of Competent Authority) Regulations 1991 (S.I. 1991/2000)”Member’s explanatory statement
This amendment and the Minister’s other amendments to Schedule 1 (except for the amendment at page 100, lines 45 and 46) would add various instruments containing retained EU law relating to financial services to the list of subordinate legislation to be revoked in Part 2 of Schedule 1 to the Bill.
“Official Listing of Securities (Change of Competent Authority) Regulations 2000 (S.I. 2000/968)Financial Markets and Insolvency (Settlement Finality) (Revocation) Regulations 2001 (S.I. 2001/1349)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Financial Services and Markets Act 2000 (Communications by Auditors) Regulations 2001 (S.I. 2001/2587) Public Offers of Securities (Exemptions) Regulations 2001 (S.I. 2001/ 2955)Financial Services and Markets Act 2000 (Official Listing of Securities) Regulations 2001 (S.I. 2001/2956)Financial Services and Markets Act 2000 (Official Listing of Securities) (Transitional Provisions) Order 2001 (S.I. 2001/2957)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Electronic Commerce Directive (Financial Services and Markets) (Amendment) Regulations (S.I. 2002/2015)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2007 (S.I. 2007/ 126)Financial Services and Markets Act 2000 (Markets in Financial Instruments) (Amendment No. 2) Regulations 2007 (S.I. 2007/2160)Financial Services and Markets Act 2000 (Motor Insurance) Regulations 2007 (S.I. 2007/2403)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Financial Services and Markets Act 2000 (Reinsurance Directive) Order 2007 (S.I. 2007/3254)Financial Services and Markets Act 2000 (Reinsurance Directive) Regulations 2007 (S.I. 2007/3255)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Takeover Code (Concert Parties) Regulations 2008 (S.I. 2008/3073)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Financial Services and Markets Act 2000 (Amendment) Regulations 2009 (S.I. 2009/2461)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Financial Services and Markets Act 2000 (Market Abuse) Regulations 2009 (S.I. 2009/3128)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Prospectus Regulations 2013 (S.I. 2013/1125)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Payments to Governments and Miscellaneous Provisions Regulations 2014 (S.I. 2014/3293)” Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Banking Act 2009 (Restriction of Special Bail-in Provision, etc.) Order 2014 (S.I. 2014/3350)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Financial Services and Markets Act 2000 (Qualifying EU Provisions) (Amendment) Order 2016 (S.I. 2016/936)Financial Services and Markets (Disclosure of Information to the European Securities and Markets Authority etc. and Other Provisions) Regulations 2016 (S.I. 2016/1095)Companies Act 2006 (Distributions of Insurance Companies) Regulations 2016 (S.I. 2016/1194)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Banks and Building Societies (Priorities on Insolvency) Order 2018 (S.I. 2018/1244)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“Financial Services and Markets Act 2000 (Central Counterparties, Investment Exchanges, Prospectus and Benchmarks) (Amendment) Regulations 2020 (S.I. 2020/117)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
Member’s explanatory statement
This amendment would remove from the list of instruments to be revoked under Part 2 of Schedule 1 the Payment and Electronic Money Institution Insolvency Regulations 2021 (S.I. 2021/716) which predominantly comprise domestic regulation.
“Financial Services and Markets Act 2000 (Qualifying Provisions)(Amendment) Order 2022 (S.I. 2022/1252)”Member’s explanatory statement
See explanatory statement for the amendment at page 94, line 12.
“(za) section 55J(7A) to (7C);(zb) section 55KA;”Member’s explanatory statement
This amendment would add sections 55J(7A) to (7C) and 55KA of the Financial Services and Markets Act 2000 to the list of legislation to be revoked in Part 4 of Schedule 1 to the Bill. The provisions implemented in part the Solvency 2 Directive and concern powers of the Prudential Regulation Authority to cancel permission of certain undertakings.
“(fa) section 367(3)(za);”Member’s explanatory statement
This amendment would add section 367(3)(za) of the Financial Services and Markets Act 2000 to the list of legislation to be revoked in Part 4 of Schedule 1 to the Bill. The provisions implemented in part the Solvency 2 Directive and concern winding-up petitions where the Prudential Regulation Authority has cancelled permission of certain undertakings.
Baroness Worthington
Member’s explanatory statement
These amendments maintain the duty for FCA to set position limits on commodity derivatives and over the counter equivalents, and the associated powers to request information and intervene, whilst onshoring the power to set limits which are appropriate for the UK.
Baroness Worthington (CB)
My Lords, I am very pleased to speak to this group of amendments this afternoon, having sadly been unable to make Second Reading. I declare my interest as a co-chair of Peers for the Planet. I also declare my relative ignorance of this topic, as I am not steeped in the details of financial services. I very much approach this issue from a layperson’s perspective, guided by common sense. Much of my efforts here are to apply parliamentary scrutiny to this very complex issue and to seek reassurances from the Minister.
As we debated in the previous group, it is vital that we have proper scrutiny of proposed changes to laws and regulations governing financial markets. Potentially poorly regulated markets could have significant negative real-world consequences, as we have seen in the past. Complexity is now endemic in this sector and can catch regulators, and indeed parliamentarians and Ministers, out. Derivative markets are particularly complex and require especially careful scrutiny.
My Amendments 21 to 25 and 41 concern the proposed future regulation of trading in commodities and their derivatives. Many noble Lords will be aware of this, but to give some background, derivatives are used in the financial markets and the wider economy to hedge exposure to commodity prices in the future. However, this opens up the opportunity to speculate and seek profit from volatility. Roughly two-thirds of commodity trading relates to commodities in the energy and food markets. Therefore, unchecked speculation and poor regulation in these markets can have very real-world consequences. Some types of commodity derivative investment are of course socially desirable. For example, soft commodity or energy producers seeking to insure themselves against future risks arising from such things as weather and an unstable climate are making a necessary hedge to keep products economic. However, there are dangerous aspects of this as they relate to food and energy, which affect people’s lives and the affordability of living.
Momentum-based trading strategies can exacerbate steep price rises and the cornering of markets, by which I mean taking large positions that are disproportionate to your genuine participation in the market, which could force unnatural or artificial scarcity into the market and raise prices. More generally, increasing volumes of capital being tied up in future derivatives removes money from the real economy today, where it could be delivering much greater real-world impacts.
There is overwhelming evidence that unchecked speculation produces price bubbles. I do not intend to go into this in detail, but in relation to oil, a 2021 piece in Resources Policy looked back at a whole host of research dating back to 2009 in highly cited journals. So firm is the consensus that there is now a whole body of techniques dedicated to measuring and modelling bubbles. We are well past the point of discussion of whether there is a risk; it is now about how we manage it and its impacts.
The co-author of last October’s UN Conference on Trade and Development—UNCTAD—trade review said that a ratio of around 70% real hedging and 30% speculation might be seen as “healthy”. However, he added that what we see in the market today indicates that the ratio has been reversed: 70% speculation and 30% real hedging. The same report warned of a policy-induced global recession. The report said that insufficient attention has been paid to the “betting frenzies” on future markets in the current crisis and called on Governments to tighten rules on speculation. However, with this legislation we seem to be doing the opposite.
EU legislation on commodity derivatives was introduced, and it was not simply pointless bureaucracy. There was clear evidence in the run-up to and during the financial crash of 2008 that food and energy prices were being driven upwards not by shortages but by fevered speculation, so action was taken. Investment banks were seen to be profiting by around $16 billion a year from commodity trading. Thanks to these new approaches, we have seen that profit-making fall by around three-quarters, according to analysis from the research firm Coalition. So there was a reason for the EU regulations that we are seeking to modify as we translate to post-Brexit financial regulation.
The general point is that we should be seeking to allow the socially beneficial, but not allowing bubbles to be created in this market. We should not be making it easier to do that but keeping a careful eye and tracking trends, while requiring clear data and better disclosure. You could argue that the EU perhaps overreached or did not get it exactly right, and that we should seek to take our own approach, but I have some questions about the Government’s proposals in the Bill.
It appears to me, and I seek reassurance from the Minister on this, that Schedule 2 is handing the power of setting appropriate position limits and controls—and the maximum position any firm can take on trading on a commodity—to financial exchanges, or certainly taking the power to do so. But are those exchanges not incentivised commercially to maximise liquidity and volumes of trade, so does this not create something of a conflict if they are also setting their own limits?
These new arrangements would see the FCA retaining backstop powers to give directions, but only in certain fairly narrowly defined circumstances. It can request information and intervene, but the drafting suggests that the exchanges would be free to set their own limits. Is this the case and, if so, how does the Minister expect them to handle this potential conflict between their commercial interests and a more cautious approach to the prevention of harmful speculative bubbles?
There is also the question of what will be regulated in future. The current rules cover both over-the-counter trades and exchange trades but, as I understand it, this new approach is about simply deciding not to continue to seek oversight of over-the-counter trades. From what I have been able to read, this seems to be based on the fact that those consulted said it was too difficult to do. That does not seem a good enough reason to remove the oversight of OTC trades and focus simply on exchange trades.
There is also the point about exchanges having less oversight of systemic risks building up in the global market. Whereas the FCA engages via the IOSCO, the International Organization of Securities Commissions, and the FSB—
Baroness Worthington (CB)
I shall seek to remember where I was in my speech. I was talking about international co-ordination and how the FCA currently is part of a global network of regulators, and therefore has a more effective chance of spotting systemic risks building up in the global markets, and that the exchanges would not be plugged in at the same level of international co-operation and co-ordination. The FSB warned, in the aftermath of Russia’s invasion of Ukraine, that
“prices have swung wildly, with liquidity temporarily evaporating in some commodity derivatives market segments and a number of traders coming under strain”.
So I ask the Minister: in these uncertain times, how certain are we that UK exchanges can be patched into that wider market scrutiny and regulatory infrastructure, which the regulator currently has the power to do?
The powers retained by the FCA are limited to intervening on operational objectives and, most relevantly here, consumer protection and integrity, but I am concerned that that definition of consumer may be rather too narrow. It could refer, as it does in Section 1 of the 2000 Act, to the investor, rather than the man or woman on the street. I worry that “integrity” could simply refer to soundness, stability, orderliness and lack of crime. I would welcome the Minister’s view on how this maps on to the existing grounds for regulation that are to be revoked, which are much broader and relate to preventing market abuse and market distortion and try to ensure that there is no artificial inflation of commodity prices.
My concern is that we can have a sound and orderly market which works very well for investors but inflates prices for consumers and businesses and adds extra costs on to essential commodities. I believe the FCA should retain the power to intervene in these cases, and that the definition of grounds for intervention should be as broad as it is currently.
I mentioned the over-the-counter derivatives no longer being covered in regulation. I was rather worried to read in the Treasury’s consultation on wholesale markets that:
“The objective of including them as part of the regime was to prevent market participants from circumventing regulatory requirements that are applicable to exchange traded commodity derivatives by dealing in lookalike OTC contracts. However, in practice, identification of these contracts has proven difficult, and they have only been reported in a very small number of instances.”
Therefore, the Treasury concluded that
“the inclusion of these contracts and uncertainty about the scope of this requirement imposes increased legal risk and potential compliance costs for firms.”
To me, that sounds as though something important is proving difficult and, rather than seeking to solve it, make it easier and provide clearer guidance, we have decided to drop it altogether.
The consultation goes on to say:
“to ensure market integrity, the government proposes that the FCA and trading venues should continue to take account of relevant OTC contracts when monitoring markets.”
But amendments to Regulations 27 and 28 take away the power from the FCA to do this and to request information on these contracts. That is my reading of it, but I look forward to reassurance or clarification from the Minister. If the FCA is not able to monitor these transactions, how can we oversee them? Would it not be more desirable to have the FCA retain the powers it has?
I am grateful for the support of the noble Baroness, Lady Bennett of Manor Castle, for my amendments. Essentially, they seek to unhook the legislation from the EU but continue to require the FCA to maintain the same powers to set position limits and to intervene as widely as possible to ensure proper consumer protection and maintain international co-ordination, which is so essential in these markets.
Amendment 41 requires the FCA to make rules requiring listed companies to publish the revenue and earnings attributable to trading commodity derivatives and economically equivalent over-the-counter contracts. I think this is important because I have personal experience—and there is plenty of anecdotal evidence—of firms that are operating very significant trading activities but hiding their profits in their financial statements and in other parts of their accounts, because to disclose quite how much was being made from trading would bring a lot of questions about the nature of those companies. I am specifically talking about energy companies, which have very significant trading activities and are not, at the moment, required to disclose in their accounts the level of profit they are making from those activities.
This is important because it materially affects the ability of financial services to assess the health of these companies. If we are not seeing the extent to which they are engaged in these derivative-trading activities and we are unable to see where the profits are being made, how can we make fair and open assessments about the nature, success and propriety of their business? It is important that we give ourselves the transparency to see exactly how much of this is happening and the degree to which it is altering the balance sheets of companies in these sectors, which are so essential to maintaining our standard of living and, in the case of energy and food companies, have such a material impact on our environment and global climate.
I am sorry that that was a very long speech, but I look forward to hearing the Minister’s responses and to continuing the debate.
Baroness Noakes (Con)
My Lords, I will speak to the amendments from the noble Baroness, Lady Worthington. I do not support them, because I think that what the Government are trying to do in this Bill is moving in the right direction.
We have to remember that derivatives are basically a success story. It is a huge financial activity. The total value of derivative trading is sometimes estimated to be a multiple of global GDP. Of course, commodity trading is only a relatively small part of that, but it is important because the advantages of trading allow effective risk management, price discovery and market efficiency. Those are the sorts of things that actually help consumers, at the end of the day, so we must be very wary of trying to interfere in what is fundamentally a successful part of our financial infrastructure.
Of course, speculation is involved in derivatives, there is risk for some counterparties—and sometimes systemic risk—in derivatives, and sometimes they are extremely complicated as individual instruments, even to understand. But they are part of and underpin something that works well for markets overall. We should intervene in that only if absolutely necessary.
My own view is that the changes in the Bill probably do not go far enough to take the dead hand of EU prescriptive regulation away, but they are a solid move in the right direction. As the noble Baroness, Lady Worthington, pointed out, they replace a mandatory regime with a permissive one that allows the rules to be designed for the particular markets. In particular, the changes in Schedule 2 will allow the FCA to transfer responsibility for setting position limits to trading venues, if indeed position limits are needed. For some time now, the FCA has not been enforcing excesses on position limits in respect of the majority of contracts, and the world has not come to an end.
I think Amendments 21 and 22 are a step backwards in trying to preserve a mandatory EU regime. So too is trying to drag over-the-counter derivatives into that regime, because—as the noble Baroness pointed out—it has been found that they are extremely difficult to identify. Their removal from the regime was almost universally supported in the consultation that the Government carried out on changes to the derivatives regime.
Amendment 41 from the noble Baroness, Lady Worthington, is about putting additional information in annual reports and accounts. There are already obligations on companies to report things that are material to an understanding of the financial position of those companies. They are required to describe their trading model and the operating segments that are relevant to them, but they are not required to identify income streams from particular instruments that they operate. There is a good reason for that. Annual reports are already very long, complicated and difficult to understand, and the noble Baroness is asking for information that in very many cases will be wholly irrelevant to an understanding of the financial position or operations of the companies that involve some trading. For many, it is embedded in their marketing activities for the products they engage in. I do not support any of the amendments put forward by the noble Baroness.
Baroness Bowles of Berkhamsted (LD)
My Lords, I congratulate the noble Baroness, Lady Worthington, on venturing into commodities. I remember many happy hours—I call them that—when I was chair of ECON, discussing commodities with the chair of the CFTC, Gary Gensler, in particular, and the chairs of the agriculture committees in the Senate, which deal with a lot of the derivatives. It is an impossible task to get a grip on everything, but that does not mean you should not try to get a grasp of things that might go wrong.
Baroness Kramer (LD)
My Lords, I will speak very briefly to the amendments tabled by the noble Baroness, Lady Worthington, because my noble friend Lady Bowles has set out the position very well.
I am concerned that we see, in parts of this new legislation, a very libertarian view of how financial markets should be structured. Even libertarians will say to me, “Look, it all works in the long run, but in the short run there are an awful lot of victims and collateral damage”. Because of that, we are asking the Government to go back and relook at the changes they are proposing. The developing world, including some of the poorest people, will suffer from the volatility of many commodity prices. Particularly where that volatility is artificially created, it seems to me that we ought to expect the regulators to play a disciplined and effective role.
While I must admit that most of this legislation is beyond my comprehension—the markets are extremely complex—I am rather concerned that regulators, whom the Minister herself has said have great expertise, knowledge and understanding, should not be in a position to apply those to ensure that there is no market abuse. I will leave it at that, because all that has been far better said by others.
My Amendment 27 in this group amends the Minister’s Amendment 26. It is another probing amendment, because I am not quite sure exactly what the Minister’s amendment says. My noble friend Lord Sharkey and I were both very involved in the Financial Services Act 2012, which set in place the framework for regulation of behaviour by central counterparties. That was after the 2007-08 crash, which was, as much as anything, a severe liquidity crisis. The chaotic nature of the derivatives market meant that no particular financial institution knew whether the financial institution with which it would normally do business was about to collapse, because, in turn, it had complex derivative products with yet another financial institution that was about to go under.
I am very supportive of the decision that was made, obviously at a global level, to channel virtually all financial derivatives, particularly the standard ones, through central counterparties. The largest of those central counterparties was of course the London Clearing House. I think we all recognise that, in doing that, a great deal of risk cumulated at the central counterparty. That is mitigated by the central counterparties themselves by requiring collateral.
However, to give the Committee a sense of the size of this market, I was looking at a typical number for outstanding financial derivatives on any one day. It is approximately $600 trillion, so it is vast, and a good part of that is now run through central counterparties. The problem is that there is not enough quality collateral in the whole wide world to meet margin calls from the various central counterparties, even after they have gone through a compression or netting process, which of course was led by London. Part of the reason that London is so dominant in this arena is that it has such a large market share.
The way in which the sort of fiction works—that collateral sits in place to cover risk—is that low-quality collateral can be used in these cases through a mechanism of discounting it for its embedded risk. Frankly, there is a point at which you can discount junk as much as you like but that does not turn it into high quality. It might do so on paper or by calculation, but it does not in reality, so there is always a weakness and high risk at the central counterparties.
In that 2012 legislation, we were attempting to put in place a resolution mechanism for the moment when central counterparties went sour. It is easy to put a resolution mechanism in place when a single member fails, because the other members of the central counterparty bloc are usually in a position and have sufficient financial strength to step in, and there are requirements under that resolution waterfall to be able to do so. But when the problem is at a systemic level, the waterfall does you no good at all. Most of the amendments here are meant to strengthen the waterfall, but the reality is that when there is a systemic problem, the waterfall collapses in a matter of seconds—and the ultimate backstop is, basically, the taxpayer. With the numbers that I am talking about, your Lordships can see that the exposure for the taxpayer is very significant.
All central counterparties across the globe, no matter where they are located and what rules they sit under, tend to have exactly the same membership. So if one CCP goes, you can pretty much count on all the rest of them going. In that environment, I am trying to understand the changes that the Minister is bringing forward under Amendment 26. I had understood that it was the Treasury that gave equivalence status to third-party central counterparties—I could be wrong because I am so out of date—if advised by the relevant regulator, which in this case would be the Bank of England. If I understand Amendment 26 correctly, it effectively extends the equivalence recognition to EU CCPs from one year to three years and six months. That is in primary legislation and we can make the decision whether we think that is appropriate.
I am rather troubled by proposed new paragraph (4), to be inserted by proposed new sub-paragraph (3) in Amendment 26, which says:
“The period determined by the Bank of England in a particular case”
under the rule I just described
“may be varied by the making of a subsequent determination.”
Can the Minister help me understand what on earth that means? Does it mean that equivalence can be extended by a decision of the Bank of England, say from three and a half years to 10 years? Does it mean only that the Bank of England could shorten the period of equivalence recognition and that it is limited by the three years and six months? I can see no way that there is any mechanism at all for scrutiny around this issue, even though it can represent a very serious chain of risk.
I just need some help to try to understand what power is being given to the Bank of England. It is a little like the previous question on the earlier amendment. What exactly is this power? What does it enable the Bank of England to do? What kind of scrutiny is there? Is there a sunset clause to it? How open-ended is this? I am just trying to understand those implications, so I would be very grateful if I could have the Minister’s help in doing that.
Lord Tunnicliffe (Lab)
My Lords, I will not make a long speech on this group, largely because I do not have the knowledge or skills to do it. What I am seized of is that financial crises come relatively often, about a generation apart. It seems that those who suffer in a financial crisis then set about putting in controls to try to make markets more stable. Clearly, markets are intrinsically not stable; they need rules to be stable.
One has a sense in some of the debate about the Bill that somehow the crisis of 2008-09 did not happen, and anyway it will not happen like that again. I share the little bit of concern about the central counterparties. We had debates on it about four or five years ago, and I could not see how we were protected against a systemic collapse. Every time you make a set of rules, you create some other areas of potential crisis.
I did not come here with a particular mandate on this subject, but in the debate so far it seems to have been argued that regulators need to have the ability to step into a situation and set some rules that might help limit the damage in a crisis. We will await the Government’s argument and I will read Hansard with particular care to come to a conclusion, but so far a very good case for retaining the power to the regulators has been made.
Baroness Penn (Con)
My Lords, I will begin by speaking to government Amendments 26 and 191 to 195 in my name, and Amendment 27, tabled by the noble Baroness, Lady Kramer. As she described very well in her contribution, CCPs are a type of market infrastructure and play a vital role in promoting financial stability in markets.
Government Amendment 26 will allow the Bank of England to extend a firm’s run-off period to the temporary recognition regime from a maximum period of one year to a maximum period of three years and six months. This will ensure that overseas central counterparties, or CCPs, within that run-off can continue to offer services to UK firms during that period.
While the UK was an EU member, access to overseas CCPs for UK firms was determined centrally by the EU. Following the UK’s exit, the Government put in place a new process to tailor access to the UK market, together with a temporary recognition regime, or TRR. The TRR allows UK firms to continue to use overseas CCPs while the Treasury and the Bank of England make equivalence and recognition decisions in respect of those CCPs. Once made, these equivalence and recognition decisions will provide the basis for long-term UK market access for overseas CCPs.
The TRR was accompanied by a year-long run-off regime, intended to ensure that CCPs that leave the TRR before it expires, without gaining recognition, can slowly and safely unwind transactions with UK members before exiting the UK market. Remaining within the TRR requires CCPs to take a number of steps, including submitting an application for recognition to the Bank of England by 30 June 2022. While the majority of CCPs in the TRR did this, a small number did not apply for recognition by that deadline and have consequently entered the run-off regime. UK firms therefore stand to lose access to these CCPs at the end of June 2023 under the current arrangements.
Amendment 26 will allow the Bank of England to extend a firm’s run-off period to the temporary recognition regime from a maximum period of one year to a maximum period of three years and six months. This extension is appropriate as the Government understand that some of the CCPs in the run-off may wish to apply for recognition in future. A temporary loss of access for UK firms to these CCPs would be highly disruptive. The extension therefore provides time for CCPs in the run-off regime who wish to apply for recognition to do so and ensures that the relevant CCPs can continue to offer services to firms during that period. It also ensures that, where necessary, UK firms can wind down their exposure to CCPs, leaving the run-off state in a safe and controlled manner.
Amendment 27 from the noble Baroness, Lady Kramer, seeks to remove proposed new sub-paragraph (3), which makes it clear that the Bank of England can vary any decisions it has already made on the length of the run-off period for a particular firm. I understand that this is a probing amendment to understand how that works. However, the Bank already provides dates by which these firms must exit the run-off, in line with the existing one-year limit set in legislation. This amendment extends the limit set in legislation and then gives the Bank the power to vary those dates under it. It is important for the Bank to set the exact date on which a particular CCP will exit the run-off in order to carefully manage the process for the reasons the noble Baroness points out. The run-off period for a firm cannot be more than the three years and six months specified in this legislation.
The Bank can specify a period shorter than this for a particular CCP. This does not affect the equivalence process as described by the noble Baroness. Equivalence is a separate process managed by the Treasury where the Treasury determines that an overseas jurisdiction is equivalent to the UK’s regime based on an assessment of the jurisdiction and its regulatory regime. Amendment 26 therefore allows the Bank to set specific dates for when CCPs will exit the run-off, with a maximum period set in legislation, which the Bank is currently responsible.
Briefly, Amendments 191 to 195 to Schedule 11, which introduces a special resolution regime for CCPs, are technical amendments which will ensure that Schedule 11 functions as intended and reflects the original policy intent, by correcting drafting and clarifying the scope of certain provisions.
On Amendments 21 to 25 and 41, tabled by the noble Baroness, Lady Worthington, the Government believe that effective commodities markets regulation is key to ensure that market speculation does not lead to economic harm. This is a lesson we all learned from the food crisis in the 2000s, and the Government remain committed to the G20 agreement that sought to address that.
However, the current regime, which we have inherited from the EU, is overly complicated and poorly designed. The application of limits to close to a thousand different types of commodity derivative contracts is far too broad. It captures many instruments that are not subject to high levels of volatility or speculation, and therefore unnecessarily undermines trading and liquidity in some contracts. Since the UK left the EU, the EU has significantly reduced the scope of its regime to only a handful of contracts—just 18—and no other major jurisdiction applies position limits as widely as the current UK regime.
To ensure that the regime is calibrated correctly, the Bill makes trading venues responsible for setting position limits. As some in the Committee have noted, they are well placed to ensure limits apply only to contracts that are subject to high volatility. However, the Bill empowers the FCA to put in place a framework for how trading venues should apply position limits and position management controls. As part of this, the FCA will continue to require trading venues to set position limits on contracts which pose a clear threat to market integrity. The FCA has confirmed that agricultural and physically settled contracts, among other highly traded contracts, will continue to be subject to position limits, in line with the UK’s G20 commitments, and therefore consistent with international standards.
The FCA will also retain its ability to intervene directly to set position limits if it believes it is necessary. However, Amendments 21 to 25 would require the FCA to instead continue setting position limits on all commodities that are traded on a venue or economically equivalent over-the-counter traded derivatives. This would place unnecessary restrictions on investors, to the detriment of all market participants, and would place the UK at a disadvantage compared to other international financial centres, such as the EU and the US, which apply restrictions to contracts that genuinely pose a risk of volatility. It would change existing market practice that has been shown to work effectively.
I will address more directly a number of the points that the noble Baroness, Lady Worthington, raised. On how to manage the “conflict of interest”, as she put it, for trading venues, as I said, under the measure in the Bill the FCA will establish a framework that will govern the way venues set and apply limits. The FCA will also have powers to intervene and require venues to set limits on specific contracts that pose a risk to market integrity.
On the FCA’s information-gathering powers, in particular in relation to over-the-counter trading, the FCA will have more powers to request information from any participants about contracts it is considering applying limits to. This includes, but is not limited to, over-the-counter contracts. I assure the noble Baroness that over-the-counter contracts will remain in scope as the FCA will have the ability to set limits. This means that over-the-counter traded agricultural products will remain in scope.
The noble Baroness also asked how, given that the FCA often participates in international fora, exchanges will be plugged into them. Market participants, including exchanges, are often invited to participate in round tables organised by international bodies, such as IOSCO, to discuss specific regulatory issues. They can also respond directly to consultations.
I hope that provides some reassurance to the noble Baroness on some of the specific questions that she raised.
Lord Sikka (Lab)
I thank the Minister. Unless she is going to in a moment, she did not specifically refer to Amendment 41. What it proposes is very reasonable, for two reasons. First, the information that the noble Baroness, Lady Worthington, requests is costless. It is readily available within the organisations. Secondly, if we go back to the last crash, one of the complaints about Bear Stearns was that it made almost 100% of its income from risky speculation, but the breakdown of that income was not available. Therefore, the creditors and other stakeholders were unable to make an assessment of the likely continuation of that income or the risks attached. This kind of disclosure gives us insights into the risks and enables market punters to make their own predictions about future cash flows and riskiness, and it is all costless. Therefore, it is hard to see what objections there can be to this disclosure.
Baroness Bowles of Berkhamsted (LD)
If I may drag the Minister back to where she was just finishing off, in her response to me and the noble Baroness, Lady Worthington, she said that the UK would continue to observe its G20 commitments, which I do not doubt, and that various agricultural products and so on would definitely still be within scope. However, it says here in legislation that the FCA “may”. It does not say, “Apart from the fact that we are observing G20, and agriculture is still in”—it just says “may”. Where does it say in primary legislation that there will be guidance—or whatever the appropriate word is—as to how these things will be dealt with by the exchanges in the circumstances that give rise to concern? Otherwise, looking at our legislation—at least, our primary legislation —I see that we would not have that certainty, and it is proper that we have it.
Baroness Penn (Con)
It might be wise for me to write to the noble Baroness to address that specific point. Under the overall framework for the regulators, they need to make their rules in a way that is consistent with international standards, to which the noble Baroness referred. That would be the additional way in which one would have that reassurance, but it is worth writing to set out the point for her with more clarity.
The noble Baronesses, Lady Bowles and Lady Worthington, talked about whether the FCA, in acting to advance its objectives, would have sufficient grounds to intervene in these markets. The Treasury is confident that it would, and an example of humanitarian grounds for intervention was given. We are confident that the FCA could intervene on humanitarian grounds, acting in line with its objectives, but perhaps I will also write to the Committee to expand on that further.
The noble Lord, Lord Sikka, somewhat pre-empted me: I was just about to turn to Amendment 41. I am afraid that the Government will disagree with the noble Lord and the noble Baroness. Arguments were advanced by my noble friend on this point. Amendment 41 would require all listed companies to disclose how much revenue they make from trading commodity derivatives. However, listed companies are already required to publish comprehensive information about their operations and finances as part of their annual reports. The Government view that as sufficient.
It may be worth turning to the questions asked by the noble Baroness, Lady Kramer, on government Amendment 28, if the Committee is happy for them to be addressed here. Does the power in Clause 3 allow the Treasury to amend primary legislation to give us or the regulator new powers? The power in Clauses 3 and 4 to modify legislation, including to create new powers for the Treasury or regulators, is limited to retained EU law, as set out in Schedule 1. Clause 3 powers cannot amend primary legislation.
The powers in Clause 4 can be used to move provisions from retained EU law into primary legislation. The power in Amendment 28 applies where the Treasury is making transitional amendments to retained EU law or restating it. It is designed to allow, for example, the Treasury to give itself a power to update a definition or threshold in legislation. This mirrors delegated powers for the European Commission in retained EU law. While it would be possible to deliver the same outcome by reuse of the powers in Clauses 3 and 4, the Government consider it more appropriate to create a specific power to allow for such updates to be made, where they consider it appropriate. When creating such powers, His Majesty’s Treasury will have the ability to specify the procedure for any statutory instruments made using the new power. The Treasury will follow the same approach to determining the appropriate procedure as it has in the Bill. Where the Treasury exercises the power to create further powers, the instrument doing that will be subject to the procedure specified in Clause 3(9), which, in the vast majority of cases, will be the affirmative power.
Baroness Kramer (LD)
The Minister has been very helpful, but I will ask the question that I think the noble Lord, Lord Tyrie, would ask if he were still in his place: is there any kind of sunset clause on this?
Baroness Penn (Con)
There is no sunset clause on this power, just as there is no sunset clause on the powers in Clauses 3 and 4, so it is consistent with the approach we have taken with those other powers.
I thank the Committee for allowing me to address those points in this group. With that and the further information I shall deliver to the Committee on some of the questions from the noble Baroness, Lady Worthington, I hope that she will withdraw her Amendment 21 at this stage and will not move her other amendments.
Baroness Worthington (CB)
My Lords, I am genuinely grateful to the Minister for her response, which was very helpful and contained information about which I was not aware—I thank her for that. I will read Hansard in great detail. In her letter, can she explain a little more about those 18 contracts that will be covered and the retained powers? I would find that very interesting, although I am sure I can also google it.
I will now sum up. I am very grateful to the noble Baronesses, Lady Bowles and Lady Kramer, for their contributions. Returning to the statements by the noble Baroness, Lady Noakes, I am sure it is seen as a great success that we have this $600 trillion market in stuff that exists in the future, which is hugely complex and can crash the global economy. Some people will have benefited hugely from it; I have no doubt that some of those people may be in this Room. The point is that there is someone paying at the other end of that profit, and often it is the people at the very end of the chain who are trying to buy food in supermarkets or heat their homes. If a bubble in that market is definitely benefiting some—even maybe benefiting the Government, if they are receiving revenues from it—it comes at a cost, so we should be very mindful of the need to regulate that market. There is evidence after evidence of these bubbles forming because, quite frankly, the incentives to make cheap money are huge. Compared with the real economy, where you actually have to do things, build things, sell things and employ people, the desire to make money fast is overwhelming, and I do not want the UK to become the home of ever more exotic derivatives that allow us to make money the quick and easy way. Let us make banking and the financial markets boring again by getting them back to basics: using money to further society’s aims. If we cannot do that individually, we should do it collectively. I do not want to get on my soapbox, but the fact that we are exiting Europe makes that more difficult, so even more scrutiny needs to be applied now that we are setting our own rules.
I am grateful for the responses. I will end by saying that I had the pleasure of meeting a gentleman who worked in a bank that was more than 500 years old. I asked him about its ESG policies, and he listed them. They started with, “We will make no profit at all from soft commodities”, then went on to the usual checklist about arms and whatever else. I asked him where that came from, and he said, “Oh, we can’t remember”. Because it was such an old-fashioned concept—that we should take a moral position that we will not engage in profiteering from soft commodities—it sort of lapsed into the history of time.
Banking was moral once. I am not saying it is immoral now, but it is incredibly complicated. The incentives to make money in ever more novel ways are always there. Even the noble Baroness, Lady Noakes, alluded to the fact that systemic risks exist. They have existed in my lifetime and I am sure they will come again.
I am glad that we are here to do this scrutiny and very glad of the Minister’s offer to write. I hope that we will revisit some of these questions, and I will end on Amendment 41. I have personal experience of how energy companies are loath to disclose how much of their profits rest on trading. If that is the case, the markets should care about it and disclosure is the most obvious step to address it. With that, I beg leave to withdraw.
Baroness Penn
“PART 4AAMENDMENTS TO THE CENTRAL COUNTERPARTIES (AMENDMENT, ETC., AND TRANSITIONAL PROVISION) (EU EXIT) REGULATIONS 201850A (1) Regulation 19B of the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 (S.I. 2018/1184) is amended as follows.(2) In paragraph (2) for “one year” substitute “3 years and 6 months”.(3) After paragraph (3) insert—“(4) The period determined by the Bank of England in a particular case under paragraph (2) (whenever determined) may be varied by the making of a subsequent determination.””Member’s explanatory statement
This amendment would allow the Bank of England to extend the period during which third country central counterparties that have fallen out of the temporary recognition regime following IP completion day can continue to offer services to firms in the United Kingdom, from a maximum period of one year to a maximum period of 3 years and 6 months.
Baroness Penn
“(aa) authorise the making of subordinate legislation by the Treasury;”Member’s explanatory statement
This amendment would ensure that the powers in clauses 3 and 4 of the Bill to make transitional amendments or saving provision in relation to the retained EU law listed in Schedule 1 for revocation, also include the power to confer new regulation-making powers on the Treasury.
Baroness Penn
“(ii) the Bank’s duties under section 30D(1)(a) of that Act;”Member’s explanatory statement
This amendment would ensure that when the Bank of England makes material changes to rules where consultation exemptions apply under clause 6, the Bank must publish a statement explaining how the rules are compatible with the Bank’s duties relating to the regulatory principles inserted by clause 45 of the Bill. (The words after “with” in line 38 become sub-paragraph (i)).
Baroness Noakes
Member’s explanatory statement
This amendment, and another, would ensure that the designation of activities did not go beyond the FCA’s operational objectives (consumer, integrity and competition).
Baroness Noakes (Con)
My Lords, in moving Amendment 30 I will also speak to Amendments 31 and 34 in this group. Amendments 30 and 31 would amend Clause 8 and Amendment 34 would amend Schedule 3. They all concern a new power in the Bill to designate activities that the FCA will regulate.
The power to designate activities in Clause 8 is a very wide one. I have no problem in principle with the designation of activities, as there have been too many instances in the past where activities went unchecked and where the FCA’s inaction was blamed on lack of powers. But it is not necessary to regulate absolutely everything in the financial services sector, and new Section 71K(3) of FSMA allows practically anything to do with finance to be regulated.
My Amendments 30 and 31 are modest, in that they say the power to designate activities can be used only if the Treasury thinks it necessary for the purposes of the FCA meeting its operational objectives. These operational objectives are consumer protection, enhancing the integrity of the financial system and promoting effective competition in the interests of consumers. That should not be a high bar, but it is important that when the Treasury brings forward designated activity regulations, it demonstrates that the activity is needed for these objectives and that it would not result in mission creep for the FCA.
I illustrate this with my Amendment 34, which would remove paragraph 4 from new Schedule 6B to FSMA which is introduced by this Bill’s Schedule 3. I am not at all clear why the Government have included Schedule 3, given that the unconstrained new power to designate activities expressly says that nothing in the schedule limits the power. I can conclude only that new Schedule 6B to FSMA contains the FCA’s wish list of areas that it wants to regulate.
My amendment, which deletes new paragraph 4, concerns short selling. I strongly believe that this should not become a designated activity, or should do so only if there is clear evidence that it is needed for one of the FCA’s objectives. Of the three objectives, I imagine that the only one that would be engaged is the market integrity objective, and I am not aware of any evidence that the regulation of short selling is necessary from a market integrity perspective. What enhancement of market integrity would be achieved? Is it actually necessary?
Viscount Trenchard (Con)
My Lords, I support all the amendments in this group introduced by my noble friend Lady Noakes, to many of which I have added my name. I do not need to repeat the arguments so powerfully put by my noble friend. Clause 8 amends FSMA 2000 through new Section 71K to create a designated activities regime, which allows certain activities related to financial markets to be regulated within a framework that is separate to the existing FSMA regime for authorised persons, while still being compatible with a comprehensive FSMA model. The intended purpose of the designated activities regime seems to be to enable the Government to perpetuate the various retained EU law regimes without adequate parliamentary scrutiny, particularly given earlier comments on the inadequate way in which we scrutinise SIs.
New Schedule 6B is an indicative list of designated activities. This regime may at first be used to replace the retained EU law being revoked under the Bill, but there is no apparent limitation to the Treasury extending it in future to new or different activities. The designated activities regime is almost completely unconstrained in scope and effect. As such, it could be used to ban all kinds of products and classes of provider, and/or to establish parallel licensing requirements for particular activities, for both authorised and unregulated firms. The Explanatory Notes to the Bill state:
“Initially, the government expects most designated activities to be activities which are currently regulated through retained EU law”,
suggesting that new designated activities may be introduced.
The market will be keen to ensure a level playing field for regulated activities among FCA-authorised, dual-authorised and unregulated firms. Can my noble friend the Minister confirm that FSMA 2000’s new Section 71N means that rule-making in relation to designated activities will be the sole competency of the FCA? Currently, the PRA and the Bank of England share regulatory responsibility with the FCA for a number of technical standards relating to the entering into of OTC derivatives, for instance. Additionally, if the requirements are set out in the FCA handbook for authorised firms and in separate instruments for unauthorised firms, there may be a risk of divergence and inconsistency.
I have tabled Amendment 35 as a probing amendment, on removing the admission of securities to listing on a stock exchange from the lists of designated activities. First, I would question whether listing should be a regulated activity at all, because many listings happen without an issue of new shares or other securities and may, for example, be undertaken by companies wishing to show that they are good corporate citizens that want their corporate information to be available to the public in the same way it is for other listed companies. This was certainly a major consideration when many major Japanese companies such as Toshiba, Fujitsu and Honda listed their shares on the London Stock Exchange in the 1980s and 1990s. They subsequently undertook capital-raising exercises involving the issuance of securities, but those were separate exercises. I see no reason why unregulated firms may not act as sponsors for stock exchange listings, and therefore would question why the arrangement of listings should be a regulated activity.
Do the Government intend as a matter of urgency to act on the recommendations in the listings review undertaken by my noble friend Lord Hill of Oareford? Does the Treasury intend to undertake a fundamental review of the prospectus regime, as recommended by the review? Does my noble friend agree with the recommendation that prospectus requirements should be changed so that, in future, admission to a regulated market and offers to the public are treated separately? Could she tell the Committee whether she thinks that the empowerment of the FCA through the designated activities regime will make stock exchange listings more expensive and cumbersome than they have become during the past 14 years, or less? In that time, as my noble friend Lord Hill pointed out, the number of companies listed on the London Stock Exchange has declined by 40%. I look forward to hearing the Minister’s comments.
Lord Stevenson of Balmacara (Lab)
My Lords, I shall speak to Amendment 32 in name, which is part of this group, although it points in a slightly different direction from the speeches we have just heard. I declare an interest, as I was chair of StepChange, the debt charity, in the period 2010 to 2014, although I have no current connection with it.
This is a probing amendment aimed at ensuring that a particularly egregious form of high-cost credit, log-book loans, issued under the bills of sale legislation dating from Victorian times, is afforded the customer protection measures rightly offered to consumers who use other forms of credit. In that sense, it needs an extension of the power discussed in this clause. To be clear, I would much prefer it if the Bills of Sales Acts of 1878 and 1882, and their related legislation, could be repealed. One way or another, I hope that some speedy action can be taken to resolve this issue. Such efforts appear to have stalled, despite a lot of work nearly a decade ago by the Treasury and the Law Commission.
Over the past few years, the Government and the FCA have been largely successful at clearing up the high-cost credit market. It is true that they had to be pushed to get started, and many noble Lords present may recall this House playing a significant part in focusing attention on payday loans, for example. But there are still issues to be addressed. The consumer duty is also a valuable step forward, and I hope that it will be a great success. At the same time, the introduction of statutory backing for the debt respite—the breathing-space regulations—and the forthcoming statutory debt repayment plan will offer immediate and effective help to the many hundreds of thousands of people who face unmanageable debts each year. The Government have done well in this area, and I commend them.
However, the current credit squeeze and cost of living crisis are going to exacerbate this situation. Indeed, if past history is a guide, logbook loans may well become as prevalent as they were in in 2014, when 52,000 bills of sale were registered in one year at the High Court. As I said, logbook loans are issued under bills of sale, which are governed by two Victorian statutes that I have already mentioned: the Bills of Sale Act 1878 had immediately to be amended, so there is also the Bills of Sale Act (1878) Amendment Act 1882. Basically, they allow individuals to use goods they already own as security for loans while retaining possession of the goods. This legislation is archaic and, in the words of the Law Commission,
“wholly unsuited to the 21st century.”
It went on to say that
“it causes detriment to all those who use it, including logbook lenders, logbook borrowers, business borrowers and third party purchasers.”
Nobody, it seems, has a good word to say for them.
This is all set out in a substantial Law Commission Report commissioned by HM Treasury in 2016. In that report, the Law Commission went on to point out the following. Most people who take out logbook loans are borrowers who already have difficulty in securing other forms of credit. Its research revealed that the term is usually six months to three years, while the interest rates ranged from 60% to 443% APR but were usually in the range of 120% to 187%—high-cost credit indeed.
There are complaints that some lenders use the threat of repossession of the goods to demand unreasonable and unaffordable extra payments, even when the loan is substantially repaid—something which is not permitted in, for example, hire purchase agreements. However, logbook loans lie outwith modern consumer protection legislation. It is true that the Financial Ombudsman Service may provide redress after the event, but the FOS is not able to prevent repossessions. There is no protection afforded to private purchasers who buy goods subject to a bill of sale, even if they act in good faith. Those who buy a second-hand car without knowing it is subject to a car-book loan face an unpalatable choice: pay off somebody else’s loan or lose the car.
The 1882 bills of sale legislation requires all bills of sale to be completed on a complex standard form and registered with the High Court, which uses a paper-based record system. Failure to comply with any of the documentation requirements carries substantial sanctions, not least being that the lender loses any rights over the goods or money owed to them. Those sanctions clearly would be out of scope if current consumer protection standards applied, but—
Lord Stevenson of Balmacara (Lab)
As usual, I have forgotten where I was in my perorations, so the Committee might get a few words that it has heard already, which can be ignored. I think I was talking about the requirement in the 1882 legislation that all bills of sale have to be completed on a particularly complex standard form, and then registered with the High Court, which, of course, uses a paper-based record system. The sanctions for failing to comply with any of its documental requirements would be out of scope if current consumer protections applied, and lenders are understandably loath to amend them.
It costs about £45 to register a bill of sale with the High Court, and another £50 to search it. That does not happen very often, because you cannot search by vehicle registration number or any other useful form; it is just a simple list of all the registered cases.
I think most people would agree that the Law Commission makes the case very well for the repeal of the Victorian bills of sale legislation. What is so disappointing about all this is that, originally, the Treasury seemed to share that view. In a Ministerial Statement in February 2017, the Government accepted
“the overarching thrust of the recommendations”,—[Official Report, Commons, 7/2/17; col. 6WS.]
albeit warning that they would not proceed until they had further reflected on some of them. The reflection took the form of a limited consultation with stakeholders, which received 25 responses, after which the Treasury decided not to take forward the draft Law Commission Bill. The principal reason given was that several of the 25 respondents felt that some of the consumer protection proposals in the draft Bill prepared by the Law Commission did not go far enough. It is almost difficult to believe that.
That remains the position. I have tried to keep the pressure on: I took over the Law Commission Bill as a Private Member’s Bill. I got 10th place in the ballot one year, but then lost the Bill because of a snap election called by, I think, Mrs May—I forget now who was Prime Minister. However, I have had meetings; in 2019 I was kindly joined by the noble Lord, Lord Young of Cookham, and the then Economic Secretary to the Treasury, John Glen, but to no avail. In his last letter to me, he accepted that there was consumer detriment taking place but, as numbers of logbook loans were falling, he said he believed
“that the rationale of the Government’s decision not to proceed with legislative reform in this area still stands”.
John Glen is now promoted and in the Cabinet, and I am where I am. However, I respectfully disagreed with him then and still do today. Only a few months ago, I was written to out of the blue—they must have got my name from the news about the Bill when it was first introduced—by people who had been scammed, aided by logbook loan legislation. An elderly couple had put all their hard-earned savings into a motor home, which they wanted to use for their retirement. Just when they had completed the purchase and the renovations, spending almost as much again as they had on buying the vehicle, they discovered that it had mysteriously acquired an outstanding logbook loan, and they lost the vehicle and their capital. This is the sort of thing that happens.
I look forward to the Minister’s response today, and I remain willing to attend further meetings if she thinks that might help move this issue forward. I know from discussions with StepChange that consumer detriment is still happening in this area. I agree with the FCA, which I spoke to earlier in the week, that the credit squeeze, inflation and the energy cost crisis is going to make the return of logbook loans—and, indeed, many other forms of high-cost credit—as inevitable as it is undesirable. If accepted, my amendment would give the FCA the tools it needs to assist the many people affected by this egregious legislation—albeit I still believe that the right solution is for the Government to commit now to repeal the Victorian legislation as soon as reasonably practicable.
Lord Naseby (Con)
My Lords, I am not going to repeat what my noble friends Lady Noakes and Lord Trenchard have said, but I certainly think that His Majesty’s Government—I am a very loyal member of the governing party—need to recognise that this is a once-in-a-lifetime opportunity in this Bill. Therefore, for me, the driving force should be to ensure that in doing what we are doing—I accept that it is important to mention designated activities—we should be driven by the need for growth for our economy, good competition and innovation. Those things are so key to the future of this country, the City and the whole of the financial services area that we need to be a little bit careful. I think that my noble friend Lady Noakes’ proposal is a perfectly valid one. The Government can have another look at it, but I do not think that it is necessary.
Baroness Bowles of Berkhamsted (LD)
My Lords, I have some questions which arise from what the noble Baroness, Lady Noakes, said. If we want to go back to before the EU had the single market in financial services, we need to know how it worked with short selling. Unfortunately, I do not know how it all worked in the UK back then. When we started to do, or were forced into doing, the short selling regulation, I was told repeatedly from all sides in the UK that we did not need it but that naked short selling was banned. A lot of the concern was about short selling when you had not actually located where you would be able to get the share from for delivery. After the regulation was done, you had to know where you were going to get it, and it was a little firmer. However, I was assured that the wording was more or less the same as was applied, so how did we apply it? We did not have a designated activity regime.
There may be lots of little snippets around in financial services where you just need a simple rule like that—that you cannot do naked short selling but covered short selling is fine—without having lots of regulation, reporting and things around it. How are we going to do this? Would we do a designation just for a one-line piece of information? This is a genuine question, because absurdities begin when you have to invoke something that then requires complex rules. As soon as you go beyond the simple principle of no naked short selling, it will become a much bigger thing, as the European regulation did. There are other drivers for that, and it may be that more than just not doing naked short selling is necessary. My question is, within this designated activities regime, how do you do just one simple, little thing?
Baroness Kramer (LD)
My Lords, I fear that if we were to follow the amendment from the noble Viscount, Lord Trenchard, we would indeed permit naked short selling. Like most people, I have no problem with short selling in highly liquid markets.
Viscount Trenchard (Con)
I am a little surprised that the noble Baroness is taking my name in vain here. My amendment is not about short selling; it is about listing.
Baroness Kramer (LD)
I apologise; it was the noble Baroness, Lady Noakes. I have attacked the wrong conspirator, as it were. I say to her that my concern, from listening to various people argue for changes in the rules that govern short selling, is that that is exactly what they have in mind, the argument being that if we allow short selling then illiquid markets will suddenly become much more liquid because many more players will be attracted into that particular end of the market. There is a great deal of risk at play, so I am quite nervous about making that kind of change. We always assume that the investors who would engage in these products would be highly sophisticated and understand fully the risks they are involved in, but the practical reality that we see in everyday life is that many people get involved who, frankly, have insufficient understanding and find themselves very much at risk.
It is for a similar reason that I say to the noble Viscount —I think accurately this time—on ending regulatory criteria for listing, that the listing issue is quite complex. I was one of the people who agreed with the IoD—I do not agree with the IoD all that often—on the changes that the London Stock Exchange made to enable a secondary listing for Aramco. It did not end up with the business, but the IoD was very concerned that the LSE compromised its approach to corporate governance to get that listing, which would obviously have been a highly profitable activity. That issue made the IoD very irate. It described it as
“an opportunistic attempt at boosting short-term primary issuance which ignores the longer-term implications for the overall UK corporate governance regime.”
This is actually quite a contentious area, so removing it completely from the regulatory sphere strikes me as rather dangerous.
I will bring my comments to a halt, except to say to the noble Lord, Lord Stevenson, and to the Government that the noble Lord should not have to fight such a difficult battle to try to deal with such a potential abuse. I wonder whether the Minister might, on a very personal basis, take up the cudgels here, because Ministers sometimes are in a position to get the relevant action that has been sitting many pages back on the back burner. I remember the battles we had to get rid of payday lenders. In the end, the noble Lord, Lord Sassoon, working very closely with all parts of the House on a very personal basis, was able to bring in the legislation that brought an end to that kind of abuse of consumers. The Minister has a very good precedent in the noble Lord, Lord Sassoon, and his capacity to use financial services legislation to deal with an aberration that puts people at risk.
Lord Tunnicliffe (Lab)
I am not persuaded by the amendments in this group, apart from the one from my noble friend Lord Stevenson. Obviously, I shall listen to the debate and check Hansard before we come to Report. My noble friend’s amendment may not be the right way to address this problem, but, in all honesty, it has been five and a half years since this issue was spotted. There has been a perfectly good Law Commission report, as I understand it, which makes a very strong case. It is no good saying that we will cover this elsewhere, or that it has to be integrated. There is a solution to this problem, and it is important that the solution happens in this Bill. I strongly commend to the Minister that she “does a Sassoon” and comes up with an acceptable compromise so that an end is put to what I would call almost an evil practice.
Baroness Penn (Con)
My Lords, I shall briefly address government Amendment 33 in this group before I turn to the other amendments.
Government Amendment 33 fixes a minor drafting error in Clause 8, which introduces the designated activities regime, or DAR. Subsection (2)(a) of new Section 71P of FSMA states that contravention of a DAR rule does not constitute an offence except as provided under regulations made under Section 71R. These provisions allow the Treasury, when designating an activity, to apply existing criminal offences within FSMA to that activity. This amendment inserts a cross-reference to new Section 71Q, as it too makes provision for DAR regulations to apply existing criminal offences in FSMA.
Amendments 30 and 31 together seek to prevent the Treasury designating, and therefore bringing into regulation through the DAR, any activity unless the regulation of that activity is necessary for the FCA to further its operational objectives. I assure my noble friend that the FCA will be required to make rules relating to designated activities in a way which, as far as is reasonably possible, furthers one or more of its operational objectives. Simply put, the FCA will not be able to make rules about a designated activity unless doing so is in line with its objectives under FSMA. This approach is modelled on the way activities are currently regulated under FSMA, whereby the Government determine the regulatory perimeter by specifying which activities are regulated, and the regulators then make rules to advance their objectives.
Amendments 34 and 35 seek to remove short selling and the admission of securities to trading from the list of activities in Schedule 3. That schedule inserts new Schedule 6B into FSMA; Schedule 6B is designed to give noble Lords a sense of the types of activity that Treasury may designate under the DAR. However, my noble friend is absolutely right that this is an indicative list and does not mean that Treasury will designate that activity in future, or that it will do so in the way described in the schedule. Should the Treasury decide to designate short selling or the admission of securities to trading in future, it will be through a statutory instrument subject to the affirmative procedure, so that Parliament can fully consider and debate the implications.
I should say to my noble friend that the list included in Schedule 6B is not an FCA wish list: it is a set of activities currently regulated through retained EU law that may be appropriate for the designated activity regime. I should also be clear to my noble friend and to the Committee that the Government believe that there should be a regulatory regime for short selling in the UK.
My noble friend set out that short selling can play a role in the healthy functioning of financial markets. It provides essential liquidity to markets, helps to ensure that investors pay the right price when investing in shares, and allows investors to manage risks in their portfolios. However, there can also be risks associated with short selling. For this reason, all major financial services jurisdictions, including the UK, have some form of short selling regime. Noble Lords will know that the losses that short sellers can incur if prices increase rather than fall have no upper bound, making it riskier than a traditional investment. In exceptional periods, markets can be dysfunctional, and there is a risk that short selling can exacerbate volatility and undermine market integrity.
The UK intends to regulate in this area, and, as the noble Baroness, Lady Bowles, notes, the UK has a history of regulating short selling which predates the introduction of the EU’s short selling regulation. Parliament legislated to give the FSA specific powers over short selling in 2010 and, prior to that, the FSA took action to address instances of short selling in the financial crisis. The powers in the Bill will allow the Government to put in place a proportionate and appropriate short selling regime that is tailored to the needs of UK markets, companies and investors. The Treasury has issued a call for evidence to support this work, which will close in March.
To answer the question asked by the noble Baroness, Lady Bowles, on how you do just one simple thing, the DAR has been designed to be flexible and proportionate and would allow the Treasury to do something very targeted if appropriate. It removes the need to introduce a Bill every time something small but important arises, and it removes the need as potentially an alternative form of regulation for it to make a regulated activities order and for it to be regulated under that regime with the associated regulations of the authorised persons that come along with it rather than just the activity itself.
On regulation for companies listing on a stock market, the Government are in the process of a fundamental overhaul of the prospectus regime. There is clear scope to make this simpler and more effective and enhance the competitiveness of UK capital markets. I reassure my noble friend Lord Trenchard that the Government have committed to deliver the outcomes of the UK Listing Review from the noble Lord, Lord Hill. We published an illustrative statutory instrument in December showing how the Government plan to use the DAR to put in place a simpler, more agile and more effective listing regime. I therefore reassure my noble friend that the Government are fully committed to improving the attractiveness of UK markets, and that the powers in the Bill will be used to deliver on that objective.
My noble friend also asked whether the FCA is the only regulator able to make rules under the DAR. I can confirm that it is the only regulator that would have powers under this regime.
Amendment 32 from the noble Lord, Lord Stevenson, seeks to enable the DAR to regulate currently unregulated credit agreements secured by bills of sale. As the noble Lord set out for the Committee, the Bills of Sale Acts allow borrowers to use goods which they already own as security for a loan, while retaining possession of those goods. Today, they are most commonly used for logbook loans. Logbook loans are a type of high-cost credit regulated by the FCA in which a consumer uses their car as security, while allowing the consumer to keep using their vehicle. However, bills of sale are also used for other unregulated secured lending, such as businesses which wish to borrow against their assets, such as machinery.
I understand that the noble Lord would like to see the framework for these products modernised, and we have discussed this during the passage of previous Financial Services Acts, although his work on it predates that. He has suggested that the DAR might be the way to achieve this.
As the noble Lord noted, the Government previously considered repealing the Bills of Sales Acts and replacing them with a new goods mortgages Act. While there was support for this approach by many stakeholders, others raised significant concerns about the degree of consumer protection afforded by the proposed regime. The Government were also concerned that a modernised and streamlined regime could lead to more consumers using goods that they already owned as security for a loan, which is inherently a higher-risk form of borrowing.
Baroness Noakes (Con)
My Lords, I thank my noble friend the Minister for her comprehensive reply to this short debate. I also thank all noble Lords who have taken part in it.
For my amendments, one was in relation to whether the Treasury’s power to designate activities should be constrained in any way. I understand that the FCA will of course be able to make rules only in accordance with its own objectives. I was trying to put an earlier hurdle in: that the Treasury should go in that direction only if it has had evidence that there was need in relation to the FCA’s objectives. I regret that the Minister indicated that she did not want to go down that route, so I will have to think carefully about that.
I was disappointed though perhaps not surprised on short selling, because there is a kind of prevailing view that if something moves in financial services, it ought to be regulated somehow. I can see that if it was regulated in the EU, it will end up being regulated again and some of the advantages of us having left the EU will simply not be realised because there is a mindset, in particular in the Treasury, which never wanted to leave the EU, that what happened in that era of our membership has to be preserved if at all possible. That is, as I say, disappointing to me.
When the noble Lord, Lord Stevenson of Balmacara, got up, I thought, “It’s déjà vu all over again”, because I too remember our debates on earlier financial services legislation. However, I believe that he has a good point and I was particularly glad to hear my noble friend offer a small possibility that some progress might be made. I think the whole Committee would be happy if that could be achieved, because it clearly does not seem like a happy state of affairs. With that, I beg leave to withdraw my amendment.
Baroness Penn
Member’s explanatory statement
This amendment would insert a cross-reference to section 71Q to ensure that the exception in section 71P(2)(a) of the Financial Services and Markets Act 2000 as inserted by clause 8 of the Bill (on liability in connection with designated activities) also refers to designated activity regulations under section 71Q.
Baroness Noakes
“(4) Omit subsections (3), (6) and (7).” Member’s explanatory statement
This amendment probes why the power to make recommendations to and obtain information from “bankers” remains relevant.
Baroness Noakes (Con)
My Lords, Amendment 36 would delete some subsections from Section 4 of the Bank of England Act 1946, the only nationalisation legislation that made any sense. Indeed, it was surprising that the Bank of England existed outside the public sector for as long as it did—the best part of 250 years. Section 4(3) says:
“The Bank, if they think it necessary in the public interest, may request information from and make recommendations to bankers, and may, if so authorised by the Treasury, issue directions to any banker for the purpose of securing that effect is given to any such request or recommendation”.
Subsection (6) says that a banker is any banking undertaking that the Treasury declares to be a banker for the purpose of Section 4. That is quite a sweeping power in relation to all kinds of banks: retail banks, commercial banks, investment banks and so on.
This is a probing amendment to find out why on earth this power is still on the statute book, given that we have a highly defined system of prudential regulation laid out in extensive detail in FSMA. In addition, the various Bank of England Acts deal with the Bank’s other functions. Collectively, the legislation gives extensive powers to the PRA, the Monetary Policy Committee, the Financial Policy Committee and the Bank of England itself. There is no deficit in powers related to bankers, as anyone operating in the financial services sector will attest.
Why does Section 4 retain these powers? How often have they been used? When was the last time they were used? If my noble friend cannot make a case for these powers still being needed—if they were ever needed—I invite her to agree to their removal from the 1946 Act. I beg to move.
Baroness Penn (Con)
My Lords, my noble friend has just described what Amendment 36 probes and the power it is seeking to look at, so I will not repeat that. What I will say is that the power is designed to be used only when it is necessary to do so in the public interest, such as in an unexpected or emergency scenario.
The Government looked at some of my noble friend’s questions. We are not aware that the Bank has ever used this power, but it could be useful in some scenarios—for example, for the Bank to require certain actions from troubled firms during a period of financial crisis. As we saw in 2007-08, such crises can develop quickly and create novel policy challenges that may not be anticipated in advance. As such, the Government consider the power to be a useful potential backstop. Any changes to this power would require careful consideration and consultation before acting.
I have been brief, but I hope that I have answered my noble friend’s questions, at least in part, and that she feels able to withdraw her amendment.
Baroness Noakes (Con)
My Lords, I rather thought I would get that answer—that the power has never been used—because I certainly could not recall any situation when it could have been used. My noble friend the Minister has put up a good case for keeping something that has been there since 1946—which is rather a long time—and has never been used but might be needed in an emergency, notwithstanding that, certainly for the last 20 years, we have been legislating on financial services and banks in extenso and there exists a range of powers that any intelligent person involved in this area thought that the Bank or the PRA would ever need to use. I think the case for removing these powers is unanswerable. I hope that my noble friend the Minister might think a little more about that between now and Report. It would be a good thing for the Government to bring forward something that would clean up our statute book. I beg leave to withdraw.
Baroness Noakes
“(3) In complying with the duty in subsection (1) the relevant regulators must ensure that any information or other requirements imposed on a critical third party minimise, so far as is reasonably practicable, the burden placed on the critical third party.”Member’s explanatory statement
This amendment shifts the emphasis from burdens on regulators to burdens on third parties.
Baroness Noakes (Con)
My Lords, I understand regulators’ desire to have more insight into the risks that critical third parties present to the provision of financial services. The regulators have been fretting about the provision of cloud services for some time—not always with good cause, because cloud providers offer some significant benefits to financial services firms in a range of areas. The PRA and the FCA have already increased their focus on critical third party suppliers by way of operational resilience requirements on regulated firms, and they already have the ability to get information via the regulated firms.
I was not hugely surprised to find a regulatory power grab regarding critical third parties in this Bill, but I was genuinely shocked to find 10 whole pages of legislation giving the regulators huge powers over critical third parties: the power to make rules, a power of direction, information powers, censure and disciplinary powers, and so on. This is typical regulatory gold-plating of the kind that I hoped we had left behind when we exited the EU. The Treasury ought to be on the alert against this kind of thing, rather than being complicit in it.
The regulators will have to exercise real care when they use these new powers. It would be a very bad outcome if some—for example, the cloud providers or the major ICT providers—decided to exit the UK financial services market because of heavy-handed regulation. If that happened it would likely increase the concentration risk within the financial services sector, as well as reducing competition in the provider market.
My Amendment 37 is in fact extremely modest. TheCityUK has called for one of the regulators to be in the lead for any critical third party, so that the likelihood of duplicative requirements and other burdens between the regulators involved would be minimised. TheCityUK is not comforted by the co-ordinating duty in the new Section 312U of FSMA because just about everybody who has been involved in financial services has been on the receiving end of unco-ordinated regulator action, despite the existence of co-ordinating duties already in FSMA. Those duties have not been a resounding success, and I may return to the idea of a lead regulator on Report.
For today, my Amendment 37 would delete subsection (3) of new Section 312U and replace it with a more third-party friendly version. Subsection (3) says that the duty to co-ordinate
“applies only to the extent that compliance with the duty does not impose a burden on the relevant regulators that is disproportionate to the benefits of compliance.”
This is typical of regulation, in particular financial services regulation. It sees things through the prism of the regulators, not the persons impacted by the regulation. My amendment would replace this with a requirement to minimise the burden placed on critical third parties so far as is reasonably practicable.
I do not regard this rebalancing of the new rules as a radical proposition in the context of the radical new powers that are being taken. The impact on third parties really does need to be taken into account, and it is curiously absent from the 10 pages of the Bill dedicated to the new powers over critical third parties. The need for rebalancing of the new regulatory provisions ought to go wider than the duty to co-ordinate, and I should probably have drafted something broader to consider in our Committee today. My purpose is to probe how the Government see the new provisions impacting on third-party suppliers, not just on the regulators, and whether they even acknowledge that they might have created something of a monster in these new rules. I beg to move.
Baroness Kramer (LD)
My Lords, I shall speak only very briefly, because I have a great deal of sympathy with the proposition that the noble Baroness, Lady Noakes, puts before us. The resistance in the industry to rules is not to the principle of the rules but to the way in which they operate, and the cumbersome methodologies—the dotting of every i three times and crossing of every t four times—that drives people completely insane. It has undermined respect for both the regulator and its effectiveness. The noble Baroness, Lady Noakes, said she had something broader in mind, and she will find amendments coming forward later, particularly in the name of my noble friend Lady Bowles, focusing on the issue of efficiency. I think that is something we would all like to see.
There are those who would like to see less regulation per se, and those like me who are very cautious about having less regulation. Obviously, less regulation may release animal spirits and innovation, as the noble Lord, Lord Naseby, pointed out earlier; in fact, he did not talk about animal spirits, but he talked about innovation. The downside is that light-touch regulation could leave you with a financial crisis, an awful lot of victims and, potentially, an undermined economy. It is very asymmetric. But efficiency ought to be built into the very heart of this, and regulation ought to be designed to put a minimum operational burden on the various parties affected. If we can adopt that somewhere as a principle in the Bill, it would be exceedingly useful.
Baroness Penn (Con)
I thank my noble friend Lady Noakes for her amendment. It is a good opportunity to talk about the Government’s proposals for mitigating the systemic risk posed by critical third parties in the finance sector, such as cloud service providers. The Government agree with the spirit of what my noble friend and the noble Baroness, Lady Kramer, have said.
The critical third parties regime has been designed with the aim of minimising the burden placed on these parties, while mitigating the systemic risks that could be posed by the use of these services. Rather than bringing, for example, a whole cloud services provider into the financial regulators’ remit, the regime instead gives the regulators powers over only the services that a critical third party provides to the financial services sector. I believe that that approach contrasts with the EU approach known as DORA, which I thought was the name of my parents’ dog. DORA bears similarities to the UK’s approach, but I am told that it is less proportionate than our regime, which targets only the services provided to the finance sector and not whole firms.
Proportionality and resource-effectiveness are therefore built into the design of the regime. I draw all noble Lords’ attention to the obligations that the regulators already operate under, including those resulting from FSMA, and the Bank of England Act 1998. In addition to public law obligations to act reasonably and proportionally, the regulators must also have regard to their regulatory principles. These include the principle that burdens or restrictions imposed on a person should be proportionate to their expected benefits. As the noble Baroness, Lady Kramer, indicated, we will come back to this question of proportionality and effectiveness as we go through our debates in Committee.
Baroness Noakes (Con)
My noble friend correctly anticipates how I intend to conclude my remarks. We will return to this in Committee because, as she noted, I and other noble Lords have tabled amendments on proportionality. Although proportionality is in the legislation as a regulatory principle, there are considerable concerns among those who are regulated that proportionality does not mean much to regulators—or that it never seems to actually bite.
I am grateful for the information on my noble friend’s parents’ dog, and I have learned something about the EU that I did not know before—although I do not generally need to learn things about the EU. We will also return to the important issue of efficiency. I have added my name to at least one of the amendments on efficiency in the name of the noble Baroness, Lady Bowles.
The weight of this regulatory package that has been put together looks scary to those who may potentially be drawn within it, and there are concerns among those who wish to use the services of cloud providers in particular—but also some of the other ICT providers —that the UK regulators will scare off things that are important to them.
I will read carefully in Hansard what my noble friend has said, but I feel that we will probably need to return to one or more specific aspects of this on Report, as well as explore further the issues of proportionality and efficiency in Committee. However, for today, I beg leave to withdraw my amendment.
House of Lords
(1 year, 10 months ago)
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Local Councils: 2023-24 Budgets
(1 year, 10 months ago)
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Baroness Taylor of Stevenage
To ask His Majesty’s Government, given the impact of current levels of inflation on budget planning for local councils for 2023–24, what support they are providing to councils in setting balanced budgets and ensuring that local services are delivered.
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
We recognise that councils are facing pressures, which is why, taking 2023 and 2024 together, we have increased the funding available to local government in England in real terms. The provisional local government finance settlement for 2023-24 makes available up to £59.5 billion for local government in England—an increase of up to £5 billion, or 9%, in cash terms on 2022-23—and includes a £2 billion additional grant fund for social care. We consulted on these proposals until 16 January, and will consider the responses prior to publishing the final settlement in early February.
Baroness Taylor of Stevenage (Lab)
My Lords, I thank the Minister for her Answer. Those standing as councillors do not do so to cut services for their residents. The Local Government Association estimates a gap in funding of £3.2 billion this year, rising to £5.2 billion next year. Across the country, local councillors are taking awful decisions on closing libraries, swimming pools, children’s centres, domestic abuse services, nurseries, transport services for disabled children and more. Even Tory Hertfordshire says that it has exhausted all options for service cuts. Do His Majesty’s Government recognise that cutting local services puts pressure on other public services? Why has the fair funding review for local government ground to a halt?
Baroness Scott of Bybrook (Con)
My Lords, as I said, we recognise that councils are facing pressures but the 9% announced in the Autumn Statement is, in real terms, an increase in funding. Local government is having to meet pressures in the same way as every resident in this country is under pressure. As I said in answer to a question yesterday, we will look further at funding issues for local government in future—probably not in this Parliament but in the next.
Lord Laming (CB)
My Lords, the Minister will know that, in the decade from 2011, there was an estimated 22% real-terms reduction in local authorities’ purchasing power, despite that being a decade of considerable increase in demand for services. Does the Minister accept that it will be some years before local government will get back to the spending power that it had in 2011?
Baroness Scott of Bybrook (Con)
My Lords, local authorities across this country are doing some very creative things to make their money go further. They are working closely with others in their local areas to deliver the services that their residents deserve. I think that this will go on. Through the levelling-up Bill that has come here, we will see different ways in which local government can join together to make itself far more financially viable.
Lord Young of Cookham (Con)
My Lords, allowing local authority expenditure to increase by 9.2% in cash terms seems reasonable to me against the background of the current economic challenges. However, if, pursuant to my noble friend the Minister’s reply, a local authority thinks that that is wrong for its area, it is free to spend more if it can persuade the local electorate to vote for that in a referendum. Is that not a more democratic way of approaching local government finance than the crude rate-capping that we had before?
Baroness Scott of Bybrook (Con)
I absolutely agree with my noble friend, not only on that point but that councils can look to a referendum. It is important that, if they look for a referendum, they say what they are going to spend the money on so that local people have a choice.
Baroness Andrews (Lab)
My Lords, is the Minister aware that, in the first few months of last year, 2.2 million hours of adult social care were lost? This year, we have half a million people waiting for a care assessment, a care package or to have some care sorted out. Does she agree that adult social care and the community basis for adult social care should be a priority in the Budget? The Health Secretary believed this when he was chair of the Health and Social Care Committee in the Commons. Will she remind him of his promise to increase funding and will she engage with her Treasury officials and her Ministers to make that happen?
Baroness Scott of Bybrook (Con)
My Lords, adult social care has been an issue to be solved for not just this Government but many Governments before them. The Government are putting more money into adult social care. They put £2 billion more into local authority funding this year for it, and we will continue to look for better ways of delivering adult social care, working with the NHS as well.
Baroness Thornhill (LD)
My Lords, according to LGA evidence, without further government intervention 74% of council areas are at risk of losing their local swimming pool or reducing leisure services due to rising fuel costs, and that is this year. Can the Minister explain why the Government’s energy bills discount scheme includes museums and libraries, which is very welcome, but surprisingly excludes public leisure facilities? Can she please check whether the Government were aware of this evidence when they drew up the recent scheme? Will they seriously reconsider classifying pools and leisure centres as energy intensive, as they surely are?
Baroness Scott of Bybrook (Con)
My Lords, the energy bill relief scheme this winter provides a discount on energy for councils whose bills have been significantly inflated. This scheme was to run until 2023, and in January the Government announced that the energy bills discount scheme would run for a further year, until March 2024. But the noble Baroness opposite is right; I have already asked that question, and when I get an answer, I will come back to her.
Baroness Buscombe (Con)
My Lords, on average, how much of all local authority expenditure is spent on public sector pensions?
Baroness Scott of Bybrook (Con)
I am very sorry that I cannot give my noble friend that answer from the Dispatch Box. I will look into it and come back to her.
Lord Sahota (Lab)
My Lords, councils up and down the country had to reduce just about every service to make ends meet. Because of the Government’s cuts for the last 13 years, many councils are on the edge of a financial cliff and have even considered a Section 114 notice. Can the Minister tell me when this nightmare will end for our local communities?
Baroness Scott of Bybrook (Con)
My Lords, there are also some councils doing extremely well in keeping services running. We continue to monitor the sector’s finances and stand ready to speak to any council and support it if it has concerns about its ability to manage its finances or faces pressures that it has not planned for. We are working with local authorities to do that so that they do not get to the point of an S114.
Lord Shipley (LD)
My Lords, when will the review of business rates take place?
Lord Watts (Lab)
My Lords, can the Minister tell the House what inflation figure was used when the local government settlement was made?
Baroness Scott of Bybrook (Con)
I cannot tell the noble Lord what inflation figure was used, but I think that 9% is a very reasonable figure in the economic situation that we are in at the moment, due to many things, such as Covid and the Ukrainian war.
Lord Brooke of Alverthorpe (Lab)
Does the Minister agree that one of our problems is that the current council tax structure is well past its sell-by date and needs changing? In those circumstances, and building on the noble Lord’s suggestion about a referendum, would they permit a council to run a referendum for a restructuring of its council tax?
Baroness Scott of Bybrook (Con)
I do not think that there is anything in the rules that allows them to do that. As I said yesterday, we are looking at updating the local government finance system. It has been an issue to get right for a long time, under many different Governments. We have said that we will continue to look at it, carry out a review—particularly on relative needs and resources—and reset the cumulative business rates growth as well.
The Lord Bishop of Durham
My Lords, can I take the Minister back to social care? Yesterday, the archbishops’ report on re-imagining care was published. It suggested that we need a major rethink on how the whole care system works, not just with local authorities—though it notes that not enough is being put in. The noble Baroness, Lady Andrews, has welcomed the report and produced a fantastic report on this with her committee. Might this be an opportunity to completely rethink how we do social care in the future?
Baroness Scott of Bybrook (Con)
My Lords, as I have said, successive Governments have looked at the issue of social care. With an ageing population, it is something that we have to do; we have to change the way we deliver social care and the way it is funded. This Government are looking at this, and will continue to do so until we have a solution.
Police and Crime Commissioners: Accountability Arrangements
(1 year, 10 months ago)
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Lord Bach
To ask His Majesty’s Government whether they have any plans to change the accountability arrangements for Police and Crime Commissioners.
The Parliamentary Under-Secretary of State, Home Office (Lord Sharpe of Epsom) (Con)
My Lords, the Government undertook a two-part review of police and crime commissioners, to strengthen their accountability and expand their role. Delivering these recommendations will sharpen their transparency and accountability and ensure they have the necessary tools and levers to be strong local leaders in the fight against crime and anti-social behaviour. PCCs continue to be directly held to account by the public at the ballot box.
Lord Bach (Lab)
My Lords, I thank the Minister for his Answer and for his written reply I received this morning on the vexed question of whether the accountability of police and crime commissioners includes, by law, the need to inform the police and crime panel of senior appointments so that the panel can interview and form a view, even when the senior appointment is interim. The Government’s view is that an interim senior appointment is in exactly the same position as a full appointment for these purposes. So I ask the Minister: is he aware that, in my county of Leicestershire, there have been six—yes, six—chief executive appointments in 19 months, four of them interim? The interim chief financial officer has been in place for 14 months. Not one of the interim appointees has been before the police and crime panel. Does this not show a complete contempt for accountability?
Lord Sharpe of Epsom (Con)
My Lords, the noble Lord is completely right. Paragraph 7 of Schedule 1 to the Police Reform and Social Responsibility Act provides that any reference to the chief executive or chief finance officer of a PCC, in any legislation,
“includes a reference to a person acting as chief executive, or chief finance officer”.
In other words, there is no distinction, in our view, between acting or permanent appointments. My officials have spoken with the chair of the Leicestershire police and crime panel; it is the department’s understanding that representations have been made by the Leicestershire panel to the PCC insisting that formal notice of the interim CEO appointment be given to the panel as soon as possible, to enable the proper scrutiny to take place.
Lord Lexden (Con)
My Lords, a disgraced policeman, Mike Veale, has featured quite often in Oral Questions in your Lordships’ House. A few years ago he deliberately smeared the reputation of Sir Edward Heath. Asked recently why this notorious man’s gross misconduct hearing, announced in 2021, has been indefinitely postponed, the PCC for Cleveland said:
“It is complicated, it is interwoven with other things and there is an order of things that I cannot supercede.”
How can this impenetrable goobledegook possibly be reconciled with proper public accountability? When a member of the public asked the same question last August, he was told that a review was taking place. After two attempts to find out about the progress of the review, he was told just yesterday that “Once information about a hearing is published, we will notify you.” How can these curt, dismissive comments possibly be acceptable? Why has the Home Office done nothing to make this PCC properly accountable?
Lord Sharpe of Epsom (Con)
My Lords, I have to say—and it will not please my noble friend—that the misconduct hearing of Mike Veale, who is, as noted, the former chief constable of Cleveland, is a matter for the Cleveland police and crime commissioner, and the management of the hearing itself is the responsibility of the independent, legally qualified chair appointed to it. It would be inappropriate to comment further while those proceedings are ongoing. As to why this has lasted longer than the normal 100 days of an officer being provided with a notice, it can be extended when the legally qualified chair considers it is in the interest of justice to do so, and I believe that is the case here.
Lord Ponsonby of Shulbrede (Lab)
My Lords, on 21 December in response to an earlier question by the noble Lord, Lord Lexden, the noble Lord, Lord Sharpe, described the situation as very concerning. That was in respect of the issue which the noble Lord, Lord Lexden, has just reminded the House about. Since then in the press it has become evident that the Leicestershire PCC has paid out £56,000 in compensation after an ethics group claimed it had been dismissed unfairly, so does the Minister believe that recall legislation should be considered for PCCs?
Lord Sharpe of Epsom (Con)
My Lords, the potential benefits and disbenefits of a recall mechanism were considered by the two-part review that I referenced in my Answer. It was decided that that would be to create a whole new body of bureaucracy and unnecessarily expensive. Ultimately, the public have the right of the ballot box, if you will, to determine the outcome of the PCC.
Lord German (LD)
My Lords, given the concern there has been about the vetting of candidates for the police forces and the uneven procedure of granting face- to-face interview after assessment for candidates, does the Minister believe that there is now a need for a tighter role and concern for making sure that the best practice in the appointment of police officers is now part of this scheme which rests either with police and crime commissioners or the central Minister concerned?
Lord Sharpe of Epsom (Con)
As the noble Lord will be aware, after referencing a number of conversations that have been had in the House over the past few days, all of those things are happening with regard to vetting, police officer recruitment and so on.
Lord Cormack (Con)
My Lords, will my noble friend not accept that our noble friend Lord Lexden has made an extremely important point and made it very well indeed? The Minister in response really gives the impression of an incompetent and impotent Home Office. We really must have a proper inquiry into this man Veale, and he must be properly dealt with expeditiously.
Lord Sharpe of Epsom (Con)
I think I thank my noble friend for that. I am afraid I rather impotently have to go back to the comment I made earlier: it would be inappropriate to comment further while these proceedings are ongoing. However, of course I understand, and I accept that my noble friend Lord Lexden has made an extremely valid point and continues to do so.
Lord Mackenzie of Framwellgate (Non-Afl)
My Lords, as I recall, the original reason for setting up police and crime commissioners was to create more accountability, because the police and crime commissioner would be more visible in the community and very well-known. In fact, the opposite has been proved true because the turnout at votes shows apathy and ignorance. Then there is the question of the cost of setting up the offices of police and crime commissioners and their deputies and the salaries and everything else that goes with it. Can the Minister tell the House what this has added to the policing bill annually?
Lord Sharpe of Epsom (Con)
I am afraid I cannot answer that specific question, but I can and will say that the public profile of PCCs means they are scrutinised in a way that anonymous police authorities were not. I think the fact that we have this conversation on a relatively regular basis is proof of that. Ultimately, PCCs are directly elected by the communities they serve, and the public will have their say in due course. The noble Lord raised a point on turnout. In 2021, the turnout figure was 33.9%, a 6.5% increase from 2016 and a significant increase on 2012.
Lord Hayward (Con)
My Lords, on 21 December, in answer to the noble Lord, Lord Ponsonby, my noble friend was willing to describe the current circumstances as “disturbing”—this was previously indicated. We have now seen a further month and four days pass, so could my noble friend please indicate when “disturbing” becomes “unacceptable”?
Lord Sharpe of Epsom (Con)
My Lords, they are disturbing; they are concerning; they are all of those things. I cannot say they are unacceptable at the moment because, unfortunately, the responsibility for this particular misconduct hearing lies with the Cleveland police and crime commissioner.
Baroness Jones of Moulsecoomb (GP)
My Lords, the Minister was quite dismissive about police authorities, but I have some experience of them. They were in fact not anonymous; they were mostly councillors, who were elected directly by their constituents and known extremely well, and they actually did talk to people. PCCs do not; they are quite remote, and the Minister has also pointed out that they are held to account at the ballot box every four years. I can quote an example in Dorset where the PCC and the local MP have generated a lot of public dismay about their relationship, and yet the voters cannot do anything about it until next year, can they?
Lord Sharpe of Epsom (Con)
My Lords, I would have thought that councillors are also elected once every four years as a rule, so I am not sure what the difference is there. The fact is that police authorities were anonymous, notwithstanding the noble Baroness’s evident fame on the police authority where she was. I would also say that, through part 2 of the review, we are undertaking a fundamental assessment of the whole panel system, and there is a considerable degree of transparency that has been introduced into the way the police and crime commissioners communicate with their constituents.
Lord Grocott (Lab)
I make it eight questions that the Minister has fielded so far today, all of them pretty hostile to what he has had to say, including a number from his own side. These include those of two Members, the noble Lords, Lord Bach and Lord Lexden, who have persistently raised the issue that I will not repeat, which seems to have general support from the House. Can I give him some friendly advice? Unless he sorts out some of these questions from the noble Lords, Lord Lexden and Lord Bach, he is going to go on and on having to suffer this pain on a relentless basis.
Lord Sharpe of Epsom (Con)
I reassure the noble Lord that I actually enjoy it enormously, but I am going to have to go back to my earlier comment that it would be inappropriate to comment further while the proceedings are ongoing. The noble Lord knows that I will continue to say that until the proceedings are no longer ongoing.
PPE Expenditure
(1 year, 10 months ago)
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Lord Harris of Haringey
To ask His Majesty’s Government what is their latest estimate of expenditure incurred in purchasing faulty personal protective equipment (PPE) during the COVID-19 pandemic; how much had been recovered by 31 December 2022; and how much they forecast to recover by 31 December 2023.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord Markham) (Con)
The department’s Annual Report and Accounts 2020-21 confirm that 817 million items of PPE worth £673 million were not fit for any use. By December 2022, the department had reduced the number of contested PPE contracts from 176 to 60, with an associated recovery of value for the taxpayer of around £1 billion. Given commercial sensitivities, we cannot comment on our forecast for further recovery.
Lord Harris of Haringey (Lab)
My Lords, I am grateful to the Minister for that reply, but when I look at the National Audit Office report it produces some slightly different figures from those that he has given. It says that his department had identified 3.6 billion PPE items that were not suitable for use, at a cost of £2.9 billion. The point I want the Minister to comment on is that 53% of those suppliers who came through the VIP route provided materials which were not fit for use. Does that raise any questions about the procurement processes operated during the pandemic?
Lord Markham (Con)
I thank the noble Lord. Given the recent press, I want to start by setting out the position of Cignpost, the private sector Covid testing company in which, as many noble Lords will be aware, I own a stake. To be clear, Cignpost did not bid for any government PPE contracts and has only private sector clients. None the less, upon taking up the role as an unpaid Minister of Health, I resigned my directorships, made an undertaking to sell my stake, and in conjunction with the Permanent Secretary, ensured that I was not engaged in any areas where there could be perceived to be a conflict—I just wanted to make that clear.
Turning to the question, I was giving the most up-to-date figures. The £1 billion reflects the money that we have continued to recover. Right now, the only amount that has been written off is the £600-odd million that I have mentioned, and we are continuing to pursue the other amounts. When we close the accounts, we will have an update on where that will go. On the VIP lane, I think we accept that, given our time again, we would conduct that in a different way. I will check but I do not recognise those figures as to the level of faults.
Lord Allan of Hallam (LD)
My Lords, as well as the financial cost of failures in the PPE procurement process, does the Minister agree that it is important to remember the human cost paid by care workers who became ill when looking after vulnerable and elderly people without adequate PPE? Does he understand how frustrated care workers must now feel to see this level of wastage when their services are crying out for more investment? We could buy a lot of care packages for “£600-odd million”.
Lord Markham (Con)
In the circumstances at the time, I think we were all worried that we were going to run out of PPE. If the noble Lord remembers, it was the Wild West out there in terms of trying to purchase it, with planes gazumped literally on the runway and flying to other countries. That is why we stepped in. We bought to a worst-case projection, because we knew we could not afford for PPE to run out in our social care homes or our hospitals. We ended up buying 20% too much as a result, and that is what we are dealing with now. However, only 3% of everything that we bought ended up being faulty, which I think people will agree was a pretty good result.
Lord Forsyth of Drumlean (Con)
My Lords, will the Minister indicate how much we are paying for storage of PPE? Are the press reports that we paying for the storage of PPE on a substantial scale in China correct?
Lord Markham (Con)
Right now, less than 1% of stock is held in China—to answer that question directly. In terms of cost, we are currently paying about £700,000 per day, which is why we are writing off the stock and effectively disposing of it. We have tried to donate as much of it as possible to people who want it, but we have to bite the bullet on the rest and say, “You know what? It’s no longer required so we are disposing of it as rapidly as possible.” We are bringing down those costs; we will be saving £200 million a year through that rapid disposal.
Baroness Finlay of Llandaff (CB)
How many health and social care staff are now off long-term sick with long Covid? What correlation has there been between long Covid and their perception that they did not have adequate PPE for the job to be done?
Lord Markham (Con)
I will write to the noble Baroness with the statistics. I can be clear that the endeavours undertaken to buy the PPE were to make sure that we did not run out. Again, there is quite a bit of hindsight going on in saying, “Ah, we bought too much of it”, when at the time everyone was scrambling to say, “You need to buy more.” That was the result of the situation, and to try to apply hindsight now is quite wrong. They did a pretty good job regarding the amount that they bought; they got 97% of it right, which I think we would agree is a pretty good result.
Lord Whitty (Lab)
My Lords, the reference to hindsight is misplaced. The Minister accurately described the shambles and panic that happened at the beginning of the pandemic, but there had been several reports in the 10 years before it that indicated that one measure the Government could take for any pandemic was to have standby contracts whereby there were arrangements with companies to provide PPE and laboratory facilities. That was recommended by, among others, your Lordships’ own Science and Technology Committee. Do such contracts now exist so that, were another virus to hit us, we should not go through the same shambles and corruption that we did on that occasion?
Lord Markham (Con)
Absolutely. As ever, we want to learn the lessons. That is why we have set up the Covid inquiry. Yes, supply arrangements are in place. At the same time, as per the answer to the previous question, holding high levels of stock does not make sense. It is cheaper in this case to dispose of it while making sure that the supply lines are in place so that we can rapidly respond to any future event.
Baroness Walmsley (LD)
My Lords, I understand from the Minister that it is the department that paid the cost of this useless material, and for its storage. How many doctors, nurses and ambulance staff could be given a decent pay rise if that money had been given to the NHS?
Lord Markham (Con)
Again, I would take issue with the words “useless material”. It was bought based on a projection of how the pandemic could progress and what would be required. The fact that it did not progress that far was thanks a lot to the work we did in being the quickest country to vaccinate in the world. So, we did not need that level of PPE; that was a good thing. We bought for a worst-case scenario and, thank goodness, we did not require it because of the action we took to get on top of it all. Now, we are dealing with the surpluses bought for that worst-case scenario and quickly disposing of them.
Baroness McIntosh of Pickering (Con)
My Lords, can my noble friend tell us the amount of this stuff in UK warehouses, and how much that costs daily?
Lord Markham (Con)
As I mentioned before, the daily cost is roughly £700,000.
Baroness Merron (Lab)
My Lords, the National Audit Office found that during the pandemic one in 10 suppliers processed through the VIP lane were awarded contracts. This compared to less than one in 100 suppliers going through the ordinary lane. In view of this, could the Minister share with the House what particular qualities were required of suppliers to merit VIP status? Following up on his answer to my noble friend Lord Harris, in the event of a future emergency, was the Minister ruling out having a VIP lane?
Lord Markham (Con)
I think we all agree that, at the time, some mechanism was needed to sift the thousands upon thousands of offers of goodwill to help with PPE. A decision was made to take recommendations —the so-called VIP lane—and I think we all accept now that was not the right decision. Going forward, a different sifting mechanism would be set up in place of that. Now, of course, we have supply chains set up to do this, so we hope that occasion will not arise in future.
Lord Lexden (Con)
My Lords, my noble friend was right, was he not, to remind us of the context in which those decisions were taken three years ago? There was an overwhelming sense of crisis, to which the Government had to respond with extreme rapidity.
Lord Markham (Con)
Absolutely. I remember well, as I am sure do others, watching the news about planes being diverted to other countries and it being asked how come they were not coming to the UK and what the department was doing to get on top of it. I am sure there was criticism from this House—it was before my time—asking what we were doing as a Government to get a grip of it. Well, we did get a grip of it; we did buy the PPE and it did not run out. Yes, we ended up buying too much of it because, thankfully, the pandemic did not turn out to be as bad as we thought it would. I think we did a sensible thing at the time, and now we are going after all those people who did not keep to their supply agreements, and we are recovering the funds. By and large, with the benefit of hindsight, I think we did a fairly decent job—not perfect but pretty good.
Lord Patel (CB)
How long will we continue paying £700,000 a day to the Chinese?
Lord Markham (Con)
As I said, less than 1% of the stock is being held by the Chinese. Most of the money being spent on storage costs is in the UK. Notwithstanding that, we clearly want to get rid of it as quickly as possible. As soon as I came in, I said, “Let’s bite the bullet, write it off, get on with it and dispose of it.” That is absolutely what we are doing. We are accelerating that to the maximum extent. Those accelerations have already saved £200 million this year.
Schools: Transgender Guidance
(1 year, 10 months ago)
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Lord Farmer
To ask His Majesty’s Government when they intend to publish their official transgender guidance for schools.
The Parliamentary Under-Secretary of State, Department for Education (Baroness Barran) (Con)
My Lords, we recognise that issues relating to sex and gender can be complex and sensitive for schools to navigate. That is why we are developing guidance to support schools in relation to transgender pupils. It is important that we are able to consider a wide range of views to get this guidance right, so we have committed to holding a public consultation on the draft guidance prior to publication.
Lord Farmer (Con)
My Lords, I thank my noble friend for that Answer, but schools need this guidance now. There is much confusion in schools, children are suffering, and teachers and headteachers are struggling. Also, the experience of NHS gender dysphoria services points towards future class actions, brought by former pupils. Some of those who want to detransition fully will be unable to do so. Will the Minister assure this House, and headteachers and their staff, that this guidance will be definitive enough to protect schools legally?
Baroness Barran (Con)
The guidance to support schools in relation to transgender pupils will set out schools’ legal duties and aim to provide clear information to support their consideration of how to respond to transgender issues. However, the guidance will not create new laws or be able to pre-empt the decision of a court on any specific case that might be brought.
Lord Cashman (Lab)
My Lords, discrimination is on the rise, and I welcome this Question because it is clear that we have to do something. A YouGov poll commissioned by Gallup and published today indicates that one in five LGBT people has been coerced or face conversion out of their sexual orientation and gender identity. From this, coupled with the staggering rise in hate crime against trans people, it is clear that we need action. No one should feel isolated at school, feel that they do not belong, or feel that their families or parents do not belong. Therefore, does the Minister acknowledge that we need inclusive relationship and sex education, especially for those misrepresented, stereotyped and marginalised groups? Will she ensure that any strategy is both evidence-based and based on the needs of pupils, including trans pupils, and their families?
Baroness Barran (Con)
The noble Lord obviously brings extensive experience and wisdom in these areas. As he is aware, the Government will publish a draft Bill to ban conversion practices, and we are committed to protecting all who are at risk of harm from them. On listening to the voices of all pupils, including trans pupils, I stress that the Government are committed to a very full and open consultation so that the guidance we produce reflects the views of all those affected.
Baroness Fox of Buckley (Non-Afl)
My Lords, puberty is a difficult time, especially for young women. For example, a dread of sexualised stereotypes can lead to anxiety about the body, sometimes expressed as dressing as a tomboy and sometimes pathologised as anorexia. Therefore, can the Minister ensure that schools do not automatically affirm the fashionable gender dysphoria as a catch-all solution, which is particularly difficult for young lesbians? Can she assure teachers who do not endorse social transitioning associated with gender ideology that their employment and reputation will be protected from false allegations of transphobic bigotry?
Baroness Barran (Con)
The noble Baroness raises important points, but she paints a picture that I do not fully recognise. The vast majority of schools realise that these are incredibly sensitive issues for staff, pupils and pupils’ parents, and do their absolute utmost to keep that level of trust with all in their care and for whom they are responsible.
Baroness Burt of Solihull (LD)
My Lords, as the Minister says, this is clearly a sensitive and complex issue, and schools are clamouring to know what to do. All kinds of stories abound about “woke policies” and “political correctness gone mad”, but the Cass review said that “doing nothing” for a child in distress is not a “neutral act”. Pending guidelines arriving, will the Minister agree that all school policies should be as sensitive and inclusive as possible?
Baroness Barran (Con)
We absolutely want our policies to be sensitive, and we need them to be practical, clear and trusted. The noble Baroness quoted one element of Dr Cass’s report, but I did not hear her also say—forgive me if I missed it—that any decisions about social transition are not neutral either.
Baroness Meyer (Con)
My Lords, is not imposing the use of preferred pronouns on teachers and pupils an attack on freedom of speech?
Baroness Barran (Con)
As I say, I do not think it is helpful to generalise and talk about imposition of pronouns. We will address these issues in our guidance, and will draw on the widest range of views to inform it.
Baroness Chapman of Darlington (Lab)
My Lords, I think most people agree that guidance is needed for schools, and they will welcome the Minister’s comments that this must be done with sensitivity and respect to all pupils, including, of course, trans pupils. But does she acknowledge that the lack of certainty over the timing of this is furthering anxiety and concern and that, notwithstanding what she has correctly said about consultation, the sooner we can get this guidance published and out to schools the better?
Baroness Barran (Con)
I agree, and I hope I did not give a sense of foot-dragging on the part of the department. What I wanted to share with the House was a sense of how important we see this guidance being and how seriously we are taking it.
Baroness Foster of Oxton (Con)
My Lords, there is evidence that children as young as seven are being asked whether they are male, female, bisexual and trans in schools. Parents appear to have no say in these matters. Does my noble friend agree that this cannot continue? This is now, in my view, bordering on child abuse. Will she look into this matter with the utmost urgency and report back to this House as soon as possible?
Baroness Barran (Con)
If my noble friend or any Member of this House has specific examples, it would be really helpful for them to share these with the department so that we are able to respond. Certainly, if one looks at the data on, for example, children who have been referred to the NHS GIDS clinic, it shows that there are very, very few children as young as seven. I appreciate there are a number of other issues involved, but the more we can have practical examples, the more we are able to respond effectively.
Baroness Falkner of Margravine (CB)
My Lords, I need to declare an interest as chairwoman of the Equality and Human Rights Commission. I completely endorse the department’s intention to consult widely on this; it is important that it does so. The Minister will also be aware that this matter has been tasked to her department since 2021, and parents, who are incredibly anxious, as well as children affected, really need her department to come to a speedy resolution. It cannot be right to let it stay out there in the ether, year after year.
Baroness Barran (Con)
By my calculations, it has been only a year and a bit since 2021. More seriously, I say that one of the important elements in our considerations is the work that Dr Cass is doing in her review. Her interim report did not touch on the implications of these issues in relation to education, but we want to draw on important resources such as her work.
Lord Sandhurst (Con)
My Lords, on 5 July last year, the Minister wrote to me saying:
“We are in absolute agreement over the principle that parents should know what their children are being taught, especially in relation to sensitive topics”.
That is an important matter and, in subsequent correspondence and meetings, I was told that a letter would be sent to all schools instructing them to show parents who asked for it the material from which their children were being taught, and not to assert commercial confidentiality or copyright issues. To date—unless it has happened today—no such letter has been written. When will it be sent?
Baroness Barran (Con)
I recognise my noble friend’s concerns on this point. The department remains absolutely committed to sending the letter. He will appreciate that, with various ministerial changes, we have to get sign-off from the current ministerial team. There is no block to the letter going, and it will be sent shortly.
Baroness Hoey (Non-Afl)
Can the Minister tell us who exactly is being consulted?
Baroness Barran (Con)
This will be an open, public consultation in the normal way.
Russia (Sanctions) (EU Exit) (Amendment) (No. 17) Regulations 2022
(1 year, 10 months ago)
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Lord Ahmad of Wimbledon
That the Regulations laid before the House on 15 December 2022 be approved.
Relevant document: 25th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 23 January.
Local Government (Structural Changes) (Supplementary Provision and Amendment) Order 2023
(1 year, 10 months ago)
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Baroness Scott of Bybrook
That the draft Order laid before the House on 12 December 2022 be approved. Considered in Grand Committee on 23 January.
Environmental Targets (Residual Waste) (England) Regulations 2022
(1 year, 10 months ago)
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Lord Benyon
That the draft Regulations laid before the House on 19 and 20 December 2022 be approved.
Relevant document: 25th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instruments). Considered in Grand Committee on 24 January.
Ecology Bill [HL]
Wednesday 25th January 2023
(1 year, 10 months ago)
Lords ChamberRead Full debate Ecology Bill [HL] 2022-23 View all Ecology Bill [HL] 2022-23 Debates Read Hansard Text Amendment Paper: HL Bill 13-I Marshalled list for Committee - (16 Nov 2022)
Genetic Technology (Precision Breeding) Bill
Wednesday 25th January 2023
(1 year, 10 months ago)
Lords ChamberRead Full debate Genetic Technology (Precision Breeding) Act 2023 View all Genetic Technology (Precision Breeding) Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 83-I Marshalled list for Report - (23 Jan 2023)
17:22 - Division on Amendment 11 - Ayes: 192 / Noes: 206 - Amendment 11 disagreed.
18:14 - Division on Amendment 21 - Ayes: 173 / Noes: 193 - Amendment 21 disagreed.
19:20 - Division on Amendment 22 - Ayes: 161 / Noes: 176 - Amendment 22 disagreed.
Member's explanatory statement
This amendment is intended to remove animals from the scope of the Bill.
Baroness Bennett of Manor Castle (GP)
My Lords, in moving Amendment 1, I will speak also to Amendment 2 in my name and briefly comment on the other amendments in this group.
Many Peers will no doubt have received overnight the joint briefing on the Bill from Friends of the Earth England, Wales and Northern Ireland; the Landworkers’ Alliance; the Consortium for Labelling for the Environment, Animal Welfare, and Regenerative Farming —known as CLEAR; the Soil Association; GM Freeze; Organic Farmers and Growers; and the Organic Research Centre. The tone of that briefing reflects what I hear from academics and campaigners: they feel let down by your Lordships’ House. In Committee, we had a detailed, informed and productive debate on the contents of this Bill and the science behind it, and I single out the noble Lord, Lord Winston, for his rich and expert contributions and many amendments. Then they saw the list of amendments for Report, before I had tabled the amendments in my name, and it seemed as though all that debate and all the issues raised in Committee—not satisfactorily answered by the Government—had dissolved into a puff of smoke, or perhaps a puff of gene-edited pollen.
Many Members of your Lordships’ House attended a very informative online briefing on Friday and heard from an academic expert, Dr Michael Antoniou from King’s College London, about his concerns, and I think most noble Lords were copied into the subsequent detailed written exchanges that continued that debate. With that in mind, since Hansard does not yet allow footnotes in speeches, I put on the record two articles that I urge every noble Lord and civil servant who will be involved in this Bill and subsequent regulations to read and ponder: in Nature, on 12 January 2022, “Mutation bias reflects natural selection in Arabidopsis thaliana”; and, in Elementa: Science of the Anthropocene in March 2021, “Differentiated impacts of human interventions on nature: Scaling the conversation on regulation of gene technologies”.
In short, the first is a substantial debunking of the claim that the mutations occurring in nature are random. This is a subject of continuing scientific debate and a claim relied on heavily by the supporters of the Bill, but it is increasingly evidently incorrect. The second makes the point that even if you were to concede that similar detrimental changes take place through natural means, they are not transmitted around the world at the scale of our globalised industrial agricultural systems, which can spread mistakes before they are recognised. Your Lordships will note the date of those articles. The understanding of genetics and particularly epigenetics is changing fast and the Bill is stuck in the understandings of the 20th century.
All the amendments I have tabled, with one exception, offer a final chance: different routes by which your Lordships’ House could take a pause and allow reflection for the science and the understanding to catch up. I think it is telling that in the last few weeks I have had three major groups of scientists from different fields reach out to me to ask for advice on how they can get through to the Government—in the words of one, “to get the Government to understand our issues”.
There is further evidence for that and I will comment further in the next group on government Amendments 3, 5, 6, 9 and 10. These are amendments to foundational elements of the Bill. This is not mere tidying up—crossing the “t”s and the odd dotting of the “i”s. It is reminiscent of the mess we encountered in Committee on the Procurement Bill and the now gutted and apparently defunct Schools Bill. But here we are at the final stage, the last detailed consideration of the Bill, and the Government are still trying to play around with what it is actually all about.
As I said, my amendments—apart from Amendment 12, which is somewhat different—focus on giving us the chance to go slower, to pause, to look at this somewhat differently. In Committee and in the other place, there was much debate about whether animals should be included in the Bill—to draw a parallel, something that, as far as I am aware, is not even being considered in the yet to be settled debate on gene editing in the European Union. It is an issue of great interest to farmers, growers and food manufacturers in the UK—those who are still managing to export there even after Brexit. Noble Lords will see from the briefings that organic growers and farmers in the UK are very concerned about the Bill.
Amendment 27 in the names of the noble Baronesses, Lady Hayman and Lady Parminter, and the noble Lord, Lord Winston—and its associated amendments that make up the rest of this group—sets out a very fast timetable of 2026 for farm animals and 2028 for other animals. The best I can say about it is that it is better than nothing. Should it be put to a vote I will support it, but that is still a very short timetable in view of the time it takes for science to get from the lab bench to the peer-reviewed publication, let alone the time it takes to then reach government understanding.
Amendment 1 excludes animals and Amendment 2 in my name would exclude animals and plants not used for food production. We are told again and again by the Government that they want this Bill for food security—they want to be able to produce food—even though it looks a lot like a Bill designed for and by the multinational-dominated biotech sector. But if it is for food, why allow companion animals—or, indeed, as the noble Lord, Lord Winston, said in Committee, and the Minister admitted, the gene editing of great apes, the species whose closeness to us has been highlighted only this week by research showing we have an embedded understanding of their gestural language?
So, what I have done with my Amendments 1 and 2 is offer the House a final chance to deliver the changes to the Bill that many were expecting. It is not my intention at this point to call a vote on either, unless the House should signal that it does want to reflect, pause and at least proceed more slowly on a major change in our relationship with the natural world—in the natural world—as human animals in an immensely complex system that has developed over hundreds of millions of years.
Baroness Hayman of Ullock (Lab)
My Lords, I shall introduce my amendments in this group, Amendments 11, 27, 29 and 30. I thank the noble Baroness, Lady Parminter, and my noble friend Lord Winston for their support. I declare my interest as laid out in the register as president of the Rare Breeds Survival Trust.
During our Committee debate, the Minister stated that the Government’s intention was to take a step-by-step approach, particularly around the introduction of animals, and that the Bill had the ability to do so. Our concern is that we have heard no clarification as to how this will actually work. By what means do the Government intend to introduce provisions related to distinct species, rather than the “relevant animals” as a class, under the Bill as currently drafted? Despite the Minister’s assurances, we still have no guarantee that this step-by-step approach will actually happen.
My Amendment 11 would set this expectation on the face of the Bill. Combined with my Amendments 27, 29 and 30, the effect would be to prevent a precision-bred animal being released until it had met the date condition provided by my new clause, which would follow Clause 47. This proposes that, for farm animals, the date is no earlier than 1 January 2026, and for other animals, no earlier than 1 January 2028. Also scientific evidence must support this extension: if it does not, the date could be put back further. I just say to the noble Baroness, Lady Bennett, that this is not an automatic introduction at that date; it is just putting the step-by-step approach on the face of the Bill.
The reason I have tabled these amendments is that, whether we agree that animals should be included or not, clear concerns were expressed during our Committee debates as to when they should be included, how quickly they should be included, and whether all animals should be included at the same time. We believe there is insufficient detail in the Bill regarding concrete provisions around timeframes: many of them are vague and noncommittal. Much of the preparation that we believe is necessary for a regulatory framework for animals has not yet been properly carried out.
When this issue was debated in Committee, the noble Lord the Minister said:
“All I can do is assure noble Lords that nothing will happen before we are in the right position to do it … The priority will be to try to do this for farmed animals first, and we want to make sure that we are operating a step-by-step approach. If we put it in the Bill, it may be too prescriptive, because we are in a fast-moving area of science, and it may constrain the ability of the scientific community to progress this if we do it in the wrong way.”—[Official Report, 12/12/22; col.503.]
We listened to the Minister’s words and, in order not to tie the Government’s hands or constrain the scientific community if there is clear evidence, for example, of a scientific breakthrough in tackling bird flu, the amendment allows for flexibility. An accelerated timetable should come in only if scientific opinion supported this. So we have not set these dates in stone in either direction.
I hope the Minister can see that we are taking a constructive approach to trying to put step-by-step on the face of the Bill. However, if he is not prepared to accept our amendments, I intend to seek the opinion of the House.
Lord Krebs (CB)
I thank the noble Baroness, Lady Parminter, for her courtesy in giving way. I will make only two brief comments. The first addresses the point that the noble Baroness, Lady Bennett of Manor Castle, raised, particularly the reference to the workshop that I helped to organise last Friday, where we had a number of experts giving us their take on the science. It is very often—in fact, usually—the case that scientists do not absolutely agree on everything; that is just the way that science is. When you go as a scientist to a conference, you do not expect everybody to say, “Fantastic, your research is absolutely superb”. People criticise it and challenge you and say, “Why are you doing that in this way and not some other way?” But there is sometimes a centre of gravity of opinion. Science goes through different phases. There may be no agreed position and gradually over time it is possible that a position consolidates in a particular way.
I think it is fair to say that Dr Michael Antoniou, to whom the noble Baroness, Lady Bennett, referred, is probably not in the centre of gravity of current opinion on the safety issues and other technical aspects of gene editing. So while I absolutely applaud the noble Baroness’s point which raised the diversity of opinions in the scientific community, I do not think your Lordships should be too swayed by a particular individual’s point of view, because I do not think it is the centre of gravity of scientific opinion.
My second, very brief point concerns timescales and is related to the amendment in the name of the noble Baroness, Lady Hayman of Ullock. One can see this in two ways, as her introduction to her amendments implied. You could see it as putting the brakes on—do not rush too quickly before you are sure—as the noble Baroness, Lady Bennett, would wish us to do. On the other hand, towards the end of her speech, the noble Baroness, Lady Hayman, said, “We don’t want to hold things back”. On the one hand we do not want to rush, and on the other hand we do not want to have the brakes applied too sharply.
I am trying to anchor that in a bit of reality. As far as I am aware—I was told this at the meeting last Friday by Professor Bruce Whitelaw, director of the Roslin Institute in Edinburgh, which is the UK’s leading centre for this sort of technology in animals—in the US, the Food and Drug Administration is already reviewing a licence application for gene-edited pigs. The animal genetics company, Genus, in collaboration with the University of Missouri, has developed a pig that is totally resistant to the virus that causes porcine reproductive and respiratory syndrome—PRRS for short. So the question in assessing the amendment proposed by the noble Baroness, Lady Hayman of Ullock, is, would that amendment hold up the commercialisation of this pig, if the FDA and the relevant bodies in the UK approved it?
Given that it would improve pig welfare, because PRRS is not a pleasant disease, and save the pig industry a very large amount of money—an estimated $2.5 billion a year in Europe and the US alone—do we want accidentally to place a barrier on that kind of development through timescale limits? I do not land on one side or the other; I just think it is useful to have a real-life example of what is going on. My question to the noble Baroness, Lady Hayman of Ullock, is this: if this PRRS-resistant pig came to market before 2026, would that count as an example of where the 2026 hurdle should be removed, because it is ready to go, or would she want to keep it in place? The question on the other side is whether it will realistically go from FDA approval to commercialisation in about three years. I am not trying to land on one side or the other, just to anchor this in a specific example which may help us think through our response to the proposed amendments.
Baroness Hayman of Ullock (Lab)
Just to come back on that, proposed new subsection (4) in my amendment says:
“The Secretary of State may, by regulations, amend the dates listed in subsection (2)”—
the dates I read out—
“if the requirement under subsection (3)”,
which is the evidence condition the noble Lord is talking about,
“is met before the dates”.
There is flexibility in the amendment to bring those dates forward if that scientific evidence is there.
Baroness McIntosh of Pickering (Con)
My Lords, I will intervene briefly on a point of information. I do not think the noble Lord, Lord Krebs, has helped his cause, although he is very knowledgeable in this area and I pay tribute to him in that regard, in mentioning that a particular academic is not deemed to be at the centre of gravity on these issues. Who are we to judge? This is a fast-moving and complicated field. We are leaving what has been a highly regulated area, where our farm products have moved very freely between here and the European Union; if we go down this path of very light regulation in the Bill, how do we know that the EU will accept our food products? I shall listen very carefully to my noble friend’s response, in particular to the amendments from the Opposition Front Bench.
I feel that there is an uneasiness and lack of understanding among the public about this, which I share. I am in awe of the Roslin Institute in Edinburgh; it is my alma mater, although I studied law rather than science or veterinary science. I realise that cloning is different, but the very fact that we do not seem to be going down that path, which was first brought up with Dolly the sheep, raises issues. I am very uneasy about moving to light-touch regulation when the science is not at one on this issue.
Lord Krebs (CB)
If I could just interrupt the noble Baroness, I think it is wrong to bring up Dolly the sheep in this conversation, because this has nothing to do with cloning. It is a completely different technology.
While I am on my feet, I will respond to her point about how we know where the centre of gravity of scientific opinion is, who is to judge it and whether it will change. I appreciate her kind words about me; I am a scientist but I am no expert in genetics or gene editing. However, I know from my general experience of a lifetime as a scientific researcher that, when there is a centre of gravity of opinion, there are always outliers. Sometimes those outliers turn out to be right and there are transformations, but I have seen no evidence at this stage that the outliers are right and the centre of gravity is about to shift. That is all I want to say.
Baroness McIntosh of Pickering (Con)
I have nearly finished my remarks. I have some sympathy with the amendments from the Front Bench opposite and would like to hear a very good reason why my noble friend may be minded not to support them.
Lord Winston (Lab)
My Lords, I remind my noble friend Lord Krebs—and I call him my friend because I have huge respect for him as a scientist, a Peer and a contributor to the House—that one of the great outliers was Dr Oppenheimer at the time of the Manhattan Project, who afterwards recognised what had been released as a result of that. We know very well that every single piece of technology that humans have ever produced has a downside we do not expect, and do not recognise and predict at the time. I would argue that this is one of those examples of a technology, which we have a duty, as a House in Parliament, to examine extremely carefully. I am not sure we have done that yet, and I am not sure how we can do it very well.
Baroness Parminter (LD)
My Lords, I hope the Minister will see that these amendments in the name of the noble Baroness, Lady Hayman of Ullock, are helpful because they give expression to what he said in Committee: that the Government will move forward on a step-by-step basis.
Why do I think that is important? First, again in Committee, the Minister made it absolutely clear that there were no institutions or research bodies—nobody—making a claim that they wanted to do any form of gene editing on anything other than farm animals, and that the only reason why animals beyond farm animals were in the Bill was, to quote the Minister, to “future-proof the Bill”. That is fine, but let us give expression to that future-proofing by ensuring that there is a degree of phasing.
Secondly—this is the point that the noble Baroness, Lady McIntosh, touched on—the consultation that the Government did on the statutory instrument in advance of this Bill indicated that there was no support from either consumers or retailers for the sale of animal products into the market. The public appetite is therefore limited. Those of you in this Chamber who are strong proponents of gene editing could very well argue that this phasing amendment would allow time to bring the public along with us.
The third argument, as I think the noble Baroness, Lady Bennett, mentioned, is that while Europe is looking at gene editing, it is not looking at animals at all, and it is a major trading partner. The Welsh have opposed this legislation and, if my timing is correct, the Scottish are voting at this very moment to turn it down as well. Therefore, key partners of ours are moving at a slower pace than ours and therefore there is a strong argument for moving at a measured pace.
However, the strongest argument, which I think will find favour with the noble Lord, Lord Krebs, and others, is for doing this based on the evidence of the science. Yes, we need a proportionate regulatory framework, but we must ensure that we are learning the lessons at every stage and monitoring the adverse effects. We will come to an amendment about this later. Then, going forward, animal welfare is guaranteed, and public benefits are maintained. An argument that allows this in a phased way is the right regulatory approach. If the noble Baroness takes this to a vote, she will have the support of these Benches.
Lord Trees (CB)
My Lords, I will make one or two points, particularly with respect to the comments made by the noble Lord, Lord Winston.
Regarding imprecision, conventional breeding is totally imprecise. Mankind has been breeding animals for thousands of years, just looking grossly at the phenotype, the way animals look and so on. Recent research on pigs has shown that if you breed two pigs —a boar and a sow—and do whole-genome on sequencing on all their progeny, there will be at least 100 mutations in the DNA of each of those progenies which are not represented in either parent. Every time we breed every animal now, on every farm, in every house, in every stable, we have a very imprecise system which is constantly throwing up genetic variation.
Applying this more precise breeding will be done under very controlled conditions in research establishments which will be thoroughly looking at the changes in the genomes of the animals long before they are released. Remember that when we market animals for breeding, we control the breeding. We have had assurances that mechanisms such as gene drive will not be included in this legislation. Every precision-bred animal that is genetically edited and put on the market will be bred by humans controlling that breeding.
Lastly, regarding ethics, there are counter-ethics, and the bus has already left the station on this. The noble Lord, Lord Krebs, mentioned the work on PRRS. There is some very encouraging work coming through which indicates that we may be able to create poultry with a degree of resistance to avian influenza. An Israeli research group has published information on being able to produce only female chicks from layer breeder flocks, thus preventing the unnecessary destruction of half the chicks born for laying purposes because they are male. When we have the potential to reduce the burden of disease in animals which are under our control, is it ethical not to take up that opportunity?
Lord Roborough (Con)
My Lords, I declare an interest as a dairy farmer and as an investor in a number of agriculture-related businesses around the world. I also declare negligible scientific credentials, unlike many noble Lords who have spoken.
However, I believe that it is essential that farmed animals are included in the Bill without undue delay, and I am very much against any amendment which delays or removes these animals. I have previously mentioned in this House that I could raise the output of my herd by 23% were all my cows blessed with the same genetics as my best cow. As noble Lords have already mentioned, there are disease benefits. Another example is the Roslin Institute’s engagement in gene editing of salmon, which improves resistance to infectious pancreatic necrosis viruses. These are meaningful benefits and I agree that they also improve animal welfare.
I would also add that I do not entirely recognise the world that was described by the noble Baroness, Lady Bennett, earlier. Agricultural productivity continues to increase globally, powered largely by ongoing plant and animal selective breeding. I believe that we have an obligation to unleash this technology of precision breeding to further increase production globally and support a growing global population.
Lord Winston (Lab)
Before the noble Lord sits down, I wonder if he might be kind enough to comment on this, seeing as he wanted to breed his best cow with all the other cows to reduce genetic diversity. Can he tell me what happens if a virus comes along to which that herd is susceptible? What do you do then? That is the problem.
Lord Roborough (Con)
As a non-scientist, I am not sure that I have a good answer to that. I would rely on the vets.
Lord Taylor of Holbeach (Con)
I think my noble friend is quite right: we will depend on increasing productivity and will be able to do that only by breeding. The whole point of the Bill is selective breeding; actually, it is precision breeding. The noble Lord may well have this nightmare that we are releasing something ghastly into the world; I do not believe that is true at all. It is done because of objectives in the breeding programme, which is precise. This is just the sort of thing that I do—and I declare my interest as a horticulturalist, as the House well knows—when we are breeding bulbs and daffodils. But this is more serious; this is not about domestic gardening but is about feeding the world and making it possible for the diversity that exists in gene stock to be harnessed for greater productivity.
Lord Winston (Lab)
I do not want to argue with the noble Lord about this too much but, actually, I have to say that there is good evidence. For example, with gene editing and the operation called i-GONAD where you can change embryos, most of those animals look perfectly normal and would pass without their gene being changed, but it turns out, of course, that they do not actually fulfil the requirements that you eventually have for the gene. That is one of the problems. That is a serious issue because you change other genes; not as a result of editing them, but by having those other genes edited. That is a big problem.
Lord Curry of Kirkharle (CB)
My Lords, I will briefly respond to the noble Lord, Lord Winston, on that point. It is a fair question, which we do need to respond to: what happens if we narrow the gene pool and expose animals to genetic risk? There has been evidence in the past that by narrowing the gene pool in dairy cows, we have had lameness problems; there has been an issue in other species. That is because we have not properly understood; indeed, random breeding, as the noble Lord, Lord Trees, has said, has resulted in that kind of action. Through better understanding of the genes, and through ensuring that we retain as wide a gene pool as possible from which to choose, but being selective and more careful and intelligent about the use of those genes, we should avoid that consequence.
The Minister of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)
My Lords, I start by reminding noble Lords of my entry in the register. This has been a fascinating opener for this afternoon’s proceedings. I know that this is an area of great importance to this House. I want to take account of the concerns raised in the debate and more clearly show our intention on this issue. Perhaps I should start by saying that, having been in, then out and now back in Defra over about a decade or more—and not being a scientist—I absolutely do take the point made by the noble Lord, Lord Krebs. I try never to use the words that the noble Lord, Lord Winston, attributed to me, which was that I was following the science. The science is imprecise, and what we have to do as policy- makers is take a view, listen to reputable people who advise us and organisations both here and around the world, and hope we get it right.
I shall say just two things at this stage of the proceedings on what my involvement in the Bill is not about. First, to tackle what the noble Baroness, Lady Bennett of Manor Castle, said—that this is somehow to satisfy the demands of the global agricultural corporations—no, it is not that. As far as I know, we have had no lobbying from any of those organisations, and this is about something else which I shall come to. Secondly, it is not about taking back control. For me, it is about looking at crops that I see frying in heatwaves that we never had when I was younger. It is about talking to farmers who have Belgian Blue cattle that can give birth to calves only by Caesarean section because they have been bred through traditional breeding methods in a way that makes natural calving impossible. It is about correcting some of those aberrations that have existed, as well pointed out by the noble Lord, Lord Trees. We can tie ourselves down with negativity about this, but the opportunities for this legislation, what it offers for animal welfare and for tackling issues such as climate change, are immense.
On the amendment to remove animals from the Bill completely, as was highlighted in Committee and in today’s debate, I say that it is vital that animals remain part of the Bill. We focused on farmed animals in debate because there is already research in the UK and abroad showing the exciting potential of precision breeding to help tackle some of the most pressing challenges to our food system, the environment and animal welfare. These challenges are significant, and while these technologies are not a silver bullet, they can work alongside other approaches to help us to improve animal health and welfare, enhance the sustainability of farming, and strengthen food security and resilience. It is vital that we create an enabling regulatory environment to translate the research that we have already highlighted in debates into practical, tangible benefits.
It is equally vital that these technologies are used responsibly. That is why we have included specific measures in the Bill to safeguard animal welfare. These go beyond what is required for traditional breeding and under current GMO requirements. We therefore do not see this legislation as a route to lowering welfare standards. Instead, we see it as a real opportunity to improve animal welfare and our food system.
The debate about outliers was fascinating. As a policymaker, I quite like challenging Defra scientists and those who advise us by pushing an outlying piece of science, something that may not even be peer-reviewed. It is one of my criticisms of the scientific lobby that, to get peer-reviewed papers, you have to be in the centre. In this case, I have looked at the broad range of views in the scientific community. I entirely endorse the sentiments put forward by the noble Lord, Lord Krebs. However, I understand concerns raised in the debate about the use of precision-breeding technologies in certain groups of animals, such as companion animals, and I recognise and agree with noble Lords on the importance of building confidence in the regulatory system.
There is a case for prioritising where there is the greatest research interest and where there are greatest potential benefits for animal welfare in our food system. That is why I want to make a commitment on the Floor of this House that we will adopt a phased approach to commencing the measures in the Bill in relation to animals. In other words, we will commence the measures in the Bill for only a select group of animal species in the first instance before commencing them in relation to other species. For example, in the first phase it is likely to be animals typically used in agriculture or aquaculture.
As indicated during Committee, we intend to use the commencement powers within the Bill to achieve that. These powers allow us to bring the provisions in the Bill into force in relation to a specific list of species or group of animals; for example, we can apply the provisions to cattle by stating the species name as Bos taurus—domestic cows. That means that until the relevant commencement regulations applicable to them are made, some species or groups of animals, such as companion animals, will not be affected by changes in the Bill. Likewise, GMO rules would continue to apply to them if they are produced using precision-breeding technology. Taking this approach allows us to limit the practical effect of the Bill for a time, while retaining the flexibility and durability needed to capture the potential benefits in other species in the future.
The Duke of Montrose (Con)
It is encouraging to think that the Minister would pick one genus of defined animal such as Bos taurus, but how long would it remain the only race being investigated? Moreover, they are only about half of the cattle beasts; there are also all the beasts descended from Bos indicus that occupy tropical areas.
Lord Benyon (Con)
I understand the point that my noble friend is making. I cited Bos taurus as perhaps the greatest priority in our minds, but I have also mentioned the benefits that would accrue if we could tackle conditions such as PRRS in pigs. He is right that there are other genuses across farm animal species that we must consider.
As I said, we also intend to produce guidance on the animal marketing authorisation process outlined in the Bill. That will include guidance on the evidence that regulations will require to be submitted alongside the animal welfare declaration by the breeder and, if necessary, more specific guidance relevant to particular species. Through that consideration of evidence and clear guidance, we will ensure that the regulatory system works effectively for different species of animals. I hope that the Government’s intended approach, our commitment to phase the introduction of animals under this legislation and the words that I have said from this Dispatch Box are clear and reassuring for noble Lords. I ask noble Lords to consider not pressing their amendments.
Baroness Bennett of Manor Castle (GP)
My Lords, I thank the Minister for his answer. I thank everyone who has participated in, as he said, this fascinating, detailed and high-quality debate.
I will start with the small bombshell that the Minister that just dropped. We appear to have had a new outline for the way in which the Bill is to be implemented presented to us at the final stage of Report on the Floor of the House—and, as the noble Duke, the Duke of Montrose, pointed out, with some very unclear elements where we suddenly appear to be covering half the cattle but not the other half. I question whether this is the way in which we should be making legislation.
I want to raise a point on something the Minister said which has not been raised before: why is aquaculture here? As the noble Lord, Lord Winston, said, the reality of land animals is that at least you can keep control of them and muster them fairly well. If we include aquaculture in the early stages, we have to realise that once you release something into the sea, as we know from farmed salmon, there will of course be escapes. We have not had a chance to debate all the things the Minister just said.
I want to go back to first principles. I return to the immensely powerful and important speech by the noble Lord, Lord Winston. As he said, he has 40 years’ experience of working with genes. He is your Lordships’ House’s absolute expert. The noble Lord said that we are embarking on a massive experiment with potential global repercussions, but we do not understand what we are doing. Before I go further, I want to put those words to the Minister. My understanding is that the precautionary principle is part of government policy. How does this Bill fit with that principle?
Lord Benyon (Con)
Let me address some of the points that the noble Baroness has made. The Government have always said that our priority for the rollout of this technology will be plants, then animals. I have added to that the reassurance, in frequent meetings that I have held with noble Lords before today, that we can phase that part of it as well. So I do not consider that to be a bombshell.
ACRE, the body that advises the Government on releases into the environment, has recommended that precision-bred organisms pose no greater risk than their traditionally-bred counterparts. Its advice is supported by the Royal Society, the Royal Society of Biology and the Roslin Institute. As for food and feed, consumer safety will be ensured through a case-by-case assessment by the FSA to ensure that products are safe for consumption.
So I hope the noble Baroness feels that his is not a bombshell, that clear processes are involved and that we have been, in every way, precautionary about how we do this. I put it to her that surely it is being precautionary to tackle some of the problems we face. The greatest challenge ever for humanity is to adapt to climate change and to produce food in a way that a modern society, a civilised society, wants—to make sure we address issues such as animal welfare. That is the opportunity of this Bill.
Baroness Bennett of Manor Castle (GP)
I thank the Minister for his answer. I will pick up that point about animal welfare, and indeed pick up the points made by the noble Lord, Lord Krebs, about pigs in the US that have been gene-engineered—or, rather, gene-disrupted— to make them resistant to porcine reproductive and respiratory syndrome.
This is a case of knocking out one gene in these pigs. We know that any given strain of a virus mutates at a rapid rate—we only need to look at Covid-19. Where we have pigs held in the kind of crowded, dangerous conditions in which we know pigs are held in the US, the virus will mutate very quickly. We have been through this many times. We had it with resistance to pesticides: we got rid of a single disease with one gene and then, of course, it goes. This is the way that biology works, as the noble Lord, Lord Winston, said. We hold those pigs in the kind of crowded, dangerous conditions where PRRS is a concern. Let us remember that this genetic change is only against that one disease. When swine flu arrives, there is nothing in those pigs that will protect them against it, or prevent it becoming a zoonosis and crossing the species barrier into humans. Yet we continue those farming practices.
I pick up the point from the Minister and the noble Lord, Lord Taylor of Holbeach, who said that this is the only way we will feed the world and the only way to get more production. That is what we were saying in the 20th century. The discussion on Friday that I referred is only a preprint, but it reflects the direction of the new biology. The noble Lord, Lord Krebs, said that there is a centre of gravity, but we also know there are tipping points. The new biology acknowledges that a wheat plant and every other complex organism is a holobiont; it operates as a complex of what we think of as the plant, bacteria and fungi that work together. The preprint showed that when a wheat crop is dealing with drought, the epigenetic changes—the kind of changes that the noble Lord, Lord Winston, was talking about, where the plant adapts to circumstances and has its genes expressed in different ways—were happening overwhelmingly in the bacteria and fungi. It is not the genetics of the wheat plant at all. I do not accept that this is the way to feed the world, without tackling the issues of poverty, inequality, food waste and feeding perfectly good food to animals. We need good management of soils and crop diversity—that is how we feed the world.
I feel a sense of despair at this point; I have no alternative but to withdraw my amendment with great reluctance. I really hope that your Lordships’ House has listened, particularly to the speech by the noble Lord, Lord Winston, and that the Government listen to this as we go forward from here.
Lord Benyon
Member’s explanatory statement
This amendment would limit the test in Clause 1(2)(c) to features of a precision bred organism’s genome that result from the application of modern biotechnology and would require them to be capable of resulting just from traditional processes (whether or not in conjunction with selection techniques).
Lord Benyon (Con)
My Lords, I will begin by speaking to the amendments tabled by the noble Lord, Lord Krebs, whom I thank for his amendments and his ongoing support for the Bill. I will come on to the government amendments in due course.
The noble Lord’s amendment highlights some of the challenges in maximising the potential of plant and animal genomes using traditional breeding methods. The crucial issue is whether the types of genetic features under discussion could, in principle, occur in the genome of the organism by traditional processes. In other places in the Bill, where we intended to refer to outcomes that
“could reasonably be expected to result”
from a process, rather than outcomes that could in principle so result, we have expressly said so. This means that it is unnecessary to add further descriptions to the word “could” in Clause 1. Consequently, the existing wording—“could” have resulted from traditional breeding —already achieves the Government’s intended ambition, without the need for further descriptors in the definition. I believe that it achieves the outcome that the noble Lord wants it to.
Lord Krebs (CB)
My Lords, I thank the noble Lord, Lord Benyon, and his officials for the very productive conversations that we have had and thank the Government for tabling amendments that, as he just explained, meet the essential request of my Amendments 4 and 7 in this group. I do not think that there is further debate to be had about the purpose of my amendments, but I thought that I might spend a few minutes, if noble Lords do not mind, explaining what I was talking about with a couple of simple examples. Although he gave a very correct and detailed response, I could see the eyes of one or two of your Lordships beginning to glaze over. I will therefore try to give an illustration.
The logic of my Amendment 4 was that the Bill says —and the noble Lord, Lord Benyon, has just repeated—that a precision-bred organism could have been produced by traditional breeding. My amendment says that while this is true in principle, in practice it may be very difficult to achieve these changes by traditional breeding. The Government’s amendment, in slightly different words, acknowledges that point. I will illustrate why I tabled my amendment with two examples.
Noble Lords will know that cystic fibrosis is an incurable and often fatal disease caused by a single gene mutation. That gene is extremely bad for you, yet one in 25 of us carries that gene, which is extraordinary. After 10,000 generations or more of human evolution since Homo sapiens first emerged, why is that gene still around? If it is so disadvantageous—indeed, fatal—why has it not disappeared? The answer is very simple: traditional breeding—what we do—and natural selection over 10,000 generations has been unable to remove that gene because it is recessive. In other words, most of us who carry the gene—we do not know which ones of us do—show no manifestation of it. If two carriers have children then, statistically speaking, one-quarter of those children will manifest the disease but the others will not. That is the law of Mendelian genetics. Although, in theory, selection and traditional breeding could eliminate the cystic fibrosis gene, the fact is that it does not. But precision breeding could, if we applied it to that example.
My other illustration is on linkage. Genes that live together also travel together, which means that they are passed down through the generations as joined-up twins. One example might be hair colour and eye colour. In general, blond hair and blue eyes go together and brown hair and brown eyes go together, although not always, because those genes for hair colour and eye colour are linked together on the same chromosome but not incredibly closely linked. If they were absolute neighbours, it would be very hard, in the normal process of the reshuffling of chromosomes that occurs during traditional breeding, to separate them. Yet, with precision breeding, you could separate them at a stroke using molecular scissors.
That is what the amendment is about, and I believe that the Government’s amendment has addressed those points with slightly different wording from mine. When I asked Defra officials whether they agreed with the logic of my amendments, they said, “Yes, but our lawyers don’t like your wording.” I defer to the Defra lawyers and accept that they have come up with an alternative form of wording.
Briefly, I move on to my Amendment 7 which, as explained by the noble Lord, Lord Benyon, is about whether having any small fragments of exogenous DNA—probably bacterial DNA—left over after gene editing is a bad thing. The first thing that I need to say to noble Lords in case they are not aware of it is that there is nothing wrong with exogenous DNA. None of us would be alive today were it not for our exogenous DNA. In fact, no multicellular organism on the planet would be alive today were it not for their exogenous DNA. The reason is that, in every cell of our body, there are tiny little organelles called mitochondria, which started life as bacteria. They are not our own DNA; they got into multicellular organisms long before we appeared on the planet 1.5 billion years ago and have been accepted by the host—and, in fact, used by the host to generate energy. The energy that fuels your body and keeps you going is created, second by second in every cell of your body, by these little inclusions that are controlled by exogenous DNA.
Baroness Bennett of Manor Castle (GP)
My Lords, having spoken a great deal on the last group, I will be extremely brief now. What we have is the Government still trying to define what the Bill is about at this incredibly late stage. We have been through Committee, Report and the other stages in the other place and here, and here we are still trying to find the wording. Neither the science nor the law is stable enough for this to become an Act and we have just seen a very useful demonstration in this short debate of how this is very likely to be a field day for lawyers, so the lawyers in your Lordships’ House can get ready.
Lord Benyon (Con)
My Lords, I thank both noble Lords for their contributions to this debate. I particularly thank the noble Lord, Lord Krebs, for his continuing help in trying to get this right. I hope the eyes of not too many noble Lords glazed over. I had to get on the record, about what is undoubtedly a very technical piece of legislation, what we were seeking to do by the changes that we were putting in.
The noble Lord makes a very good point about “modern biotechnology” as a term. I am at great pains not to throw in new definitions that could one day come back to bite us, but “modern technology” is widely recognised to cover a specific set of technologies for regulatory purposes. In particular, it is used in the UN’s Cartagena Protocol on Biosafety. The definition of modern biotechnology can be updated—to be probably even more modern technology—subject to the affirmative procedure under powers in the Bill if required.
I hope that the government amendments, which aim to clarify which kinds of genetic features are permissible in a precision-bred organism and the techniques by which they may be introduced, will provide assurance to the noble Lord not to press his amendments. I hope that noble Lords are confident in accepting these government amendments.
Lord Benyon
(d) its genome does not contain any feature that results from the application of any artificial modification technique other than modern biotechnology.”Member’s explanatory statement
This amendment would introduce a new requirement to ensure that the genome of a precision bred organism could not contain features that result from artificial modification techniques that are not modern biotechnology within the meaning of the Bill.
Member’s explanatory statement
This amendment would omit Clause 1(6), which defines “natural transformation”. It is consequential on the Minister’s first amendment to Clause 1 which would remove Clause 1(2)(c)(ii).
Lord Benyon
“(7A) An “artificial modification technique” means any technique by which genes or other genetic material can be artificially modified within the meaning of Part 6 of the Environmental Protection Act 1990 (as it has effect from time to time).”Member’s explanatory statement
This amendment would define artificial modification techniques in line with Part 6 of the Environmental Protection Act 1990 (which deals with genetically modified organisms).
Member’s explanatory statement
This amendment is a technical amendment so that subsection (8) reflects the language of the definition of “artificially modified” in the Genetically Modified Organisms (Deliberate Release) Regulations 2002, which is expressed in relation to genes or other genetic material, rather than the organisms. It would not make a substantive change.
“(10) An organism to which subsection (11) applies does not fail to be precision bred merely because it does not meet the condition in subsection (2)(d).(11) This subsection applies to an organism which, for the purposes of Part 6 of the Environmental Protection Act 1990, is to be taken not to be a genetically modified organism by virtue of—(a) paragraph (3) of the regulation referred to in subsection (8)(a), or(b) regulations under subsection (4C) of section 106 of that Act.”Member’s explanatory statement
This amendment would ensure that an organism will not fail to be a precision bred organism by reason only of the new test introduced by the Minister’s second amendment to Clause 1 if it is to be taken not to be a genetically modified organism by virtue of the provisions referred to in subsection (11)(a) and (b).
Baroness Hayman of Ullock
Member’s explanatory statement
This amendment would prevent a precision bred animal from being released unless the date condition in a later Clause in the name of Baroness Hayman of Ullock has been met. Taken collectively, these amendments would ensure a phasing in of the animal provisions in the Bill.
Baroness Hayman of Ullock (Lab)
I thank the Minister for his response to my amendment and I am pleased that he reaffirmed the Government’s ambition to phase in different species. The problem is that it is not actually in the Bill, so there is no guarantee that it will happen. I would also like to come back to him on this: the amendment is not designed to restrict. If scientific evidence supports this application, it will not restrict it. I thought I had made that clear. Also, if the Minister believes that the introduction of animals is likely to be later than the date in my amendment, I really do not understand the reluctance to accept this and have it in the Bill. On that note, I would like to test the opinion of the House on my Amendment 11.
“(iv) the details of the gene editing event, and the record of the whole genome sequence of the qualifying organism, are recorded in a publicly available register established by regulations,”
Baroness Bennett of Manor Castle (GP)
My Lords, in moving Amendment 12, I will speak also to Amendment 13 in my name. This is an adaptation and development of the work done by the noble Lord, Lord Winston, in Committee—he is not currently in his place; I hope he will be back in a second—when he put forward the idea of a register. This is my attempt to write that register into the Bill, to establish full transparency and traceability around gene editing.
The drafting is my own, although I thank the Table Office for its help. I will not claim that this is the perfect way to set this in the legislation, but in this legislation it absolutely should be, for the sake of transparency and traceability. We are giving commercial companies the right to mess around with the basis of life on earth. Showing their working and allowing the knowledge to be available to others is a small price to pay.
The noble Lord, Lord Krebs, and I had a detailed debate in Committee about whether it is possible to identify gene-edited organisms; some aspects of that debate remain in dispute, but we heard on Friday’s call that, should the nature of the gene-editing event be recorded, as Amendment 12 calls for, there is absolutely no doubt that any gene-edited organism can be identified.
This amendment goes further in calling for the record of the whole-genome sequence of the qualifying organism to be recorded. For the House’s information, I think it is worth going a little further into that, and into an explanation of why the regulations should be covered by the affirmative procedure.
Whole-genome sequencing can accurately identify the full spectrum of unintended mutations at both off-target and on-target editing sites, including the inadvertent insertion of foreign DNA. Given what we heard from the Minister in the last group, I am not sure how we can be sure than an organism is legal if we do not have this. Multiple-reference genomes derived from the whole-genome sequencing of major crop plants are available already in the public domain. That has yielded important information about the unintended effects of gene editing on the genome. For example, in a study on gene-edited rice using CRISPR-Cas, whole-genome sequencing was used to investigate unintended mutations arising from several aspects of the gene-editing procedure. The procedure, which taken as a whole includes tissue culture and Agrobacterium-mediated cell transformation, resulted in several times more unintended mutations than were found in rice propagated through natural pollination. If you do not do the whole-genome sequencing, you simply cannot know that to be the case.
We are sometimes told that this is too complicated, difficult and expensive. We have been talking about how fast this field is moving, and one recent innovation is what is known as long-read DNA sequencing. Unlike many things in this area, its meaning is pretty clear-cut from its self-description. It provides a continuous sequence that reads up to 1.5 million DNA base units and would provide unequivocal understanding of the placement of long stretches of repeat sequences, which some of the older methods that break up the DNA strand do not do so easily. Several companies offer a long-read genome sequencing service, making this technology readily available.
I did not write this into the Bill, and it is another reason why I put in the affirmative procedure, but this register could also include requirements for molecular compositional profiling methods: gene expression-profiling transcriptomics, protein-profiling proteomics and small biochemical molecule-profiling metabolomics—let us call them “omics”. These are now used by thousands of research groups around the world to gain a more comprehensive and deeper insight, not just into the genome but into how an organism functions. It is crucial to understanding the health and disease implications of the genome to see how that genome plays out in the proteins in the cells.
A 2016 research paper published in the extremely prestigious journal Nature used a multi-omics approach to demonstrate that a glyphosate-tolerant GM maize was not substantially equivalent to its non-GM relative. The large-scale protein and metabolite alterations that were detected were unintended consequences of the GM transformation process, with potential downstream health consequences for the consumer in terms of the introduction of toxins and allergens.
I see that the noble Lord, Lord Winston, is here and I refer Members of your Lordships’ House to his speech in this area and our discussion in Committee. To know what is going on is scientifically and practically essential. That is why I have tabled these amendments. I do not intend to move to a vote, but this is a matter that the Government should commit to. It is interesting that in our discussion on Friday with all the experts one of them said to me, “Yes, there is a public register. At least that’s how it’s going to work”. I do not know whether the Minister can explain this, but my understanding is that there is nothing in the legislation that provides for a public register. If I am wrong, I am happy to be corrected. However, these people are proponents of the Bill and this procedure, and they believe that there will be a public register. If that is what the experts are trusting in and want to be able to use—it is a public resource—and if it is not already there, the Government certainly should introduce it. I beg to move.
Lord Krebs (CB)
I thank the noble Baroness, Lady Bennett, for introducing the amendment because it gives me a chance to say two things quickly. One, which she alluded to, is our discussion in Committee about detectability by analytical methods. I asked Wendy Harwood from the John Innes Centre to give me an exact form of words about that, which I shall repeat with her permission. It confirms, in a way, what the noble Baroness has just been saying. Wendy Harwood said:
“If you had details of the exact edit made, then you could detect”
the PBO by polymerase chain reaction,
“followed by sequencing of the PCR product. If you were just presented with a plant, and no audit trail and asked whether it was genome edited, you could not determine whether it was or not.”
One therefore needs an audit trail in order to be able to tell. She continued:
“If exactly the same change had been made by precision breeding as had been made by traditional breeding, and you tested by looking for that precise change, then you would not be able to tell which was which. Again an audit trail would be required. You might however have a case where both PB and traditional breeding had made changes to the same gene, giving the same trait, but these changes were not identical at the DNA level, in this case you could tell the difference.”
That emphasises that if one is serious about knowing which products on the shelves are produced by PB, there needs to be an audit trail.
On whether whole-genome sequencing is of value, one angle is that so much mutation in the genome is going on all the time that it is hard to know what one’s reference material would be. The Royal Society produced in its evidence to the Defra consultation a calculation that in a hectare of wheat there would be at least one mutation for every base pair in the wheat genome. There are 10 billion base pairs in a wheat genome. In a one-hectare field of wheat, there would be a mutation somewhere in every one of those base pairs. So the difficulty with using whole-genome sequencing is what one makes of the information one gets. There will be huge variation and one does not quite know what the value of the information is.
Baroness Bennett of Manor Castle (GP)
I think we have agreement that some parts of the genome are functionally relevant and have a particular functional significance. We perhaps have points of disagreement about how relatively protected some of those may be from natural mutations. There are lots of mutations that happen naturally in areas that may be beneficial to the plant but only in certain parts of the genome and with certain sorts of functional effects. The parts of the genome that are particularly crucial to the function of the organism are the structural, basic ones, where there are far fewer natural effects. If you read the complete list of the genome, you are going to look at certain bits to see which changes are significant, which ones may be deleterious and which ones are less significant. Does the noble Lord agree?
Lord Krebs (CB)
Obviously, I agree that the different parts of the genome serve different functions. As the noble Baroness said in Committee, when we were students, we learned about junk DNA. However, it is not junk DNA; it can play an important part in regulating the expression of other genes. I take the point.
Lord Winston (Lab)
I love the idea of the noble Lord’s field of wheat waving gently in the breeze and the sunlight, but does he not agree that certain genes in those wheat seeds are rather well conserved and, in fact, do not change? Indeed, certain genes are protected from mutation. Therefore, there is nothing to prevent us looking at analysis to see the frequency of certain mutations within the genome; perhaps we need to be doing that. The data there could be very useful in all sorts of ways.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, this group of amendments deals with technical scientific issues and moving whole or parts of clauses from the negative procedure to the affirmative. Your Lordships will know that I am not a scientist so I shall, I hope, avoid digging a hole for myself or getting caught in the crossfire.
Amendment 12, in the name of the noble Baroness, Lady Bennett of Manor Castle, would require the details of genome sequencing to be recorded in a publicly available register. If the processes outlined in this Bill are to be carried forward successfully, it will be necessary for farmers, producers and the public especially to have confidence in the process. Ensuring that there is transparency and visibility through a publicly available register can only help this process. The DPRRC was strongly in favour of such a register in its report of 2 December.
Amendment 13, also from the noble Baroness, Lady Bennett, seeks to make the whole regulation in Clause 3 affirmative. Currently, the Bill is silent on whether Clause 3 is affirmative or negative. I suspect that, as it currently stands, Clause 4(6) applies to the whole of the section headed “Release”.
I am grateful to the Minister for his amendments in this group. At Second Reading and in Committee, concerns were raised at the number of negative procedures in the Bill. The Minister has tabled government Amendments 14 and 15 to Clause 4, which would qualify the section on marketing and keep subsection (1)(b) as negative while the rest of this clause will be moved to the affirmative procedure. This is welcome and gives the opportunity for debate on the notification requirements if necessary. Perhaps the Minister can clarify in his response whether Clauses 3 and 4 are covered by his Amendments 14 and 15. If not, can he say what process is applied for Clause 3? I am sorry; I may have misunderstood what this is all about.
Amendment 16, to Clause 6(4), moves regulations on the precision bred confirmation from negative to affirmative. We welcome the Minister’s movement on this point. This is a sensible way forward and, again, gives the opportunity for further debate.
Government Amendments 24 and 25 are somewhat confusing. Amendment 24 indicates that the regulations under Clause 18(1) are to be affirmative, and Amendment 25 deletes “this section” and inserts “subsection (6)”. I think this means that Clause 18(1) is affirmative while the rest of the clause is negative, as Clause 18(7) has not been amended. I would be grateful for the Minister’s clarification. It is important for when we come to debate these things later to know whether it is affirmative or negative. Although these are technical amendments, they are very important and provide transparency in the Bill, which is to be welcomed.
Baroness Hayman of Ullock (Lab)
My Lords, the noble Baroness, Lady Bennett, has tabled two amendments. Amendment 12 concerns the publicly available register. Clearly, transparency and information for the public will be important if we are to carry people with us, so we need to look at how we develop registers and information to reassure people and to give them the information that they need to have confidence in the legislation.
In Committee, my noble friend Lord Winston and the noble Baroness, Lady Parminter, drew attention to the parallel piece of legislation, the Human Fertilisation and Embryology Act, in which there is a requirement for the surrender of ongoing records containing the information about the impacts, both the positive and the adverse outcomes, on individuals used under the terms of that Act. The noble Lord, Lord Krebs, read out an opinion which emphasised the importance of an audit trail, so there is a general feeling in this House that information and a public register are important.
Amendment 13 is also in the name of the noble Baroness, Lady Bennett. I thank the Delegated Powers and Regulatory Reform Committee for its report on the Bill, which was very helpful. I reassure the Minister, who knows that we support the Bill, that what concerns us is that so much is left to an unknown number of SIs over an unspecified timescale. If the regulations in Clause 3 are under the affirmative procedure, Parliament will rightly have a formal role in improving the finer details of the release and marketing notices, crucially ensuring that we have proper political consensus on this. As the noble Baroness, Lady Bakewell, said, the Government have moved a number of clauses from the negative to the affirmative procedure. I will not go into all the detail, as she covered everything that I was going to ask about on this, since some of it is not crystal clear. We know that the Government can see that there is merit in moving from the negative to affirmative. Can the Minister clarify why not this clause as well if that is not the case, as this is important?
Lord Benyon (Con)
My Lords, I thank the noble Baroness, Lady Bennett, for her Amendment 12, which would require details of the specific gene editing event and the whole-genome sequence of a qualifying precision-bred organism to be made publicly available for its release into the environment. The noble Baroness’s Amendment 13 to Clause 3 would require that regulations made under this clause to establish a public register containing this information are subject to the affirmative procedure.
It is not our intention to require breeders to include sequence data as part of their release or marketing notices. I have discussed this previously following an amendment tabled by the noble Lord, Lord Winston, in Committee. We have since had a very useful meeting with the noble Lord and our scientific advisors, ACRE, to explore why whole- genome sequencing information has limited value in most cases, and the noble Lord has not retabled his amendment on Report.
This type of information has limited value because there is a significant degree of genetic variation between individual plants and animals within a species, which is more or less the point that the noble Lord, Lord Krebs, was making. This amount of background noise means that the value in requiring whole-genome sequences is limited in terms of addressing regulatory questions; for example, questions about the precision-bred status of a plant or animal. Additionally, the release notice that researchers are required to submit to Defra will be in line with the requirements of the Genetically Modified Organisms (Deliberate Release) (Amendment) (England) Regulations 2022, which were agreed by the affirmative procedure.
Our intention is that information provided in release notices will be published on the precision breeding register and will include the relevant and necessary information about the precision-bred organism in it. We also intend to require developers to confirm that the organisms that they intend to release in research trials meet the criteria in the Bill. The technical details of this notice will be prescribed by regulations, prepared with input from the advisory committee appointed to advise the Secretary of State on the regulatory status of these organisms and, in accordance with the amendments to Clause 4 that I have tabled, our intention is that such regulations will be scrutinised using the affirmative procedure before they are made.
I hope that this reassures noble Lords and that the noble Baroness, Lady Bennett, is persuaded to withdraw this amendment and not move her additional amendment to Clause 3, which would specify the parliamentary procedure for the delegated power that her substantive amendment would insert.
I always pay particular attention to points raised on secondary legislation by the noble Baroness, Lady Bakewell. As a member of the Secondary Legislation Scrutiny Committee, she is very good at holding me to account on these. I did not quite understand her point about Clause 3 because there are no regulations in Clause 3 and therefore no requirement for it to be affirmative or negative.
We remain of the belief that the matters to be set out in the regulations under the powers in Clauses 4(3) and 6(2) are administrative in nature. However, the Government acknowledge that these provisions are of significant public interest. We have heard this previously in the House and the Delegated Powers and Regulatory Reform Committee has raised this as well. We have considered these matters closely and have decided to change the procedure from negative to affirmative for both powers. These changes will increase the scrutiny when these powers are used to prescribe the information which must be provided to the Secretary of State by a person who wishes to release or market a precision-bred organism. I hope that noble Lords feel that I was serious in Committee when I said that I had listened to them. I hope that they feel that this improves the Bill. Regulations under Clause 4(1)(b) would be administrative in nature, not of significant public interest, and will remain subject to the negative procedure. I hope that this reassures noble Lords.
Amendments 24 and 25 will increase the level of scrutiny when powers are used to prescribe information that must be included in the precision breeding register. The Government acknowledge that these provisions are of significant public interest. We accept noble Lords’ concerns about the level of scrutiny for such provisions. Therefore, we will change the parliamentary procedure from negative to affirmative for the power in Clause 18(1). Regulations under Clause 18(6) regarding the keeping of the register, which is an administrative matter and, again, not of significant public interest, will remain under the negative procedure.
Lord Winston (Lab)
My Lords, I thank the Minister for what he has just said, but can he answer this question about whole-genome sequencing?
When we first started genome sequencing, it was laborious, expensive, time-consuming, and so on. It is now a pretty rapid process and can be done without huge expense. Does the Minister not agree that one of the reasons for doing this is not just marketing—because of course there are different issues there, which is how we are addressing this—but the advantage of getting more knowledge about what we are doing? The advantage there would be seeing where things are moving within the organisms that we are trying to edit. That is important as a research tool because, ultimately, we are doing something that—admittedly—we do not fully understand, and this would greatly increase knowledge. Does he feel that this is a relevant point?
Lord Benyon (Con)
It is entirely a relevant point, and was much on our minds when we debated some months ago a research measure in secondary legislation to allow the development of plant precision editing but not for it to be taken forward to market. The noble Lord is absolutely right that this is fast-moving and that we therefore need to be clear about how we regulate: that we are regulating a research process and a process to take products to market. Ministers will have to be clear about the intention of the organisation taking that forward. I hope, through the changes that we made, that there will be greater parliamentary scrutiny, that people with real knowledge, particularly in this place, will be able to scrutinise that, and that the Secretary of State of the day will have the best available information about what is being taken forward and why—whether it is just for research. The point made by the noble Lord about the value of research of products that will never go to market, that it is just to understand a particular aspect of genomic sequencing, is crucial.
Baroness Bennett of Manor Castle (GP)
My Lords, I thank the Minister for his answer, and everyone who contributed to this debate. Once again, the noble Lord, Lord Winston, gave us the expert nailing of the issues. I thank particularly the noble Baronesses, Lady Bakewell of Hardington Mandeville and Lady Hayman of Ullock, for stressing the importance of transparency, both for scientific and public confidence reasons.
The Minister went over some of the same ground that the noble Lord, Lord Krebs, and I circulated back and forth on in terms of saying “Oh, there are lots of mutations” is not a reason not to do whole-genome sequencing. What we see are the mutations that are of greater importance in particular areas of the genome, et cetera, so the claim that “Oh, there are lots of mutations, so it doesn’t matter” does not scientifically stack up.
We are in a situation of regulations. The Minister said that the regulations will specify that the release notices contain “relevant and necessary” information. I think it is already clear that the detail of what “relevant and necessary” actually means is going to be crucial. We all know the problem with regulation and the way in which we are given it on a take it or leave it basis. Again, I feel great reluctance: I feel that we really should have whole-genome sequencing, and indeed broader omics testing. But I see no option at the present moment but to withdraw the amendment, with great reluctance.
Lord Benyon
Member's explanatory statement
This amendment is consequential on the Minister’s next amendment to Clause 4.
“(7) Regulations under subsection (3) are subject to the affirmative procedure.”Member's explanatory statement
This amendment would provide for regulations under Clause 4(3) to be subject to the affirmative procedure.
Lord Benyon
Member's explanatory statement
This amendment would provide for regulations under Clause 6(2) to be subject to the affirmative procedure.
Lord Benyon
“(9A) Regulations under subsection (5) are subject to the affirmative procedure.”Member's explanatory statement
This amendment would provide for regulations under Clause 11(5) to be subject to the affirmative procedure.
Lord Benyon (Con)
My Lords, I thank the noble Baroness, Lady Jones of Whitchurch, for her amendments, to which the noble Baroness, Lady Bakewell of Hardington Mandeville, and—in the case of the first of the amendments—the noble Lord, Lord Cameron of Dillington, have added their names.
The amendments require the animal welfare advisory body, when assessing precision-bred animal marketing authorisation applications, to also consider and report on the notifier’s history of compliance with relevant provisions of the Human Fertilisation and Embryology Act 1990, the Animal Welfare Act 2006 and other legislation it deems relevant. However, the purpose of the animal welfare declaration process is not to vet notifiers themselves, but to assess their applications for marketing authorisations. The role of the welfare advisory body is to use its scientific expertise to evaluate the notifier’s animal welfare declaration. It would not be an appropriate body to assess compliance history.
We expect notifiers, as with any other keepers of animals, to ensure they are in full compliance with all applicable animal welfare laws. The Animal Welfare Act, as mentioned in the noble Baroness’s amendment, will continue to apply to all vertebrate animals subject to precision breeding. Under the Act, it is already an offence either to cause any captive animal unnecessary suffering or to fail to provide for the welfare needs of the animal. Persons found to have committed certain serious offences under the Animal Welfare Act may be disqualified from keeping animals. Such persons would therefore be unable to keep animals that have been precision-bred.
Similarly, other animal welfare legislation provides for appropriate sanctions for non-compliance. For example, notifiers may also be licence holders for research under the Animals (Scientific Procedures) Act, known as ASPA. It is in the interest of such notifiers to ensure that any research involving animals carried out in the UK complies with the requirements of the ASPA licences relating to that research; these licences may be revoked or suspended if their conditions are not complied with.
Furthermore, the Bill provides powers under Clause 15 for regulations to enable the Secretary of State to suspend or revoke a precision-bred animal marketing authorisation if new information about the health or welfare of the animal or, crucially, its qualifying progeny comes to light, or if the notifier fails to comply with a legal requirement to report information about a relevant animal’s health and welfare under Clause 14. Regulations will describe the procedures to be followed when a marketing authorisation is suspended or revoked, and the consequences of such suspension or revocation.
Amendment 21 reflects ones put forward during previous stages, in this House and the other place. We intend to explore these matters further as we develop the technical details underpinning the animal welfare declaration process. The Government agree that safeguarding animal welfare is crucial, and I acknowledge the high level of interest in this topic. That is why, as I mentioned previously, we have commissioned an external research project to gather the evidence required to develop the health and welfare assessment that underpins the declaration process. This will enable us to set out, in regulations and guidance, the information that a notifier must provide to support their declaration that the health and welfare of a precision-bred vertebrate animal is not expected to be adversely affected.
Furthermore, Clause 13 already ensures that the Secretary of State will need to be satisfied with the animal welfare declaration before issuing a marketing authorisation. That is why we do not consider the amendment to be necessary. In addition, as I mentioned before, the power in Clause 25 allows us to set out in regulations what constitutes an adverse effect on health or welfare. This includes any parameters needed for assessing that and could include consideration of any known health and welfare issues in selectively bred animals.
Finally, the welfare declaration and the welfare advisory body’s assessment will be based on the principle that relevant precision-bred animals will need to be kept in conditions which satisfy existing requirements in the Animal Welfare Act 2006 and, where relevant, the Welfare of Farmed Animals (England) Regulations 2007. I fully understand the noble Baroness’s concerns. None the less, existing animal welfare legislation is in place and the Bill is intended to work alongside that to enable responsible innovation.
I will now address Amendments 17, 18 and 26 in my name. It is essential that the animal welfare protections under this Bill command strong public and stakeholder confidence. To that end, we have listened carefully to the points raised by the Opposition and stakeholders about the need for strong animal welfare protections. We understand that noble Lords feel that there should be more opportunity for parliamentary oversight of these vital elements of the legislation. Consequently, we are tabling these amendments so that regulations made under the powers in Clauses 11(5) and 22(3) will need to be debated and actively approved by both Houses of Parliament through the affirmative resolution procedure before they come into effect.
Amendment 17 relates to Clause 11(5). The amendment provides an increased opportunity for parliamentary scrutiny when powers are used to lay out the form and content of the animal welfare declaration and accompanying documents, and the information that must accompany the declaration.
Regulations under Clause 11(9) regarding provisions for an application for a precision-bred marketing authorisation to be made by a person other than the notifier are a technical and administrative matter and not of significant public interest. They will therefore remain subject to negative procedure.
Amendment 26 relates to Clause 22(3). This amendment will provide Parliament with an increased opportunity to scrutinise and debate the body which is to be designated as the animal welfare advisory body, while retaining the flexibility the Bill provides on how the advisory body can be established. We expect there to be strong public interest in the requirements set out in the animal welfare declarations, and we want to come to Parliament with a robust set of proposals informed by expert advice. Indeed, that is why we have already commissioned in Scotland’s Rural College to run an independent research project to set criteria for the animal welfare assessment and the evidence that will be required to accompany it.
The research will involve experts from the Animal Welfare Committee and a wide range of organisations with expertise in animal welfare, genetics and industry practice. This is a growing, innovative sector, and the regulatory system that oversees it is likely to need to evolve over time. Establishing the regulations in secondary legislation subject to the affirmative procedure will allow the Government to ensure that the regulatory system continues to achieve its goals in the long run, while maintaining proportionate parliamentary oversight of its design and future development. I hope noble Lords will be content to accept these amendments.
Baroness Jones of Whitchurch (Lab)
My Lords, I should first declare an interest through my involvement at Rothamsted, as in the register. I have tabled Amendments 19, 20 and 21 in this group. They all focus on the welfare advisory body in protecting animal welfare. I am grateful to the noble Baroness, Lady Bakewell, and the noble Lord, Lord Cameron, for their support.
Amendments 19 and 20 would require the welfare advisory body to look beyond the information provided by applicants to ensure that they have a consistent record of meeting animal welfare standards, as set out in previous legislation. Amendment 21 would require the welfare advisory body or the Secretary of State to consider wider health and welfare issues before granting a marketing authorisation. These factors, set out in the new clause, include the direct and indirect effects on the health of the animal or its offspring, whether there might be pain or suffering arising from increased yields or faster growth, and whether the precision-bred traits may result in the animal being kept in worse conditions. These amendments reflect the widespread concern raised in Committee about the consequences for animal welfare of extending precision-breeding techniques from plants to animals, and they also express the concerns of many animal welfare organisations, including the RSPCA and Compassion in World Farming, as well as the report from the Nuffield Council on Bioethics.
As we discussed before, British farming and traditional breeding techniques have not always had a great record on considering animal welfare. Without going back over all the arguments raised in Committee, I will say that there remains a fundamental concern that the genetic editing of animals will be used for the wrong purpose. Once we understand that there could be benefits from improved disease resistance in animals, we need better guarantees that this will not result in animals being kept in more crowded, stressful conditions, which in turn could result in the spread of new and emerging pathogens. Similarly, we need better guarantees that precision-breeding techniques will not be used to speed up selective breeding for fast growth, high yields and large litters, when they have historically caused a great deal of suffering to farm animals, despite the animal welfare legislation already in place.
All these concerns are raised against the backdrop that so much of the detail in this Bill is left to secondary legislation, so we do not know how its provisions will work in practice. I hope the Minister will understand why we are trying to spell out in more detail the specific animal welfare protections in this Bill. I shall make a further point: this is specifically about animal welfare. It is not a criticism of the whole Bill. It is about the specifics and our widespread concern about wanting to get animal welfare protections right.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I thank the Minister for tabling Amendments 17, 18 and 26. The Government have responded well to the concerns expressed in Committee about the number of negative procedures on some critical issues. Amendments 17 and 18 relate to Clause 11, “Application for precision bred animal marketing authorisation”, which is a key element of the Bill. Regulations under subsection (5) are moved to affirmative, and only subsection (9), which deals with regulations for precision-bred animal marketing authorisations for a relevant animal, are negative and reserved to the Secretary of State. While it would have been preferable for all that clause to be affirmative, we are pleased with this movement, as the change allows more debate on these issues in future.
I turn now to Amendments 19 and 20 in the name of the noble Baroness, Lady Jones of Whitchurch, to which I have added my name—she introduced them fully, as always. The Government have been trying for a long time to introduce gene editing of plants and animals. Changing the name of this process to “precision engineering” has somewhat helped their case. At the heart of previous and current objections which have been raised over time against precision engineering is animal welfare.
Whenever a man, woman or child is to undergo a surgical or medical procedure, numerous forms have to be completed, and a consent form signed; in the case of a child, a parent or guardian signs. Animals undergoing genetic change have no such individual guardian, and they certainly cannot speak for themselves. It is therefore necessary for those of us in this Chamber to ensure that safeguards and trust are in place which will be robust. This trust is placed in the welfare advisory body. The noble Lord, Lord Winston, referred to ethics in his comments on the first group of amendments, and the issue runs all through the Bill. The process is that the notifier applies to the Secretary of State for an authorisation in relation to an animal, and the Secretary of State then refers the application to the welfare advisory body, which in turn provides a report for the Secretary of State. Amendment 19 requires the welfare advisory body to ensure that the notifier has a record which provides the necessary reassurance that animal welfare will not be compromised in any way. Precision engineering can take place, but not at the expense of the animal’s suffering. Amendment 20 is consequential on Amendment 19.
The noble Baroness, Lady Jones of Whitchurch, has also spoken to her Amendment 21, which proposes a new clause. This lists some additional factors which the welfare advisory body or the Secretary of State must consider before granting a marketing authorisation. The Minister has said that he does not feel that this is necessary, but such is the interest in the Bill and the consequences which flow from it that we believe a belt-and-braces approach is necessary.
We on these Benches do not wish to interrupt the passage of the Bill, but we support all efforts to ensure that animal safety and welfare are protected. This is not the stage of the Bill at which to relate cases of experimentation on animals which have gone horribly wrong and ended with considerable suffering to the animals concerned. Animal welfare is our prime concern, and I look forward to the Minister’s response, but if the noble Baroness, Lady Jones, is not satisfied with it and decides to divide the House, we will support her.
Lord Cameron of Dillington (CB)
My Lords, for the purposes of Report, I declare my interests: I am still involved in a family farming enterprise growing crops and rearing livestock, I chair the board of the UK Centre of Ecology & Hydrology, and I am president of the Royal Association of British Dairy Farmers.
As the House knows, I am a very strong supporter of the Bill and everything it stands for. It is only to strengthen the Bill that I have added my name to Amendment 19 tabled by the noble Baronesses, Lady Jones and Lady Bakewell, because here again we touch on the same weakness in the Bill that I referred to at earlier stages—notably, the oversight of the ongoing welfare of animals and their ensuing progeny affected by these processes. As I said at Second Reading:
“To my mind, however, there is too much responsibility, certainly in the latter stages of the proposed development process, for the notifiers themselves to keep the welfare advisory body informed. It appears that the notifiers are in the driving seat.”—[Official Report, 21/11/22; col. 1218.]
These notifiers will be the ones who have probably invested millions of pounds, and almost certainly years of man-hours and academic endeavour in the process, and will therefore be very strongly motivated to ensure that the results give them some sort of positive return. I am not saying that they will necessarily falsify the evidence, although that may not be beyond the realm of possibility, but they will surely be sorely tempted to slant the results—if only for the sake of their commitment to what they see as the greater good. For instance, one person’s definition of bovine, ovine or avian distress might be another person’s idea of, say, satisfactory close family living. Therefore, it is essential that the welfare advisory body has the duty to audit and check up on these notifiers.
I know that the Government—any Government—have a priority to repel all boarders when it comes to amendments to their legislation, but I cannot see how or why they would want to tell the public that their new welfare advisory body would not have an obligation to check up on and satisfy itself that the notifier is conforming to the codes of practice set out in existing legislation. I am sure that the Government will tell us that this is not necessary—in fact, they have already done so—that there are other bodies involved, and that the notifiers already have an obligation. However, unless the welfare advisory body has a specific duty to check on and audit the notifier, it is quite possible that such persons or bodies could slip through the Met. Oh! That is not necessarily a Freudian slip—I mean “the net”, of course, but after last week’s revelations about rogue policemen I expect you can see how my mind is working. The welfare advisory body needs a specific duty spelled out in the legislation to ensure that there are no rogue notifiers.
I hope that the Government will see fit to accept this amendment, or undertake to discuss a positively worded government replacement amendment to be introduced at Third Reading, either for Amendment 19, to which I put my name, or Amendment 21, or indeed Amendment 22 in the next grouping. There has to be some give here on their part to persuade me, and I would like to think to persuade the House, that a vote on this matter of animal welfare is not necessary.
Lord Jopling (Con)
My Lords, during the proceedings on the Bill—I spoke at Second Reading—it has been clear that some people, both inside and outside the House, do not want anything to do with genetics in terms of food production, and think that its application is anathema. I understand that and I do not blame them in the least, although I do not agree with it, but I have been looking at Amendment 21 in the name of the noble Baroness, Lady Jones of Whitchurch, and I ask her whether she thinks that the provision in proposed new subsection (3)(b) might well give an opportunity for one of those people. Its wording is about progeny being
“likely to experience … lasting harm”
resulting from “faster growth” If you take that to its logical conclusion and encourage faster growth in an animal used in the meat trade, it is fairly clear that the animal will become suitable for slaughter at an earlier stage than if it had not had the influence of genetics. If you create faster growth by the application of genetics that ends up with the animal having a shorter life, is that not lasting harm? Some people could argue that, and I ask the noble Baroness if she would like to comment on that question.
Baroness Jones of Whitchurch (Lab)
I am not sure if this is the right moment to speak, but, in answer to the noble Lord’s specific question, the amendment is saying only that the welfare advisory body should take that into account. If there were other overriding reasons why we would want to have faster growth, for example, then that would be a balanced decision that it would make. However, if the faster growth were indeed leading to more pain, we hope it would take that into account. That is what the animal welfare role ought to be about. In Committee we heard lots of examples of new breeding techniques causing considerable pain, but I hope we are moving away from that now and can have a more generous attitude towards both conventional breeding and, potentially, the genetic breeding of animals where it does not have that effect. So it is all about the balance, and this is just one factor that the welfare advisory body will take into account.
Baroness Rock (Con)
My Lords, I declare my interests as a tenant farmer and as chairman of the Rock review into England’s agricultural tenancies.
The Government’s procedural amendments will increase parliamentary oversight of the design and future development of the animal welfare provisions. The Government recognise that there is a need to safeguard animal welfare, and that is why we need a step-by-step approach by bringing legislation into effect for precision-bred plants first and then for animals. Research in farmed animals is already leading to the development of animals that have increased resistance to some devastating diseases that, as farmers, we all see, and it thereby enhances the health and welfare of animals.
Baroness Hayman of Ullock (Lab)
My Lords, I welcome the government amendments that move the regulations to the affirmative procedure; they are extremely welcome.
I thank my noble friend Lady Jones of Whitchurch for her thorough introduction to her Amendments 19 to 21. I am sure noble Lords will remember that in Committee I tabled a number of amendments relating to the welfare advisory body, so we are very pleased to see my noble friend Lady Jones tabling similar amendments today. I spoke at length on this issue in Committee, my noble friend has introduced her concerns and we have heard from across the House, so I shall be brief.
Amendment 19 makes it clear that, in addition to considering information submitted by the notifier, the welfare advisory body should satisfy itself that the notifier has a record of acting in a manner that is consistent with research and animal welfare requirements across other Acts of Parliament. That really should be part of the body’s role. We do not want any confusion or different decision-making across different bodies.
I may have this recollection wrong, but I thought that in an earlier meeting a flow chart was mentioned showing how different animal welfare bodies, in Defra and the Home Office, would interact. I had been hoping to receive a copy of that to get some clarification about precedence and how this was all going to work together. It may have gone into my spam folder and I may have missed it, but if the Minister could check on that, that would be very helpful.
Currently, the Bill states that the welfare advisory body has to determine whether in the animal welfare declaration the notifier has paid regard to the risks to an animal. One of my concerns has always been that it is the notifier who is driving the process and is in the driving seat, rather than the welfare advisory body, which is why we were all very concerned about more checks and balances. We know the Bill says that the notifier has to take reasonable steps to assess those risks, but we do not believe that is a strong enough protection for animals in the Bill.
My noble friend’s amendment would mean that the welfare advisory body had to assess the impact on animals where a precision-bred trait was developed, with the aim, as she said, of achieving fast growth, high yields or other increases in productivity. As we have heard, we have seen that too often in traditional breeding methods, so we need to bring in these protections. We have heard many examples of traditional selective breeding producing animals that were highly efficient but this was often at the expense of animal welfare, and we need to ensure that that is not an unfortunate consequence of the Bill. The RSPCA and Compassion in World Farming have raised serious concerns about the lack of safeguards in the Bill to prevent that happening. In addition, the Nuffield Council on Bioethics has drawn our attention to the fact that many of the effects of selective breeding have been unintended.
We agree with our noble friend that it is reasonable that welfare impacts should be assessed here. Without the amendment, it is not clear exactly how that would be part of that process with the advisory body, particularly in relation to other bodies that already exist. So we strongly support my noble friend and believe that her amendments should be in the Bill.
Lord Benyon (Con)
My Lords, I am grateful for another useful debate. I assure the noble Baroness that we sent her a copy of my flow chart, so it must have ended up in her spam folder. I hope none of my other correspondence to her will be rejected into the ether. It sets out in five clear steps the process of taking something through to authorisation.
I say to the noble Lord, Lord Cameron, that I am not one of those people who repel all boarders when it comes to amendments; we have actually moved considerably on the scrutiny of the Bill, and we want to ensure that there is as much agreement as possible. I concede that we might have a problem on Amendment 19, but I will come on to that.
I repeat that the welfare declaration and the welfare advisory body’s assessment will be based on the principle that precision-bred relevant animals will need to be kept in conditions that satisfy existing requirements in the Animal Welfare Act 2006 and, where relevant, the Welfare of Farmed Animals (England) Regulations 2007. So existing animal welfare legislation is in place, and the Bill is intended to work alongside it to enable responsible innovation.
An accusation was made, although I cannot remember who by, that this was an enabling Bill and was somehow a forest of Henry VIII clauses. I reject that. It is not a skeleton Bill. We have set out our substantive policy proposals in the Bill and have included appropriate delegated powers to supplement those provisions. Delegated powers serve a valuable purpose and it is always important to assess them in context. Simply counting up the number of powers in a given Bill is not necessarily always meaningful, but I hope we have shifted the balance in terms of those that are affirmative and those that are negative.
There has been talk of belt and braces. I think you can overdo caution in these circumstances, and you can clog up the system. I really feel it would be difficult to accept Amendment 19 as it would pre-empt the Scottish royal college research project. The Bill already outlines a regulatory framework to safeguard animal welfare that goes beyond existing requirements in traditional breeding.
I hope that my words, and the government amendments to increase the degree of parliamentary scrutiny on the animal welfare provisions in the Bill, provide noble Lords with sufficient reassurance not to press their amendments.
Lord Benyon
Member's explanatory statement
This amendment is consequential on the Minister’s previous amendment to Clause 11.
“Additional factors to be considered in relation to a precision bred animal marketing authorisation(1) When producing a report under section 12, the welfare advisory body may choose to consider the factors listed in subsection (3).(2) In the event that a report of the welfare advisory body does not consider the factors listed in subsection (3), the Secretary of State must do so prior to making a decision under section 13(1) regarding the issuing of a precision bred animal marketing authorisation.(3) The additional factors to be considered in relation to a precision bred animal marketing authorisation are—(a) whether the precision bred traits will have a direct or indirect adverse effect on the health or welfare of the relevant animal or its qualifying progeny,(b) whether the relevant animal or its qualifying progeny are likely to experience pain, suffering or lasting harm arising from or connected with precision bred traits that aim to produce increased yields, faster growth or any other increase in productivity, and(c) whether the precision bred traits may facilitate the keeping of the relevant animal or its qualifying progeny in conditions that are likely to have an adverse effect on animal health or welfare.”Member's explanatory statement
This new Clause would introduce a small number of additional animal welfare factors to be considered by the welfare advisory body or Secretary of State prior to the granting of a precision bred animal marketing authorisation.
Baroness Jones of Whitchurch (Lab)
My Lords, I want to pursue Amendment 21. I thank all noble Lords who have spoken and I have listened very carefully to what the Minister has said. My amendments are fundamental to animal welfare issues and, as a number of noble Lords have said, they already have huge public support externally—not only in this House.
I still feel that we are being asked to take far too much on trust. The Minister said that it is not a skeleton Bill and he tried to reassure us on that. I would say on the animal welfare protections it is skeleton and it is sketchy, for the very good reasons that he has outlined in the past, which is that the Government have not decided what they want to do about animal welfare legislation going forward. So, we are being asked to take a great deal on trust. That is why we feel there need to be some minimum protections built into the Bill.
My Amendment 21 is not comprehensive, and I do not pretend it is, but it is the beginning of some basic protections on animal welfare, which in the absence of any other legislation we feel is absolutely necessary. I am very grateful to the noble Lord, Lord Cameron, and my noble friend Lady Hayman, who both made the correct point that at the moment the notifier is in the driving seat on all this. They are providing the information, and they have considerable vested interests in providing a selective range of information to the animal welfare body. There is not an external role for audit and check on the information they provide. We would not get this with any other regulator. Any other regulator the Government set up would be expected to have a wide-ranging role, not just to accept the information they were given. I think the logic of what we are proposing is common sense and it fundamentally addresses animal welfare legislation. I therefore beg to move.
Baroness Parminter
“Precision bred animal marketing authorisations: reporting obligations(1) Before issuing a precision bred marketing authorisation for the first time, the Secretary of State must establish a monitoring system for the reporting of potential adverse effects on the health or welfare of such animals or their progeny which must enable—(a) the voluntary reporting to the Secretary of State by keepers of animals, animal health and veterinary professionals, or others, of adverse effects,(b) the mandatory reporting to the Secretary of State by the marketing authorisation holder of adverse effects, and(c) relevant information to be available to support future research.(2) Regulations under subsection (1) may—(a) define what is meant by adverse effects on health and welfare,(b) prescribe information to be required from the notifier for reporting adverse effects to the Secretary of State,(c) make provision for requiring the recipient of marketing authorisation to take prescribed steps, in connection with supplying such an animal to another person, to secure that prescribed information about the subsequent health and welfare of that animal or its progeny, is provided by, or can be collected from that other person, and(d) determine the period after marketing authorisation that such reporting of adverse effects on the health and welfare of animals or their progeny of a given precision bred technique is to be required.(3) Regulations under this section are subject to the affirmative procedure.”Member’s explanatory statement
This amendment requires that, before precision bred animals are marketed, there be mechanisms established for reporting possible adverse effects on the animals’ health and welfare or that of their progeny. Regulations shall define adverse effects, details of the information required, and the time period over which it is required for any given precision breeding technique and application.
Baroness Parminter (LD)
My Lords, Amendments 22 and 23 are in my name and that of the noble Lord, Lord Trees. My name is at the head, but they are really joint amendments, and we grateful for the support of the noble Baroness, Lady Hayman, on the Labour Front Bench and my noble friend Lady Bakewell of Hardington Mandeville from the Liberal Democrats. The aim of the amendments is to ensure that a very clear monitoring system is set up in advance of when gene-edited animals are marketed. This is to ensure that the lessons can be learned about any adverse, or indeed positive, effects on animal welfare so that, throughout the process, we can make those learnings available to others so that animals can benefit in the future.
The provisions in Clause 14, which we are proposing this amendment as a replacement for, say that the Government “may” do this—but this is a fundamental issue about whether or not we are ensuring that a proper surveillance and monitoring system is in place right from the beginning. We would certainly concede that it is appropriate that the regulations to implement such a provision were in secondary legislation, but that is not what Clause 14 says: it basically says that the principle of undertaking a monitoring system is only a “may”, not a “must”. As was referred to earlier this evening, in comparable legislation—the Human Fertilisation and Embryology Act—the principle of having a surveillance and monitoring system in the Act and the regulations for how to deliver it are in secondary legislation. This seems to be a reasonable position.
The Minister talked on a number of occasions this evening about the research project with a Scottish university on how these regulations might work in practice. If you have the provisions on how they will be delivered in secondary legislation, that seems to be appropriate. But our amendment would put in the Bill a provision that the Government will introduce a surveillance and monitoring system and that the information will be recorded and available to inform decisions in the future to guarantee animal welfare— which is a common theme that we have covered this evening.
I am grateful to the Minister and the Bill team for their meetings with me, the noble Lord, Lord Trees, and others on this matter between Committee and Report. I do not wish to put words into the Minister’s mouth, but I can guess what he will say in response to our amendment, given the email that the noble Lord, Lord Trees, and I received from the Bill team on 13 January. The objections were that what was in the Bill was proportionate and what we were asking for was not a proportionate form of regulation. The exact words were that our amendment
“could be seen as being too burdensome a requirement for industry and would remove our ability to scale back reporting requirements in the future if we have a scientific basis for doing so”.
To be clear, our amendment is about putting in the Bill a requirement that there is scientific monitoring; we are not saying that the regulations need to go in the Bill. But the Bill team basically says that making it effectively something that the Government must do— putting it in the Bill—is too “burdensome” a requirement for industry. That does not seem a proportionate approach to a regulatory process, where you are balancing the rightful requirements of people going into this new industry against public benefit and animal welfare. This gets the scales wrong.
This is compounded when the email goes on to say:
“Introducing a requirement on the face of the bill to require and publish data from clinical outcomes from research would also curtail our flexibility and could lead to issues with commercial sensitivity”.
Again, it is not beyond the wit of man for Governments to produce regulations in secondary legislation that ensure that legitimate issues of commercial sensitivity are handled—but that should not preclude the duty on companies to supply that information so that lessons can be learned for the benefit of both animal welfare and public confidence, which is an issue that I think the noble Lord, Lord Trees, will address in some detail.
So I look forward to what other noble Lords will say and how the Minister will respond to both our amendments. I reserve our position on moving to a vote. But we think that this is a really important way of doing what the Government say they want to do: move ahead with this in a step-by-step way, while ensuring that the evidence is retained from the relevant companies and available to inform future research.
Lord Trees (CB)
I am grateful for the excellent introduction of the noble Baroness, Lady Parminter, which carries my name and those of two other noble Baronesses. I am also very grateful to the Minister for our meetings. As he and others in the House will be aware, I strongly support the Bill, and I commend the Government on including animals in it. Alongside existing animal welfare legislation, the new breeding technologies promise great benefits to animal health and welfare by reducing the burden of disease, thereby maintaining food production with potentially fewer animals, and reducing land use, the use of drugs and chemicals, the carbon dioxide footprint and greenhouse gas emissions.
I will expand on the productivity issue. Productivity goes both ways: you improve productivity by producing the same amount from fewer animals. Reducing the disease burden will enable us to produce the same amount with fewer animals, with concomitant advantages.
I thank the Minister for the amendments he introduced earlier. Although I have great enthusiasm for the modern technologies and for this Bill, which will facilitate the uptake of those technologies, this enthusiasm—and I note that in Committee the noble Baroness, Lady Hayman, referred to mine as “gung-ho”, which I take as a compliment—is not shared by everyone. If we want these technologies to be applied and the benefits to be realised, it is going to be essential to take the public with us and ensure public confidence so that they take them up and accept them. This amendment, as the noble Baroness, Lady Parminter, has elegantly said, basically makes it mandatory in the Bill that there shall be a reporting process for potential adverse effects post marketing. So it differs in that respect from Clause 14, but much of the rest of our amendment is copied from Clause 14.
What we are suggesting is also a two-tier reporting system. The first tier is a voluntary system, proposed for individuals such as farmers, keepers of animals, veterinary surgeons and animal health professionals. But for the commercial bodies that hold a marketing authorisation, there should be a mandatory requirement to collect data about the possible adverse effects on PB animals’ health and welfare and to submit that data at periodic intervals.
I will make a number of key points on the amendments. First, they mirror precisely current regulations with regard to possible adverse effects of drugs marketed for veterinary use, and indeed for human use, both of which have voluntary as well as mandatory reporting systems in place.
Secondly, we submit—and I reinforce the points the noble Baroness, Lady Parminter, made—that we do not feel that what we are asking is disproportionate, in that only the commercial sellers of these animals, the people making money, have the legal obligation to collect adverse effects reports and notify of them. But there is a provision for others to do so voluntarily, which could be a sort of check that the notifiers are not ignoring potential problems.
Thirdly, surely it is in the interests of the developers of a new product to safeguard the reputation of that product by seeking and surveying and monitoring the possible outcomes of the development when used in the real world.
Fourthly, the definition of an adverse effect can be made in regulations, and indeed that is already provided for in Clause 25. But I suggest it should refer to issues over and above the expected health issues that might affect any conventionally bred animals but might reasonably be associated with a particular breeding technology. But this requirement can be time-limited under regulation for any given precision-breeding method.
Fifthly, this can be quite a light-touch system. For example, the reporting of adverse effects of veterinary medicines requires an online pro forma which can be sent in digitally to the Veterinary Medicines Directorate, which assesses it. That directorate, of course, already exists. The marketing authorisation holders could also submit their reports in the first place to something like the VMD, which could triage them and then pass them to the Secretary of State for consideration by the animal welfare advisory body, which is already set up —we are not asking for new bodies to be set up.
Sixthly, and perhaps most importantly, the public acceptance of precision-bred animals is hugely important if the Bill is ultimately to be of value, and I submit that it will be a considerable reassurance for the public to know that the sale and commercial breeding of precision-bred animals will be monitored for unforeseen negative effects post-marketing to complement the pre-marketing reporting requirements under Clause 12.
Seventhly, such post-marketing monitoring will also provide both the animal welfare advisory body and the marketeers with essential feedback on the robustness, validity and safety of their pre-marketing assessments. That would be important to inform them and help them develop, if necessary, better systems.
Eighthly and finally, the Minister has assured us that the use in animals will be phased in. Surely, if one is phasing in, one would want to monitor what was happening to the first group in the real world when it is being sold and used by farmers. Only then, by collecting that information, could you be assured, at the end of whatever length of time that phase is, that it is safe and appropriate to proceed to subsequent phases. I would argue that phasing in automatically suggests that one needs to be monitoring what is happening in that first phase, which will involve thousands of animals but will be a real-world experiment to prove or disprove the safety of the system. I do not expect there to be major problems, but it will give assurance to the public. On these collective grounds, I support Amendments 22 and 23.
Baroness Hayman of Ullock (Lab)
My Lords, I thank the noble Baroness, Lady Parminter, for her thorough introduction to her two amendments, to which I am very pleased to have added my name. We strongly support what she is trying to achieve. We believe that there does need to be a reporting process for the adverse effects on the health and welfare of animals and, of course, their progeny. The noble Baroness, Lady Parminter, talked about the importance of evidence being retained to inform future research, as did the noble Lord, Lord Trees. This is also about public benefit; we discussed public benefit a lot in Committee, and it does need to be central to the Bill.
As the noble Baroness also said, we need to understand any lessons that can be learned. The noble Lord, Lord Trees, put it very clearly and succinctly when he talked about “robust” feedback. When we look at the first tranche of animals, we need to have the confidence that the industry is acting appropriately, that the outcomes are what we would hope to see and that we can catch anything that perhaps is not what we hoped for.
The noble Lord, Lord Trees, talked, importantly, about public confidence, as did the noble Baroness, Lady Parminter. If we are to carry the public with us, the future monitoring of animal health and welfare, consequences and outcomes is really important. Understanding adverse events is therefore terribly important. The noble Lord talked about drug introductions in the veterinary field, and we should have the same principles here, I believe, if we are to carry the public with us.
It does not seem to me that this amendment is disproportionate in any way. Instead, it would bring in some really important checks and balances and underpin what the Government are trying to achieve. I urge the Minister to consider very carefully what noble Lords have said. If the noble Baroness wishes to test the opinion of the House, she will have our support.
Lord Cameron of Dillington (CB)
My Lords, I repeat, again, that I am a very strong supporter of this Bill and everything it stands for. However, again, as I have said at every stage and indeed a moment ago on the previous grouping, the one weakness of the Bill is around animal welfare. Anyone reading the Hansard of the passage of this Bill through the Commons will note that it was the greatest concern of MPs too, but they failed to make even a dent in the Government’s protective carapace on this issue.
In Committee, many noble Lords from all sides of the House—myself included—put down amendments to try to minimise the possibility of any genetic change being proposed or implemented that could result in the future suffering or discomfort of, or distress to, animals or their progeny involved in the process. However, none of these amendments was put to the vote. We now have a well-thought-out amendment—or two—which precisely covers the worries that we all had and attempts to avoid them. The Government should think seriously before they reject them.
Lord Benyon (Con)
I thank noble Lords for their engagement on this important issue. I am grateful for the meetings that I have had with noble Lords from across the House on this and for them taking the time to share their thoughts with me and with the House on this occasion. I have found it constructive and enlightening.
We recognise that there is a need to safeguard animal welfare in the new regulatory regime; we are all united on this. That is why we are taking a step-by-step approach with regulatory changes for plants first, followed by animals. The measures in this Bill in relation to precision-bred animals will come into force, as I said before, only when safeguards for animal welfare are in place. This will include a monitoring and reporting system for the precision-bred animals once they are placed on the market.
The Bill will give us the ability to place a time-limited and proportionate duty on breeders and developers to monitor for significant health and welfare outcomes in animals that could be linked to their new traits and to report such outcomes to Defra. This monitoring and reporting system will be informed by research that we intend to carry out—which I have already spoken about—to help us identify the specific outcomes that must be reported, as well as appropriate timeframes and numbers of generations that must be monitored for each species or type of animal.
We believe that the powers in the Bill are sufficient to enable us to put this monitoring system in place. Clause 14 sets out that regulations may require the notifier, or any other person specified, to provide information to the Secretary of State about the welfare of the relevant animal and its qualifying progeny. The regulations may set requirements on the information that must be collected, and they allow the Secretary of State to apply reporting requirements in a bespoke manner. This flexibility is essential to ensure that any obligations placed on businesses are proportionate to risk—this is the key point that I hope I may be successful in getting across.
Baroness Parminter (LD)
I thank the Minister for that reply. Sadly, it is quite clear, in the almost immortal words of the noble Lord, Lord Cameron, this evening, that we have not yet managed to make a dent in the Government’s protective carapace on this Bill—it is a great phrase—which is a disappointment, as a number of other amendments earlier in the evening led up to this amendment.
I do not want to spend much time. I just want to make two points to the Minister. He did not answer the fundamental question that Clause 14 says only that regulations “may” make provision. There is absolutely nothing to stop a future Government—and I do not wish to impugn the Minister’s character or motives—not doing anything at all. It is not about the regulations in future; they do not need to introduce a surveillance monitoring system in the future because all that is in the Bill is that regulations “may” make provision. If it was regulations “must” make provision, that might have made a difference, but the Minster was not prepared to concede that.
Secondly, we have a difference of opinion on the issue of commercial sensitivity. I referred to other legislation in comparable fields of human research where this issue has been overcome, and the noble Lord, Lord Trees, outlined other legislation in the veterinary field where this commercial sensitivity issue has been addressed with wording in legislation to that effect.
So I am not content with what the Minister has said. I have seen where we have been heading this evening, but I think it is a matter of principle. For those of us who feel strongly about this, this was a solid amendment seeking to do a good job to help this Bill from both sides of the House, and I wish to press it to a vote.
Lord Benyon
“(6A) Regulations under subsection (1) are subject to the affirmative procedure.”Member’s explanatory statement
This amendment would provide for regulations under Clause 18(1) to be subject to the affirmative procedure.
Member’s explanatory statement
This amendment is consequential on the Minister’s previous amendment to Clause 18.
Lord Benyon
Member’s explanatory statement
This amendment would provide for regulations under Clause 22(3) to be subject to the affirmative procedure.
“(2) This section comes into force on the day on which this Act is passed.(3) The rest of this Act comes into force on such day as regulations may appoint.(4) Regulations under this section may not be made until the Secretary of State has laid a Priority Setting Partnership Report before both Houses of Parliament.(5) The Priority Setting Partnership Report shall be drafted by a Priority Setting Partnership established and funded by the Secretary of State, and include a response from the Secretary of State.(6) The Priority Setting Partnership shall—(a) identify evidence uncertainties in relation to precision breeding which cannot be answered by existing research,(b) produce a list of research priorities in relation to precision breeding, and(c) make comments on this Act in relation to issues identified in respect of paragraphs (a) and (b).(7) The Priority Setting Partnership shall have a membership comprising—(a) scientists and academics with expertise in the field of genetics, agriculture, and ecology,(b) lay members of the public,(c) representatives of animal welfare organisations, and(d) other interested parties.”Member’s explanatory statement
This amendment would require a report to be published identifying gaps in scientific evidence relating to precision breeding before the Act can come into force.
Baroness Bennett of Manor Castle (GP)
My Lords, I am aware of the time but I have attempted, through this amendment, to find a creative new way of tackling some of the issues that have come up in the Bill. The noble Baroness, Lady McIntosh, said quite some time ago, early on, that we have to reassure the public. The noble Lord, Lord Trees, said in the last debate that it is essential to take the public with us. The Minister said that it is essential to build confidence. This amendment seeks a positive way forward. For anyone still worrying about their dinner break, I am not intending to put this to a vote, for the avoidance of doubt, but I want to suggest a way forward for what has clearly been a very difficult Bill with a lot of issues that remain of great concern in your Lordships’ House and more broadly.
On the first group, I spoke about the number of people whom I know are watching the debate at this very moment and feeling very disappointed about what has happened—or rather, not happened. I also refer back to what I said at the start about the scientists who were coming to me saying, “How do we get our knowledge through to the Government? We feel we are just not being heard”, and these are experts in a range of different fields. This is a creative suggestion. I might have included the word “consultation” but, as we have heard in debates on various amendments today, the Government did consult the public and stakeholders and then entirely ignored what they said. It might be said with some justice that what result you will get depends on how you ask the question. Indeed, I think the Minister at some stage referred to a survey saying, “If we can get drought-proof wheat with gene editing, should we go ahead with it?” If you phrase the question that way, you will get a positive result; however, that is not listening to the academic—a proponent of the technology—who said to me this week, “You cannot drought-proof wheat with one genetic change. That is a fact.”
What I am suggesting here is a process of deliberative democracy. This is something that has really taken hold in government departments—not, that I know of, in Defra, but in others—and indeed across the world. Some of the classic examples of deliberative democracy are in Ireland, on equal marriage and on abortion, where the public, when allowed a chance to deliberate and carefully consider the issues, showed themselves to be significantly in front of the politicians. We have seen climate assemblies in the UK— that may have been under Defra; I am not sure what department they were under. We have seen a very effective climate assembly in France. Lots of local government organisations have been having climate assemblies. It is a way of getting people together and getting themselves informed, both the general public and stakeholders.
I borrowed the term “priority setting partnerships” from an organisation called the James Lind Alliance; I did not ask first. I have spoken to people who have been involved in this process, and it is of particular relevance here because it has been used in a significant number of cases to look at how to set priorities and make decisions about ways forward in healthcare. It brings together clinicians, patients and carers in those healthcare settings. My Amendment 28 is a commencement amendment, but I am not going to push it on that basis. My constructive suggestion to the Minister is that, to find a way forward among many of the issues that have really not been resolved in your Lordships’ House, and have not been resolved among scientists, the Government should seek a deliberative process looking at how the regulations are constructed for the Bill. That process could actually get public involvement and engagement, because I guarantee him that there will be a great deal of public concern and public anger about where we have got to today, and public resistance to the products.
That issue is particularly going to arise around whether gene-edited products will be labelled. I could very easily have tabled amendments on this; lots of people asked me to. We debated it extensively in Committee, but I could not see a different way forward and I did not simply want to revisit the Committee debate. However, if we are going to talk to the public about labelling and about what is happening to their food, we know how deep the public’s concern is about food safety, the nature of their food and the way it is produced. I do not need to list all the scandals and the concerns, including genuine health concerns, that have arisen in recent years. This is an area of public concern, so I am suggesting that on regulations, issues such as labelling and many of the things that remain unresolved, the Government should bring together scientists, government officials, experts and the public and seek a way forward that works.
While I remain gravely concerned, for all the reasons I have set out previously about the Bill and what it could unleash, I think there is a very significant chance that this will go nowhere, both because of the legal tangles and the public resistance. If the Government want to find a constructive way forward, I have set out here a way in which they could co-create a model with the public and the experts. That is my genuinely constructive suggestion, and I beg to move.
The Deputy Speaker (Baroness Morris of Bolton) (Con)
My Lords, if Amendment 28 is agreed to, I cannot call Amendments 29 and 30 for reasons of pre-emption.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I rise to speak briefly to Amendment 28 in the name of the noble Baroness, Lady Bennett of Manor Castle, who has spoken at length on why she feels it is necessary to delay the implementation of the Bill. The Bill sets in train a considerable step towards precision engineering and a move away from traditional practices. Great care is needed to ensure that all unintended consequences are avoided. The extra protections that the noble Baroness proposes are therefore necessary and I look forward to the Minister’s response and reassurance on this matter.
Baroness Hayman of Ullock (Lab)
My Lords, I thank the noble Baroness, Lady Bennett of Manor Castle, for her thorough introduction to her amendment. I completely understand why she is bringing it forward. There are areas of the Bill around implementation, oversight and the step-by-step process that we have discussed time and time again that people are still concerned about. The requirement of the amendment for a report to be published that identifies any gaps in scientific evidence is an interesting one. It will be good to hear the Minister’s thoughts on this.
Lord Benyon (Con)
My Lords, I thank the noble Baroness, Lady Bennett, for this amendment. I am keen to have a much wider conversation with people. My learning curve has been incredibly steep as I have gone through this—the noble Baroness, Lady Hayman, is nodding as well. It is an area of science which is not understood by an awful lot of people. While I have sought to bring in as many safeguards as possible, there is a continuing job to do for all sorts of parties, not just the Government, to explain the benefits of this technology and the safeguards that the Government are introducing. However, I do not think that a priority setting partnership should be established in or under this Bill.
The Bill places science at its core. ACRE advised that precision-bred organisms pose no greater risk than traditionally-bred counterparts. As I said earlier, its advice is supported by the Royal Society, the Royal Society of Biology, the Roslin Institute and a wealth of peer-reviewed literature. The Royal Society stated that
“these are no more likely to pose a risk to human health or the environment than non-editing derived mutations, which occur spontaneously in each new generation”.
In earlier debates, I have sought to make it clear that if we inserted regulatory measures or language into the Bill that somehow elevated this technology beyond where it is, we risk misleading the public and we have to be really careful about that.
ACRE’s expertise in precision-breeding technologies is considerable, having first advised on them in 2013. We used this as a basis for our intervention in a pivotal European Court of Justice case in 2018 and for our consultation on genetic technologies in 2021.
The Secretary of State will be required to make decisions based on the advice of expert committees. As part of its current role as adviser on genetically modified organisms, ACRE will also advise the Secretary of State on whether an organism is precision bred. A comprehensive understanding of the underlying science is essential for this process and ACRE members have a wealth of experience in the regulation of genetic technologies. Moreover, this Bill will sit alongside existing legislation that deals with human, animal, and environmental health.
I understand the noble Baroness’s reservations. However, where we have identified evidence is incomplete, we have taken steps to address this. The regulations under the Bill will not come forward until the relevant measures are in place, and Parliament will have the opportunity to further scrutinise them.
Baroness Bennett of Manor Castle (GP)
I thank the Minister for his answer. I will certainly look to take up his offer in the final section of his response. I also thank the noble Baronesses, Lady Bakewell of Hardington Mandeville and Lady Hayman of Ullock, for acknowledging the reasons why I brought forward the amendment and the continuing issues around the Bill, that, I think, the Minister also acknowledged to some degree.
I make one comment on the Minister’s reliance on ACRE, which has an extremely narrow scientific focus that lacks the sociological and ecological approaches that would give the Government a much broader view. The noble Lord, Lord Krebs, and I were playing with metaphors around centres of gravity and shifting balance. ACRE reflects one part of the scientific community and views, but not perhaps the more, dare I say, modern and newer forms of biology, which are not represented in its membership.
However, we are where we are, and I feel the next debates pressing in on us. We have had a good debate today. I do not think we have got to where we need to go, but I do not think we are finished on this issue by any means. In the meantime, I beg leave to withdraw my amendment.
Health and Social Care Information Centre (Transfer of Functions, Abolition and Transitional Provisions) Regulations 2023
(1 year, 10 months ago)
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Lord Markham
That the draft Regulations laid before the House on 15 December 2022 be approved.
Relevant document: 25th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument).
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord Markham) (Con)
My Lords, to make sure that all noble Lords have the right version of this SI, I draw attention to the correction slip amending two points:
“Page 3, regulation 5(3)(a): omit ‘annual’; and Page 22 … paragraph 63(a): ‘…paragraph (b);’ should read ‘…paragraph (a);’.”
These regulations are intended to transfer the statutory functions of the Health and Social Care Information Centre, which operates as NHS Digital, to NHS England, and to abolish NHS Digital. This will create a central authority responsible for all elements of digital technology, data and transformation for the NHS, which was a key recommendation of the review by Laura Wade-Gery into how we can improve the digital transformation of the NHS. The recommendations were accepted by the Government in November 2021; we announced that we would merge NHS Digital into NHS England as soon as legislation allowed.
I know that noble Lords had concerns about this transfer during the passage of the Health and Care Bill last year, which we have sought to address. I will also seek to address the points raised by the report of the Secondary Legislation Scrutiny Committee, which are echoed in the regret amendment tabled by the noble Lord, Lord Hunt.
First, I reassure this House that the transfer will not weaken the existing protections of people’s data and that the protection of data remains a priority for NHS England, which at senior levels takes these new responsibilities very seriously. All statutory functions of NHS Digital relating to the protection of data are being transferred, including the rules and safeguards required by law. This has been a guiding principle. NHS England will be subject to the same rules on collecting and disseminating data as are applied to NHS Digital.
NHS England can establish an information system only when directed by the Secretary of State or in response to a request from another body. All directions and requests that NHS England complies with must be published, so there is full transparency on what is being collected and for what purposes, and a clear upfront control. It cannot exceed the requirements of the direction or request. It must also publish its procedures for receiving and considering requests to establish information systems and for requests to access data. NHS England will report annually on how effectively it has discharged its transferred data functions, seeking independent advice to inform this report and consulting with the National Data Guardian for their views.
Concerns were raised during the passage of the Bill that we would lose the excellent practice that NHS Digital has followed in protecting people’s data and the crucial separation between those responsible for collecting and de-identifying data and those in NHS England analysing it. We therefore committed to place further requirements on NHS England, alongside the transfer of statutory functions, to ensure it would be a safe haven for data via statutory guidance. This is a new requirement.
This statutory guidance sets out measures that we expect NHS England to protect confidential information. There was some disquiet that the guidance did not seem to go far enough and that we had not added new duties to the regulations. This was not considered necessary; this is a straightforward transfer of functions under a legal framework which goes back to 2012 and has stood the test of time. That framework includes duties under the 2012 Act to have regard to various matters such as the need to respect people and promote the privacy of service users.
Additionally, we will issue statutory guidance, and I will come on to its contents in a moment. NHS England must have regard to this guidance; that means that it would have to demonstrate that it had justification for any decision not to follow it. Case law has shown that clear and cogent reasons would be needed to depart from guidance which is subject to a statutory duty to have regard. However, we have added strength here, as there is also a new power of direction, introduced in the Health and Care Act 2022, which could be used in cases of non-compliance with the guidance—namely, in Section 13ZC of the NHS Act 2006. Together, these mechanisms create a strong, binding commitment on NHS England to maintain the highest levels of data protection and safeguards.
NHSE is a long-established public authority which is experienced in processing personal data, including that of patients and employees. It does so in accordance with a robust legal framework which includes UK GPDR and the Data Protection Act. The lawful and proper treatment of personal data by NHS England is extremely important to maintain the confidence of service users and employees, and NHS England is well versed in processing personal data lawfully and correctly. It is aware of the importance of seeking independent advice and will be able to do so where necessary, including on the recommendation of staff transferring from NHS Digital. NHS England will also be able to approach the Information Commissioner’s Office as the independent regulatory body if it needs an independent view on particular matters.
I also reassure noble Lords that this statutory guidance covers all confidential information as defined in Section 263(2) of the 2012 Act. Therefore, it covers all data identifying an individual and all data identifying an individual which is subsequently identified or pseudonymised where an organisation, including NHS England, holds both the de-identified data and other data which would enable reidentification.
The guidance requires NHS England to obtain independent expert advice on its data access processes and procedures and, where appropriate, on individual decisions around data access. This will enable these experts to provide advice and assurance for both external and internal requests for access to data for purposes other than direct care. NHS England will be required to secure this independent advice or have a very good reason for not doing so. It is not optional or a case of doing so only when convenient.
Central to this should be a data advisory group, comprising appropriate experts and lay members, including one or more members with expertise in social care. This last point is not currently spelled out by the draft guidance, which we will amend. It would be appropriate for some internal representation to support this group to add expert knowledge and insight, such as the organisation’s Caldicott Guardian and data protection officer. However, the majority of members should be independent advisers. Minutes of the data advisory group meetings should also be published.
I know that some noble Lords have been concerned that NHS England will receive data which is still identifiable and which NHS Digital would previously have de-identified before sharing. The statutory guidance requires that the organisation will de-identify data before its internal analysis and use—the same role which NHS Digital undertook previously will be done internally, by a team separate from those who need to use the data. It explicitly states that responsibilities and accountabilities for using the data should be organisationally separate from the functions providing assurance and advice on this, such as information governance and Caldicott Guardian functions, to ensure that there are no conflicts of interest.
NHS England must ensure that there is the right governance for considering internal requests to access data, based on the same principles of risk-based assessment as for external requests for data, and drawing on the same independent scrutiny and advice. Furthermore, the Secretary of State will issue a direction in relation to NHS England’s internal use of data, which will be published. This will make clear the legal responsibility for NHS England to de-identify data before analysis, so that an individual cannot be directly identified either from the data to be accessed or analysed from the results of the analysis carried out. The guidance also calls for NHS England to develop a register of internal data uses mirroring that which currently exists for external data uses.
In response to the concerns of the Secondary Legislation Scrutiny Committee, although we are moving at pace, we are doing so because we are keen to see the benefits of creating a single statutory body responsible for data and digital technology for the NHS delivered quickly. The statutory guidance has been neither rushed nor piecemeal in development. The guidance has been in development for a number of months; a version was shared with some noble Lords and stakeholders before Christmas, and we have been discussing it with stakeholders—including the National Data Guardian, the Information Commissioner’s Office, NHS Digital and NHS England—revising it to reflect their comments and strengthening the requirements on internal use of data, which was a predominant concern.
We have now published the second draft, which we have drawn to the attention of noble Lords. This was also shared with the Secondary Legislation Scrutiny Committee and the British Medical Association and other professional organisations, to seek their feedback. I am sorry that we did not share the guidance before with the BMA.
Lord Hunt of Kings Heath
At end insert “but that this House regrets that (1) the consultation on the statutory guidance that will direct NHS England’s handling of the medical data under these Regulations is being conducted in a rushed and piecemeal manner, and (2) the results of that consultation are not available alongside the Regulations to reassure the House that patient data will be used properly”
Lord Hunt of Kings Heath (Lab)
My Lords, let me say at once that I support the digital transformation of the NHS and the use of information to enhance patient outcomes. I want to see the NHS move faster in a digital world, but it is essential that there are safeguards in place to protect the integrity and confidentiality of patient data. I say that as I look back into the history of NHS data, where we confronted a number of occasions when this did not happen. That is why this is such an important debate. I am grateful to the Minister for the assurances he has already given in his opening speech, and through him I thank his officials for the way in which they have been prepared to engage with us over the past few months, which has been very helpful.
I remain of the view that it was a mistake to bring NHS Digital, or the Health and Social Care Information Centre as it was formerly known, into NHS England, and feel that there are some inevitable tensions and conflicts in so doing. I think the review that led to this overlooked the issue of the integrity of patient information and public confidence when it suggested that the two functions should be brought together. That was legislated for; here we are now, examining some of the details.
The noble Lord has already referred to the Select Committee’s disappointment about the way in which it considered this had been done in a rushed and piecemeal manner. I have no doubt the House will want to take account of the Minister’s response. It is a pity that the full statutory guidance is not available as we debate these regulations. I think, as a matter of principle, it would have been much more sensible if that had occurred.
The core issue is that in the passage of the Bill, and a number of noble Lords who are here took part in that debate, the Government gave assurances that governance arrangements would protect NHS England from marking its own homework, with independent oversight of governance decisions under the new arrangements. The noble Lord, Lord Kamall, the then Minister, said that
“I can assure your Lordships that the proposed transfer of functions from NHS Digital to NHS England would not in any way weaken the safeguards. Indeed, when I spoke to the person responsible in the department, who the noble Lords met, he was very clear that in fact we want to strengthen the safeguards and take them further.”—[Official Report, 5/4/22; cols. 2005-06.]
Having said that, when one comes to look at the arrangements, there are still some questions and doubts that we would like to put forward tonight. I pay tribute to medConfidential, which has raised questions on how some types of data will be handled under the new regime and whether, in pursuit of efficiencies, NHS England’s handling of the data will be less transparent and subject to fewer checks and balances. I think that expresses the issue and the potential tension in a nutshell.
This was reinforced by the comments of the National Data Guardian, to whom I pay tribute for her strong involvement in these matters. In December, Dr Nicola Byrne expressed concern that, in the statutory instrument before us, there is no recognition of the need to have independent oversight. She noted that provisions to obtain independent advice from specialists and experts to advise on and scrutinise NHS England’s exercise of its data functions, which were originally included in a previous draft of the SI, had been removed. She reminded the Government that the commitments to putting the current, non-statutory provisions safeguards regarding oversight into regulations had been made by officials to the House of Commons Science and Technology Committee. I understand from the briefing we received last night that the advice received by the Minister’s officials was that it is not possible, due to the nature of the statutory instrument and the original primary legislation. It is, though, a pity.
In relation to the membership of the Data Advisory Group, the National Data Guardian referred to the arguments put forward by the department for having NHS England representatives on the group present in their capacity as senior individuals with responsibility for data access. I think they are not full members, but they will be present. The department’s argument is that that will support more efficient discussions regarding applications for data access. I can see that, clearly, officials may need to make presentations. I think it is a bit of grey area when they are members, albeit not full members, of the actual group. The National Data Guardian reiterated that moving from a completely independent group to a hybrid model could affect public trust, particularly when advice is given and decisions are made on the internal uses of data.
We need to be clear why NHS Digital had an entirely independent oversight group. It was for very good reasons; it was put in place following the 2014 Partridge review which was conducted due to concerns about the way that patient data had been shared with insurance companies. There was a huge furore at the time. It was interesting that one of the resulting proposals after Partridge was the disbanding of an oversight group which involved staff members for a new independent oversight group. A public consultation in 2015 found support for this change. This is now being reversed. My fear is that something may go wrong with patient data and the department will come back and say, “Actually, we should make this an independent function”.
We have dealt with the issue of timing, and tonight the Minister has given an assurance that the outcome of the internal review into how well the transfer has gone will be made public—that will be very welcome. I will go just one step further and say that I hope the Minister may be prepared to brief parliamentarians on this at the same time.
The noble Lord also answered a question about social care that was asked in our briefing. I think he said there would be a person from a social care field on the group, which is definitely welcome. I suggest that discussions take place with the Local Government Association and the Association of Directors of Adult Social Services to make sure that they are fully involved and supportive of this happening.
So I remain of the view, as I have made clear, that it has been a mistake to bring NHS Digital into the NHS executive. Whatever the structure, one has to build in rigorous safeguards. The key here is the integrity and confidentiality of patient data. It is pretty clear that if the NHS is to be at all sustainable, it has to embrace the digital revolution and it has a long way to go. So I am right behind the Minister in what I know he is personally seeking to do. It is just that if anything that goes wrong with patient confidentiality, the whole thing can fall down. That is why this is so important. I very much look to the noble Lord and NHS England officials to ensure that we recognise that the integrity of personal patient information is important. I beg to move.
Baroness Brinton (LD)
My Lords, I echo the thanks of the noble Lord, Lord Hunt of Kings Heath, for the helpful and detailed discussions that the Minister, his predecessors and officials have had with the small group of us who have been worried about this issue, even before the Health and Care Bill started its passage through your Lordships’ House. Although some of us were more expert than others, and I was definitely not one of the expert members of the group, I care greatly about the digital revolution and ensuring that patient data is kept confidential.
The noble Lord, Lord Hunt, said that he supports improving and transforming data in the NHS. That cannot come soon enough. I have said before in this House, and it is still true probably a decade on from when I first said it here, that for my monthly blood tests I have to print out, photocopy and send copies to my hospital consultant because the hospital that I go to and the hospital that processes my blood tests do not use the same data system. That is ridiculous. It needs to change.
It is a real problem, as the noble Lord, Lord Hunt, set out, that the consultation and draft statutory guidance have been rushed through. I want to set that in the same context as that to which he referred, about perhaps going at a slightly slower pace while wanting the revolution to start. That might have been helpful. Omitting organisations such as the BMA from seeing the original statutory guidance raises the question: who else has not seen it? The question is almost impossible to answer. However, the detail of how this is going to work in practice inside the NHS will be the business of all clinical and administrative staff at all levels. It is vital that it works.
The Minister will know that I have repeatedly raised concerns about patient data and how people were not consulted in the two previous patient data and care.data communications. Both had to be held back because there has been outrage from the public that they were not given the chance to understand how their data would be used. Earlier this week, the Mirror reported that Matt Hancock had talked about handing over private patient medical records and the Covid test results of millions of UK residents to US data company Palantir fairly early on in the pandemic. It had offered to hold its data in its Foundry system, clean it and send it back to the NHS. I spoke about this in the Procurement Bill because I am concerned about how data can be kept truly confidential. Regarding the GP data for planning and research, the NHS has already published its federated data platform details, which is called by the Mirror the Palantir procurement prospectus. Perhaps I may ask the Minister, as an example of transparency for the new NHS England digital processes set out, whether organisations such as Palantir that are handling data records will absolutely not be permitted to use that data—even anonymised or deidentified—outside the purposes of the NHS, other than for agreed research being used in what my noble friend Lord Clement-Jones would say, if he were able to be in his place today, was a safe haven, thereby ensuring that that patient data remains completely confidential. The Minister knows, because I have said it before, that the problem is that in the past it has been possible to identify patient data when it was pseudonymised. I want confirmation that deidentifying really means that individuals cannot be tracked down and, most importantly, that the data will not be used elsewhere or sold on.
Baroness Finlay of Llandaff (CB)
My Lords, I am grateful to the noble Lord, Lord Hunt of Kings Heath, for having put this amendment before us. I am not going to repeat the important points made by other noble Lords who have spoken but I have a few questions for the Minister. I should declare that I am a member of the BMA’s ethics committee and I am slightly concerned—if I heard the Minister right—that there has not been a comment back from the BMA, because there have been concerns about the potential monetisation of NHS data.
There were a lot of discussions within NHS Digital at the time of the passage of the legislation about pharma companies possibly having early access to some data and negotiating discounted prices as a result, particularly for expensive medication and early access. Can the Minister tell us how much discount has been achieved by some of those arrangements, whether those discounts have applied across the whole United Kingdom or whether they have been only of specific benefit within NHS England? As health is a devolved issue, we now have a problem particularly between Wales and England, where there is effectively a porous health border and many people are going from Wales to England for parts of their treatment cycles. That means that data moves across the border. So my next question is: what has happened in discussions with NHS Wales and what is being done to ensure compatibility for data transfer?
My next question relates to our experience last year when an NHS trust had its systems hacked and the whole system went down. How will the security of the new, larger holding of data be ensured? Obviously, if you have a lot of data held together, there are benefits but also risks. How are those risks being looked for and, as much as possible, mitigated against?
The other issue, again in relation to Wales, is somewhat historical but I have not been able to track down exactly what happened to some data. The Health and Social Care Information Centre merged with Connecting for Health in the 2012 Act. At that time, the data side was a UK-wide database. I wonder what happened to the data that was being held for Wales; whether NHS Digital still holds any data relevant to Wales; what discussions have been had with Wales over the transfer of relevant data; and what arrangements are being made for the future transfer of patient data—again, to allow the transfer of data while, importantly, preserving patient confidentiality. Of course, one of the problems when data is transferred between organisations is that there is a potential risk in terms of confidentiality and a possible leak.
My last question for the Minister is quite simple: why were these regulations not laid earlier? As I understand it, the processes are now well under way—indeed, they are almost complete in terms of the staff, the merger and so on. It would have been helpful for everyone to have been able to have sight of these regulations, as well as all the supporting documentation, earlier.
Lord Allan of Hallam (LD)
My Lords, I am grateful to the noble Lord, Lord Hunt, for ensuring that we have an opportunity to debate this statutory instrument. I am also grateful to the Minister for both his initial response to the amendment and the time that he and his officials have spent responding to queries from me and my noble friends Lady Brinton and Lord Clement-Jones.
I revealed in yesterday’s debate how I started my tech career in the Avon Family Health Services Authority. From there, I moved to the FHS Computer Unit and worked on national NHS IT, so this reorganisation has a special interest for me. The subsequent path of the system that I worked with, which was called the Exeter system because the developer hub was in Exeter, is illustrative of the constant reorganisation of NHS IT, of which the latest example is in front of us today; I note in passing that early versions of the Exeter system were written in a language called MUMPS, like the disease but in capital letters, proving that geeks do have a sense of humour. The FHSCU was incorporated into something called the NHS Information Authority, which was then split between the National Programme for IT—NPfIT—and the Health and Social Care Information Centre. NPfIT was later rebadged as Connecting for Health, while the Health and Social Care Information Centre found its way, via a couple more name changes, into NHS Digital; this was referred to by the noble Baroness, Lady Finlay of Llandaff.
It can feel like the architects of these reorganisations have drawn inspiration from peristalsis, the process that moves food through the body by contracting and expanding the gut. The belief seems to be that we can make progress with NHS IT by pulling everything to the centre then pushing it out again to the edges in a cycle of rinse and repeat. I fully expect us to be back here in a few years’ time being told that we have lost focus by pulling everything into NHS England and that we need to create some kind of new stand-alone agency. We might call that new body the Unified Trust Operational Process Information Agency, or UTOPIA for short—there is some free branding advice for the Government.
The serious point here is that, in spite of—or perhaps because of—these reorganisations, the NHS still has information systems that fall well short of what is possible and desirable. There are many excellent people who work in NHS IT, and there are examples of great systems being developed, but we cannot say that there is consistent excellence, which is what the service needs and deserves, as noble Lords have said. I sincerely hope that we might get it right in the public interest this time, but experience suggests that we should remain cautious and test thoroughly what we are being offered.
An early test for this new structure will be the mega contract that has just been opened up for bids to provide a federated data platform, to which my noble friend Lady Brinton referred and which looks like it will cost the taxpayer at least £500 million; that is the number on the face of the contract, and God knows what else will need be spent by trusts on ancillary services. We will be asking searching questions of the Minister at all stages of the development of this project, as some elements are already triggering the spidey-sense of those of us who have seen too many big NHS IT projects go south—by which I do not mean going to Exeter but further than that.
As well as the structural questions about whether this reorganisation will achieve its core purpose of improving IT support for health and social care, there are concerns about what it will mean for the treatment of personal data. The noble Lord, Lord Hunt, and my noble friend Lady Brinton have done a thorough job in describing those concerns so I will not repeat their arguments in detail. However, I want to reinforce their emphasis on the importance of independent oversight. I have worked in technology organisations and have huge admiration for the way in which software engineers, researchers and data scientists tackle problems using data, but their deep focus on addressing problems is not always accompanied by the same level of interest in documenting and getting approvals for all of their uses of data. This is not usually because they are doing anything wrong but because they are in a hurry to explore a task that we have given them. Given this tendency, it is essential that we put in place good governance systems that do not get in the way of necessary uses of data but ensure both that these are properly considered and that any risks are surfaced and mitigated.
As other noble Lords have argued, the IGARD system, which worked for NHS Digital, has broad support. We need something equivalent in this new structure. I ask for the Minister also to consider additional forms of transparency that will help people have confidence that data is being used appropriately. The overriding principle here is that you do not want people to feel surprised that particular kinds of data are being collected or used for particular purposes. A healthy discipline that will help avoid surprises is to ensure that the data schema and software code are made public, as this allows third parties to see for themselves what is going on inside the black box. This is not about publishing all the data held in the databases, which needs to be managed separately; it is about showing the kinds of data that sit in different systems and informing us what the systems are doing with them.
There is a common trope that Governments like to trot out to reassure the public and show that something is safe: putting in place a triple lock. This is part of the Government’s rhetoric around the Online Safety Bill, for example. I invite the Minister tonight to commit to a quadruple lock in this case, given the importance and sensitivity of health and social care data. Lock 1 is the commitment to meeting fully all the data protection standards that are already in place for NHS Digital and in the general data protection regulation. Lock 2 is to ensure there is a truly independent body assessing and authorising requests to use data. Lock 3 is the publication of data schema so that we can see the full extent of what is being held, and where. Lock 4 is the publication of code that will allow people to check that what was authorised is what has actually happened.
I hope that this reorganisation will both lead to positive technology outcomes and avoid negative data outcomes. The NHS needs success in these areas more than ever. I also hope that the Minister will agree that our scepticism on these Benches is healthy and makes it more, not less, likely that we will see those outcomes. Onward to UTOPIA.
Baroness Merron (Lab)
My Lords, I thank the Minister for introducing these regulations and for the assurances he has given your Lordships’ House. I also express my appreciation to my noble friend Lord Hunt for what, as other noble Lords have said, was an extremely detailed and helpful examination of the challenges that these regulations present. I hope that the Minister will take his amendment and this debate in the spirit which I know is intended.
I share the view of all noble Lords who have spoken this evening that digital transformation of the NHS is a good thing; on that we are agreed. We all support the use of information to make things better for patients. However, this is about getting it right, and I hope that the debate this evening has contributed greatly to that. It is about confidence. As the noble Lord, Lord Allan, just said, people should not be surprised. They should also not find themselves compromised, uncertain or in any way undermined by the use or misuse of data. That is the challenge before us.
Lord Markham (Con)
I thank noble Lords for their contributions and agree that we are all trying to achieve the same thing: to ensure the digital benefits come from this system and maybe—who knows?—create a UTOPIA, but also, vitally, maintain confidence. I take all these comments in the helpful spirit in which they are intended, and I hope that noble Lords will like my replies. At the same time, anything that I do not properly cover now—I suspect there will be some things I am not able to cover—I will, as ever, follow up on in detail in writing. Such is the importance of this that I am happy to meet again as well. The various meetings that we have had have been very productive, so I will make sure that those written answers come out quickly. I invite noble Lords to please come back if they feel there are some bits that still need further clarification. I will definitely set that up quickly and ensure that the officials are there as well. I have had various bits of feedback from the officials—I have tried to be engaged all the way through this. As the noble Baroness, Lady Merron, said, we have tried to get this right. I accept that we have not always done it perfectly, but I hope noble Lords can see that the good will is there.
On the specific questions asked by the noble Lord, Lord Hunt, I agree not only to publish the review but, happily, to brief Parliament on that. On the idea of including the LGA in the composition, I am very happy to do that. Regarding the points made by the noble Baroness, Lady Brinton, on the ability to use Palantir outside of the agreed research, the intent is absolutely that it can be used only for the agreed purposes and it cannot be used or sold elsewhere without suitable agreement. Again, the annual report will address how well it is working in practice.
I hope that the merger will not be like the PHE closure. I think they have been working on the new timing, in terms of February, since October, when it was announced, and have been working with the staff on that timing. I know that the plans that I have seen have taken into account the ability or need to retain people, which is obviously crucial to this, as we know that you need additional skills in this space and the importance of retaining them.
On the questions asked by the noble Baroness, Lady Finlay, my understanding regarding Wales—and I will make sure that this is followed up properly in writing—is that it has consented to the transfer arrangements in this. Generally, NHS England will continue to play the same role it has currently; that has been agreed. I entirely take and accept her point about the hacking risk, that the more attractive you make the data pool, for want of a better word, obviously the more essential it is to make sure that security and protections are in place.
As ever, I enjoyed the points made by the noble Lord, Lord Allan. He was talking about UTOPIA. He mentioned the geeks, and I am sure he is aware that that word came out of the Second World War, when they were looking for general engineering and electrical knowledge in their recruitment of soldiers, so that is one for him. Going forward, those extra forms of transparency and the quadruple lock all sound very sensible to me. I had a quick note from my team, saying that they also thought that it sounded sensible. Again, I think that we will probably need to put some detail around that, but I thank the noble Lord for those suggestions. Let us try to make sure that we work with those.
I absolutely take all the points made by the noble Baroness, Lady Merron, again, in the spirit in which they are intended. I do not think that I have a good answer to the “marking their own homework” point, to be fair. I hope that the noble Baroness knows me well enough to know that I will never try to argue that black is white from where we are. I think that is, quite rightly, the concern that all noble Lords have raised tonight, and it is obviously these protections, such as the quadruple lock and the other things that we need to put in place, that we need to make sure are there.
On the kind of things mentioned, the advice and the minutes from the meetings and the advice given by the independent groups—absolutely. I spent a bit of time today on how we would involve the ICSs, and my understanding—again, I freely admit my understanding is probably at GCSE level right now, so I need to do a bit more work on this—is that a lot of this is around the data standards that the ICSs are starting to deploy to make sure that the formatting of the data is correct so that everything can be kept in this common data warehouse. That is something that they are working on already, in terms of establishing those standards. A number of trusts have worked towards that, accepting that it cannot be completely finalised until we know who is going to win the tender for it.
Lord Hunt of Kings Heath (Lab)
My Lords, I am very grateful to the Minister and other noble Lords who have spoken in this debate. I should say that I am particularly grateful to the noble Baroness, Lady Brinton, as she and I have been working on this for quite some time, along with the noble Lord, Lord Clement-Jones, who unfortunately could not be here tonight.
I very much take the substantive point. If you look at care.data, essentially the people running it were very careless in terms of the confidentiality of patient information. That set back the whole programme for a number of years, and that is the lesson that we need to remember. The noble Baroness, Lady Finlay, raised some very important points, including about Wales, on which the Minister has responded in terms of the agreement that has been reached with the Welsh Assembly Government, but her point about the security of local NHS data is very relevant to the way we are going forward.
On the issue of commercial companies, 20 years ago, I took through the legislation to allow the NHS or the Department of Health to agree with commercial companies a very legitimate use of patient information. We had in mind the research institutes and pharmaceutical companies, because we have such a rich information source in the NHS, and we wanted to do that to encourage new medicines and speed up their introduction to NHS patients. The problem is that as it has proceeded there has been a lack of transparency, and this wretched commercial incompetence has undermined confidence in what is happening. It is perfectly legitimate to seek to use this information, provided patient confidentiality is preserved, for the enhancement of our knowledge and understanding and future treatments. Clearly that is in everyone’s best interests.
On UTOPIA, mentioned by the noble Lord, Lord Allan, I could not help thinking of “Utopia, Limited”, the Gilbert and Sullivan opera. The alternative title is “The Flowers of Progress”. He went through the list: Avon FHSA, the Exeter system, NHS AI Lab, Connecting for Health. Such happy memories. The point that he raises is that the NHS and the Department of Health have a constant need and desire to restructure. We know this is displacement activity. Even now one hears that NHS England wants to reduce the number of regions and you think, “For goodness’ sake! Can you not understand that it’s completely hopeless thinking a restructure will have any impact whatever on the task in hand?”
This is the substantive point: we know that we are going to be back here debating an SI at some point which will take NHS Digital out of NHS England and establish a separate body. No one will take a bet on it, because we know it is going to happen, and I am afraid that this instability really detracts from the core purpose of what we are seeking to do. My noble friend Lady Merron raised some very pertinent points about the information, the lack of final guidance, the impact on staff and the big question about patients knowing whether their information is being used, which I believe from the advice I have received is possible. I hope that, as the work gets taken forward, this will be taken very seriously by NHS England. The Government will find that patients will have much greater confidence if they get that information, and that most of us will be absolutely supportive of why that information has been used.
Finally, I thank the Minister for his constructive response and the parliamentary briefing that he has offered on the 12-month review; I also think the information about Wales has been very helpful indeed. Having said that, we wish him and his officials the very best in taking this work forward, and I beg leave to withdraw my amendment.
Environmental Targets (Biodiversity) (England) Regulations 2022
(1 year, 10 months ago)
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Lord Harlech
That the draft Regulations laid before the House on 19 December 2022 be approved.
Relevant document: 25th Report by the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument).
Lord Harlech (Con)
My Lords, I declare my farming and land management interests—some of that land is SSSI, as I have set out in the register.
Biodiversity globally is in decline, and in England species abundance has fallen by 52% since 1970. According to the State of Nature partnership’s 2019 report, 13% of species assessed in England are threatened with extinction within Great Britain. We know we need to take determined action to ensure that we halt the decline of nature and leave the environment in a better state than we found it.
I am grateful to the noble Baroness, Lady Young of Old Scone, whose amendment gave rise to this debate. It raises concern about the lack of a statutory target on improving the condition of terrestrial and freshwater protected sites; we feel that this is already addressed through our species abundance targets. The species abundance targets to halt decline by 2030 and then reverse that decline by 2042 are ambitious, world-leading targets which will drive wide-ranging actions to deliver nature recovery, including action on protected sites which are vital wildlife havens.
There may be other biodiversity targets that warrant consideration; however, we chose species abundance as a good proxy for the health of the wider ecosystem. Our indicator to track progress includes over 1,000 representative species for which we have robust data; between them, these species depend on the majority of habitats found in England.
The noble Baroness is right that many of our protected sites are in a poor condition and are subject to many pressures and threats, including climate change and water and air pollution. But we are committed to addressing this challenge. Our 25-year environment plan set the goal to restore 75% of our 1 million hectares of terrestrial and freshwater protected sites to favourable condition. We have a robust programme of work in place, led by Natural England, which includes providing £2.9 million per year to assess all protected sites, implementing protected-site strategies, introducing the Environment Act 2021, and rolling out the new ELM schemes which will provide the bulk of the funding needed. These regulations implement the requirements of the Environment Act to set a target that will halt the decline in species abundance by 2030, and have at least one additional long-term target relating to biodiversity.
There is no single way to measure the health of our biodiversity, so we have proposed a number of targets that address the status of species and habitats. Our three-pillar approach to restoring and improving our biodiversity involves: first, restoring and creating habitat that is bigger, better and more joined up; secondly, tackling pressures on species and their habitats, such as addressing pollution and improving water quality; and, thirdly, taking further targeted action for specific threatened species. The regulations therefore set targets for species abundance, species extinction risk, and habitat restoration and creation. Taken together, our actions to meet these targets will result in the broad improvement in the state of nature that is needed. Our overall suite of Environment Act targets, including those on water and air quality, will put nature at the centre of all government policy-making for generations to come.
I turn to the details of the instrument. It sets out our target to halt the decline in species abundance by 2030 and then reverse that decline by 2042. We have changed that target in response to public consultation and feedback from the OEP. We recognise concerns that the target as previously phrased could have allowed for nature to be in worse condition than it is today, which was not our intent. The instrument therefore requires the Government to ensure that, by 2042, species abundance is greater than it was in 2022 and at least 10% greater than it was in 2030. Species abundance is a good proxy for the health of the wider ecosystem. The indicator that will be used to track progress includes over 1,000 representative species for which we have robust data. These species are listed in a schedule to the instrument and include the water vole, the marsh fritillary and the red-tailed bumble bee.
We know that action to achieve the species abundance targets will require the restoration and creation of wider habitats and ecosystems. We also know that we need that habitat to be bigger, in better condition and more joined up, which is why through this instrument we are setting a target to require the Government to restore or create in excess of 500,000 hectares of a range of wildlife-rich habitat outside of existing protected sites by 2042. We have defined wildlife-rich habitats as those priority habitats set out under the Natural Environment and Rural Communities Act 2006, as well as those habitats listed in a schedule to this instrument. We will measure progress towards that target by compiling a record of actions that have been or are being undertaken to restore or create wildlife-rich habitat.
As well as taking action for widespread species, we need to prevent the loss of our rarest or fastest-declining species. We also need to make sure that those which are currently at a lesser risk of extinction do not further decline. That requires bespoke actions, as some of our most threatened species will not be reached solely by the broad-stroke approaches that are central to achieving the species abundance targets. The instrument requires the Government to reduce the risk of species extinction by 2042 compared to 2022, as measured by the red list index for England. That index includes data covering over 8,000 taxa, including hedgehogs and red squirrels.
I emphasise that the measures in the regulations are crucial for us to halt and reverse the decline in nature. I hope that all noble Lords will support these measures and their objectives. We will be setting out our approach to meeting the targets in our revised environment improvement plan, which will be published by 31 January 2023. I beg to move.
Amendment to the Motion
Baroness Young of Old Scone
At end insert “but that this House regrets that the Regulations fail to set a target for terrestrial protected sites condition; notes that this contrasts with the Environmental Targets (Marine Protected Areas) Regulations 2022 target for Marine Protected Areas condition; notes that around 40 per cent of England’s terrestrial protected sites remain in unfavourable condition and this has not changed significantly since publication of the 25 Year Environment Plan target to reach 75 per cent in favourable condition; further notes that the United Kingdom committed in December 2022 to a new Global Biodiversity Framework including the target to ensure that by 2030 at least 30 per cent of the overall terrestrial and marine areas are effectively conserved and managed and to report periodically on that target; and therefore calls on His Majesty’s Government to bring forward a new target which addresses the condition of terrestrial protected areas in England”.
Baroness Young of Old Scone (Lab)
My Lords, I declare my interest as chair of the Woodland Trust and president and vice-president of a range of conservation organisations as listed in the register. When I tabled this regret amendment, I did not realise I would be scheduled in the death slot at the end of the day, and I apologise to the Minister for keeping him up.
I thank the Minister for laying out these regulations. I feel a sense of déjà vu with some of them because the history of creating targets for biodiversity is a rather chequered one. I hope the House will forgive me if I dwell on some of the history. When I first came into the environment movement 30 years ago, I was told very firmly that to save biodiversity we had to pay attention to three things: first, the abundance of individual species and the extent of their distribution; secondly, habitat creation in the wider countryside; and thirdly, very definitely, a network of protected special sites and the condition of those sites. We have got some way in these targets towards the first two, and I will comment briefly on them, but I am afraid we have nothing on the third. The targets put forward by the Government fail to tackle all these three issues, and they need to be put together.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, it is a pleasure to be taking part in this debate, and I thank the noble Baroness, Lady Young of Old Scone, for her introduction to her amendment.
The environmental target on biodiversity is extremely important. The Secondary Legislation Scrutiny Committee, of which I am member, reviewed these instruments on 17 January. The committee has commented fully on each of the targets and on the overarching legislation under which they hang. The consultation that Defra conducted from 16 March to 27 June last year received 181,000 responses, and Defra seemed surprised at the number.
As the consultation response document indicates, there was an overwhelming number of responses from campaigns, organisations and petitions. There were also 660 individual responses. Given the number of campaign responses, it is surprising that Defra gave the huge number of responses as the reason for not being able to meet the deadline of 31 October 2022 to set the environmental targets, as required by the Environment Act, especially since there was only minimal, if any, alteration to the targets after considering the consultation responses.
In terms of biodiversity, the Secondary Legislation Scrutiny Committee found that between 91% and 99% of respondents disagreed with the proposed targets, feeling they indicated a lack of ambition. Concern has been expressed as to how the red list indicator will be interpreted. A very small change in one species from “critically endangered” to “endangered” could be interpreted as meeting the target. This would clearly be nonsense. The Government said in their response to the Secondary Legislation Scrutiny Committee’s concern about the absence of a favourable condition target that they do not feel a more ambitious target is necessary. Can the Minister say why?
Wildlife and Countryside Link and Greener UK had three criteria for a successful biodiversity target package. First, there should be high ambition, which sadly is not the case with these targets. Secondly, it should be comprehensive, which again is not the case. Thirdly, it should include sites of special scientific interest, which are totally absent from the targets. We are lucky in England that we have a large number of SSSIs over a very wide range of habitats, from lowland peat moors to uplands, coastal waters and woodlands. Some are managed extremely effectively, but others are in a very sad state and in need of radical attention in order to increase the species they should be supporting.
The UK’s agreement to the Convention on Biological Diversity post-2020 framework strengthens the case for a protected sites target to:
“Ensure that by 2030 at least 30 per cent of areas of degraded terrestrial, inland water, and coastal and marine ecosystems are under effective restoration”.
Defra’s target to
“ensure that species abundance in 2042 is greater than in 2022, and at least 10% greater than 2030”
could be met by restoring 1% of the moth, 3% of the butterfly and 5% of the bird abundance lost since 1970. This in itself would not be an accurate indicator that biodiversity is healthy or resilient.
I have confidence in the Minister and in his passion to deliver against these targets, but I regret that I have no such confidence in Defra as a whole. Defra was unable to publish the environmental targets by 31 October; these were delayed until 16 December. Defra was overwhelmed by the number of consultation responses. It is due to publish the environmental improvement plan by the end of January, which is next Tuesday. Defra has the largest number of all pieces of legislation due to be reviewed under the Retained EU Law (Revocation and Reform) Bill. Further, according to the green business paper for today, Defra has 22 of the 34 questions not answered after 10 working days—with one going back to November.
Baroness Jones of Whitchurch (Lab)
My Lords, my noble friend made a powerful speech setting out why the targets in this SI are inadequate. It follows on from the concerns we raised in the amendment to the Motion on water on Monday and in Grand Committee yesterday.
The fact is that these targets are not the huge strategic targets that we were expecting from the Environment Act. Instead, they have been cherry-picked to comply with the legislation, so that the box can be ticked without worrying the department unduly. As a result, we have weak and unambitious targets, which will underpin the environmental improvement plans due at the end of the month, and the department will continue to coast along without clear drive and focus.
I refer noble Lords again to the excellent report from the OEP published last week, to which my noble friend also referred, which was a stocktake of the Government’s progress on improving the environment. It raised significant concerns, making reference to persistent trends of environmental decline; adverse trends becoming difficult to arrest; and risks of environmental impacts becoming irreversible. It also made the important point that the Government have far too many targets—some voluntary, others statutory—and that it is not at all clear how these targets work together to achieve the overarching goals and objectives. I do not think that the OEP had had sight of these new targets when its report was written, but I am guessing that its concerns will not have been allayed by these statutory targets that we are now considering.
Once again, I am also grateful for the excellent work of the Secondary Legislation Scrutiny Committee and the submissions from Greener UK and Wildlife and Countryside Link. They raise considerable concerns about how the targets will be measured and the consequences of unforeseen distortions of data. For example, as has been said, they question whether the use of the red list indicator fluctuations is a credible way to measure extinction risk, which should look across a wide range of species rather than one or two outliers. I ask the Minister: was authoritative scientific advice requested before this statistical model was proposed? Were the Government advised on the best way to set the baseline, so that we could be assured that real progress was being made right across the board?
On species abundance, we already have a target set in the Environment Act to halt the decline of species abundance by 2030. There was a logic in all the debates around this target that a halt in the decline of biodiversity would then be followed quickly by increases in biodiversity as the graph started to go up again. But this expectation is not reflected in the new targets before us today. Instead, we have a huge gap between 2030, when the decline will halt, and 2042, when we might see some measurable progress upwards, according to these proposals. This seems to water down the original, hard-fought deadline of 2030, as we now have to wait 14 more years for signs of progress. Then the target will be met—as we have heard—if, by an insignificant amount, the 2042 level is better than the baseline 2022 level.
Given the current rate of decline, with 41% of species in decline since 1970, this is a ridiculously unambitious target. Can the Minister provide some reassurance that 2030 will see the species decline go properly into reverse and by 2042 a significant, measurable improvement will be achieved?
Finally, my noble friend has made a compelling case for an ambitious target to improve terrestrial protected sites. We know that protected sites have a crucial role to play in delivering the Government’s stated objective of creating 30% of land for nature by 2030, but so far the rate is only 3%. The SSSIs have a particular role to play in protecting our ancient woodland, hay meadows, peat bogs, chalk streams and moorland. How have we allowed them to get in such poor condition that only 40% meet an acceptable standard?
These sites are key to driving nature’s recovery. Can the Minister explain why, after 13 years of Conservative government, the SSSIs have been left to languish in such a poor state? Can he assure us that this latest round of target setting will be more effective than those that have gone before, when we have not been able even to protect our most sensitive and highly prized sites? I look forward to his response.
Baroness Jones of Moulsecoomb (GP)
My Lords, I declare an interest as a rabid Green who thinks that these are not just limp targets; they are utterly inadequate. It strikes me that Defra is not doing its homework with scientists. It is not listening to the science; it is not keeping up.
I thank the noble Baroness, Lady Young, for tabling this amendment and I have really enjoyed the speeches. I am not going to go on for very long, but I would like to mention the whole issue of zoonotic disease. I am quite concerned that at the moment we have caged animals in the UK for all sorts of reasons; they are mainly hens. Such practices can pose a serious risk to human health as well as to animal welfare and biodiversity. Unnatural crowding, poor hygiene, stress, injuries and low genetic diversity are ideal for the creation and spread of novel pathogens, as we have already seen in the past few years. I am curious as to whether the Government are working on this issue or if it is just not part of their thinking at their moment.
I also mention that international zoonotic diseases are particularly prevalent in fur farming and although we have banned such practices in the UK, we still allow imports. Are the Government considering a ban on imported furs?
Baroness Smith of Basildon (Lab)
My Lords, this has been a really interesting debate. I cannot help noticing the gender balance of speakers who have shown an interest in the environment this evening, so I forgive the Minister if he is slightly terrified by us all standing here tonight.
We owe a debt of gratitude to the noble Baroness, Lady Young of Old Scone, for bringing this forward tonight because it has given us the opportunity, even at this hour—and it is not late for your Lordships’ House; I was here later last night—to look at some really serious issues and see whether there is anything the Minister can do, other than answering the questions posed to him, to take this back, as the noble Baroness asked, and come back with something more ambitious that will do the job that we seek it to do. Her speech showed her experience and knowledge of the issues and that is what this House is best known for. It is where our strength lies but it is a strength only if we take notice of what is said by those who know more than us at the Dispatch Boxes.
My first reaction to this SI was one of disappointment, which I think is a similar comment to the one made by the noble Baroness, Lady Jones of Whitchurch. This was an opportunity, across the suite of the SIs we are seeing, although we are discussing just one tonight, to set targets that match the scale of the challenge. The Minister was clear at the beginning about the scale of the challenge we are facing. But there was an opportunity to set targets that were ambitious but which with commitment would be achievable. The Government’s own reports outline the scale of the challenge, but it is not clear, certainly from today’s SI, that the sense of urgency and the ambition that are needed are actually there.
I want to raise three issues. A lot of the issues have already been aired and I feel that the Minister has a long list of responses to make. First—and I am glad to say this when the noble Baroness, Lady Bakewell of Hardington Mandeville, is here—I thank the Secondary Legislation Scrutiny Committee for its work. I also thank all those who provided briefings, including Wildlife and Countryside Link and Greener UK. On the Secondary Legislation Scrutiny Committee, one piece of advice I give to MPs, which was given to me when I was first an MP, is to look at the reports from this committee, because they are excellent at getting under the issues of how things could have been done better if there is an issue. Interestingly, it was one of the very few occasions when I have seen one of these reports quoted extensively in a House of Commons debate on this issue: the committee is a credit to the whole House.
I start by emphasising the points made by my noble friend Lady Young on the reasons for her amendment today. It is clearly a serious omission not to have a target for the condition of terrestrial protected sites. SSSIs are recognised by Defra as important to the future programme of protection. Its own report says:
“To halt nature’s decline by 2030 we know we will need to take action to restore our protected sites, which are vital wildlife havens.”
These areas are pretty much the foundations of site-based conservation: there are 4,000 sites in England over 4,000 square miles, yet where are we and what are we doing about it? The 25-year environment plan committed, as my noble friend Lady Young said, to ensuring that 75% of SSSIs were in favourable condition. That has not been met. Not only has it not been met, the figure, as has been made clear in the debates, is stuck at around 40%.
This SI was a prime opportunity for the Government. It is a missed goal. It was an opportunity to show that we care about this, we want to do something about it and we are going to be ambitious. I do not understand why there is no target in here. I hope the noble Lord, Lord Harlech, will enlighten us this evening as to why there is no target, because that is the crux of why we are here this evening. My noble friend Lady Young has provided an opportunity for the Government to explain why, or to withdraw and come back with other targets, so we can understand and make some progress. I think the best thing to do, as she says, would be to take it back to the department to act on this.
My second point is about the 2030 species abundance target, regulation 12 in this SI. It outlines how the Government are going to measure whether the decline in biodiversity has been halved by 2030. We have heard already that it will be determined by comparing the relative species abundance index for 2029—anybody watching tonight is probably dozing off at that snappy expression—and 2030. The target to be met is for the 2030 figure to be
“the same as, or higher than,”
the 2029 figure. That seems to me pretty unambitious. It is a low bar to be comparing two consecutive years, rather than using an earlier baseline.
We know that biodiversity is steadily falling, year on year. It has been noted in the Commons already—by the Minister, incidentally—that the index has declined by around 2% a year, yet the Government think it is an ambitious target to ask if it has stayed the same. I have to say, that is really not good enough. It would be helpful to know whether Defra has an estimate of the likely index in 2029 and how that compares to where we were when Ministers made the commitment in 2021.
On a more general point about targets in the regulations, the noble Baroness, Lady Bakewell of Hardington Mandeville, touched on the issue of consultation. We have heard from several speakers tonight that about 90% of those consulted thought the targets were not ambitious enough.
When I look up a definition of “consultation”, it normally means you listen, you take on board what has been said and you do something to respond to it. Are the Government just going to plough ahead, regardless of what is in the consultation? It is probably wasting public money having consultations in the first place. I remember as a Minister, the first question I would ask when we were consulted was, “Are we going to change our minds on anything?” If I was told, “Well, the policy is settled, Minister”, then why are you going to have that consultation? The Government need to take that back and think about the terms they use and if they are serious.
Lord Harlech (Con)
I thank all noble Baronesses for their valuable contributions tonight. This is a very important subject, regardless of the time or the fact that this is an SI as opposed to a piece of legislation. The environment and environmental targets are one of the reasons why I joined this place, so this is a subject that is very important to me. As a Government, we put the requirement to set targets into the Environment Act in 2021, but at the same time it is important that they are deliverable and realistic, while also raising our ambition to tackle the issues faced by the natural world. I absolutely agree that it is the job of this House to question those targets and that ambition, and it is our job to set out how they will be met.
The targets were developed to be complementary. They will ensure that action is being taken to improve wider ecosystems in England. Meeting them will require improvements across our protected sites network in line with the 25-year environment plan goal to restore 75% of 1 million hectares of terrestrial and freshwater protected sites by 2042.
As well as action across central government, we will need to work with local authorities, businesses, land managers and environmental NGOs to ensure that we do not just halt biodiversity decline but actually turn it around and restore nature.
As I said to preface this, it is important that we set targets and that noble Lords challenge them, but we also need to see wider societal and cultural change. It needs to become unacceptable for people to throw litter out of car windows or leave rubbish on the beach. Meeting this challenge will take everyone changing their mindset and behaviour. I will try to answer the questions put tonight. I hope noble Lords will forgive me if I do not cover them all; I will endeavour to write to noble Lords so I ask them to pick me up on that.
We believe these targets represent one of the most robust environmental programmes in any country. The final suite of targets is stretching, and to deliver them we will require shared endeavour across all of government and society. We considered the evidence carefully. In some cases, it is not technically or practically possible to go further at this time; in others, higher targets would involve significant restrictions on and costs for businesses and people’s lives which we do not think would be right to impose at this time—but that is not to say that they are not constantly under review.
The Environment Act requires the Government to report regularly on the process. As new technologies and methodologies evolve, we will be able to show more ambition and increase the targets. The Government have committed to halting and reversing decline, and the UK has been leading international efforts in developing an ambitious and transformative framework under the global targets of the Convention on Biological Diversity. We have addressed concerns with the previous phrasing to ensure that we leave the environment in a better state than it is in now.
We have also considered calls to increase our ambition further, but we do not believe that those calls to increase the targets have been met by the evidence base we have seen. Modelling for species abundance targets was developed alongside external partners, with guidance from Defra and Natural England. These targets are already challenging, so it is important that we set them at an achievable level.
On measuring the targets and comparing the 2042 target with the 2022 target, the index value is linked to a smooth value which takes into account fluctuations in data from year to year, making underlying trends easier to detect. The calculation of the index values in the smoothing process is peer-reviewed and well established. The methodology applied to this indicator follows that used in the England biodiversity indicators, so we are confident that using this will enable us to report on the target. The 2042 target will be assessed based on an increase in the smooth index value.
We believe that the suite of targets we are proposing is appropriate at this time, but the Act allows additional long-term targets to be set in future. There were quite a few concerns over whether this is it. It is not: we will monitor and continue to improve and push the targets, but we have to establish that baseline. The natural environment is complex, so we see target setting as an iterative process, built on over time, as our evidence base and understanding develop. We want to use the targets meaningfully to drive the environmental outcomes that we need to see.
I was asked why we have focused on abundance rather than other species indicators, such as distribution. We believe that species abundance is a good proxy for the health of the wider ecosystem. The indicator that we will use to track progress includes over 1,000 representative species, for which we have robust data. Between them, these species depend on the majority of habitats found in England. Action to achieve the species abundance target will necessarily require the creation and restoration of wider habitats and ecosystems. Indicators of abundance, in comparison with others such as distribution, are the most sensitive to change. This sensitivity will be useful in demonstrating whether policy action is leading to improvements.
I turn now to the 2022 red list index for England and assessing how that will change towards 2042. The index used the best available evidence at the time of the laying of this SI to set out a baseline for 2042. For the purposes of legal certainty, the SI needs to refer to a fixed baseline and not a baseline index value which will be calculated in the future. To ensure that we are measuring the target as accurately as possible, we will consider new data and information as appropriate, in conjunction with the relevant independent experts.
On the subject of ensuring that environmental regulations are protected, I can say that, in reviewing retained EU law, Defra’s aim is to ensure that environmental law is fit for purpose and able to drive improved environmental outcomes, while ensuring that regulators can deliver efficiently. This will ensure that the UK regulatory framework is appropriate and tailored to the UK. The Government have clear environmental and climate goals, demonstrated by the 25-year environment plan and the net-zero strategy, and any changes to environmental regulation will need to support those goals.
Several Peers mentioned the missing of targets, including laying the instrument by 31 October, and it is important to address that. As was mentioned, in March 2022, the Government launched their consultation on targets relating to the Environment Act 2021. It included 800 pages of evidence that were published following three years of developing the scientific and economic evidence. The consultation closed on 27 June. We received over 180,000 responses which needed to be analysed and carefully considered. In light of the volume of material and the significant public response, we indicated that we would not be able to publish targets by 31 October. The Secretary of State for Environment, Food and Rural Affairs reassured the House and all interested parties that we would continue to work at pace to lay draft statutory instruments as soon as practicable.
I turn now to the criticism from the OEP. The Government are looking at alternative systems of land use; I was very proud to serve alongside the noble Baroness, Lady Young of Old Scone, on the Lords Select Committee on land use. I would like to think that I heard a lot of the arguments over land sharing and land sparing. Land is a finite resource and we are asking it to do more—to provide more in terms of food, but also restore nature and energy. We are constantly looking at that, and it is very encouraging that Defra has made positive sounds about a land-use framework to balance all the competing asks on land. Our new environmental land management schemes will encourage farmers to maximise the use of highly productive agricultural land, while freeing up less productive land for things like planting trees and creating wildlife habitat.
In addition, the introductions of technological innovations, such as vertical farming, through our £270 million farming innovation programme, will allow us to free up space for nature while maintaining agricultural output. We will publish more details of this in our land-use framework later in 2023.
Several Peers raised the issue of sites of special scientific interest—SSSIs. We feel that what we are introducing through these species abundance targets will help to nurture SSSIs. We know that to halt nature decline by 2030 we need to take action to restore these protected sites, which are valuable wildlife havens. We are committed to delivering our 25-year environment plan and for our 1 million hectares of terrestrial and fresh water protected sites to be in a favourable condition by 2042. Natural England is increasing proactive work on SSSIs and has developed a much-improved monitoring system to gain a better understanding of the action required. Natural England is using this information at local and national levels, working closely with landowners and managers to put in place the changes, on and off site, that are required to improve site condition.
Baroness Young of Old Scone (Lab)
My Lords, where do you start, where do you start? I thank the Minister for his response and thank other noble Lords who have spoken in this debate. There was an interesting point from the noble Baroness, Lady Bakewell, who is no longer in her place, that she worries that Defra is struggling with volume. We are all worried that Defra is struggling with the volume of things coming at it. We are struggling with the volume of things coming at us, and it must be 10 times worse for the department.
The noble Baroness, Lady Smith of Basildon, made a very valid point about the expertise of this House. There is an issue in that Defra does not capitalise on expertise. There is quite a lot of inventing stuff from the start when, in fact, there are a whole load of old fogies like us out there—including former Defra civil servants, ex-NGO folk and business folk—who have gone through many of these issues umpteen times before and could have valuable input into Defra’s considerations. That has been particularly so with the ELM scheme. I do not know how many million times I have sat down and helped develop new land-management schemes under agricultural subsidy, and I am just one small cog in a big set of wheels that could be at Defra’s disposal; that is a bit off the point but is nevertheless important.
I want to pick up one or two things that the Minister said. At the heart of my concern about there being no target for protected sites is a worry about the point he made that halting species decline will need site improvement. My view is that, if there must be a focus on improving the condition of protected sites to halt species decline, why not have a number on it while we are at it and measure site improvement? First, you will be looking at sites anyway; and, secondly, not all protected sites will be picked up by the array of species in the “species abundant” set. A number of SSSIs are designated for weird and wonderful small organisms that are nevertheless incredibly important and threatened but simply will not be picked up by the array that is there. I remember fighting nobly for the SPA in the Bristol Channel, which is designated for some teeny little worm that lives in mobile sandbanks. Try telling that to the folks who were trying to build the Severn barrage—but it was important, and we won.
I am happy about the idea that optimising land use will produce a bigger range and extent of habitats, but I do not think that really helps with the protected sites. For me, the important thing about protected sites is that they are specifically designated for a set of species and there is a specific set of management conditions that can produce improvement. We have to focus on that. I was a bit gobsmacked, if that is the technical term in your Lordships’ House, that the Minister seemed to say that some things that need to happen cannot happen because they would mean restrictions on and costs for people’s businesses and lives. That is the whole point of protected sites. They are protected regardless because they are that important. They are only a small proportion of the land surface but they are protected so that they are above the rest of the land that can be managed for multiple uses. Biodiversity must be the primary purpose.
We have legally binding targets, which are what we wanted in the Environment Act. Now that they have emerged, we are not that thrilled with them. I worry a bit. Yesterday, we spoke in the Moses Room about the woodland target because the tree cover target has been reduced to make it more achievable. The idea that, if we cannot achieve something, we should pull it down and make it more achievable worries me stiff. I also worry that we may have a tiger by the tail in that inventing the Office for Environmental Protection has meant that there is now a huge focus on anything that is statutorily required by the office’s processes. I worry that this will distort priorities and that the total focus is on avoiding the OEP taking cases against Defra; that would be a real shame at the very beginning of this new regulator.
I recognise the Minister’s personal commitment. However, I just want to say that in 2042 I shall be 94, but I will be around to remind people of how well we have done on these targets. What is more, I shall be around every year from now until then to remind people of what needs to happen. I hope that I will be encouraged by the environmental improvement plan next week and that we will see some of the informal, non-statutory targets covering protected sites. If we do not, I shall be cast down, because the statutory targets do not. I beg leave to withdraw my amendment.