All 18 Parliamentary debates in the Lords on 20th Jun 2023

Grand Committee

Tuesday 20th June 2023

(1 year, 1 month ago)

Grand Committee
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Tuesday 20 June 2023

Arrangement of Business

Tuesday 20th June 2023

(1 year, 1 month ago)

Grand Committee
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Announcement
15:45
Baroness Pitkeathley Portrait The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)
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My Lords, welcome to this Grand Committee. If there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells ring and resume after 10 minutes.

Building Safety (Responsible Actors Scheme and Prohibitions) Regulations 2023

Tuesday 20th June 2023

(1 year, 1 month ago)

Grand Committee
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Considered in Grand Committee
15:45
Moved by
Baroness Scott of Bybrook Portrait Baroness Scott of Bybrook
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That the Grand Committee do consider the Building Safety (Responsible Actors Scheme and Prohibitions) Regulations 2023.

Relevant document: 38th Report from the Secondary Legislation Scrutiny Committee. Special attention drawn to the instrument by the Joint Committee on Statutory Instruments.

Baroness Scott of Bybrook Portrait The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
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My Lords, these regulations establish a responsible actors scheme for developers under Sections 126 to 129 of the Building Safety Act 2022, focused on the remediation by developers of historic fire safety defects in residential buildings they have developed in England. Developers that are eligible for the scheme but choose not to join, and developers that join the scheme but then renege on their membership commitments, will be prohibited from carrying out major development or obtaining building control approvals.

Following the Grenfell Tower tragedy, it became evident that thousands of residential buildings over 11 metres had serious fire safety defects. This put resident safety at unacceptable risk while leaving many leaseholders facing potentially life-changing remediation costs. This scheme is one part of the Government’s wider response to the building safety issues that came to light following Grenfell. In addition to the scheme, we are protecting residents by investing £5.1 billion in remediating unsafe cladding on 18 metre-plus buildings; securing industry contributions to remediation through introducing a building safety levy; implementing statutory leaseholder protections against unfair costs of remediation; and creating new legal avenues for affected parties to recover remediation costs from those who caused the problem.

This scheme focuses on major private sector developers, which sit at the top of the supply chain and have overall responsibility for their developments. The Government engaged with major developers through a remediation pledge and then a legally binding developer remediation contract. I welcome the action taken by 48 developers that have signed the developer remediation contract; these include the top 10 private sector UK housebuilders. The scheme will create a level playing field whereby eligible developers that commit to remediate are not placed at a competitive disadvantage compared with those that do not.

The regulations set out three descriptions of persons who are eligible to join the scheme. Developers based anywhere may be eligible for the scheme, if they developed relevant buildings in England. First, major housebuilders are eligible where their principal business has been residential property development; they were responsible for the development or refurbishment of one or more 11 metre-plus residential buildings in England in the 30 years ending 4 April 2022; and they meet the profits condition set out in the regulations. Secondly, developers are eligible where they meet the profits condition and they were responsible for the development or refurbishment of at least two buildings that we know are defective because the buildings have been assessed as eligible for a relevant government remediation fund. Thirdly, there is a voluntary eligibility provision. This allows other persons to join, where they were responsible for the development or refurbishment of a building that would require remediation under the developer remediation contract.

The profits condition is focused on typical operating profits averaged across the three years from 2017 to 2019, which were not impacted by the Covid pandemic. Both the profits condition and other aspects of the eligibility provisions make appropriate provision for the complex company group structures used by some developers.

The regulations make clear that registered providers of social housing are not eligible for the scheme. They will not be invited or permitted to join.

The core conditions of membership of the scheme are for developers to commit to identifying and remediating life-critical fire safety defects in residential buildings over 11 metres in height that they developed or refurbished in England in the 30 years ending on 4 April 2022, and to reimburse taxpayers for government-funded remediation of such buildings. To demonstrate their commitment, an eligible developer must enter into a self-remediation contract: a contract containing the terms of the developer remediation contract published by the Secretary of State in March this year. The membership conditions require members to give effect to their remediation and reimbursement commitments in accordance with the contract’s terms.

I turn now to the application provisions. The Committee will be aware that the Joint Committee on Statutory Instruments has drawn attention to two technical aspects of the drafting of these regulations, including one relating to the scheme’s application provisions. I am grateful to the Joint Committee for its time, its valuable scrutiny and its report, which the Government have carefully considered. We have corresponded with the Joint Committee and provided a memorandum setting out our position, which is printed as an appendix to the Joint Committee’s report.

I welcome this opportunity to reaffirm our overall position on the issues raised, as explained in the memorandum. On the application provisions, we consider it to be clear in context that, where the Secretary of State identifies that a person is likely to be eligible for the scheme, they will be invited to join it, but the registered providers of social housing will not be invited to join, as they are not eligible under Regulation 6. In light of the Committee’s report, we will monitor implementation carefully and consider bringing forward amending regulations in the event that the regulations give rise to a misunderstanding in practice as to who is invited or able to join the scheme. The Government will also issue guidance on aspects of the scheme. However, the issue of developer remediation of unsafe buildings is urgent, and I seek the Committee’s approval of these regulations today.

The regulations set out the time period to join the scheme and give developers an opportunity to make representations if they believe that they are not eligible. They also set out how developers can join the scheme in other circumstances, including under the voluntary eligibility provisions.

Membership of the scheme may be revoked for breach of membership conditions or ended without fault where a member has substantially satisfied their obligations. Members will have the opportunity to make representations to the Secretary of State before their membership is revoked. Should an eligible developer decide not to join the scheme by the end of the application period, or should their membership be revoked for failure to comply with the scheme’s conditions, they will, in accordance with the regulations, be prohibited from carrying out major development or obtaining building control approvals.

At this point the developer, and known persons controlled by the developer, will be notified and then added to a published prohibitions list, which will be used by local authorities for enforcement. Only a person named on the prohibitions list will be subject to the prohibitions. The regulations also apply the prohibitions to persons controlled by the developer to make sure that developers cannot easily avoid the prohibitions by continuing their development business through other entities they control. Prohibited persons will be subject to a planning prohibition that prevents them carrying out major development in England, except where planning permission is received before these regulations come into effect. Development of land carried out by a prohibited developer in breach of a prohibition will constitute a breach of planning control.

The regulations include provision that developers notify the local planning authority about their status as a prohibited person, or when the prohibitions are lifted. The Joint Committee on Statutory Instruments has reported on the absence of a specific sanction for failure to give notice under these provisions. I would like to reassure the Committee that these regulations are effective without such a sanction. The primary mechanism for identifying prohibited persons will be the prohibitions list published by the Secretary of State, so local planning authorities will have access to all the information they need even if a developer fails to notify them. In addition, any developer that engages in development contrary to the prohibition will as a result be subject to sanctions through planning enforcement.

The regulations also establish a building control prohibition, which prevents prohibited persons gaining initial and final building control approval in respect of any building work that requires such approval. The prohibitions have limited exceptions. The purpose of these exceptions is to mitigate potential impact on innocent third parties such as off-plan buyers, the wider public and certain entities that are not in the building industry.

The building control prohibition is subject to exceptions that seek to protect innocent third-party purchasers of properties from a prohibited developer, including a specific exception to assist those whose deposits could be at risk if a prohibition came into effect after they had exchanged contracts. There are also exceptions to ensure that emergency repairs and other repairs to any occupied building that are necessary for the safety of residents can proceed.

Both prohibitions are subject to exceptions to exclude critical national infrastructure projects and to permit certain entities in developers’ corporate groups that are not in the building industry to have the prohibitions disapplied to them where this would not frustrate the purpose of the scheme.

I know the Committee will also be concerned about other industry actors, particularly construction products manufacturers. It is unacceptable that cladding and insulation manufacturers have not yet acknowledged their responsibility for the legacy of unsafe buildings. Most recently, the Secretary of State has written to three industry participants, Kingspan, Arconic and Saint-Gobain, and to their institutional shareholders, to make it clear that those manufacturers must contribute to the cost of remediation or may face severe consequences. The Government will consider all options to ensure that construction products manufacturers contribute their fair share.

These regulations launch an important scheme for developers to remediate unsafe buildings. Given the urgency of this issue, we are bringing forward these regulations for a scheme focused on larger developers at speed. We propose to extend the scheme over time to cover all developers that have built defective buildings over 11 metres and should be paying to fix them. I commend these draft regulations to the Committee.

Lord Naseby Portrait Lord Naseby (Con)
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My Lords, I very much welcome the way my noble friend has introduced these important regulations. My dear late father was an architect so I was brought up in that climate, and I do not think anybody in the industry disputes the fact that those responsible for developing unsafe buildings should remedy the defects at their own cost as quickly as possible. That bit seems to be agreed all round.

However, there are some aspects of the scheme that I hope my noble friend will take on board and that should probably result in some changes. The first is the presumption that anyone who has developed a building above 11 metres has to bear the burden of proof that their buildings are not unsafe. That is a pretty costly execution to be done, plus I wonder whether this self-examination is actually the right way forward. What ought to happen is that a regulator should be employed and report accordingly to the Secretary of State.

Secondly—and this is an important dimension—the regulations impose qualifying criteria for membership that appear to bear no rational relationship with the harm identified. Rather than specifying membership criteria by reference to the number of buildings above 11 metres developed, instead the criteria relate to profitability. The result is that a cowboy developer that has built countless buildings of 11 metres and over unprofitably appears to escape the criteria, but for the responsible developer that has built virtually no buildings above 11 metres, profitability is required to join the scheme, with all the obligations that entails.

16:00
My third overall observation is that membership, as I understand it, involves the requirement to sign up to a binding contract negotiated by the department’s lawyers, apparently with some select representatives from the industry. I am not aware, in the time I have been in Parliament—nearly 50 years now—of where we have had a statutory liability subordinated to a contractual document in terms that give some cause for concern.
I will list three key features that came to my mind as I worked my way through these papers. First, there is eligibility. Inclusion is understandably determined with reference to profitability in financial years 2017, 2018 and 2019, together with having developed any residential building over 11 metres in any year since 1992. So you are automatically included, even if you have only one or two buildings a few centimetres over 11 metres and they do not, in the view of the developer, need remediation. They are automatically excluded if they are unprofitable, no matter how many buildings the developer builds of 11 metres and over. Logically, one would have thought that the more buildings that have been developed, the greater the statistical risk to the public. In other words, rather than leaving the burden of proof where it normally lies—on the regulator to show that there had been a breach—in this scheme, instead, it amounts to the Secretary of State saying, “I have decided, in broad terms, that because you all meet these criteria”, seemingly selected without consultation, I am told by the industry, “you must prove that you are not in breach”.
Secondly, there is obligation. The obligation is to sign a developer remediation contract. As my noble friend rightly says, this contract has already been signed—voluntarily, we are told, but it seems from talking to some of the contractors in the business that it was not entirely voluntary, bearing in mind the sanctions if they do not sign—by 48 companies, thankfully. That is good in itself. It seems to me that it was not, initially at least, intended that those companies with buildings that were not in need of repair should be included. Nor, as I understand it, was it anticipated that people, particularly small and medium-sized contractors, with buildings that were 11.2 or 11.3 metres —and others right at the bottom of the scale—would be included.
Thirdly, and importantly, I come to the sanctions. They are pretty tough. In fact, I am not aware of any such scheme in all the time I have been working in and commenting on this market. Failure to join the RAS means exclusion from the planning and building control systems, hence exclusion from—
Baroness Pitkeathley Portrait The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)
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My Lords, there is a Division in the Chamber. The Committee will adjourn for 10 minutes.

16:04
Sitting suspended for a Division in the House.
16:14
Baroness Pitkeathley Portrait The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)
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My Lords, as there is another Division immediately, we will not restart the Committee. We will start it again at 4.25 pm, by which time the second Division will have taken place.

16:15
Sitting suspended for a Division in the House.
16:26
Lord Naseby Portrait Lord Naseby (Con)
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My Lords, I had finished two of the three key features I wanted to address, which were eligibility and obligations. I now turn to probably the most important of the lot: sanctions. As I understand it, failure to join the RAS means exclusion from the planning and building control systems. In effect, that means exclusion from most commercial and residential development in England for all companies, including non-developer companies—for example, an engineering subsidiary wanting to expand.

These sanctions are automatic. The regulations remove discretion in their use from the Secretary of State. The underlying Act originally contemplated the availability of discretion, but somehow it does not appear to have been carried through to the regulations. There are no mechanisms to determine whether the sanctions are proportionate to the risk or the harm. These coercive penalties would also apply to any further membership conditions applied in future, including compulsory financial contributions for works to buildings to which the scheme member had no connection at all.

I conclude with my reading of the situation. The severity of the penalties and the sanctions, the lack of discretion in their application, the arbitrary nature of inclusion in the scheme and the effect on employees, subcontractors, other stakeholders and shareholders seem to me, and to others outside who I have talked to, to be disproportionate and suggest that—I hope—His Majesty’s Government will think again. This industry is absolutely vital to this country; we see that daily in the newspapers.

My noble friend mentioned the material suppliers. In many ways, to any of us who take a real interest in this, they are equally liable. After all, without rotten materials that were highly inflammable, we probably would not have had Grenfell. I am surprised that, if I understand what my noble friend said, so far no single firm in that field has contributed anything or is proposing to join the scheme and contribute.

The other area that my noble friend did not cover was overseas developers. A fair number of projects was undertaken by overseas developers. We have a diplomatic corps in these countries. I hope that our ambassadors or high commissioners in the relevant countries have been given the information to pursue these developers. They should be looked upon just as firmly as are our developers. If they do not wish to contribute at all, frankly, in my judgment they should be barred from working in the United Kingdom in future.

Baroness Pinnock Portrait Baroness Pinnock (LD)
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My Lords, it is seven years since the Grenfell Tower fire that killed 72 people and devastated the lives of countless others. We owe it to them, and to all those still living in buildings deemed to be unsafe, to find a route to full remediation that excludes innocent tenants and innocent leaseholders from any of the costs.

As the Minister stated, the Building Safety Act included the measures that the Government intended to take to enforce the cost of remediation on those who developed the buildings. They should also have included a route to impose the costs of remediation on those who used the flammable cladding. I know that the Minister referenced this but to date, seven years on, the Government have not been able to find a route to force the three substantial manufacturers that the Minister named to accept responsibility and accept that they ought to pay towards the costs of remediation.

Then there are the construction companies that omitted fire breaks, relied on false material-testing outcomes and relied on building inspectors contracted by the very same construction company. We Liberal Democrats have said from the very beginning, seven years ago, that whatever legislation is passed to put these wrongs right, leaseholders must not pay a penny.

Through the Building Safety Act and this statutory instrument, the Government have focused entirely on the developers. Of course, that is right, but there are government responsibilities here as well. I am talking about all Governments, not necessarily this one. Thirty years ago, those who privatised the Building Research Establishment and the British Board of Agrément enabled building control inspectors to become independent of the local planning authority. All these policy decisions played a part in enabling the Grenfell disaster. I say that because that has been said in the Grenfell Tower inquiry.

No doubt, when the inquiry publishes its findings, hopefully sometime this year, it will expose these facts and attribute relative responsibilities. Meanwhile, these regulations are draconian; in many cases rightly so. However, there are inevitably some unforeseen consequences. The first of these relates to developers that are brought into the scheme and discover that, following intrusive building inspections, their developments need no further action. The noble Lord, Lord Naseby, and I have obviously had access to the same lobbying material from those in the industry who are concerned about some aspects of these regulations.

The principle is sound; the implementation is leading to some circumstances in which those who are not responsible will be required to fund remediation for which they have no part to play. The issues arise, first, from the criteria the Government have set. As the noble Lord, Lord Naseby, pointed to, these are around profitability—so those developers that were unprofitable but nevertheless built these faulty and dangerous buildings are excluded. I am sure the Government did not intend that to be the case, so I hope the Minister will point to the way in which that will not happen. It does not seem right at all, because we know how companies can evade some of the requirements put on them.

The next area has again been raised by the noble Lord, Lord Naseby, but I want to emphasise some of it. I remember the debates on the Building Safety Act. Initially, it was all about trying to ensure that only those developers and construction companies, and those who knowingly supplied flammable cladding—I am still waiting for that bit; I say “knowingly” as it is in the evidence of the Grenfell Tower inquiry—would be made liable for the remediation cost. That is fair and is absolutely the right thing to do. Those who did these things knowingly must be made to pay for them, but not those who did not. Unfortunately, the great scoop of these regulations will pull in some companies and developers that built blocks of flats of over 11 metres but kept to the rules that existed at the time. That does not seem right.

Another issue with these regulations—I am sure that the Minister will recognise this as an unforeseen outcome of them—is that I could see no way by which developers, once they join the scheme and then assess their buildings, at a considerable cost, are able to leave the scheme if they find that there is no action to be taken. This issue was in the lobbying material as well. Perhaps the Minister will either give me an assurance that they can or point me to where it says that they can leave, because that would be helpful.

There is another issue with these regulations, which are very extensive. Many developers are part of a wider family of companies, some of which will have had no part to play in development. That family of companies is being brought into the scheme and could be sanctioned, even if it is a company that has nothing to do with development. That does not seem right either, and I am sure the Government did not want it to happen. It would be foolish, but the sanctions are automatic.

This is all about the unforeseen outcomes of some draconian regulations, which I support. But we have to try to find a way in which good players are able to escape the scheme, and the sanctions and obligations that are part of it.

I will now raise the consequential impact of these regulations on local planning authorities. I remind the Committee that I am a councillor and a vice-president of the Local Government Association. I notice that there is an impact assessment, and calculations have been made of additional costs, but I am not sure that it has taken into account the differential impacts on local planning authorities across the country. The regulations will have very little impact on some, and a major impact on others. For those on which there will be a major impact, there will be expectations of additional members of staff, either in building inspection or as local planners. That does not seem to have been raised in the impact assessment as a calculation of costs to local planning authorities. I know the Minister agrees with the “new burdens” philosophy—the agreement that any new burdens that the Government impose will be met in full—so will the costs be met in full and, importantly, over the lifetime of these regulations?

Secondly, in her opening remarks—for which I thank her—the Minister emphasised social housing remediation a couple of times. Can she remind us where the costs for essential remediation of social housing—either local authority housing or social housing providers—will come from?

My next point is about the end date for the regulations. It seems that they are designed to respond to a specific set of issues so, once all the remediation work has been done, will the regulations cease? I could not find a sunset clause; should there be one? Otherwise, we will have sets of regulations that are no longer relevant.

Finally, I remind the Minister that these regulations address the safety issues facing only those who live in buildings that are more than 11 metres high. She will know what I am about to say, because I feel very strongly about it: those living in blocks that are 11 metres or lower are being forgotten. The leaseholders who live there still face extortionate insurance costs, for example, and many are still trapped in their flats, unable to sell. My big ask of the Minister is this: will she agree to meet those of us in the House who are concerned about this situation to discuss it and see whether we can find a way forward? It is not going away. The Government have tried; I am not pointing fingers. It is just that this is where we are, and we have to try to find a solution.

In conclusion, I totally support these regulations, with the caveats that I have explained. I want them to succeed, but I want the Minister and the Government to think about the unconsidered consequences. I look forward to what she has to say in response.

Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage (Lab)
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My Lords, I draw attention to my interests in the register as a councillor at both district and county level and as a vice-president of the District Councils’ Network, though not the LGA—yet.

I thank the Minister for introducing the regulations, which we welcome. I am sure all noble Lords want every possible step taken to support leaseholders and to speed up the remediation of these unsafe buildings. Perhaps it is my inexperience in this House, but would it not be more appropriate for legislation with 43 clauses to be considered properly, as a Bill, rather than as regulations? We understand how urgent this is, so if the Minister has done it as a matter of expediency, perhaps she could confirm that it could not have been achieved in another way, allowing full scrutiny of all the issues raised by noble Lords this afternoon.

16:45
Some of these issues, including those around eligibility, as raised by the noble Lord, Lord Naseby, and those around housing associations, social housing and other actors, as raised by the Minister, show that further work on this—what amounts to a mini-Bill—might have been helpful. I think there is probably another piece of work to be done on the issues we have heard about construction materials.
We have worked constructively with the Government through the drafting of legislation to improve building and fire safety and will continue to do so. It is unfortunate that here we are now—I am sorry to contradict the noble Baroness, Lady Pinnock—I believe six years on from the dreadful events of Grenfell Tower.
Baroness Pinnock Portrait Baroness Pinnock (LD)
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Oh yes, it is six years.

Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage (Lab)
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It is unfortunate that we are only now starting to make some progress on the essential remediation works that will allow leaseholders to sleep easily in their beds and begin to get their financial plans and aspirations back on track. I appreciate that some well-intentioned developers have done work in the meantime, but the regulatory framework supporting it is only now coming into play.

I pay tribute to the tireless campaigning groups, both those directly associated with Grenfell and others such as the Cladiators group in my area, driven by Sophie Bichener. I know the Minister is very familiar with Sophie’s case so I will not reiterate all the details, but the firebreaks referred to by the noble Baroness, Lady Pinnock, are a good example of non-cladding-related building fire safety jeopardy. Without these campaigns, we would almost certainly be no nearer having this leaseholder limbo resolved.

The fact that 48 developers have now signed up to the remediation contract is a significant step forward; there is no doubt about that. However, signing up is one thing and action is another. We hope that things will start to move much more quickly now. What steps is the department taking to ensure that developers move as quickly as possible on the remediation steps, and how will it monitor, challenge and enforce where appropriate?

We hope that the reports of full risk assessments by major developers to determine which defects need resolution and which do not are not simply a further device to delay essential works. Can the Minister tell us whether any deadlines are being set for all such risk assessments to be completed?

We would also like some reassurance about how leaseholders will be kept informed and updated on progress. Does this responsibility fall on the developers? If so, how will the department ensure that it has been carried out?

In his Statement on 14 March 2023, the Secretary of State rightly said:

“Those who are responsible must pay”.—[Official Report, Commons, 14/3/23; col. 727.]


While we welcome the fact that 48 builders have already signed up, it is extremely disappointing that some have still refused to do so. We are aware that the Secretary of State has rightly been very robust in his language in trying to bring builders that have not yet signed the contracts into line with those that have. We absolutely support this robust approach and hope that it is successful. If not, as the Secretary of State has clearly stated, such developers will be prohibited from further development. We have heard more about that this afternoon.

It would be helpful to know how such a ban will be enforced. The Minister has set out some further information relating to the enforcement process but it would be helpful to know how it will work. Is it to be done by the department or will it be a new burden on local government—as referred to by the noble Baroness, Lady Pinnock—and will that new burden be fully funded?

We welcome any action to address the building safety crisis, but the remediation contract and responsible actors scheme are still only a partial fix to the problem—in part, owing to the more limited scope of the definition of a relevant defect used in the remediation contract—compared to the Building Safety Act. Signing the contract will not obligate developers to fix all life-critical fire safety defects as defined by the Building Safety Act 2022. The Government acknowledge this in the Explanatory Memorandum, where they state:

“The developer self-remediation approach, and the RAS, is to be expanded over time to cover other developers who developed or refurbished defective 11m+ residential buildings and should pay to fix them”.


Is it intended to extend the contract in future to cover all life-critical fire safety defects? We also have a particular concern regarding the number of buildings covered by the contract. The department itself estimates that only 1,500 buildings will be remediated as a result of the contract, whereas credible estimates put the total number in need of remediation at around 10,000.

The Secondary Legislation Scrutiny Committee comments that

“between 6,220 and 8,890 mid-rise (11 to 18 metres) residential buildings required work to alleviate life-critical fire safety risks due to external wall systems”.

How does the Minister envisage this being resolved and what is the timescale? How many of the outstanding buildings beyond the 1,500 are the responsibility of those developers that have refused to sign the contract?

Meanwhile, ACM cladding remains on faulty high-rise buildings, with remediation not having even started on 22 of them. The building safety fund for remediation of non-ACM cladding and other fire safety defects on high-rise buildings is proceeding at a glacial pace, with just 37 buildings having completed remediation out of the 1,225 applications for funding. The building safety fund for non-ACM high-rise remediation was rated as red in the Infrastructure and Projects Authority annual report for 2022, falling from amber the year before, meaning, to quote the report:

“Successful delivery of the project appears to be unachievable. There are major issues with project definition, schedule, budget, quality and/or benefits delivery, which at this stage do not appear to be manageable or resolvable. The project may need re-scoping and/or its overall viability reassessed”.


Many leaseholders in unsafe buildings waited patiently for years for building safety fund applications to be processed by the department, only to see them terminated. What guarantees are there that any building covered by the contract will not face additional delays to remediation work? Although we welcome the further action proposed in the regulations, some questions remain outstanding. How will leaseholders in buildings with defects outside the scope of the contract get them remediated?

With reference to developer obligations to identify, assess and remediate unsafe buildings, the contract stipulates that they must be carried out “as soon as reasonably practicable”. What assurances can be given to affected leaseholders of their ability to enforce this to ensure that developers are acting within a reasonable timeframe? What is the point of contact in the department and what powers will be used to support them? Why are buildings that are part of national infrastructure exempt? Surely, people working in or living close to such buildings should expect at least as great a level of protection, if not more.

I note the Minister’s comments about prohibited persons, but it is difficult to see how the use of new entities will not avoid those prohibitions and, without sanctions on that, where is the incentive not to do so? Can the Minister explain how new developers will be brought into the regulatory framework?

The Minister raised the critical issue of construction products. Will we receive further regulations on this? It seems they may be necessary. There was a Question today in your Lordships’ House on the manufacturers of construction products used in schools. Surely the manufacturers of construction products must be responsible for adequate safety testing of materials they produce.

I agree with the noble Baroness, Lady Pinnock, about work for remediation of buildings under 11 metres. What assessment has been done by the department of the extent of those issues in lower-rise buildings?

To reiterate, we welcome the additional regulations and encourage the Minister and the Secretary of State to be as robust as is necessary to bring these long-drawn-out issues to a stage of remediation and resolution. We hope that the department will use every power it has to deal with those who are not looking to do the right thing and live up to their responsibilities. The leaseholders in these buildings have been faced with a living nightmare. We owe it to them to get these issues resolved without any further delay.

Baroness Scott of Bybrook Portrait Baroness Scott of Bybrook (Con)
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I thank the noble Lords who have contributed today. I open my remarks and answers to the questions asked by saying that the noble Baroness, Lady Pinnock, is absolutely right: six years ago, 72 people died; that is what we are talking about today and why this is such an important statutory instrument. To the noble Baroness, Lady Taylor of Stevenage, I say that this is secondary legislation to the Building Safety Act 2022; that is how it comes in today.

I move on to answering questions. A number were asked by all three noble Lords, so excuse me if I do not mention each name but I will try to remember them. First, the Government believe that it is fair and reasonable that developers that meet the prescribed eligibility criteria for the responsible actors scheme, including a profit threshold, should be asked to assess whether they have developed relevant buildings that require remediation, and remediate those buildings.

We believe it is appropriate that the Government create a level playing field with consequences for eligible developers that opt not to make these important commitments. The obligations under the scheme and contracts for developers with no buildings to remediate are very modest once they have done the necessary work to check and confirm that they have developed no buildings requiring remediation work. As I said in my speech, an eligible developer that substantially satisfies its obligations under the regulations and the self-remediation terms may be released from the scheme. I think that answers the question from the noble Baroness, Lady Pinnock. We are engaging with a number of developers about the developer remediation contract, and I hope they will respond positively to that engagement.

I move on to the issue of construction product manufacturers. I know that this is a concern of noble Lords and it is an important one. I reiterate that the Secretary of State made clear in a recent letter to the major institutional shareholders in the three companies most involved—Kingspan, Arconic and Saint-Gobain—that, if an appropriate financial package is not agreed, the focus of the department will be trained on them, and the consequences for the relevant construction product manufacturers are likely to be severe. We can do this only one stage at a time, but they are next in line. The Secretary of State made it clear that reputational, legal, commercial or further new tools could all be considered if these firms do not do the right thing.

My noble friend Lord Naseby asked: who says that these buildings are unsafe? The Government believe that it is fair and reasonable that the developers that meet the prescribed eligibility criteria for the RAS, including a profits threshold, should be asked to assess whether they have developed relevant buildings that require remediation. I do not think that is unreasonable.

My noble friend also asked why we were focused on profits. We have used the £10 million average operating profits threshold to make sure that the initial phase of the scheme captures larger, more profitable businesses and those that have developed the majority of the affected buildings.

My noble friend also asked about the application of prohibitions to group companies. An eligible non-member of the scheme will be prohibited along with the entities that they control, so it is not all group companies and an exception is available for entities controlled by an eligible non-member that is not in the building industry. Developers can have quite complex business relationships both here and abroad, and we need to capture those as well.

17:00
That takes me on to foreign developers. I thought I made it clear that any overseas-based developer that meets the eligibility criteria in the regulations will be eligible for the scheme. The eligibility criteria do not distinguish between overseas-based and UK-based companies. Several developers that have signed the developer remediation contract have overseas parent companies at the moment. Looking beyond the responsible actors scheme, the building safety levy will be tied to the building safety process in England. Qualifying projects will be required to pay the levy regardless of where the developer is based. I hope that answers the question about that.
I think I have answered the question from the noble Baroness, Lady Pinnock. Where members have satisfied the Secretary of State that they have done everything they should, their membership can then cease.
I knew the noble Baroness would bring up the point about buildings under 11 metres. I am sorry that there is nothing more to say, but I will reiterate what I have already said for Hansard, because it is important. The scheme and the developer remediation contracts cover residential buildings over 11 metres. That reflects the risk to life from historical fire safety defects, which is much lower in buildings under 11 metres. Therefore, building safety-related remediation works are required in a very small number of buildings under 11 metres. We discussed this at length in the debates on the Bill and I am not sure I can say any more, except that, in very rare cases where remediation work is needed, the responsibility for the costs of fixing the historical building safety defects should—and does—still rest with the building owner. They should not pass these costs on to leaseholders but seek to recover them from those responsible for building unsafe homes in the first place. I am more than happy to meet the noble Baroness and any other noble Lords to discuss this further if she would like to. I will get my office to get in touch with her.
The noble Baroness, Lady Pinnock, also raised social housing remediation. Registered providers are already responsible in law for the safety of their buildings, and the Government are working with the Regulator of Social Housing to strengthen oversight of buildings developed for registered providers by developers covered under the RAS contract. Registered providers can access government remediation schemes for funding. It is covered, but under different legislation.
The noble Baronesses, Lady Pinnock and Lady Taylor of Stevenage, quite rightly asked about new burdens for local planning authorities. We are working closely with local authorities and local planning authorities to ensure a smooth implementation of the scheme. If any disproportional costs for local authorities and local planning authorities are identified, they will be addressed through the new burdens doctrine, as we normally would. Details of implementation of this will be set out in guidance to come.
The noble Baroness, Lady Taylor of Stevenage, also asked about a lot of numbers and timings. If she does not mind, I will get those up-to-date figures and timings and will write a letter, copying it to all noble Lords. I will also ask the team to look at Hansard and make sure that anything I have not answered is put in the letter and answered at the same time.
To conclude, these draft regulations establish a responsible actor scheme to secure the safety of people in residential buildings, to protect leaseholders and taxpayers from costs and to ensure a level playing field where any developer eligible for the scheme that does not take responsibility for remediating unsafe residential buildings will face serious consequences. As I have said, there is of course much more to do, and the Government intend to expand the scheme in future, but I hope the Committee will welcome this important step forward.
Motion agreed.

Building Safety Act 2022 (Consequential Amendments etc.) Regulations 2023

Tuesday 20th June 2023

(1 year, 1 month ago)

Grand Committee
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Considered in Grand Committee
17:05
Moved by
Baroness Scott of Bybrook Portrait Baroness Scott of Bybrook
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That the Grand Committee do consider the Building Safety Act 2022 (Consequential Amendments etc.) Regulations 2023.

Baroness Scott of Bybrook Portrait The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
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My Lords, these regulations will make technical but important changes to the language used in existing legislation, bringing it into line with the new terminology and processes introduced by the Building Safety Act 2022.

I will start by providing some context for these regulations. After the Grenfell Tower tragedy, the Government recognised the need for an overhaul of our building safety regime. In 2017 we appointed Dame Judith Hackitt to conduct an expert review of the current regime. Her review identified the need for significant cultural and regulatory change, including recommendations focused on the building control process.

Part of the Government’s response to these building control recommendations included the introduction of provisions in Section 33 of the Building Safety Act that repeal Section 16 of the Building Act 1984. The Government consulted on these provisions, and they were subject to pre-legislative scrutiny ahead of formal consideration of the Building Safety Act.

Section 16 made provision for the deposit of plans with local authorities before starting building work, as well as the passing or rejection of the plans. The information provided to building control was not always consistent, nor always sufficiently detailed for the work to be carried out.

Section 33 of the Building Safety Act, which has yet to be enacted, repeals Section 16 and provides instead for a new system of applications for building control approval. For higher-risk buildings, this means a more stringent system, with the building safety regulator the sole building control body. Applicants cannot proceed with work without explicit approval from the building safety regulator.

For non-higher-risk buildings, there is no significant change from the existing procedure. Local authorities and approved inspectors will remain responsible for supervising this work, and work can begin before approval is granted. Applicants do so at risk of having to uncover or change work and could face enforcement action. In addition, provisions in the Building Safety Act largely transfer procedures for appeals under the Building Act from the magistrates’ court to the specialist First-tier Tribunal.

The purpose of these regulations is to align the Highways Act 1980, the Clean Air Act 1993 and 13 local Acts with the terminology and processes that will be established when Section 33 of the Building Safety Act is enacted. Provisions in the Highways Act that relate to the payment of charges for street works when building control plans are deposited are amended to refer to new systems of applications for building control approval. Section 16 of the Clean Air Act is also amended. This section requires local authorities to check the height of proposed chimneys to ensure that they are tall enough to prevent smoke and particulates becoming prejudicial to health. It is amended to replace references to the deposit of plans with provisions that refer to applications for building control approval.

Similarly, 13 local Acts are also amended to replace definitions of the deposit of plans with provisions that instead refer to the new system of applications for building control approval. Further references to the deposit of plans in these acts are also updated to reflect the new terminology. Of the local Acts, 11 contain provisions relating to appeals to the magistrates’ courts. To align these Acts with the new procedure for appeals, the provisions are amended to direct appeals to the First-tier Tribunal. The instrument also contains a transitional provision providing that consequential amendments do not apply to plans for building work deposited before the date on which the regulations come into force.

I wish to reassure noble Lords that they will have the opportunity to scrutinise the specific requirements of the new system of applications for building control approval. These requirements were subject to consultation in 2022 and will be set out in a number of statutory instruments that amend the Building Regulations 2010 and provide for new building control procedures et cetera for higher-risk buildings. The Government will lay these instruments in the coming months.

The Government intend to bring both these consequential amendments regulations and the regulations that create the new building control system into force in the autumn. Without these consequential changes, the provisions of the Highways Act, the Clean Air Act and the 13 local Acts will cease to operate as they do now, as they will no longer have meaning once Section 33 of the Building Safety Act is brought into force. I hope that noble Lords will join me in supporting the draft regulations. I commend them to the Committee.

Lord Stunell Portrait Lord Stunell (LD)
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My Lords, I rise to comment on this statutory instrument and thank the Minister for the introduction she has given to it. It goes in partnership with Section 32, which is not yet in force. She has rightly drawn attention to the fact that it does not cover the question of the actual application process, which is going to be dealt with later. So it is rather a small cog in a very big machine to make sure that the system works effectively.

I do not propose to spend a lot of time commenting on the local building Acts, with which I once used to wrestle in a professional capacity. I am sure that rationalising those makes a great deal of sense, regardless of the building safety and high-rise issues driving this change.

I note the frequent references to the building safety regulator in what the Minister put to the Committee a few moments ago. I share her view that the regulator is an absolutely fundamental part of the new machinery and, clearly, will be pivotal to making sure that, ultimately, the machine moves and works. The Minister will know that I have already expressed my concern about proposed amendments that the Government have brought forward in the levelling-up Bill to potentially change who the regulator is, perhaps on a timescale that could very likely interact with the implementation of Section 32 and the bringing into force of a new application process. What consideration has the department given to the potential for this process and the very tightly drawn and carefully designed machinery, of which this is a small part, to continue to function—or, rather, begin to function—smoothly and without effort or distortion when the new system comes into play, as outlined in the levelling-up Bill amendments by the Government?

That is a matter that we will obviously return to at the Report stage of consideration of that Bill—I do not want to enter that debate now—but I hope the Minister will give us what reassurance she can that the machine of which this is a small cog is intended to continue working seamlessly in the event that the Government proceed with completely reshaping the building safety regulator sometime in the next two years.

17:15
Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage (Lab)
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My Lords, I thank the Minister for setting out the proposals in these regulations. Although it could be considered a minor amendment dealing with just consequential matters, in view of the overall context of building safety and the fact that this is one of a number of steps we are seeing to ensure that the very serious issues that have arisen from the Grenfell Tower disaster and others are taken seriously and acted upon, we need to treat all these regulations with a degree of seriousness.

We were very pleased to learn that proposals for new building regulations were consulted on last year and that new regulations will come forward before the Summer Recess for enactment in the autumn. We look forward to hearing about the new process. As we are not able to amend these through the regulation process, I ask the Minister whether we will have the opportunity to see them in draft form before they come through to us.

Two aspects relating to building safety and building control that have emerged in recent years are, first, that the transfer to the private sector—the deregulation —of building control did not anticipate that there would be an impact on the quality or availability of the building control function. Neither did it anticipate the dilution of the independence of the building control function from the development industry.

Secondly, we hope that, as new regulations are developed, attention will be paid to the capacity, resources, recruitment and retention of the building control inspectors to ensure that they are sufficient to deal with what we hope will be tighter regulation for building safety in future.

We note the transfer of the appeals procedure to the First-tier Tribunal. Can we be reassured that the First-tier Tribunal will have sufficient resources to enable it to deal with those new duties? In view of the glacial pace of progress on building safety matters that leaseholders have had to endure, it would be unfortunate in the extreme if the level of appeals resulted in unacceptable backlogs and were not dealt with promptly. It will also be essential that matters such as stop notices are able to be progressed without delay. I hope the resources are there to deal with that.

Baroness Scott of Bybrook Portrait Baroness Scott of Bybrook (Con)
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I thank noble Lords for that and for their brevity; I think that was right, considering that these are quite technical matters. It is important that many of the things brought up by both noble Lords will be discussed further when we bring the building control SIs to the Committee later in the year. In particular, the question of whether building control remains as professional and regulated as currently is an important issue. That has to happen, and we will have that debate.

I was also interested in the capacity of tribunals; that is always important. We know that the magistrates’ courts are probably where a lot of things are being held up. I quite agree that the First-tier Tribunals must have the capacity to be able to deal with things in a timely manner.

As far as the building safety regulator and the LURB are concerned, I can assure the noble Lord that the Government will work to ensure that all these parts of building safety work together and that there is no black hole between one and the other. That will take some timings; I am sure that we will discuss that further before it happens. If the LURB goes through, there will be SIs to change the regulator and to ensure that everything works in a timely manner and nothing is lost in the meantime. I can assure noble Lords that we will work towards that end. To conclude—

Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage (Lab)
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Before the Minister moves on, it would be really helpful to understand the entire role of the building safety regulator. There has been a lot of heavy lifting as we have gone through the process of the LURB and the Building Safety Act, and it would be really helpful if the entire scope of the building safety regulator could be set out somewhere.

Baroness Scott of Bybrook Portrait Baroness Scott of Bybrook (Con)
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I am more than happy to write to the noble Baroness, and copy in the Library, about what we foresee that to be, although that concerns the LURB and not this instrument. I am happy to have a meeting on that, if necessary, before we go into that part of the LURB on Report.

As I said, these regulations will ensure that the Highways Act, the Clean Air Act and the 13 local Acts will continue to function as intended when the new system of applications for building control approval is brought into force. I hope the Committee will join me in supporting these regulations.

Motion agreed.

Environmental Protection (Plastic Plates etc. and Polystyrene Containers etc.) (England) Regulations 2023

Tuesday 20th June 2023

(1 year, 1 month ago)

Grand Committee
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Considered in Grand Committee
17:22
Moved by
Lord Harlech Portrait Lord Harlech
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That the Grand Committee do consider the Environmental Protection (Plastic Plates etc. and Polystyrene Containers etc.) (England) Regulations 2023.

Relevant document: 43rd Report from the Secondary Legislation Scrutiny Committee

Lord Harlech Portrait Lord Harlech (Con)
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My Lords, I declare my farming and land management interests as set out in the register. These regulations were laid before the House on 23 May.

The purpose of this instrument is to restrict the supply of single-use plastic plates, bowls and trays and to ban the supply of single-use plastic cutlery, balloon sticks and expanded and extruded polystyrene food and drink containers, including cups. The instrument applies to England only, as environmental protection is a devolved matter. I will cover both the purpose and the impact of the instrument, starting with the former.

It is the Government’s ambition to leave the environment in a better state for the next generation. The Government’s 25-year environment plan and the resources and waste strategy outline the steps that we will take to eliminate all avoidable plastic waste by 2042. Government measures focus on extracting maximum value from plastic materials by making sure that we keep it in circulation for longer, moving away from a “take, make, throw” model and shifting towards a circular economy. Single-use plastic items are especially problematic, as they are typically littered or discarded to general waste, rather than recycled. This is due to the difficulties involved in segregating, cleaning and processing them.

The instrument will restrict and ban commonly littered single-use plastic items that we so often see polluting our environment and are frequently reported in beach litter surveys. These items can endanger wildlife and damage habitats. As well as causing damage to biodiversity, there are also costs associated with their clean-up. It is estimated that the UK spends more than £15 million a year removing beach litter. This does not include the costs imposed on our tourism and fishing industries, which are also impacted.

As is well understood, plastic eventually breaks down into microplastics, ending up in our soils and seas and eventually permeating our food chains. The full impact of microplastics is still being uncovered, especially the impacts on human health. Therefore, to build on the success of other single-use plastic item bans and our carrier bag charge, further action is needed to curtail the use of problematic single-use plastic items and their release into the environment.

Turning to the impact of the statutory instrument, we acknowledge the ongoing voluntary action being taken by industry to reduce the use of these items, led by the UK Plastics Pact. These new regulations will support that and ensure that all businesses move to more sustainable alternatives.

To inform the regulations, we gathered key stakeholder views by running a public consultation on these measures between November 2021 and February 2022. This showed overwhelming support for the regulations, with more than 80% of respondents supporting their introduction. We also consulted businesses, the NHS and charities to determine the scope of the regulations. To minimise the impact on small businesses, we have given a nine-month lead-time since the announcement of the ban.

It is intended that this instrument will come into force on 1 October this year. From then, it will make it an offence to supply single-use plastic cutlery, balloon sticks and certain types of polystyrene, with no exemptions. The ban on the supply of single-use plastic plates, trays and bowls applies only when supplied to the end user —typically a consumer, who will use them for their intended purpose. Businesses can continue to supply these items to other businesses. This allows single-use plastic plates, trays and bowls to continue to be used for packaging, as defined in Regulation 3 of the Packaging (Essential Requirements) Regulations 2015. This is to avoid confusion with the Government’s proposals for extended producer responsibility for packaging, which will give producers responsibility for the costs of their packaging throughout its lifecycle. However, it is important to stress in all cases that we encourage businesses to use reusable alternatives where practical.

We are determined to get this right, and it is vital that businesses and the public are informed about what they can and cannot do. We have recently published guidance for businesses and will publish our guidance for local authorities in advance of this instrument coming into force. The guidance will assist manufacturers, suppliers, retailers and the public in understanding the enforcement and sanctions regime. Defra intends to further raise awareness by meeting local authority representatives to provide further clarity and support on the restrictions and exemptions, and to empower trading standards officers to carry out effective enforcement.

This instrument also makes amendments to the Environmental Protection (Plastic Straws, Cotton Buds and Stirrers) (England) Regulations 2020 and the Environmental Protection (Microbeads) (England) Regulations 2017. These are to amend the civil sanctions provisions in those instruments to provide for fixed monetary penalties, instead of variable monetary penalties. This will ensure consistency with the civil sanctions provisions in this instrument and make enforcement easier for local authorities. The amendments to the 2020 regulations also omit a transitional provision relating to medical devices, which is no longer needed. Finally, I should mention a typographical error in the instrument as laid in draft. The heading preceding Regulation 14, “Part 1—Amendments”, should read “Part 6”. I confirm that our intention is to have this corrected in the draft instrument before it is made.

To conclude, these new regulations send a strong signal to industry and the public that we need to think carefully about the products we buy and the materials from which they are made. This instrument will bring us a step closer to protecting the environment and reducing the risk of harm to human health and marine life. I commend the draft regulations to the House.

Baroness McIntosh of Pickering Portrait Baroness McIntosh of Pickering (Con)
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My Lords, I thank my noble friend and welcome him to a speaking role on the Government Bench this afternoon.

I broadly welcome the regulations before us—I just have some queries, which I shall address. In so far as it goes, the ban is very welcome. We are told that the instrument

“bans the supply of single-use of plastic cutlery and balloon sticks and EPS/XPS food and drink containers in England”.

But at paragraph 7.4, the Explanatory Memorandum goes on to say that the,

“ban does not apply to the supply of a single-use plastic plate, tray, or bowl that is packaging as defined in regulation 3 of the Packaging (Essential Requirements) Regulations 2015”.

Apparently, that is to do with extended producer responsibility. Would it not have been better if it had been absorbed in these regulations? From the point of view of producers and users, it would be clearer what is being banned under the instrument and what is not.

17:30
The Explanatory Memorandum goes on, at paragraph 7.7, to state that
“there are exemptions to the restriction on the supply to the end user of single-use plastic stemmed cotton buds and single-use plastic straws for single-use plastic-stemmed buds and single-use plastic straws”.
Are they totally exempt? My concern, particularly with single-use plastic buds, is that people often do not know how to dispose of them and regrettably put them down the loo. They then end up in rivers, seas and places that they should not, which is why they get washed up on the beach. Unless they are specifically for medical purposes, as paragraph 7.7 says, I would be interested to know what categories are exempt.
I am struggling to understand what has happened with wet wipes. Have we already banned them? If not, why not? I remember that a lot was said about that during the passage of the Environment Act. The reason I ask about it is because I was with someone from the National Infrastructure Commission yesterday who seemed to think that they had not been banned. I am not completely up to date on that, and I would be interested to know.
The cost of the instrument is not insignificant. We are told that in 2019 prices, 2020 present value, the net cost to business per year will be £10.2 million. How has that figure been reached? It is quite sizable.
The Green Alliance has expressed concerns in its very helpful briefing, which it shared with me in preparation for this afternoon. It asks for reassurance from the Government that the regulations will not simply lead to switching from one use of an unnecessary single-use item to other unnecessary uses of non-plastic items that might be equally difficult to dispose of. It begs the question as to whether the Government or the department are going to give any advice as to which alternative materials to plastic might be used, and what assessment they have made, whether they are made from wood or alternatives—possibly compacted paper, I do not know—of the impact they might have on the environment.
My noble friend said at the outset that this is a devolved matter. It is interesting to see that Wales, Scotland and parts of the EU such as France have gone further. France, I understand, is banning disposable cutlery altogether, and the EU is considering targets for the reuse and reduction of some materials. Given the Government’s commitment, which my noble friend stated at the outset, to leaving the environment in a good or better state, should we not be going as far as we possibly can? I understand also that Wales, in line with the EU, is intending to ban highly damaging oxo-degradable plastics; apparently the Government are not minded to do that at the moment.
If we are going to go for wooden cutlery and wooden materials, we should be very conscious of the fact that many of these materials come from third countries such as Brazil. In the Amazon area, there is a deforestation programme with which I think the Government themselves are very unhappy. Where will these alternative wooden materials be sourced from to ensure that we are indeed leaving the environment in a better state? With those few remarks, overall I applaud and welcome the regulations.
Baroness Bakewell of Hardington Mandeville Portrait Baroness Bakewell of Hardington Mandeville (LD)
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My Lords, I thank the Minister for his introduction to this statutory instrument. Having been around for the previous SI on the banning of microbeads in washable products and plastic straws and stirrers, there are familiar elements. Although single-use plastic straws are already banned, reusable plastic straws are readily available in some bigger supermarkets. Having bought a packet of these for my granddaughter, I can see that they are not reusable due to the difficulty in cleaning them, and that they have a very limited shelf life.

I regret to say that I found the Explanatory Memorandum contradictory and confusing. I am afraid that the Minister has already read paragraph 2.1 out, but I am going to do so again. It says:

“This instrument is being made to restrict the supply of single-use plastic plates, bowls, and trays and ban the supply of single-use plastic cutlery and balloon sticks and expanded and foamed extruded polystyrene … food and drink containers, including cups”.


That is quite clear and understandable. However, if we move to paragraph 6.5, the EM states that

“the market access principles of the UKIM Act will only apply to this instrument in respect of the restriction it introduces to the supply of single-use plastic bowls and trays”.

That may not be contradictory to those who wrote this SI, but I fear it certainly is to me. It also seems that paragraphs 6.4 and 6.5 are something of a “get out of jail free” option. The issue about clarity is one I will return to later.

Single-use plastic bowls and trays, although banned in England, can still be produced in Scotland, Wales and Northern Ireland. Since there is no border between the devolved Administrations, these items will be brought into England. As the supply of all the items listed in paragraph 2.1 to the end-user are banned, this will cause some confusion.

However, it does not apply to single-use plastic bowls and trays if they are used as containers for food at the point of sale in a takeaway. One of the most pernicious forms of litter containing plastic is that which not only occurs around fast-food outlets such as McDonald’s, Kentucky Fried Chicken and Burger King but is strewn around the countryside, where it has been thrown out of car windows or left littering roadside lay-bys. I am struggling to see why these exemptions are being allowed. Can the Minister explain why this is to be permitted into the future? Are the Government relying solely on the extended producer responsibility legislation to sort this issue out?

I turn to the consultation which Defra conducted; the Minister has referred to this. From 20 November 2021 to 12 February 2022, an extensive consultation took place. A good response from all sides was received, with 95% of the public and non-governmental organisations supporting all the bans. However, businesses were less enthusiastic, with 20% opposing any kind of a ban on single-use plastic. On 16 January this year, a further consultation took place by way of a notice in the London Gazette, plus a weblink to the GOV.UK website and Defra’s “relevant” stakeholders, as the department put it. The timeframe for response was 15 days; not surprisingly, there was a small response. Can the Minister say just how small that response was?

I was interested to see that the Association of Chief Trading Standards Officers responded on the enforcement issues; I should declare my interest as a vice-president of the LGA. It is generally accepted that trading standards officers are under enormous pressure already. They are now being asked to enforce this SI and collect the fixed penalty fines, in accordance with the future published guidance.

The regulations will come into force on the 24th day after they have been made. We are debating them today, 20 June; they will doubtless be on the Order Paper tomorrow, 21 June, for agreement in the Chamber. This means that they will come into force on 15 July. Can the Minister assure us that the guidance will be published before 15 July so that trading standards officers know exactly what they are expected to do and how to execute their functions successfully?

Small businesses employing up to 50 people will have over nine months’ grace in which to implement these regulations from the date of the consultation. Can the Minister say whether this is the consultation which ended in February 2022 or the one from January this year, which was somewhat limited?

I turn now to the penalty, or fine. This is fixed at £200 and is a one-off, no matter how many offences there are. It can be reduced to £100 if it is paid within 28 days—a bit like a parking fine. Having looked at the SI—I may have missed it—I cannot see who exactly will be charged with the penalty. Is it the manufacturer, the retailer or the end-user? The level of fine appears to indicate that it is the end-user who will pay. Can the Minister provide clarification, please?

The extensive section in the SI on non-compliance gives the opposite impression. Here the inference is that the manufacturer will be liable for up to 100% of the cost of the compliance notice if they do not comply. As I said earlier, this SI is not transparent but confusing and contradictory.

Nor does the SI go far enough, and I am concerned about the plastics that it does not cover. Oxo-degradable plastics are designed to fragment in the presence of oxygen, but will not break down at all, or only extremely slowly, in environments with relatively low concentrations of oxygen, such as marine environments, or if covered by soil or buried in a compost bin. Wales, which has an international reputation for recycling and waste management, has banned the use of oxo-degradable plastics as they are regarded as one of the most pernicious types of plastic and a source of damaging microplastics. The EU has also banned them. Do the Government have any plans to ban the use of oxo-degradable plastics in England?

There is also the issue of substitution, as referred to by the noble Baroness, Lady McIntosh of Pickering. If single-use plastics are banned, what other unnecessary non-plastic single-use materials are likely to be used as a replacement? The Environment Act 2021 gives powers to implement charges for single-use items, which have so far not been used. What plans do the Government have to begin charging for non-plastic single-use items?

Lastly, the UK internal market is referred to in the SI. What plans do the Government have to conduct a post-implementation review of the 2020 Act? The Act has implications for the Government’s environmental ambitions to leave the environment in a better state than they found it, to which the Minister referred in his opening remarks. I am not convinced that the SI moves us much closer to the Government’s goal.

Baroness Anderson of Stoke-on-Trent Portrait Baroness Anderson of Stoke-on-Trent (Lab)
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My Lords, I fear that I will shortly be interrupted by a Division. I, too, welcome the noble Lord, Lord Harlech, to his place. As Defra will be a recurring theme in his diary, I look forward to working with him in the months ahead.

I am a proud resident of the Potteries, which means that I am not sure why anybody would want to eat or drink from anything other than Stoke-on-Trent-made ceramic plates and mugs—the most sustainable containers from which to eat and drink—yet we find ourselves here to discuss far less sustainable alternatives. It should therefore come as no surprise to the Minister that His Majesty’s Opposition will support this SI. The Labour Party is committed to removing single-use plastics as quickly as possible and moving on to sustainable and, I hope, ceramic alternatives.

However, I am sure it will not surprise the Minister, especially following the interventions so far, that I have a few questions on the detail of the SI and the consultation, implementation and next steps. As the noble Baroness, Lady Bakewell, highlighted, does the Minister really think that 15 days was an appropriate timescale to consult business, local authorities and key stakeholders on the implementation plan and detail of this significant change in regulation and permissible products that are used extensively in nearly every community in the country?

Paragraph 10.8 of the Explanatory Memorandum notes that His Majesty’s Government notified the World Trade Organization of the draft instrument on 21 March 2023 and that:

“No objections have been made pursuant to notification”.


Given that WTO processes are incredibly slow, would we have expected objections within that timeframe? Were any representations made by the WTO which stopped short of being formal objections?

Paragraphs 6.4 and 6.5 of the EM outline the exemption under the United Kingdom Internal Market Act that means that single-use bowls and trays legally produced in or imported into other parts of the UK can be sold in England, irrespective of this ban. Can the Minister inform the Committee whether Defra has done any modelling on how many items are likely to make use of this exemption? What are the process and timescale for conducting the post-implementation review of the United Kingdom Internal Market Act 2020, in which the implications for the environmental ambition of the UK Government should be considered?

17:45
Paragraph 11.1 confirms that the policy will be enforced by local authorities and their trading standards officers. There has been a 56% reduction in the collective budgets for trading standards since 2009. Given the direct impact that these austerity cuts have had on the capacity of trading standards teams, what assessment, if any, have His Majesty’s Government undertaken of their ability to take on this additional task? These cuts have not been universal in their application, so what efforts is the Minister making to mitigate potential differentiation of enforcement across local authority areas, and how is this being kept under review?
Paragraph 12.2 talks about potential extra costs for consumers, with 60% of the total costs for retailers likely to be passed on. Given that the current rate of food inflation is running at 16.5% as of today and that we are living through an associated cost of living crisis, what discussions is Defra having with retailers to mitigate the costs being passed on?
I think we all prefer to eat off a ceramic plate—or at least we all should—but sometimes convenience wins out and disposal alternatives are necessary. In those instances, we have a responsibility to make sure that convenience is delivered with the least harm to our natural environment.
Lord Harlech Portrait Lord Harlech (Con)
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I am grateful to all noble Lords for their important contributions to this debate. These measures do not seek to solve the problem of single-use plastic in one go. However, they are an important part of a wider strategy to tackle plastic pollution and serve as an important marker that our reliance on single-use plastics must be reduced. I will address some of the points raised in the debate.

All Peers raised the consultation period. A public consultation around the policy area was carried out from November 2021 to February 2022. I understand that the consultation period on the SI itself was shorter. However, given the correlation between the two themes, it is our view that the public consultation period was long enough to address this SI. Responses from members of the public and non-governmental organisations demonstrated overwhelming support for our proposals, with 95% in favour of all bans. However, responses from businesses were varied, understandably, with approximately 20% opposing all bans, while others were supportive of the proposals but highlighted areas for further consideration to make sure that bans do not have unintended consequences.

We also engaged with relevant sectors, such as the NHS and disability charities, to determine whether any exemptions were needed. Our determination was that no medical exemptions were needed for these bans. We conducted an impact assessment, which covered banning the supply of single-use food and beverage containers made from expanded or extruded polystyrene, or EPS, in England, and banning the supply of single-use plastic plates and cutlery to the end-user in England. A de minimis assessment was carried out for the ban on single-use plastic balloon sticks in line with better regulation guidance, as the annual net direct cost to businesses was estimated to be less than £5 million. All received green ratings from the Regulatory Policy Committee.

The noble Baroness, Lady Anderson of Stoke-on-Trent, talked about costs to businesses and consumers. This is very much about reducing the cost to the environment, so this one SI is not meant to tackle all costs in society.

Baroness Anderson of Stoke-on-Trent Portrait Baroness Anderson of Stoke-on-Trent (Lab)
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My Lords, I was asking about additional costs on food-related products during a cost of living crisis, especially given evidence today suggesting that more people are having to use microwaves rather than ovens. This would potentially be covered by this SI, meaning that there will be an additional cost to the consumer. I asked specifically what debate and discussions the Minister and the department are having with retailers to mitigate the costs being passed on at this time.

Lord Harlech Portrait Lord Harlech (Con)
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I absolutely take the point and I am not downplaying it; I am just saying that this SI is focused on single-use plastics. However, I would like to reassure the noble Baroness that we remain in constant conversation with food retailers and food service providers to make sure that excessive costs are not being put on consumers at this very difficult time.

The noble Baroness, Lady Bakewell of Hardington Mandeville, raised the important issue of who will pay the charge. The supplier of the product will pay, not the end-user; I hope that provides some clarity. She also spoke about Scotland and Wales, the devolved nations. I think we are having a Division.

Baroness McIntosh of Hudnall Portrait The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)
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My Lords, there is indeed now a Division in the Chamber. The Committee will need to adjourn for 10 minutes. Does the Minister have much more to say? If not, we might be able to clear this instrument and start fresh after the Division with a new one. Otherwise, we will adjourn and pick up with him later.

Lord Harlech Portrait Lord Harlech (Con)
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I was asked a great many questions and I would like the opportunity to answer.

Baroness McIntosh of Hudnall Portrait The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)
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My Lords, in that case we will adjourn the Committee for 10 minutes and return to the Minister afterwards.

17:51
Sitting suspended for a Division in the House.
18:00
Lord Harlech Portrait Lord Harlech (Con)
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My Lords, we were getting on to the topic of how some of the devolved nations are dealing with plastics and recycling. The Government’s view is that plastic pollution is a global challenge and, as such, we welcome ambitious actions from all Governments. All nations across the UK are making good progress on tackling these challenges. However, where areas are devolved, nations are able to act in ways that reflect their circumstances. For instance, the Government moved to introduce restrictions to the supply of single-use plastic straws, stirrers and cotton buds in October 2022, ahead of the Scottish Government. We delayed those restrictions from earlier in 2020 to avoid additional burdens being faced by businesses on top of the challenges already posed by the impact of the coronavirus pandemic. We have to move at pace, but we also think it is right that each of the nations has the flexibility to address its most pressing problems in the timescale it wants.

The noble Baroness, Lady Bakewell of Hardington Mandeville, mentioned how the ban will be affected by the UK internal market Act. The United Kingdom Internal Market Act 2020 (Exclusions from Market Access Principles: Single-Use Plastics) Regulations 2022 created an exclusion from the market access principles in Part 1 of that Act for legislation, so far as it prohibits the sale of single-use plastic plates, straws, drinks stirrers, stemmed cotton buds, cutlery, chopsticks and balloon sticks, and expanded and extruded polystyrene food and drinks containers, including cups. This follows an agreement reached under the then provisional resources and waste common framework. This exclusion does not encompass single-use plastic bowls and trays. Therefore, the market access principles of the UK internal market Act will apply to this legislation in respect of those items.

My noble friend Lady McIntosh of Pickering asked why there are no exemptions, as with plastic straws. Throughout our consultation and post-consultation engagement, we were able to determine that no exemptions were needed in any potential settings. This will give the SI the greatest positive environmental impact.

My noble friend and the noble Baroness, Lady Bakewell of Hardington Mandeville, also mentioned oxo-degradable plastics. We have prioritised work on introducing restrictions on single-use plastic plates, cutlery and balloon sticks and polystyrene food and drinks containers because, at this moment in time, that will have the greater impact on reducing plastic pollution. However, we are aware of oxo-degradable plastics.

I turn to the issue that my noble friend raised about wet wipes. In the Plan for Water published in April 2023, the Government announced their intention to ban wet wipes containing plastic, subject to a public consultation, which will be published in due course. Some 96% of respondents to our 2021 call for evidence supported a ban on wet wipes containing plastics. Therefore, we are keen to deliver this at pace, just not in this particular SI. More information on the proposed timings of any ban will be announced following the consultation.

We are working with local authorities and trading standards to ensure that any breaches of legislation are being enforced. If breaches are identified, it will be the responsibility of local authorities as regulators of the legislation to enforce it and tackle the pollution appropriately.

Baroness Anderson of Stoke-on-Trent Portrait Baroness Anderson of Stoke-on-Trent (Lab)
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Just to clarify, on the trading standards point—we have seen something like 170 fewer trading standards officers in the past 12 years. They are spread in different areas; some local authorities now spend only 50p per resident, while others spend £4.50 per resident on their trading standards function. Can the Minister let me know either now or in writing how we are ensuring that this is being applied equally across all local authorities in the UK, given the varying regulatory framework that will exist and given the enforcement action—as in, the number of people that can enforce?

Lord Harlech Portrait Lord Harlech (Con)
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That is a fair question, although it is slightly out of Defra’s remit, so I think that the best thing to do would be to write to the noble Baroness in response to her question about trading standards officers.

To avoid duplication or confusion with our proposals for our extended producer responsibility scheme, bowls, plates and trays used as packaging by businesses will not be included in the ban. However, we strongly encourage businesses to explore how they can reduce the use of single-use items and move to reusable alternatives instead.

My noble friend Lady McIntosh of Pickering rightly brought up the potential impact on businesses through the introduction of this SI. The largest cost is due to capital investment costs incurred by producers for adapting their production processes. Producers may also incur a loss of profits. Another large cost is due to wholesale prices of wooden cutlery and paper, and food and beverage containers, usually being larger than their plastic equivalents. Businesses will also incur familiarisation costs, additional waste management costs and additional fuel costs. On the question about single-use plastic cotton buds used for medical purposes, there are exemptions for use for forensic and scientific purposes—otherwise, they are totally banned.

If I have neglected to answer any questions, I shall consult Hansard, and do my best to write with an answer. Not wishing to detain the Grand Committee further, I conclude by thanking noble Lords for their contributions.

Baroness McIntosh of Pickering Portrait Baroness McIntosh of Pickering (Con)
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If my noble friend is unable to answer today, can he write to us on substituting wood for plastics and the knock-on effect that that would have on the environment and deforestation? I understand that that might be the responsibility of a different part of the department, but the noble Baroness, Lady Bakewell of Hardington Mandeville, and I both asked about that. I understand that it is quite technical, so he could write to us.

Lord Harlech Portrait Lord Harlech (Con)
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I think that I just said that I shall answer in writing any questions that I have not answered now.

Motion agreed.

Electricity and Gas (Energy Company Obligation) Order 2023

Tuesday 20th June 2023

(1 year, 1 month ago)

Grand Committee
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Considered in Grand Committee
18:09
Moved by
Lord Callanan Portrait Lord Callanan
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That the Grand Committee do consider the Electricity and Gas (Energy Company Obligation) Order 2023.

Relevant document: 43rd Report from the Secondary Legislation Scrutiny Committee

Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
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My Lords, I beg to move that the draft order, which was laid before the House on 24 May, be approved. Since it was introduced in 2013, the energy company obligation—ECO—scheme has ensured that around 2.4 million predominantly low-income households have received much-needed support to improve the energy efficiency of their homes. The Government committed in the Growth Plan 2022 and the energy security plan to place a new obligation on energy suppliers to deliver vital energy efficiency upgrades, helping hundreds of thousands more households to take action to reduce their energy bills by making their homes cheaper to heat.

The order delivers on these commitments by introducing a new energy company obligation, the Great British insulation scheme, to run until March 2026. Alongside establishing the GBI scheme, the order introduces some small additions to the existing ECO4 scheme, providing heating support for certain households which are not currently eligible for these measures.

I turn to the detail of the order. The order establishes the GBI scheme in law as a complement to the existing ECO scheme—ECO4—in Great Britain. Its main provisions are: an additional energy company obligation to run from 2023 to 2026, boosting previously planned energy-efficiency investments by another £1 billion across this period; a focus on the rapid installation of the most cost-effective, single insulation measures; and the extension of support through the ECO schemes to a much wider group of households living in the least energy-efficient homes in the lower council tax bands, who are also now challenged by higher energy bills.

The Great British insulation scheme will boost further the support already available through ECO4 that targets low-income and vulnerable households, those most at risk of being in fuel poverty. Energy suppliers must deliver at least 20% of the new help available through the scheme to these households. This low-income group will include those on means-tested benefits as well as households in the least energy-efficient social housing. Fuel-poor homes in the private rented sector will also benefit, building on the provisions of existing regulations.

Working alongside this low-income minimum, the scheme’s flexible eligibility provisions will offer additional routes to reach those on low incomes or in other ways vulnerable, such as through ill health, but where households may not be in receipt of benefits. These flexible eligibility provisions will enable local authorities, energy suppliers, Citizens Advice and the NHS to work together to help those most vulnerable to the effects of living in a cold home.

As with previous ECO schemes, the obligation will be set based on annual bill savings. This incentivises energy suppliers to target those homes where the savings from energy-efficient measures will be greatest, also installing those measures that will have greatest impact. The scoring approach for this will mirror that used for ECO4, minimising complexity and any bureaucracy for industry.

Installation quality will be governed and assured under TrustMark’s compliance and certification framework. The quality of installations, alongside a whole assessment of the property, will continue to rely on independent industry standards—in this case, the publicly available specifications PAS 2030 and PAS 2035. The order also adds to the circumstances in which some heating measures, particularly solar PV and electric heating, can be available for households within the existing ECO4 scheme.

As a direct result of the boost provided by the GBI scheme, we estimate that around 376,000 measures will be installed in around an additional 315,000 homes. This is expected to save households, on average, £300 to £400 per year. To help to insulate as many homes as possible before next winter, the order permits measures installed since 30 March to count towards the suppliers’ obligation target. This provision was signalled to energy suppliers in the Government’s response to their earlier consultation on scheme design, which was published on that date.

I turn for a moment to that earlier government consultation, which was conducted towards the end of 2022. The scheme design encapsulated in the order we are now considering takes forward the main provisions set out within that consultation. The majority of consultation responses supported the proposals, including as central features the extension of energy efficiency help to the wider household group and a focus on the most cost-effective, single-insulation measures.

18:15
The Government are therefore proceeding with the main proposals, with some key changes considering the responses received and the final impact assessment. We have expanded the eligible council tax bands in Wales from A to C to A to E, better aligning with the proportion of eligible households in England and Scotland. We are requiring all measures to be installed under the PAS2035 requirements due to the complexities of defining low-risk measures which could use any alternative standards.
We have removed the new scheme’s eligibility requirement for suppliers to evidence that low-income households cannot meet the ECO4 scheme minimum requirements to simplify administration. We have ensured that households supported under the GBIS will not be excluded from receiving future help under the ECO4 scheme, when the eligibility criteria for that scheme are, again, met.
We will uplift scores on measures delivered to low-income, rural off-gas households in Scotland and Wales, given the additional challenges these households are likely to face. Equivalent households in England will be supported via the home upgrade grant. Recognising the value of innovation, those innovative products offering the greatest improvements delivered to the low-income group will be eligible for both a 25% and 45% uplift, subject to a cap.
In conclusion, the GBIS will continue building on the successful ECO approach that has been delivering energy efficiency measures to millions of households now for the past decade. The scheme will extend help to hundreds of thousands more households previously ineligible for government energy efficiency scheme support. It will build momentum towards the Government’s ambition to reduce the total UK energy demand by 15% from 2021 levels by 2030. It is estimated that it will save more than 5 million tons of CO2 emissions over the lifetime of the measures installed. Finally, it will empower thousands more to insulate their homes, protecting the pounds in their pockets and, of course, helping to support jobs across the country. With that, I commend this order to the Committee.
Baroness McIntosh of Pickering Portrait Baroness McIntosh of Pickering (Con)
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My Lords, I thank my noble friend for introducing the order this afternoon, which I warmly welcome. I declare my interest as honorary president of National Energy Action, based in the north-east, an organisation with which I think my noble friend is very familiar. It welcomes the scheme but has one or two issues that it would like to understand better.

I ask my noble friend about the background to how the scheme has been introduced, because it could lead to unfairness in how the money is distributed. In particular, a potential flaw is that the targeting of the scheme is quite loose: it is not tight enough sufficiently to help fuel-poor households, which he said is the purpose of the order. For the majority of the scheme, households are assumed to make a financial contribution to the cost of the measures, which may effectively make a large proportion of the scheme inaccessible to the lowest-income households, which cannot afford to make such contributions. The way in which the policy is funded is therefore potentially unfair. Coupled with the rather loose targeting, this means that low-income households may effectively subsidise higher-income householders’ home upgrade.

I give my noble friend an illustration. The UK Government are assuming that £80 million will be provided in customer contributions over three years to support funding of the scheme. That is based on the assumption that uptake is not disproportionately affected by the level of contribution required. The assumption apparently originated from research based on a survey of 1,000 owner occupiers who fell within the general eligibility criteria. I put it to my noble friend that that may not be representative of low-income households, which I understood was the purpose we are trying to achieve with the order before us.

Similarly, research quoted in the impact assessment assumes that three-quarters of home owners will be willing to contribute towards insulation measures, with almost half willing to contribute £500 or more. Once again, I put it to my noble friend that it is extremely likely that households unwilling or unable to contribute fall into the category of the most financially vulnerable, and therefore in most need of the support given by the scheme.

Those two examples point to the potential for this not being what the Government intended. On vulnerable households, I think my noble friend described the purpose as extending support to households in the least energy-efficient and lowest income bands. I would like to query my understanding. Could the targeting have been better and could we have directed the funding more clearly to those in that bracket?

I warmly welcome the fact that support is being extended to off-grid rural households in Scotland and Wales. Can my noble friend assure me that the grant to English homes in that bracket for the home upgrade funding that he referred to will be as high as for those in Scotland and Wales?

Lord Lennie Portrait Lord Lennie (Lab)
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My Lords, this has nothing to do with the instrument, but I begin by congratulating the noble Lord, Lord Callanan, on his efforts to recruit Sadio Mané to play for Newcastle United when he was recently in Senegal. As a fellow Newcastle United season ticket holder, I can pass on the warm thanks of all fans of Newcastle United. I suppose more unites us than divides us when it comes to being “Howay the lads” fans.

The draft order proposes a Great British insulation scheme, which would require licensed gas and electricity suppliers to promote the installation of energy-efficiency measures, such as loft or cavity wall insulation, across Great Britain. The Department for Energy Security and Net Zero explains that while ECO4 aims to deliver full-house retrofits for low-income and vulnerable households, the new scheme seeks to encourage rapid installation of the most cost-effective, mainly single insulation, measures and to extend support to a much wider group of households in the least efficient and lower council tax banded homes. These are worthy aims.

The department expects the scheme, as the Minister said, to provide around 376,000 insulation measures in 315,000 homes by the end of March 2026, which coincides with the ECO4 scheme’s end date. The department also says that Ofgem, which will administer the scheme, will be required to submit monthly reports on progress to the Secretary of State on suppliers’ performance. What will the Government do if performance is not on target overall? Are there any plans to push beyond the initial target, if performance suggests that this could be possible? Will Ofgem report on the income distribution of household delivery?

Those suppliers required to participate in the ECO4 scheme are also required to participate in the Great British insulation scheme, so the same domestic gas and electricity supply data is being used as under the ECO4 scheme. Were there any issues with the use of this data? If so, have they been addressed and overcome?

Unlike the ECO4 scheme, a minimum level of delivery of the obligation will be set for each of the three phases of the Great British insulation scheme. It requires each obligated supplier to achieve at least 90% of its home heating cost reduction obligation and low-income minimum requirement for phases A and B through measures completed before the end of each phase, with the total obligation required to be met by 31 March 2026. Suppliers will have performance requirements across each phase of the scheme—a new development from ECO4. This is of course a good thing, but how will the performance in each phase be monitored and enforced?

The instrument also sets a low-income minimum requirement. This will ensure a minimum level of support through the scheme for those on the lowest incomes and the most vulnerable—the low-income group, as it is known—while allowing the remaining support to be targeted at a much larger pool of people now challenged by higher energy bills, in other words the general group. There is no upper limit on the amount of a supplier’s home heating cost reduction obligation that can be met through the measures delivered to the low-income group.

The low-income minimum requirement is defined by the instrument as 20% of the overall obligation, and that 20% must be delivered using the standard low-income eligibility criteria. Assuming the distribution is equal, 20% of 315,000 homes is 63,000 low-income households. Given that this scheme will be paid for by all customers but that the much larger benefits will be felt only by benefiting households, does a 20% minimum not feel somewhat low? I appreciate that it is only a minimum, but is there any incentive for the participants to deliver above this 20%? How was this amount reached? Do the Government have an estimate for where they expect this to fall across the whole scheme?

The home-heating cost reduction target is set at a level that assumes that households in the general group —as in Article 12 of the order—will collectively contribute £80 million, as the Minister said, towards the cost of installing the insulation measures, which is equivalent to 10% of the £800 million scheme budget earmarked for this group. This reflects that households in the group will generally have higher incomes and be able to contribute. Any contributions will in practice be a matter for agreement between the customer and the installer, reflecting the measure’s type and property issues.

For the purpose of the home-heating cost reduction target, should a participant elect to go beyond the minimum 20% for the low-income group, would the general group be significantly more burdened by the total contribution required? For example, if, across all providers, the general group averages only 40% of the overall makeup, which I understand is unlikely but a possibility, is it correct that this group would then be required to double their joint contribution to the £80 million home-heating cost reduction target, compared to if it made up the maximum of 80%?

Domestic premises cannot receive more than one insulation measure under the Great British insulation scheme. As long as it is installed on the same day as, or after, the insulation measure is completed, owner-occupied premises in the low-income group can also receive heating control measures under the scheme. The heating control measures must be completed within three months of the insulation measure.

The majority of responses to the consultation addressed the fact that private rented sector households are ineligible for heating control measures, or for cavity or loft insulation, if they are in the general group. These measures are excluded as landlords have responsibilities to maintain and improve their housing. Is that a good enough reason? Why is it acceptable for lower-income households to have to choose between unaffordable bills or a lack of heat because they are renting, if their landlord is not adequately improving their property? For clarity, if a participant offers a combination of an insulation measure and heating control measures to either a household in the general group or a non-owner-occupied household in the low-income group, would the cost be expected to be apportioned between the scheme and the payer or would that not be a feasible option?

Another aspect of the instrument is targeted encouragement to support the development of innovative products and installation techniques. This is of course welcome. Has any assessment been made of the potential impact of this encouragement? What counts as an innovative product or installation technique? Perhaps the Minister can enlighten us on that.

The 2021 Sustainable Warmth strategy announced plans for the expansion of ECO to run from 2022 to 2026, with an increase in value from £640 million to £1 billion per year. This obligation is expressed in terms of outcomes, not expenditure. The obligation is for notional annual bill savings of £224 million to be achieved by 31 March 2026. Part 10 of the instrument amends the 2022 order. Most of the changes are made to enable heating measures that are of benefit to ECO4 households in achieving annual cost savings, and reducing their overall energy bill, to be installed in a wider range of circumstances.

Labour’s warm homes plan would upgrade the energy efficiency of about 2 million homes per year. It would upgrade all 19 million homes that need it and help families to save up to £500 on their energy bills. The target of 315,000 homes under this scheme does not really compare. Do the Government accept that this is a drop in the ocean of what is needed? As part of the Labour green prosperity plan, the warm homes plan would give families the grants and loans they need to upgrade the energy efficiency of their homes, cutting their energy bills and emissions. Labour’s national plan would save households £500 a year, cut national gas imports by up to 15% and create over 206,000 full-time equivalent jobs in retrofitting industries.

18:30
Lord Callanan Portrait Lord Callanan (Con)
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First, I thank the noble Baroness, Lady McIntosh, and the noble Lord, Lord Lennie, for their contributions. I thank the noble Lord for complimenting my efforts to recruit Sadio Mané—who is a lovely guy, by the way. It is an interesting correlation, thinking about the priorities of most of the population, that if I tweet something on energy efficiency or that I have met someone to do with hydrogen schemes or whatever, I am lucky if I get 700, 1,000 or 2,000 views, but if I bump into a footballer in a hotel and tweet a picture, I get 85,000 views all across Europe. What we need to do is link famous footballers with energy efficiency and then perhaps we will get the message through.

Anyway, I turn now to the subject of the day. Improving the energy efficiency of our homes is the best long-term solution to reducing energy bills—I do not think anybody disagrees with that—and the corollary of tackling fuel poverty. That is why the Government have set a new and ambitious target to reduce our final energy demand from buildings and industry by 15% by 2030. The Energy Efficiency Taskforce is meeting at the moment to try to put some policies behind that. We are also committed to making sure that homes are warmer and cheaper to heat by investing £12 billion in various Help to Heat schemes, such as the home upgrade grant and social housing decarbonisation fund.

The Government remain committed to helping low-income and vulnerable households to reduce their fuel bills and heat their homes, with the new Great British insulation scheme being a crucial element of that help for this winter and for years to come.

I start with the contribution from the noble Baroness, Lady McIntosh, who asked a question on the targeting of the scheme and consumer contributions. This scheme mirrors the eligibility of the ECO4 scheme; there is in fact no limit on how many low-income consumers can be treated through the scheme. There is no mandatory requirement for contributions, and we do not assume any contributions for low-income consumers as we recognise that they are most in need.

The new general group is designed to capture a broader pool of households. I am sure that even the noble Baroness will accept that not everyone in fuel poverty is necessarily on benefits. We have a number of other schemes targeting those on lower incomes. This is the first scheme we have done for a while that allows those in the so-called able to pay grouping in the lower council tax band to also be eligible for support. That is the new general group; it is designed to capture a broader pool of households which are more likely to be able to contribute. Encouraging contributions through the scheme makes the scheme more cost-effective and ultimately enables more homes to be treated and more measures to be delivered. I am sure that is something the noble Baroness would support.

Suppliers are encouraged to leverage higher contributions from wealthier households and for more expensive measures, which would possibly be in bigger homes, ensuring that low-income and vulnerable households receive the support they need. As a market-led scheme, it is ultimately down to the installer to negotiate any contribution that the consumer is willing and able to pay, taking account of any property issues and of the measures to be installed.

The noble Lord, Lord Lennie, asked a question about monitoring. As with the existing scheme, Ofgem will work with energy suppliers to monitor progress and ensure compliance—including, if necessary, considering enforcement action should that be judged appropriate. As the independent regulator, it is ultimately a matter for Ofgem to judge the form and extent of any compliance action appropriate to the circumstances; it is only right and proper that it should do that.

Annual targets will initially be tracked using notified measures alongside other information. For the benefit of noble Lords, all measures that are installed are notified and lodged with TrustMark. Once the Ofgem digital system is in place to support it, this is intended to minimise any additional costs and bureaucracy from annual targets while still managing to drive momentum.

We have allowed flexibility through the analysis to allow industry to decide how to gather contributions. There is no firm requirement on how suppliers must do that. To reiterate—I made this point to the noble Baroness, Lady McIntosh—there are no limits on the number of low-income homes that can be treated through the scheme. We have several schemes currently in operation, as I mentioned, which support low-income households. Of course, the original ECO scheme, ECO4—its latest iteration—the home upgrade grant and the social housing decarbonisation fund are all targeted at those on lower incomes. That is why we wanted this scheme to be open to a wider pool of households that are currently ineligible for any government support through existing schemes. As I said to the noble Baroness, suppliers are encouraged to leverage higher contributions from wealthier households for more expensive measures. Additionally, of course, there is no requirement for consumers to contribute, or to contribute a set amount through the scheme. It is market-led, and it is down to the installer to negotiate a contribution that the consumer is able and willing to pay.

For ease and pace of delivery, the GBIS aims to mirror as much of ECO4 as possible, keeping the same eligibility criteria for the low-income group that industry is currently very familiar with. That will help to ensure that the GBIS is able to deliver energy efficiency measures to those households as quickly as possible and provides energy suppliers with an incentive to deliver to that group, which they are already very familiar with.

The noble Lord, Lord Lennie, asked about innovation. We have a technical panel to determine and approve products as innovative through the scheme to ensure that consumers continue to be protected.

Once again, I thank both noble Lords for their contributions and the points they made during the debate. I also recognise the broad agreement that the scheme should continue at this time and should help to provide the critical support to an even greater pool of households that are currently challenged by higher energy bills. I commend this draft order to the Committee.

Motion agreed.
Committee adjourned at 6.37 pm.

House of Lords

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Tuesday 20 June 2023
14:30
Prayers—read by the Lord Bishop of St Edmundsbury and Ipswich.

Industrial Strategy

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Question
14:37
Tabled by
Lord Allen of Kensington Portrait Lord Allen of Kensington
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To ask His Majesty’s Government what is their industrial strategy.

Lord Haskel Portrait Lord Haskel (Lab)
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In the name of my noble friend Lord Allen, and with his permission, I beg leave to ask the Question standing in his name on the Order Paper

Earl of Minto Portrait The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)
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The Government have set out an ambitious plan for growth and prosperity. Delivering economic growth in key sectors is a priority and the Chancellor has identified five growth sectors for the UK: digital technology; green industries; life sciences; advanced manufacturing; and creative industries. The Government have announced a £500 million per annum package of support for 20,000 research and development-intensive businesses and £650 million to support the UK’s life sciences sector.

Lord Haskel Portrait Lord Haskel (Lab)
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I thank the Minister, but we are still little the wiser about a strategy. The Prime Minister removed the words “industrial strategy” from the business department. As Chancellor, he scrapped the Government’s industrial strategy and the independent Industrial Strategy Council. Instead, we now get announcements, as now—soundbites instead of sound economics. Can the Minister say precisely when the Government will produce a much-needed comprehensive and co-ordinated industrial strategy? That will help business, industry and investors plan for the long term and, we hope, get some growth and progress back into the economy.

Earl of Minto Portrait The Earl of Minto (Con)
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My Lords, I think noble Lords will agree that this is a time for specialisation rather than a single, overarching, broad strategy. By targeting specifics, such as the five key growth sectors, we can be more effective and, in this age, more agile to respond to change.

Lord Howell of Guildford Portrait Lord Howell of Guildford (Con)
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My Lords, does my noble friend agree that a key component of a successful industrial strategy and growth is massive investment, both from foreign sources, on the scale we used to attract and are not attracting now, and of course from pension funds, which are managing trillions and are ready to invest? Does he agree that in the energy sector the attraction is going to be more to quick-build small modular reactors than to any large, rather out-of-date, massive giants which take years to build and are full of risks? Will he advise his friends, as a priority, to put all their efforts behind developing small nuclear reactors as part of our sensible energy strategy and our move to a decarbonised electric sector?

Earl of Minto Portrait The Earl of Minto (Con)
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I thank my noble friend for his comments and his question: indeed, I will. On the specific question of investment, the Government, along with Rolls-Royce, have invested over £300 million in small modular reactors. On inward investment—again, I agree that a massive amount of inward investment is always required—we have arrangements with the UAE, bringing in £5.9 billion, and Qatar, for £10 billion. We know about the Nissan/Envision billion-pound investment up in the north and Ford has put in nearly £400 million recently as well.

Lord Fox Portrait Lord Fox (LD)
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My Lords, Make UK, the manufacturing organisation—it represents most of the countries’ manufacturers—issued an authoritative report on industrial strategy. Some 99% of respondents said that they believed that the UK should have an industrial strategy—which indicates that they do not think that the UK has one now. Will the Minister acknowledge that the very people who are going to deliver what he talks about have not heard what he thinks he has told them?

Earl of Minto Portrait The Earl of Minto (Con)
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My Lords, I understand exactly the point that is being made. Communication is critical to any successful enterprise, and there is no doubt that the change from a unified industrial strategy to one that is more targeted and focused is, at times, not the easiest message to get across. However, I believe that the five growth sectors for which the specific strategies have been written will be very effective.

Lord Aberdare Portrait Lord Aberdare (CB)
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My Lords, an essential part of any industrial strategy is a strategy for addressing the skills needs on which it depends. When the Minister reads the Make UK report that the noble Lord, Lord Fox, has just referred to, he will find that it sets out a long-term vision for UK manufacturing and highlights the failure of current apprenticeships policy to support manufacturers in developing the talent pipeline they need. When will the Government respond to the barrage of demand from employers for a more flexible apprenticeship levy, with greater incentives to offer apprenticeships addressing skills and labour shortages?

Earl of Minto Portrait The Earl of Minto (Con)
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My Lords, I think the whole House agrees with that point, and I can assure the House that the whole question of the apprenticeship levy and the flexibility thereof is being looked at closely right now.

Lord Woodley Portrait Lord Woodley (Lab)
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My Lords, I have raised my serious concerns about the lack of industrial strategy for the automotive sectors, important as they are for our country. But I also pay tribute to the Government for supporting the Jaguar Land Rover battery plant that could easily have gone to Spain—well done. But does the Minister agree that this is small compared with the billions and trillions being set aside by the EU and the USA to encourage investment, particularly in battery gigaplants? What is our industrial strategy for this important sector, which, clearly, as I said last time, is genuinely at a tipping point?

Earl of Minto Portrait The Earl of Minto (Con)
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My Lords, I quite agree with the noble Lord about the success of the announcement from JLR. It is extremely important that we continue to invest in all sorts of technologies and advances. We are continuing to see investment into that sector. As for where the tipping point comes, I am not quite clear. But I will go back and write to the noble Lord with specifics.

Lord Bellingham Portrait Lord Bellingham (Con)
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My Lords, is the Minister aware that only 15% of SMEs actually export? If that figure could be increased substantially, maybe to 20% or 25%, it would not only create a lot of jobs but help our balance of trade and be a crucial part of our industrial strategy.

Earl of Minto Portrait The Earl of Minto (Con)
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I entirely agree with my noble friend. I assure him and the whole House that the Department for Business and Trade is specifically making it easier for small and medium-sized enterprises to consider and go through the process that they fear is difficult—and in fact is not so difficult—to start exporting, to the benefit of all.

Lord Anderson of Swansea Portrait Lord Anderson of Swansea (Lab)
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Do the Government agree that a continuation of steel production in the UK is vital to our industrial future? Therefore, does an industrial strategy include the investment at Port Talbot steelworks which Tata Steel is now wishing to make, without which there will be an enormous hole in employment in south Wales?

Earl of Minto Portrait The Earl of Minto (Con)
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The Government fully recognise the role that steel plays within the UK economy, and they are working with the industry on its decarbonisation options. It is a foundation industry, it is high-wage, and it is extremely important to this country for all sorts of reasons. On the specific issues with Port Talbot and Tata, there are ongoing negotiations, which I am sure the House will realise I cannot divulge. But we are closely involved with Tata, British Steel and Liberty.

Baroness Hoey Portrait Baroness Hoey (Non-Afl)
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My Lords, an industrial strategy must be for the whole of the United Kingdom. How does the Minister think it will work in Northern Ireland, since so much in Northern Ireland is still under European Union rules and not British law?

Earl of Minto Portrait The Earl of Minto (Con)
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My Lords, there is a conference later this year on investment into Northern Ireland, which I am sure will prove a successful enterprise. Investment into Northern Ireland is critical; the difficulty we have had with extricating that part of the United Kingdom is well known.

Baroness Chapman of Darlington Portrait Baroness Chapman of Darlington (Lab)
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My Lords, Make UK says that the UK is

“the only leading nation in the world without a comprehensive, long-term industrial plan”.

The Government might be on slightly firmer ground on the UK storming ahead of other economies but a range of initiatives, as the Minister has referred to, is not a strategy. The Government are sitting on their hands and we are losing out to the US and the EU too often when they should be acting. They will have to grip this at some point. When will they?

Earl of Minto Portrait The Earl of Minto (Con)
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My Lords, the Atlantic declaration shows how closely we are working with our American colleagues. The value of trade with that nation is well known and there is no question that we will be able to grow that and continue working with it. The green deal industrial plan is being followed in the EU; I hope that we will get some breakthroughs in that area too.

Inheritance Tax: Cohabiting Siblings

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Question
14:47
Asked by
Lord Lexden Portrait Lord Lexden
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To ask His Majesty’s Government what plans they have, if any, to make transfers of property between long-term cohabiting siblings exempt from inheritance tax.

Baroness Penn Portrait The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
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My Lords, the long-standing inheritance tax assumption for wealth transfers between spouses and civil partners reflects the formal legal obligations that marriages and civil partnerships necessarily entail. While the Government understand the issue, there are no plans to exempt transfers of property between long-term cohabiting siblings.

Lord Lexden Portrait Lord Lexden (Con)
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My Lords, the Government say that two people who have shared a jointly owned home for years must be in a legal relationship if inheritance tax is to be deferred when they are parted by death. I remind the Government that they blocked my Private Member’s Bill to open up civil partnerships to siblings after its Second Reading, where it gained wide support across the House. This would have enabled siblings to establish legal relationships and solve the problem. Why on earth should the postponement of tax on the death of the first of two people united in a loving association for years require sexual activity between them? Why should the survivor of a chaste relationship have to face the agony of selling the family home on the death of a loved partner to pay an inheritance tax bill? Have this Government no compassion?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, it is important to set this Question in context. Each individual has a nil rate band of £325,000. Two cohabiting siblings who jointly own a house may have an inheritance tax liability only when the value of the house exceeds £650,000—well in excess of both the average UK house price and the average London house price. There are also circumstances in which inheritance tax can be paid over a period of time, giving the beneficiaries time to adjust to changed circumstances. That facility would enable people in those circumstances to remain in their home, which I believe is the concern at the heart of my noble friend’s Question.

Lord Pannick Portrait Lord Pannick (CB)
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My Lords, I declare an interest in that I acted for the two Misses Burden, who unsuccessfully challenged this policy in the European court in 2008. This is not a question of law but a question of fairness. How can it be fair for two elderly sisters who have lived together for the whole of their lives, jointly own their property and have each made wills leaving the property to each other on the death of the first to be denied a tax benefit enjoyed by married couples and civil partners who may have a far less committed, developed and permanent relationship, or does fairness not count in the implementation of the tax system?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, the Government have attempted to draw up a system that is fair but recognises the unique status of marriage and civil partnerships. As I pointed out to your Lordships’ House, very few estates fall subject to inheritance tax, and we have put in place processes to ensure that those who live in the same house, for example, are able to meet their obligations over time, to lessen the impact of inheritance tax.

Lord Palmer of Childs Hill Portrait Lord Palmer of Childs Hill (LD)
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My Lords, one can leave all above £325,000 to your spouse, your civil partner, a charity or a community amateur sports club. Can the Minister explain how siblings are less important than a community amateur sports club?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I do not think that is the rationale behind the approach. The rationale in distinguishing between marriage and civil partnership and other relationships is the unique legal status and the unique legal and financial obligations that people enter into in that regard. As the noble Lord, Lord Pannick, referred to, this question was also referred to the courts, which found in the Government’s favour.

Baroness Browning Portrait Baroness Browning (Con)
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Does my noble friend accept that the Treasury seems to regard inheritance tax as locked into the Ovaltine family of the 1950s with 2.4 children? As my noble friend Lord Lexden’s Question indicates, it is about time that it took a long look at how inheritance tax works for families that do not have 2.4 children. Can I add to the sibling argument, and I declare a personal interest, the parents who take responsibility for disabled adult children for all of their lifetime, where the amount of money that can be passed on during an adult’s lifetime is severely limited on the assumption that lawyers—looking round the Chamber now, there are lots of grins around me—will be able to manage the trusts for that money after the parent has died? The parents want to do what is right for their children during their lifetime.

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I am happy to look at the specific circumstance that my noble friend raises. I do not think the Government have an old-fashioned view of how families are formed in modern times; that is why the benefits of being able to pass on inheritance, if you are married, is also extended to those who are civilly partnered.

Lord Livermore Portrait Lord Livermore (Lab)
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At the last Budget, the Government abolished the lifetime limit on tax-free pension savings. In the middle of a cost of living crisis, this giveaway for the very wealthiest cost £1.2 billion and increased the value of a £2 million pension pot by some £250,000. It also opened up an inheritance tax loophole whereby it is now possible to accumulate unlimited sums within a pension fund and pass them on entirely free of inheritance tax. What assessment has the Treasury made of the number of very wealthy individuals who will now use pension funds as a vehicle for inheritance tax planning, and at what additional cost?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I was disappointed that the party opposite did not support our changes to pensions, which were key for many public sector workers in respect of recruitment and retention for their posts. The primary purpose of a pension is to provide income or funds that individuals can draw on in retirement. If an individual dies before they get to use it for that purpose, we believe their beneficiaries should be able to have those funds, and that is why unspent pension pots do not normally form part of an individual’s estate. As the Chancellor said to the TSC after the Budget 2023, we will keep any changes to the lifetime and annual allowances under consideration and look at the impact.

Baroness Deech Portrait Baroness Deech (CB)
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My Lords, I think the Minister is avoiding the issue of principle. Ever since I took an interest some 15 years ago in the case of the Burden sisters, referred to by the noble Lord, Lord Pannick, I have wondered why the financial inheritance benefits of coupling up are confined to sexual relationships, whether it is husband and wife, civil partners or even a deceased person and the person they lived with. What is so special about the sexual relationship, when you might have two sisters who have been committed for much longer, are unable to marry and have undertaken freely to take care of each other? The Government would not even lose in the end, because the inheritance tax is rolled over. Will the Minister please address the issue of principle?

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I do not think that I am not addressing the issue of principle; I am just disagreeing with some noble Lords on the conclusions of that question. The Government’s view is that marriage and civil partnership relationships necessarily entail particular legal and financial obligations to one another for the parties concerned. We think it is right that those obligations are reflected in our inheritance tax system. When it comes to the impact of inheritance tax, however, on people in the circumstances to which the noble Baroness referred, there are several measures in place to ensure that those impacts are minimised. Those include the existence of the nil-rate band, which means that the vast majority of people in this country—fewer than 6% of estates this year are due to fall subject to inheritance tax—do not pay inheritance tax. For those who are affected, there are measures in place to ensure the smoothing of those obligations when they find themselves in circumstances that we have heard about today.

Lord Forsyth of Drumlean Portrait Lord Forsyth of Drumlean (Con)
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My Lords, following up on that last point, is not the problem that the only people who pay inheritance tax are the middle classes, or people whose only asset is the roof above their heads, whereas very rich people are able to buy farmland and make all kinds of arrangements to avoid inheritance tax? If the Treasury is keen on raising extra revenue, why not abolish inheritance tax and introduce capital gains tax on death, which would provide far more revenue and be far fairer to all concerned?

Baroness Penn Portrait Baroness Penn (Con)
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I have to disagree with my noble friend that the wealthiest do not pay inheritance tax. Statistics from 2019-20 show that tax paid on estates valued at £1 million or more accounted for 82% of total inheritance tax liability for that year. When it comes to reforming inheritance tax and looking at areas such as agricultural property relief and business property relief, we would need to be really careful about considering the impacts of changing that approach on family farms and family businesses before taking forward such changes.

Lord Watts Portrait Lord Watts (Lab)
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My Lords, the Minister said that the Government introduced the pension changes to help GPs to be retained in the National Health Service. However, is it not the case that the majority of the savings will go to rich people rather than GPs?

Baroness Penn Portrait Baroness Penn (Con)
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I have to disagree with the noble Lord. The feedback we have had comes not just from the medical profession but from people in many other public service jobs who benefit from defined benefit contribution pension schemes and who have found their annual allowance and the lifetime allowance to be a real barrier to staying on in their work. It was in response to campaigns such as those from the BMA that the Government took action.

Defence: Support Ships and Type 32 Frigates

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Question
14:58
Asked by
Lord West of Spithead Portrait Lord West of Spithead
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To ask His Majesty’s Government when they expect to place orders for (1) multi-role support ships, and (2) Type 32 frigates.

Baroness Goldie Portrait The Minister of State, Ministry of Defence (Baroness Goldie) (Con)
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My Lords, the multi-role support ship—MRSS—and the Type 32 programmes remain in the concept phase and have not yet reached the level of maturity for me to confirm when orders are expected to be placed. The programme and procurement strategy for MRSS and Type 32 will be decided following the concept phase.

Lord West of Spithead Portrait Lord West of Spithead (Lab)
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My Lords, as I stand here today, our great maritime nation has 11 operational destroyers and frigates. Why are we in this parlous state? The reason is that, for many years, up until fairly recently, we have not been ordering ships on a rolling basis. This is absolutely necessary for a proper shipbuilding industry. Indeed, the Government recognise that now and, within the MoD, Ministers understand the need for a rolling programme. We have had some recent orders, but they have stopped. We must keep ordering, otherwise we will have the same problem again. The Treasury does not seem to understand that, if we do not do that, the SMEs and all our trained people will go to the wall, we will not have a proper shipbuilding industry and we will not have a proper fleet. Could the Minister please go to the Treasury, point out the error of its ways, and explain how important it is for us to go down this route?

Baroness Goldie Portrait Baroness Goldie (Con)
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I do not impugn the noble Lord’s right to hold the Government to account but I would not wish his persistent interrogation and commentary to imply that our Royal Navy is in some dysfunctional state. The Royal Navy was one of the few navies in the world to have ships in every ocean on the planet in 2022, from the High North to the Antarctic, and from the Baltic to the Pacific. It continues to deliver its commitments by undertaking the biggest recapitalisation of the fleet in a generation, from Type 23 to 26 and 31, and from Vanguard to Dreadnought. It is worthwhile reminding your Lordships that our Royal Navy is one of only three navies in the world to be able to operate to fifth-generation carriers and aircraft, along with the United States and China. The Royal Navy is our British pride and joy. I wish that sometimes the noble Lord, Lord West, would acknowledge that, instead of repeatedly and monotonously talking down his former service. It is time to champion it.

Baroness Smith of Newnham Portrait Baroness Smith of Newnham (LD)
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My Lords, I do not wish to talk down His Majesty’s Royal Navy. However, like the noble Lord, Lord West, I am keen to ensure not only that we have an effective rolling programme but that our ships should be buoyant and seaworthy, ideally as soon as the trials are over. With regard to moving from the concept phase for the Type 32s, can the Minister tell the House what lessons His Majesty’s Government have learned from procuring the Type 45s and the “Queen Elizabeth” class so that, when the next ships go into service, they will be seaworthy from day one?

Baroness Goldie Portrait Baroness Goldie (Con)
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Again, to disabuse anyone of any misconception of the noble Baroness’s question, we have a functional, operational Royal Navy which is discharging its obligations to the country. As regards the more recent types of shipbuilding commissioning by the Royal Navy, such as the Type 26 and Type 31, part of their attraction is their design concept, which means that they are more readily produced, and they have an exportable value, and that means that the sorts of problems to which the noble Baroness refers, which certainly characterise some previous ships, are now much less likely to materialise. What I described to the Chamber with regard to what the Royal Navy is currently undertaking demonstrates beyond a shred of a doubt that it is highly professional, very well-equipped and functional.

Lord Lexden Portrait Lord Lexden (Con)
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My Lords, is it not customary, in the year which sees the Coronation of a new monarch, for the Royal Navy to be reviewed by the new monarch? Will His Majesty review the fleet in the course of the current year?

Baroness Goldie Portrait Baroness Goldie (Con)
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That is a matter for the palace. However, I am sure that if His Majesty were to review the fleet, it would be very positively received.

Lord Mountevans Portrait Lord Mountevans (CB)
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My Lords, the Minister has made some excellent points in defence of our wonderful Royal Navy. However, the impressive response of Ukraine in the current conflict demonstrates the rapidly changing nature of warfare and the growing importance of agility and flexibility. The Royal Navy is working hard to maximise these latest technologies, including AI. Does the Minister agree that the Type 32 frigate addresses all those developing priorities?

Baroness Goldie Portrait Baroness Goldie (Con)
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The Type 32 is conceived as an agile, resilient and capable ship. However, I point out to the noble Lord that we have already, for example, upgraded Type 45s with the Sea Viper Evolution programme and upgraded Type 23s with the Naval Strike Missile in partnership with the Norwegians—the first ship will be ready by the end of the year. In addition, the initial Sonar Type 2150 ships have already been upgraded. We are constantly reviewing how we can keep our fleet swift, agile and effective.

Lord Bishop of St Edmundsbury and Ipswich Portrait The Lord Bishop of St Edmundsbury and Ipswich
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My Lords, given that one of the intentions and evident benefits of a national shipbuilding programme is local economic benefit, including the levelling-up aims of investing in young people and retraining older workers, and that shipyards are, by and large, in areas of deprivation where such benefit is vital, will His Majesty’s Government ensure that current capacity and design skills, apprenticeship training and other essential infrastructure is maintained pending the commitment to the Type 32 frigates and MRSS programmes so that it does not cost a great deal more to initiate these vital programmes?

Baroness Goldie Portrait Baroness Goldie (Con)
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I thank the right reverend Prelate for making a number of extremely important points. The whole essence of the national shipbuilding strategy was to ensure that we got shipbuilding in the United Kingdom on to a more stable and sustainable basis. The right reverend Prelate is absolutely right: the MoD’s direct spend supports 29,800 jobs in the shipbuilding industry—that includes submarines—with a further 21,300 jobs supported indirectly. There is an opportunity for shipbuilding in the UK to deliver exactly the sort of benefits to which the right reverend Prelate refers.

Lord Grocott Portrait Lord Grocott (Lab)
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Can the Minister explain how asking questions, however persistently, about providing the Royal Navy with the equipment that it needs is somehow talking it down?

Baroness Goldie Portrait Baroness Goldie (Con)
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If the noble Lord had listened to my preface in response to the noble Lord, Lord West, he would have heard me say that I do not impugn the right of the noble Lord, Lord West, to hold the Government to account. However, I think the Chamber would agree that there is a certain predictability to the character of the noble Lord’s questions; I know from first-hand experience the volume of questions with which I have to deal. I am not impugning his right to hold the Government to account but to do so repetitively, without ever counterbalancing the argument by acknowledging some of the Royal Navy’s enormous triumphs, gives a slightly disproportionate and not totally representative picture.

Lord Trefgarne Portrait Lord Trefgarne (Con)
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My Lords, how many qualified crews do we have to support our destroyers and frigates? Have any been deployed in recent days in search for the missing mini-submarine near the “Titanic”?

Baroness Goldie Portrait Baroness Goldie (Con)
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I have no information on my noble friend’s latter point. I can seek specific information about the crew numbers to which he refers and will write to him.

Lord Tunnicliffe Portrait Lord Tunnicliffe (Lab)
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My Lords, the Type 32 frigate was announced on 19 November 2020. I understand that, to make the national shipbuilding strategy work, the first ship needs to be laid down by mid-2027. After two years and seven months, the project is still in the pre-concept stage. I think that means, in plain English, that we do not even know what these ships are for. Can the Minister enlighten the House, or will the project slip, so plunging the British shipbuilding industry into chaos once again?

Baroness Goldie Portrait Baroness Goldie (Con)
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I have already indicated to the House that this ship is in the concept phase; there is no more that I can add to that. The programme and procurement strategy will be decided following the current concept phase, once that has concluded. However, I would observe that this is part of a shipbuilding programme for the Royal Navy that is substantial, significant and very important for the Navy’s future operational effectiveness.

Lord Houghton of Richmond Portrait Lord Houghton of Richmond (CB)
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My Lords, on this particular argument I find myself more in favour of the Minister’s point, inasmuch as the lineage of these questions, although entertaining, occasionally gives the impression that the sole purpose of the defence budget is the maritime renaissance. Increasingly, the issue of military advantage will be born not of hardware but of software. Can the Minister confirm that it is this strategic shift, and not necessarily by accounting for military competence and capability in the counting of input numbers, that is the qualitative output of a sophisticated and technologically equipped Armed Forces—the point of the Minister’s expression of frustration—and a more balanced approach to the investment necessary?

Baroness Goldie Portrait Baroness Goldie (Con)
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I thank the noble and gallant Lord. He makes the point more eloquently and with greater authority than I can. I do not seek to pre-empt the defence Command Paper refresh, which is imminently in the stages of becoming public, but the hybrid nature of our capability will be obvious from that paper. The noble and gallant Lord is quite correct: we cannot put things in silos. We have to work out what we are trying to deal with, what the threat is, what the hybrid character of the threat is and how we can have a capability—whether by land, air or sea—that will effectively combine to address that threat.

School Buildings: Safety

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Question
15:09
Asked by
Baroness Twycross Portrait Baroness Twycross
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To ask His Majesty’s Government what assessment they have made of the safety of school buildings, particularly in relation to the use of reinforced autoclaved aerated concrete, and what action they are taking to address (1) current safety issues, and (2) any disruption to pupils’ education caused by unsafe school buildings.

Baroness Barran Portrait The Parliamentary Under-Secretary of State, Department for Education (Baroness Barran) (Con)
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My Lords, safe and well-maintained school buildings are a priority. We are actively working with the sector to help identify reinforced autoclaved aerated concrete, or RAAC. If RAAC is suspected, we commission professionals to verify its presence and assess its condition. We support schools, including with capital funding, in measures to ensure that it does not pose any immediate risk and to minimise disruption based on professional advice.

Baroness Twycross Portrait Baroness Twycross (Lab)
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My Lords, I thank the Minister for her Answer, but the Government have already admitted that current funding will not be enough to make all schools safe. Will she tell us how long children, parents and school staff will have to wait for schools to be made safe once the data on their condition is finally released?

Baroness Barran Portrait Baroness Barran (Con)
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I want to be absolutely clear to the noble Baroness and the House that the department is not aware of any child or member of staff being in a school which poses an imminent safety risk. We are working as fast as is humanly possible to identify RAAC across the school estate. We sent out a questionnaire last year and nearly 90% of schools and responsible bodies have sent in their initial responses. We are working closely with the structural engineering sector to identify accurately whether RAAC is present and whether it poses a risk.

Baroness Evans of Bowes Park Portrait Baroness Evans of Bowes Park (Con)
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Following on from my noble friend’s answer, is she confident that there is enough capacity among surveyors to identify RAAC in schools before, as the noble Baroness said, issues become too serious? We have had similar problems in other parts of the public sector estate, hospitals for instance, where there have been safety issues because of RAAC. Perhaps she could provide us with reassurance on this issue.

Baroness Barran Portrait Baroness Barran (Con)
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I thank my noble friend for her question. I hope it reassures her to know that I have met twice already the leading structural engineering firms. We have looked at different ways that we can accelerate the pace of surveys and are very confident that we will have carried out at least 600 surveys by the autumn.

Lord Addington Portrait Lord Addington (LD)
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My Lords, will the Minister give us an assurance that any new school is constructed with a material that we expect to have to pull down and will not fall down before we get there?

Baroness Barran Portrait Baroness Barran (Con)
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I can give the House that reassurance. Not only that but any new school we construct will be net zero in operation.

Baroness Berridge Portrait Baroness Berridge (Con)
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My Lords, obviously, responsible bodies are legally responsible for the safety of the building. They come in all shapes and sizes. It could be a very strong, robust local authority or a large multi-academy trust with a lot of expertise; conversely, it could be a local authority that is in intervention with commissioners or a trust which has only one school. Of the 10% which have not returned their surveys, can my noble friend the Minister outline how we are going to approach those responsible bodies to make sure they respond and find out whether they are in that risky category because they are weak for other reasons?

Baroness Barran Portrait Baroness Barran (Con)
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I do not think we can say that the 10% which have not responded are weak. We are dealing with it by running a small call centre in the department. There are organisations that we have had to contact multiple times—including, sadly, some local authorities—and we are working with MPs and others to make sure we get all the returns. We are also supporting, in slightly slower time, all trusts to improve their competency in relation to the management of their estate, including rolling out a free specialist capital adviser programme to support them in estate management.

Lord Hendy Portrait Lord Hendy (Lab)
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My Lords, one aspect of safety in schools is fire safety. I declare an interest as a vice-chair of the All-Party Parliamentary Fire Safety and Rescue Group. In 2007, draft guidance was given that predicted that most schools would be fitted with sprinklers and very few would not. In 2021, further draft guidance was published which predicted the contrary: that very few schools would be fitted with sprinklers. I understand the consultation on that has not been published yet and therefore the guidance has not come into effect two years later. I understand, too, that the problem is that there is a division of opinion between the department on one side, which thinks the risk is low, and the insurance industry and fire chiefs on the other, which think the risk is high. Would the Minister be content to attend a meeting of the APPG with representatives of the insurance industry and fire chiefs to see whether there is some methodology to ascertain precisely what the risk is and therefore the need or lack of it for sprinklers?

Baroness Barran Portrait Baroness Barran (Con)
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I would be delighted to meet the APPG, but I remind the noble Lord that there are 67,000 buildings on the school estate and about 450 fires a year, 90% of which cause no significant damage.

Lord Dobbs Portrait Lord Dobbs (Con)
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Does my noble friend agree that a much greater danger to children in our schools comes from a judge’s ruling last week that parents are not allowed to know about the relationships and sex education that their children are given? This is a hugely controversial area. Parents may knock on the door of a school to ask what is being taught to their children, and can be denied. Does my noble friend accept that this is a nonsense that undermines the heart of family responsibilities and parental authority? Would the Government please do something quickly to make clear what parental rights are in knowing what their children are being taught?

Baroness Barran Portrait Baroness Barran (Con)
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I am delighted to be able to let my noble friend know that the Government have already acted on this. We wrote to every school to be clear about exactly that relationship between parent and school and that trust, particularly on these very sensitive topics, is essential. Schools should not enter into arrangements with third parties that prohibit them sharing curriculum materials with parents.

Baroness Hussein-Ece Portrait Baroness Hussein-Ece (LD)
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To get back to the Question about the safety of school buildings, can the Minister give an assurance that schools deemed to be at risk have been made safe or at least closed until urgent repairs can take place? Is she also aware that teachers leaving the profession cite the state of school buildings and the environment in which they work as one of their reasons for leaving?

Baroness Barran Portrait Baroness Barran (Con)
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I am very happy to give the noble Baroness reassurance on that point. To be clear, the returns that we have had from schools about whether they suspect RAAC on their estate indicate that a significant percentage believe they do, but then when we send the surveyors in, in fact they do not. When RAAC is identified, some poses a risk, but some does not. In every case where a risk is posed, whether in a single store cupboard or a whole block, we send our team in and work closely with the school, trust and local authority to provide both practical and financial support to address issues as quickly as possible.

Lord Laming Portrait Lord Laming (CB)
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My Lords, the noble Baroness knows that schools have made great progress on incorporating children who have special needs of all kinds. Sometimes, the buildings are an impediment to this. Has work been undertaken to ensure that schools are adapted to meet the needs of children with very special needs?

Baroness Barran Portrait Baroness Barran (Con)
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That is extremely important. Access to and the shape of a building should never be an impediment to a child’s learning. That is more straightforward in the new schools we are building, but we are making adjustments and supporting schools through our existing capital programmes to address exactly the needs that the noble Lord raises.

Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Motion to Approve
15:19
Moved by
Earl of Minto Portrait The Earl of Minto
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That the draft Regulations laid before the House on 26 April be approved. Considered in Grand Committee on 13 June.

Motion agreed.

Amendments of the Law (Resolution of Silicon Valley Bank UK Limited) (No. 2) Order 2023

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Motion to Approve
15:19
Moved by
Baroness Penn Portrait Baroness Penn
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That the draft Regulations laid before the House on 27 April be approved. Considered in Grand Committee on 15 June.

Motion agreed.

Armed Forces Act (Continuation) Order 2023

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Motion to Approve
15:20
Moved by
Baroness Goldie Portrait Baroness Goldie
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That the draft Order laid before the House on 22 May be approved. Considered in Grand Committee on 15 June.

Motion agreed.

Judicial Appointments (Amendment) Order 2023

Tuesday 20th June 2023

(1 year, 1 month ago)

Lords Chamber
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Judicial Pensions (Remediable Service etc.) Regulations 2023
Motions to Approve
15:20
Tabled by
Lord Bellamy Portrait Lord Bellamy
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That the draft Order and Regulations laid before the House on 11 and 15 May be approved. Considered in Grand Committee on 15 June.

Lord Davies of Gower Portrait Lord Davies of Gower (Con)
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My Lords, with the leave of the House and on behalf of my noble and learned friend Lord Bellamy, I beg to move the Motions en bloc standing in his name on the Order Paper.

Motions agreed.
Commons Reasons
15:21
Motion A
Moved by
Lord Callanan Portrait Lord Callanan
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That this House do not insist on its Amendment 15B, to which the Commons have disagreed for their Reason 15C.

15C: Because the Commons do not consider the Lords Amendment necessary in order to maintain environmental protection.
Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
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My Lords, with the leave of the House, at the same time as moving Motion A I will speak to Motion B.

The retained EU law Bill has once again returned to this House from the other place. I am pleased to say that the other place has accepted the final drafting change to Amendment 16, so that matter is now closed. This amendment significantly adds to the scrutiny that Parliament can conduct on this Bill.

However, the House of Commons has now been very clear, for the second time, that it is firm in its position on the remaining two amendments. Noble Lords asked the Commons to think again, and it has reached exactly the same conclusion. Indeed, the Solicitor-General noted the many ways in which the Government have already moved on the Bill to reflect the thoughts and concerns of this House. Therefore, today I propose Motions to accept the Commons position on the Bill and accede to the wishes of the elected House.

With regard to the other Motions in front of us today, Amendment 42D looks to be loosely based on one of the scrutiny provisions of the Legislative and Regulatory Reform Act 2006. However, its use in that Act relates to the legislative reform order power, which is much broader. It can act on any piece of legislation, including Acts of Parliament, whereas the revoke and replace power in this Bill can operate only on secondary retained EU law—in other words, retained EU law that is not primary legislation. We have taken steps to make clear what this retained EU law is by publishing and updating the retained EU law dashboard, and we will be reporting regularly to Parliament on our intentions to reform it. This will allow Parliament a substantial amount of time to scrutinise and report on reforming legislation, if Parliament wishes to do so. As such, these powers are clearly not comparable in terms of scope.

Furthermore, the legislative reform order process is not time-limited. It is still ongoing and available after 17 years, whereas this power will expire three years and three days from today. This is crucial when you consider how long parliamentary processes can take. Amendment 42D envisages up to 60 sitting days for Parliament to consider and debate proposals for statutory instruments, and potentially time after that for further scrutiny before the SIs can be made. We have supported and encouraged the initiative, which started in this House, to maximise transparency around the Government’s plans for retained EU law reform via regular reports to Parliament. In our view, this additional 60-day pre-scrutiny period is simply not required.

Therefore, the Government cannot accept a requirement that would place such a significant time restraint on the usage of the power. Doing so would substantially reduce the time available for the power to be used, which is clearly not an appropriate balance between scrutiny and reform. The clause currently provides for this balance in a much more sustainable way; the third limb of the power already requires the affirmative procedure by default, and the second limb is automatically pushed to the affirmative procedure under specific circumstances. For all other circumstances, the sifting committee exists to recommend upgrading the scrutiny procedure, if Parliament judges it necessary. For all these reasons, the Government cannot accept the amendment.

On Motion A1, of the noble Lord, Lord Krebs, I am once again clear that Amendment 15D is unnecessary. I and many other Ministers have committed to uphold our environmental protections. Equally, the consultation part of the amendment is also irrelevant, as the Government remain committed to consulting on major policy changes, in line with usual practice. We take Dispatch Box commitments very seriously as a Government and will not shirk away from the commitments we have already made during the passage of this Bill.

This amendment is therefore unnecessary. The Government are clear that we have set a strong direction of travel on environmental regulation with our actions across this Parliament, and nothing in this Bill will change that. I therefore ask noble Lords to support Motions A and B on the Order Paper today. I beg to move.

Motion A1 (as an amendment to Motion A)

Moved by
Lord Krebs Portrait Lord Krebs
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At end insert “, and do propose Amendment 15D in lieu—

15D: After Clause 16, insert the following new Clause—
“Environmental protection
(1) Regulations may be made by a relevant national authority under section 12, 13, 15 or 16 only if the relevant national authority is satisfied that the regulations do not reduce the level of environmental protection arising from the EU retained law to which the provision relates.
(2) Prior to making any provision to which this section applies, the relevant national authority must seek advice from persons who are independent of the authority and have relevant expertise.””
Lord Krebs Portrait Lord Krebs (CB)
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My Lords, I will be brief, because we have debated this many times before. I will simply explain why I found it necessary to come back yet again with an amendment on environmental protection.

In the previous round of ping-pong, on 6 June, the Minister, in urging your Lordships to reject a previous version of my amendment, said:

“we have substantive concerns that this amendment, in the way that it is worded, would actually make it more difficult to uphold those environmental commitments”. [Official Report, 6/6/23; col. 1271.]

When I heard this, I was puzzled. It appeared that the Minister was saying that the problem was with the wording of the amendment, rather than the substance. I wondered which bit of the wording would make it more difficult for the Government to ensure that their policies do not lower standards of environmental protection.

Was it the non-regression element, requiring the Government to commit to not lowering standards if and when retained EU law is changed? Was it the requirement to consult relevant experts before making changes? We know from the past record that, when experts were not consulted, mistakes were made. Back in 2019, when Defra removed a protection under EU law relating to endocrine-disrupting pesticides, and it was pointed out that it had made a mistake, Defra quickly corrected its mistake and re-introduced the regulation. Was it the requirement for transparency—the need to publish the reasons for any change, and the advice received? Or was it, fourthly, the requirement to comply with international environmental treaties to which the UK is a signatory?

None of these four requirements seems to me to stand in the way of the policies designed to protect the environment, so I decided to try to find out. I requested a meeting with Ministers to help me understand how a change to the wording of the amendment would achieve my objective of ensuring that environmental standards are not lowered, without making it more difficult to achieve this end. However, I regret to say that Ministers were not prepared to discuss this with me or to come up with an alternative form of words. Therefore, I have redrafted the amendment to make it even simpler than before, in the hope that I have succeeded in overcoming the objection the Minister raised last time around.

15:30
The new version of the amendment has just two elements instead of the four that were in the previous version: non-regression on environmental protection and consultation with relevant experts. I have left out the other two elements of the previous version, which were compliance with international obligations and transparency in reporting on expert advice. I have conceded a great deal since my original amendment was passed on Report. In making these compromises, I am trying very hard to make this amendment acceptable to the Government. I am not making a partisan point; I am simply trying to ensure that our environmental protections are not weakened. I am not arguing against future changes to retained EU law. My amendment would simply put in the Bill what the Government say they wish to do in any case—the Minister said it just a few minutes ago—which is not to lower environmental standards. If that is what the Government want to do, why not put it in the Bill? It is not adding any burden or obstacles. As the Minister said, the Government already consult experts, so this is simply saying “Yes, that is what we will do”.
As I said in the previous round of ping-pong, when my amendment passed with a majority of 54, the Government’s watchdog, the Office for Environmental Protection, said that the additional insurance provided by this amendment is essential, especially bearing in mind the parlous state of our environment. I had unexpected support today. It is the first time in my life that I have been supported by the Daily Express—in an opinion piece by former England cricket captain David Gower, who expressed support for this amendment, so it is not just a narrow interest group that I represent. I hope that, in spite of what has been said by the Minister, this time around the Government will accept my stripped-down version, but if not, I will wish to test the opinion of the House. I beg to move.
Baroness Jones of Moulsecoomb Portrait Baroness Jones of Moulsecoomb (GP)
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My Lords, I am going to take the liberty of speaking on this amendment because the last time I spoke on an amendment tabled by the noble Lord, Lord Krebs, he said that he liked me speaking because I made him look more reasonable, so I will do my best now. The Minister said that the Commons is very clear on this. I would like to make a couple of points. First, I very much doubt whether any of them knew what they were voting on, because they do whatever the Whips tell them. Secondly, if it is so obvious that the Government are going to do this, why not just accept the amendment? Given that this has been brought back twice, it is clearly something this House cares very much about. Lastly, if the other end is stupid, it is our job to make it clear that it is being stupid and that we think this is a very important amendment to make to the Bill. Obviously, the Greens will be voting for it.

Baroness Parminter Portrait Baroness Parminter (LD)
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I rise briefly to add our Benches’ support, if the noble Lord, Lord Krebs, pushes this to a vote. His amendment is a canary in a coal mine—perhaps a Cumbrian coal mine. You put a canary down a coal mine when you want to test whether essential resources that you rely on are about to be lost, to be snuffed out. This is what this is. It is about not just the essential protections for our much-depleted nature, but the essential protections that we as humans rely on: water, air quality and all the ecosystem services that nature provides.

I use that analogy for another purpose, as well. You do not see the canary in the coal mine, but if you talk to the general public about puffins and other wildlife, and all the things they care for when they see them on TV programmes, they know that they want them protected, and they want the Government to act. But we are here at the coalface, mining through the amendments, and we can see the damage that this will do to the protections for people and the animals and wildlife they care for. We are here to bring that canary to the surface. We should do that and press the matter again.

Lord Hope of Craighead Portrait Lord Hope of Craighead (CB)
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My Lords, Motion B1, in my name, raises an issue that has been of great concern to many in this House from the outset in our examination of the Bill: parliamentary sovereignty. The clause that causes particular concern, and to which my Motion is addressed, is Clause 15, headed “Powers to revoke or replace”. All the powers that it contains are exercisable by statutory instrument alone, with no provision for active or meaningful scrutiny by either House. That amounts to what the noble Lord, Lord Anderson, described when the issue was before us two weeks ago—without any exaggeration, I think—as a delegated superpower.

It is worth taking a moment to think about the key words that are used to describe the extent of the powers conferred on a relevant authority by this clause. For our purposes, the relevant authority is a Minister of the Crown. Clause 15(2) states that the Minister

“may by regulations revoke any secondary retained EU law and replace it with such provision as the relevant national authority considers to be appropriate and to achieve the same or similar objectives”.

Clause 15(3) states that the Minister

“may by regulations revoke any secondary retained EU law and make such alternative provision as the relevant national authority considers appropriate”.

The subsection (2) power extends not just to achieving the same objectives but to achieving objectives that the Minister considers to be similar. The decision as to whether they are similar or appropriate, about which there may reasonably be more than one view, is left entirely to the Minister.

Subsection (3) goes even further: it extends to the making of such alternative provision as the Minister considers appropriate. There is no limit here to the objectives that are to be achieved. They do not need to be similar—there is no limit to that extent—so they could be different from those of the secondary retained EU law that is being revoked. Again, there could reasonably be more than one view as to whether the alternative provision, whatever it may happen to be, was appropriate.

It is worth reflecting for a moment on the subject matter of what is open to revocation and replacement in the exercise of these powers. This is not simple, routine stuff for which delegated legislation is unquestionably appropriate. It extends to, among other things, major instruments of policy. It extends to fundamental rules relating to public health, trade and the environment, which were handed down to us by the EU and with which we have lived for several decades. It includes, for example, agricultural support, blood safety, fisheries management, food composition standards, nutrition, resources and waste, and the control of ozone-depleting and radioactive substances. Those are just some examples.

Your Lordships might consider it rather strange, given the nature and extent of what is involved, that neither House of Parliament can play any kind of active role in the scrutiny of these regulations. It really is a take-it-or-leave-it system dictated to Parliament by the Executive. The objections to this, which I need not repeat, have been set out many times, and that is what my amendment seeks to address.

I recognise that the previous amendments, which were moved first by me and later by the noble Lord, Lord Anderson, proposed a system that the Minister was right to describe as novel and untested. What I am now proposing is based on a system, as the Minister has pointed out, known as the super-affirmative procedure, which was enacted by Section 18 of the Legislative and Regulatory Reform Act 2006. I shall explain briefly what this involves.

It applies only to regulations made under Clause 15. It proposes a Commons committee—not a Joint Committee, as previously suggested—to sift regulations made under the clause in the light of an explanation by the Minister as to why the regulation is considered appropriate. If, but only if, the committee reports that there are any regulations to which special attention should be drawn, the Minister must arrange for them to be debated on the Floor of each House. The Minister must then have regard to any resolution of either House and may, but is not required to, propose a revised proposal in the light of what has been resolved. The procedure for approval in both Houses thereafter is the affirmative procedure. Finally, the committee may recommend that the Minister’s proposal should not be proceeded with, but the House of Commons has the last word, as it can reject that recommendation. If it does that, the regulations may be laid.

This is a relatively light-touch procedure, which gives Parliament some measure of oversight of what has been proposed. I offer it as a compromise, in the hope that the Minister, despite the remarks he made at the outset of this debate, will feel able to give it serious consideration. At the heart of it all is an issue of principle, which is of basic concern to this House and the other on their entitlement to take an active part in the major exercise proposed. It is in that spirit that I propose to test the opinion of the House, if necessary, when the time comes.

Lord Hodgson of Astley Abbotts Portrait Lord Hodgson of Astley Abbotts (Con)
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My Lords, I would like to detain the House for no more than a minute on this issue. I have spoken about it many times in the past.

I support what the noble and learned Lord, Lord Hope, has said on the principle of what we are looking at. It is very important we remember that my noble friend the Minister said, as a defence of the government position, that the House would have a chance to look at these instruments by means of the affirmative procedure —unamendable, as we know—and that it would have the appropriate back-up information. One of the things that has moved on from the days of just framework Bills is the increasing reluctance of the Government to produce the back-up information—impact assessments and Explanatory Memoranda—in time for the House to do its job properly. The spat we had last week about the Public Order Act regulations was the result of this very question of overcasual behaviour.

My noble friend will say that of course we will have absolutely similar treatment—this is the Government’s argument—for affirmative resolutions as we do for primary legislation. I have the greatest respect for my noble friend on the Front Bench—for his patience, courtesy and diligence—but how he can say that with a straight face absolutely beats me. I am sure that the noble and learned Lord, Lord Hope, has done a very important service for Parliament—this House and the other House—in bringing back this issue for us to consider today.

But then we get to the politics—and politics does come into this. The reality is that the reforms that the noble and learned Lord, Lord Hope, many other Members of your Lordships’ House and I would like to see come about will take place only if they are led by the House of Commons. If that does not happen, the Government will immediately say that this is the unelected House trying to tell the elected House how to do its job. That, I am afraid, will be game over. That is why I voted against the fatal amendment in the name of the noble Baroness, Lady Jones of Moulsecoomb. The House would be unwise, within one day of the Commons having passed a resolution, to immediately pass a fatal amendment.

The brutal truth is that we have been unable to get Members of Parliament in the House of Commons in sufficient numbers to understand what we are driving at: that it is not to do with EU law but is about parliamentary sovereignty, as the noble and learned Lord has said. There are stirrings there but they are only stirrings.

The case before us is further complicated by the fact that this is all going into the Brexit meat-grinder. In the debate in the House of Commons on 12 June, Sir William Cash MP said:

“The way the House of Lords has dealt with these amendments demonstrates that the Lords are determined to try, by hook or by crook, to obstruct the House of Commons, which is the democratic Chamber in these matters as far as the electorate is concerned”.


Later in the same speech he said:

“We know from everything that we have heard over the last few weeks on the Bill that there is an intransigence—a stubbornness, if I may say so politely—from our noble Friends in the House of Lords in the face of any attempt to get rid of retained EU law in the way in which we are proposing”.—[Official Report, Commons, 12/6/23; col. 34.]

15:45
The House will realise from those quotes, which were not contradicted by the Solicitor-General when winding up the debate, that the issue of parliamentary sovereignty has now become irretrievably mixed up and commingled with Brexit, and indeed the last attempts to ask the House of Commons to think again were rejected by a majority of 65 in one case and 67 in another. I believe that the struggle between the Executive and the legislature, so elegantly and wittily explained by the noble and learned Lord, Lord Judge, in his lecture, “The King’s Prerogative”, will go on.
I hope, but I do not have much hope, that my noble friend will still have a chance to think again when he comes to wind up, and he will be able to accept, or go some way towards accepting, what is proposed by the amendment tabled by noble and learned Lord, Lord Hope. If not, I fear that this particular battle is lost, and as regards this vital principle of parliamentary sovereignty and involvement, I fear we may risk traducing it by continued referrals back, particularly when the issue concerned is the volatile and fiercely fought issue of Brexit. We need to encourage the uncommitted Members of the House of Commons to look beyond Brexit to the issue of parliamentary sovereignty and the relative power of Parliament and the Executive.
I hope my noble friend will still be able to make some concession, but in the meantime I am concerned about our continued actions in this regard, and although I entirely support the principle put forward by the noble and learned Lord, Lord Hope, it is with a heavy heart that, for this reason, I am not sure I will be able to support him in the Lobby if he chooses to divide the House.
Lord Pannick Portrait Lord Pannick (CB)
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My Lords, the noble Lord, Lord Hodgson, makes a very strong case that the House of Commons is dealing with this as a matter of politics rather than of principle. I draw precisely the opposite conclusion to that of the noble Lord: it is precisely for that reason that we should send the matter back. We should emphasise, as the noble and learned Lord, Lord Hope, did, that this is a matter of constitutional principle. It is not a matter of whether you support Brexit or you do not support it. It is not a matter of politics, and we should respectfully invite the other House to focus on what we see as the real constitutional issues that lie behind the Motion proposed by the noble and learned Lord, Lord Hope.

Baroness Meacher Portrait Baroness Meacher (CB)
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My Lords, I support the amendments tabled by the noble Lord, Lord Krebs, and the noble and learned Lord, Lord Hope, but in doing so I want to put on record, as a former member of the Delegated Powers Committee, my objection to the Government’s rejection of Amendments 42 and 42B, which proposed a very reasonable process, enabling both Houses of Parliament to debate, vote and make amendments to regulations, but only if those regulations involved a substantial change to the law. The Government’s reaction to Amendments 42 and 42B is yet another example of their determination to bypass Parliament as far as possible and enable substantial law changes to be made by Ministers through delegated powers without the ability of Parliament to make any amendments.

The new amendment tabled by the noble and learned Lord, Lord Hope, is very modest indeed: it applies only to draft Clause 15 regulations, the broadest delegated powers in the Bill. Also, although Parliament will be able to recommend amendments to the regulations, it does not enable Parliament to amend those regulations, only to accept or reject them. Justice takes the view that the amendment tabled by the noble and learned Lord, Lord Hope, is a proportionate and necessary compromise, and should be supported.

Baroness Altmann Portrait Baroness Altmann (Con)
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My Lords, I apologise to my noble friends on these Benches, particularly my noble friend Lord Hodgson. I have the opposite conclusion from the one at which he arrived. My noble friend suggests that it could be game over if we vote once again to ask the Commons to think again. As far as I can see, if we agree to this, it could be game over for us anyway. The Government’s arguments are that if we do not accept their position, these changes will delay the repeal of retained EU law and have also argued that sufficient scrutiny measures are already in place. We know that is not the case.

Giving almighty powers to Ministers to bypass Parliament upends the norms that have governed our country and given us the international reputation we have built. The possibility of allowing any Minister to revoke secondary legislation, just because it happens to emanate originally from the EU, confuses the issue of leaving the European Union with the issue of parliamentary democracy. A Minister could make, change or repeal laws or rules that they consider appropriate, according to this legislation, regardless of Parliament’s view and regardless of whether that Minister even has any expertise in the areas so well outlined by the noble and learned Lord, Lord Hope, such as public health, agriculture, fisheries and blood safety.

The noble and learned Lord’s amendment gives the House of Commons the last word. This is an existential issue beyond politics, and I urge noble Lords to think beyond this Parliament too. If we set this precedent now for this Government, presumably nothing can stop that precedent being used against these Benches, or in some other unacceptable manner, in the future. That could happen if we give up the idea that Parliament must make the rules, rather than Ministers.

Baroness Butler-Sloss Portrait Baroness Butler-Sloss (CB)
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My Lords, over the years I have sat in this House, I have become increasingly concerned about the powers which have been taken by successive Governments, particularly this Government, to the detriment of both Houses of Parliament. It seems extraordinary to me that the House of Commons has not yet appeared to realise the extent to which it, quite apart from us, is being marginalised. This is a very concerning matter. It goes, as my noble friend Lord Pannick said, far beyond the politics; this is a constitutional issue about the rights and powers of both Houses. This is just one example—the latest and one of the most disturbing—which this House has seen over a number of years.

I support both amendments, but particularly the amendment of my noble and learned friend Lord Hope. We really have to remind the House of Commons, the other place, what is happening to it as well as to us.

Lord Hamilton of Epsom Portrait Lord Hamilton of Epsom (Con)
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My Lords, I totally agree with the sentiments of the noble Baroness, Lady Meacher, my noble friend Lady Altmann, and the noble and learned Baroness, Lady Butler-Sloss. However, at the end of the day, the House of Commons is the elected House, and it has the right, as the elected House, to be wrong. I am afraid we have to accept that.

If we go on throwing this back, saying it should think again—and the House of Commons thinks again and comes up with yet another quite substantial majority in favour of the status quo—all we are doing is antagonising the other place unnecessarily. I cannot understand why the other place is giving away the powers that it is—in the way that it seems happy to let the Executive take over everything—but that is what it has decided to do. It is the elected House and we should live with it.

Lord Fox Portrait Lord Fox (LD)
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My Lords, it is an honour to follow so many wise speeches. I am not going to attempt to lengthen this debate or trump that wisdom. In the various iterations of this discussion, we have benefited from having either the noble and learned Lord, Lord Hope, or the noble Lord, Lord Anderson; today, we have both of them in their places. Although I associate myself with my noble friend Lady Parminter’s comments regarding the amendment in the name of the noble Lord, Lord Krebs, I will speak to the amendment in the name of the noble and learned Lord, Lord Hope.

I want to make just two points. First, the objection in the Commons largely and often dwelt on the unprecedented nature of the amendment that was being brought to them by your Lordships last time. In this case, the noble and learned Lord, Lord Hope, has dealt with that issue. This is not an unprecedented situation. It speaks a little to the point made by the noble Lord, Lord Hamilton: it is not that we are bringing back the same amendment, rewritten in different ways. Your Lordships are being asked to re-present a different proposition to the one that was presented last time. The Leader of the House can shake his head but, if he reads the amendments, he will see that they are fundamentally different; I am sure that he knows that in his heart. We are asking your Lordships not to be stubborn, in the words of William Cash, but to offer the Commons a different alternative. Stubbornness is doing the same thing over and over again. This is not the same thing; it is markedly different.

The other point that I want to address, which no one else has addressed, is the one made by the Minister about how much time this would take. I accept that it may take time, but we have to look at what we are doing. First, we are doing important things that Parliament should retain an ambit over. Secondly, the things that we are dealing with are things that we have lived with for many years—indeed, decades. This is not a burning platform; it is stuff that already exists. We are co-existing with it. It is not something that has a blue light on and must be rushed down the road as fast as possible. The argument about time does not count, in my view.

It is clear from what I and my colleagues have said that we support this amendment and will certainly vote for it when the noble and learned Lord, Lord Hope, presses it.

Baroness Chapman of Darlington Portrait Baroness Chapman of Darlington (Lab)
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My Lords, I will speak briefly because I agree with everything that the noble Lord, Lord Fox, just said. We are grateful to the Minister for what he said in his introduction to this debate and to all noble Lords who have contributed and engaged with this Bill since the beginning. However, we on these Benches think that the Government should join us in insisting on Lords Amendments 15B and 42D, as they now are. We agree with noble Lords that their amendments in lieu are sensible compromises and remain deeply concerned by the potential for the protection of our environment, in particular, to be watered down without such protection on the face of the Bill. It seems slightly odd that the Government have compromised on the fundamental purpose and shape of this Bill in removing the sunset, which was a huge thing for them to do. It is strange that they are now determined to hold out on these two relatively minor outstanding issues, which are about improved scrutiny and environmental protection.

The proposal from the noble and learned Lord, Lord Hope, is a proportionate and necessary compromise. The noble Lord, Lord Krebs, is correct to highlight the inadequacy of the verbal commitment offered by the Minister, which obviously may not stand the test of time. These are important principles. Should the noble and learned Lord and the noble Lord wish to test the opinion of the House, we on these Benches will support them.

Lord Callanan Portrait Lord Callanan (Con)
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My Lords, we have had this debate numerous times now, so the House will be delighted to know that I can keep my response fairly brief. I have responded to all the points made previously because noble Lords have repeated many of the points that they made in earlier debates.

Interestingly, the one person who did not repeat the points that he made in earlier debates was the noble Lord, Lord Fox; I was surprised to hear him say that he will support the Anderson/Hope amendment because, in the previous round, in response to a similar point about endless ping-pong made by my noble friend Lord Hamilton, the noble Lord, Lord Fox, said:

“I respectfully suggest that we are not proposing”


endless ping-pong but that

“we are proposing one more ping and one more pong”.—[Official Report, 6/6/23; col. 1262.]

Unlike some of the sceptics behind me, I have faith in what the Liberal Democrats say. I am absolutely certain that, because that is what the noble Lord, Lord Fox, said last time, he will join us in the Lobby this evening. We have hope yet; I am sure that the Liberal Democrats would not want to go back on their word.

16:00
On Amendment 42C, while I respect the noble and learned Lord, Lord Hope, on this point, I think he is pushing his luck slightly now, if I may say so, respectfully. I think he knows this is adding unacceptable time into the debate, and the Government cannot accept a procedure as unwieldy as what he has proposed. It would also cut the amount of time for the powers to be used by up to a third, which is an unacceptable limitation on the reform programme. I think the noble and learned Lord knows this is not about additional parliamentary scrutiny; this is actually about stopping Parliament acting in this area. The reform programme is a crucial part of the Government’s agenda, and it is not an appropriate balance between scrutiny and reform to restrict it in such a manner.
Turning to Amendment 15C, I will repeat the arguments that I have made previously and that the House of Commons has supported. The noble Lord’s Motion proposes to insert additional measures into the Bill on environmental protection. I do appreciate the sentiment, but the noble Lord also knows very well the Government’s position on this and the importance we attach to maintaining environmental standards. We do not believe that this amendment is necessary, and in light of the many commitments we have made in this House and the other place, I hope noble Lords will reject both.
Lord Krebs Portrait Lord Krebs (CB)
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My Lords, I thank the noble Lords who have contributed to the debate on my amendment, as well as on the amendment of my noble and learned friend Lord Hope of Craighead. A key word that was mentioned in the contribution by the noble Baroness, Lady Chapman of Darlington, was “compromise”. When my amendment passed at the last round of ping-pong, I asked Ministers whether we could talk about it and try to find a compromise wording that would satisfy the Government and the majority of Members of this House who supported the previous amendment; but no compromise was forthcoming. I thought that when you have a disagreement among reasonable adults, you talk it through and try to reach a compromise. That is not what the Government are trying to do, so I am left with little option but to test the opinion of the House.

I would also briefly like to thank the noble Baroness, Lady Jones of Moulsecoomb, for fulfilling her duty of making me look reasonable, so I thank her for that. I also thank the noble Baroness, Lady Parminter, for reminding us of the important fact that protecting our environment is of huge public concern. I am sure there will be noble Lords who will want to vote against my amendment, and I would like them to ask themselves whether they would be prepared to stand up in front of a television camera and explain to David Attenborough why they think it is not necessary for this Government to maintain our current standards of environmental protections. I wish to test the opinion of the House.

16:04

Division 1

Ayes: 232


Labour: 111
Liberal Democrat: 59
Crossbench: 47
Independent: 8
Bishops: 3
Green Party: 2
Conservative: 1
Plaid Cymru: 1

Noes: 187


Conservative: 169
Crossbench: 6
Democratic Unionist Party: 5
Independent: 5
Labour: 1
Ulster Unionist Party: 1

16:15
Motion B
Moved by
Lord Callanan Portrait Lord Callanan
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That this House do not insist on its Amendment 42B, to which the Commons have disagreed for their Reason 42C.

42C: Because the Commons consider the scrutiny procedure imposed by the Lords Amendment to be inappropriate.
Motion B1 (as an amendment to Motion B)
Moved by
Lord Hope of Craighead Portrait Lord Hope of Craighead
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At end insert “, and do propose Amendment 42D in lieu—

42D: After Clause 15, insert the following new Clause—
“Parliamentary scrutiny
(1) This section applies to all regulations proposed to be made under section 15 by a Minister of the Crown which revoke any secondary retained EU law and –
(a) replace it with such provision to achieve the same or similar objectives, or
(b) make such alternative provision,
as a Minister of the Crown considers to be appropriate.
(2) Regulations referred to in subsection (1) may not be made (under the applicable provisions of paragraphs 7 and 8 of Schedule 4) unless a document containing a proposal for those regulations has been referred to a Committee of the House of Commons, together with a statement by the Minister of the Crown which explains why the Minister considers the replacement or the alternative provision proposed, as the case may be, is appropriate, and the other requirements of this section have been met.
(3) If the Committee reports that special attention should be drawn to the proposed regulations in question, then subsections (4) to (8) apply.
(4) A Minister of the Crown must arrange for the proposal for the regulations to be debated on the floor of each House within the relevant period referred to in subsection (5).
(5) The relevant period is a period of 60 days beginning with the day on which the proposal and the corresponding statement were referred to the Committee, not including any period during which Parliament is dissolved or prorogued or either House is adjourned for more than four days.
(6) The Minister making the regulations must have regard to any resolution of either House and to any recommendations by the Committee made during the relevant period.
(7) If, after the expiry of the relevant period, the Minister making the regulations wishes to make an instrument in the terms of the proposal (under the applicable provisions of paragraphs 7 and 8 of Schedule 4), the Minister may do so only if the proposal for those regulations is approved by a resolution of each House of Parliament.
(8) If, after the expiry of the relevant period, the Minister making the regulations wishes to make an instrument in the terms of a revised version of the proposal (under the applicable provisions of paragraphs 7 and 8 of Schedule 4), the Minister must lay before Parliament a document containing the revised proposal for the regulations together with a statement of the changes proposed and may make an instrument in the terms of the revised proposal only if the revised proposal is approved by a resolution of each House of Parliament.
(9) The Committee may, at any time before the regulations are laid in draft or made (under the applicable provisions of paragraphs 7 and 8 of Schedule 4), recommend that they should not be proceeded with.
(10) Where a recommendation is made by the Committee under subsection (9), the regulations may not be laid in draft or made unless the recommendation is rejected by a resolution of the House of Commons.””
Lord Hope of Craighead Portrait Lord Hope of Craighead (CB)
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My Lords, I am grateful to all noble Lords who spoke to my Motion B1. I have only one comment to make, which is that the noble Lord attributed to me a state of knowledge that I simply do not recognise. It is not my intention to frustrate the intentions of the Government in any way; my amendment is all about the issue of principle to which the noble Lord, Lord Pannick, referred—it is a crucial instrument. That being the point, I beg to test the opinion of the House.

16:16

Division 2

Ayes: 241


Labour: 113
Liberal Democrat: 60
Crossbench: 50
Independent: 9
Conservative: 3
Bishops: 3
Green Party: 2
Plaid Cymru: 1

Noes: 181


Conservative: 166
Democratic Unionist Party: 5
Crossbench: 4
Independent: 4
Labour: 1
Ulster Unionist Party: 1

Report (1st Day)
16:29
Relevant documents: 27th and 36th Reports from the Delegated Powers Committee
Clause 1: The registrar’s objectives
Amendment 1
Moved by
1: Clause 1, page 2, line 8, leave out from “to” to “a” on line 9 and insert “ensure that records kept by the registrar do not create”
Member’s explanatory statement
This brings the wording of objective 3 into line with objectives 1 and 2.
Lord Johnson of Lainston Portrait The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
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My Lords, before we begin proceedings, I draw your Lordships’ attention to my interests as set out in the register of interests, including as a director and person with significant control of AMP Ventures Ltd, a person with significant control of Cigarkeep and as a shareholder of several other companies, including a previous shareholder and person of significant control of Somerset Capital Management. As I have set out before, I believe these interests serve only to increase my enthusiasm for this Bill to ensure that the UK remains the best place to start and grow a business while driving dirty money out of the UK. It is at the absolute core of this Government’s mission that we help legitimate business thrive.

I express my gratitude for the vast amount of engagement that has taken place since we concluded Committee in May, and the constructive way in which your Lordships have worked with me, my noble friend Lord Sharpe, my noble and learned friend Lord Bellamy, and all our exceptionally hard-working officials to ensure this Bill reaches its full potential. I am pleased that the Opposition Front Benches remain supportive of the intentions of the Bill and that they desire to ensure it works effectively. I am particularly grateful for the focus they have brought to bear on the drafting of the new objectives for the Registrar of Companies and for the constructive dialogue they have had with the registrar and me in recent weeks. I also give particular thanks to my noble friends Lord Agnew of Oulton and Lord Leigh of Hurley and the noble Lord, Lord Vaux of Harrowden, for their scrutiny of the Bill and their amendments on shareholder transparency, authorised corporate service providers and the register of overseas entities, which we will debate shortly.

Before I turn to the government amendments in this group, I briefly remind the House of the key principles of this Bill. It builds on last year’s Economic Crime (Transparency and Enforcement) Act, which contained key measures to help crack down on dirty money, including from Russia and other foreign elites abusing our open economy. That Act introduced reforms to the UK’s sanctions framework and to unexplained wealth orders and it provided for the introduction of the register of overseas entities.

Forming a key part of the wider government approach to tackling economic crime and sitting alongside the recently published economic crime plan, this Bill will further tackle economic crime, including fraud and money laundering, by delivering greater protections for consumers and businesses, boosting the UK’s defences, and allowing legitimate businesses to thrive.

I direct noble Lords to read the economic crime plan, if they have not already done so, as it contains a significant set of actions. Soon after the plan came out, our Home Office colleagues supplemented it with the launch of the new fraud strategy and in the coming months the Treasury will consult on the future of the anti-money laundering supervisory framework. These are relevant points because they fit within the debate today. My own department will conclude its review of the whistleblowing framework. This is a lot of activity and rightly so, because economic crime is a growing issue and affects people of all backgrounds and businesses large and small.

This Bill will make an immediate difference to real people. For example, we have discussed the problems of fraudsters creating companies using an individual’s or business’s personal details or address without their consent, including to obscure ownership and control of a company. Innocent citizens have been left seriously distressed by huge volumes of post for fake companies arriving through their letterbox and finding to their horror that their credit reference scores have suffered because they have been appointed a director of a debt-ridden company without their knowledge. The Bill introduces safeguards to put an end to these issues.

Elsewhere, the Bill provides vital new powers to underpin our law enforcement agencies; for example, over crypto assets, and to address corporate criminal liability. The powers supplement the £400 million package the Government have allocated to tackle economic crime over the spending review period, including support for the National Economic Crime Centre, reform of suspicious activity reporting and upgrading the Action Fraud service.

The Bill also supports our national security by making it harder for kleptocrats, criminals and terrorists to engage in money laundering, corruption, terrorism financing, illegal arms movements and ransomware payments. We have continuously sought to improve the Bill as it has progressed through Parliament. As noble Lords will know, the Government have tabled a number of significant amendments to be considered at Lords Report stage, including on strategic lawsuits against public participation, corporate criminal liability, the role of authorised corporate service providers and the transparency of information on trusts on the register of overseas entities. We believe these present a significant, meaningful package of measures that demonstrates that we have listened carefully to the concerns of this House.

Yet, throughout the passage of this Bill, it has also been essential to hold uppermost in our minds the fact that the vast majority of businesses are entirely law-abiding, and that the 350 or so pages of the Bill as it now stands and the dozens of secondary regulations which will follow it represent a lot for the business community to grapple with. The reforms in this Bill will touch every company in the country—nearly 5 million of them. The Government have worked very hard to ensure that, despite the length of the Bill, the burdens it will place on businesses are slight. As the FSB has tweeted today:

“The Economic Crime Bill must work for small businesses”.


The estimated net direct cost to the business community of the package of reforms to Companies House is less than £20 million a year. Indeed, these reforms will underpin systems changes that will improve the user experience for company directors. Elsewhere, the Home Office measures in Part 5 will reduce the reporting burdens on businesses, enabling the private sector to work with law enforcement more efficiently and effectively.

I am therefore extremely pleased that we have been able to maintain the support of the business community as the Bill has progressed. Indeed, the Institute of Directors very recently said:

“The UK is rightly seen as a country which champions high standards of business conduct. The IoD welcomes this legislation as a measure that will help maintain the integrity of the UK business system”.


However, that support cannot be taken for granted. As we reach the concluding phases of the Bill’s passage, I hope that noble Lords will work with the Government to ensure that what emerges is an Act which works for the law-abiding majority at a time when so many businesses and businesspeople are under strain. We are doing a great deal, and we need to bed it in and monitor how this will affect businesses before going significantly further.

Turning to the reforms in Parts 1, 2 and 3, which we will debate today and which are the responsibility of my department, I say that noble Lords will know that these measures will fundamentally change the role of Companies House, transforming it from a passive recipient of the data it receives to a proactive gatekeeper that upholds the integrity of the companies register—the most significant reform to the UK’s framework for registering companies in some 170 years. This, of course, means significant changes for Companies House as an organisation—to its systems, processes and culture. Investment in new capabilities is already under way, with a £63 million allocation to Companies House across the spending review period and the creation of some 400 new roles to ensure delivery of the registrar’s new objectives. Furthermore, through additional investment of up to £20 million of allocated spending on economic crime, new anti-money laundering intelligence teams are being created at both Companies House and its close partner the Insolvency Service to tackle the misuse of UK companies, corporate entities and property.

Having met with the registrar, Louise Smyth, several times in recent weeks—I express my gratitude to her and her team for their time; I am sure noble Lord will join me in doing so—I am convinced that she is well aware of both the challenges and opportunities this brings. These are transformative changes that will require a step change in the capabilities and practices of Companies House staff and its systems and users.

I hope that noble Lords who joined our session with the registrar and her team a fortnight ago share my conviction that the registrar and her team will rise to these challenges. Those who attended heard how, even before the reforms reach the statute book, Companies House is breaking new ground with HMRC, the National Crime Agency and others to maximise the power of its data to tackle criminality. The amendments we are about to debate get to the core of these changes.

I turn first to the government amendments in this group, starting with Amendments 1 and 2. The Bill introduces a wholly new set of objectives for the registrar. These are: to ensure that any person who is required to deliver a document to the registrar does so and that the requirements for proper delivery are complied with; to ensure that documents delivered to the registrar are complete and contain accurate information; to ensure that records kept by the registrar do not create a false or misleading impression to members of the public; and to prevent companies and others carrying out unlawful activities or facilitating others carrying out unlawful activities. These objectives were warmly welcomed across the House, as were the amendments tabled in Committee to broaden and strengthen the scope of those objectives.

However, in the interesting and lively debate we had on the subject in Grand Committee, it was apparent that a number of noble Lords felt we could have been more ambitious in the tone the registrar’s objectives set. Mindful of the need to strike a balance between that which is sensibly aspirational and what is simply unachievable, we have looked closely at the drafting once more.

I recall that the language of “ensuring” found your Lordships’ favour in the context of the first two objectives, concerning compliance and accuracy respectively. I trust, therefore, that the House will similarly support our amendment to replicate that language in objective 3, which is concerned with the risk of register records creating a false or misleading impression to members of the public. Instead of tasking the registrar “to minimise that risk”, the intention is that she will now have the more stretching objective “to ensure” that it does not happen. Furthermore, we understand the strength of feeling on the wording of the fourth objective and recognise that noble Lords wanted an alternative to “minimising” the extent of companies’ and others’ unlawful activities.

We have been cautious here for good reason, not wishing to subject the registrar to either unrealistic expectations or the risk of unnecessary legal challenge. However, following dialogue with the registrar, we have resolved to replace the wording

“minimise the extent to which”

with “prevent” in objective 4. I know that the noble Lords, Lord Coaker and Lord Fox, in particular, felt strongly about that point. I hope these amendments will be welcomed as a further demonstration both that we have listened to the views of the House and of the commitment on the part of both the Government and the registrar to improve the quality of register information and work proactively in combating economic crime.

I turn to government Amendments 46 to 48, 51, 54 to 56, 64, and 80 to 82. Companies legislation contains various regulation-making powers allowing the Secretary of State to delegate duties and functions to the Registrar of Companies. For efficient administration, there are instances where it is appropriate for such powers to allow the Secretary of State to confer on the registrar discretion as to how she discharges her statutory duties.

We have identified various new delegated powers within the Bill where such discretion would be beneficial to efficient delivery. The common thread linking them is that they determine, at a high level, how various statutory mechanisms for applications, notifications and appeals to the registrar shall be established through secondary legislation. Although we strive to establish the parameters of such mechanisms as precisely as possible, operational experience shows that sometimes being overprescriptive can hinder efficient administrative delivery.

The primary legislation is not consistent. In some cases, it allows the registrar discretion on all aspects of processes, in other cases only some aspects, and in others, none. These amendments will give the Secretary of State the ability to delegate consistent discretions. These will cover matters such as who she gives notice to when she exercises her powers, periods allowed for certain objections and what material is required to substantiate applications and objections.

Briefly, on government Amendment 40, the Bill provides the registrar with new powers to examine and query applications for company incorporation and restoration and verify certain information. Although it is expected that this will significantly improve the integrity of the register, it is inevitable that criminals will try and, in some cases, succeed in finding ways to circumvent these checks and file under false, deceptive or misleading pretences.

Existing powers, further enhanced by the Bill, allow for the removal of false information from the register—for example, directors’ names and registered office addresses. However, the circumstances in which the registrar can, by her own action, remove a company itself from the register through the process of strike-off are limited. She must be satisfied that the company is no longer operating and is effectively defunct. Forming that judgment and seeing the process to a conclusion is a relatively lengthy process, involving various statutory notification obligations.

It will be immensely beneficial for the registrar to be able to act more quickly than current processes allow. This amendment will allow the registrar to act expeditiously where there is reasonable cause to believe that the incorporation or restoration of a previously struck-off company is based on a false premise. This will mean that she can act much more quickly to expunge potentially fraudulent companies from the register.

Finally, this group contains several minor and technical amendments to Parts 1 and 2 to correct drafting errors or ensure that the drafting works properly—namely, government Amendments 3, 4, 18 and 38. Amendments 3 and 18 correct cross-references in Clause 4 and Schedule 2. Amendment 4 changes the definition of “the registrar” in Clause 30 so that it does not refer to the Companies Act—which is itself not defined. Amendment 38 corrects a mistake in Section 1082(1) of the Companies Act 2006 by spelling out that the power conferred by that subsection is exercisable by regulations—that this was always the intention is clear from the subsequent subsections.

In combination, these amendments will further improve the registrar’s objectives and powers, enabling her to better fulfil her new role. I therefore hope that your Lordships will support these amendments and I beg to move.

16:45
Lord Leigh of Hurley Portrait Lord Leigh of Hurley (Con)
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My Lords, there seems to be a gap, so I will happily fill it. I remind the House of my declaration of interests in the register, which discloses that I am a director of a number of private and public companies, and I am a person with significant control of rather a large number of private companies that should really be consolidated, but there you are. Now that Companies House has made it easier, perhaps I shall do that.

I thank the Minister for the discussions that he has held with me and others between Grand Committee and today. I congratulate him on most of these amendments. It really shows that he and his colleagues have listened, and it is really pleasing to know that our House has contributed to improving this Bill in such a dramatic way, with so many government amendments to the Bill at this stage. Nearly all of them—if not all of them—are going to be welcomed by this House.

There are a few points and comments that I would like to make. We do not have the consistency point that I wanted in the objectives, but the proposals that the Government are making on the objectives are tremendous and will make a big difference to the quality of the Bill. On Clause 40, perhaps the Minister could explain—now or later—that if we are going to have a power to strike off companies registered on a false basis, what about those companies that submit accounts on a false basis? The clause addresses when the companies are created; it does not deal with—I do not think it does, unless it is dealt with elsewhere—those regular company accounts. Perhaps I have misunderstood, and the Minister could clarify.

I turn to my noble friend Lord Agnew’s Amendment 49; he has not had a chance to speak to it, so it is perhaps not right for me to comment on it. There is obviously going to be extra work to do this risk assessment, and I would not want the registrar to be let off the hook by just doing a risk assessment, so perhaps he could clarify that that was not his intention by inserting that clause.

I welcome the discretion that the registrar is given throughout the clauses, especially Clauses 54 to 56. I think that giving the registrar much more discretion is a very good thing. As a result, I would suggest, in advance of my noble friend Lord Agnew’s words, that his idea of a review is a very good idea because, if the registrar is going to be given this discretion and so much is going to happen, it would be helpful for us to see what is happening. We all remember how disappointing the unexplained wealth order legislation is in practice in that nothing much has happened. It would be helpful for us to have an annual or regular update on the implementation of this Bill when it is enacted.

Lord Agnew of Oulton Portrait Lord Agnew of Oulton (Con)
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My Lords, I thank my noble friend the Minister for all the engagement and patience he has shown over the last few weeks and months, not just with me but with a wide congregation. We now have something that is much better than when it began its journey through the House, so I thank the Minister for that.

I am very pleased with two particular changes in this batch of amendments from the Government. First, that key, vital objective has been added for the registrar, so that it is absolutely crystal clear culturally for the organisation Companies House to know what it has to do. Added to that, giving her more discretion on how she delivers on that is very sound because, of course, it will be a mobile battlefield and she will have to be more fleet of foot.

Lastly—and I have said this before, but I think it is important that it goes on the record—we should not underestimate the extent of the cultural change needed in Companies House to move from being, as my noble friend said, a passive recipient of data to something far more dynamic and intelligent. That is why this reporting to Parliament—albeit with a sunset clause up to 2030—is really important to keep driving the momentum of that change. Every single employee of Companies House will need to be thoroughly retrained in this new mission.

Baroness Bennett of Manor Castle Portrait Baroness Bennett of Manor Castle (GP)
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My Lords, I apologise for my croakiness; the hay fever is definitely winning. I join others in welcoming, in these government amendments, that we have seen significant change since Committee. It is worth highlighting a couple of comments from the Minister’s introduction. He said that the aim of the Bill to drive dirty money out of the UK; I hope we can all agree that that is essential. He also said that we had seen so many people abusing our open system; I think we have to acknowledge that we invited those people in, and that that is the situation we created. We are now trying to fix it.

In that light, I very much welcome the fact that the Minister said that we need to see how these changes bed in before going significantly further. I want to make sure that we acknowledge, and see on the record, the fact that the Government have acknowledged that this is not enough, and that a lot more will need to be done, in what is, after all, as described by UK Finance,

“the fraud capital of the world”.

Lord Fox Portrait Lord Fox (LD)
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My Lords, there are political Bills, where the House divides on political issues and argues among itself, and there are Bills of practical importance, when the House can come together and pull in the same direction. We will not all agree about everything, but the motives behind what we are proposing have been similar. In this case, it is about helping to clear up and clean up a bad situation, and to do so in the best possible way. The Minister and his colleagues, the noble Lord, Lord Sharpe, and the noble and learned Lord, Lord Bellamy, must be congratulated on their openness and their listening ears. They have not just listened but acted on what they heard, and we should all be grateful that we have moved in this direction.

I am pleased that I can agree with the noble Lords, Lord Leigh of Hurley and Lord Agnew, in their characterisation of these changes, which are important. I think the change to the mission of Companies House is absolutely fundamental. It is vital that it is there, and it then plays to the point made by the noble Lord, Lord Agnew, about the culture change, as well as, I think, giving the flexibility and understanding that—again, as the noble Lord, Lord Agnew, said—this is going to be a mobile struggle that we have to move forward.

This group of amendments is followed by other groups which are other examples of where listening has turned into positive changes. From these Benches, we are really pleased that we are moving in this direction, and are grateful that we have done that. As we have heard, the Bill is improving as a result. So we are very supportive of these measures, and continue to be supportive of the other measures that we will hear about later.

Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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My Lords, I add my thanks to the Ministers for their regular updates, and the access we have had to their officials. The ability to meet the team from Companies House was particularly helpful and instructive. I too believe that we have a better Bill before us.

Having said that, we must not forget the scale and severity of the consequences of actions of bad actors, particularly the exposure of the public to fraud, nor the victims, who have suffered so appallingly over many years. As we know, the Ukraine war has brought all these issues to a head, necessitating a swift response. I thank everyone involved for responding positively to some of the many proposals that we have put forward.

I will refer particularly to Amendment 2, with regard to the fourth objective. It would be wrong of me not to mention the fact that the noble Lord, Lord Coaker, as has been mentioned, was very forceful in his views that the objective surely must be to prevent unlawful activities rather than to minimise them, as was the earlier wording. I also welcome the change to the third objective, and the increase in the ability of the registrar to strike off companies and take swift action. Again, I think that running through this is the emphasis on the ability to act quickly with clarity.

I acknowledge the amendments in the name of the noble Lord, Lord Agnew, which would bring in a framework of intervention criteria to assist the registrar, and particularly Amendment 57, which recognises the sheer scale of the task ahead of Companies House and seeks full, regular scrutiny. I want to put on record our concern about the sheer scale of the task ahead of Companies House and make it plain that we must communicate to everyone involved that there is a fallback position and that it can come back if the resources are not adequate for the job it has in hand. The scale of change it has to go through, from being a receiver of information to a proactive partner, is quite significant.

I again thank the Ministers involved for their openness and for having moved on a number of our suggestions.

Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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I am extremely grateful to all noble Lords who participated in this debate. I shall answer their questions in order.

The financial guru, my noble friend Lord Leigh of Hurley, pointed to Amendment 40. He is right that it does not specifically mention submitting misleading information—this is related specifically to the filing of accounts—but I believe that the Companies Act enables the Secretary of State to issue a winding-up order if there are materially inaccurate filings in the accounts. I am happy to write to him specifically on that issue.

I am grateful to my noble friend Lord Agnew for his comments. I am extremely pleased to come back to the noble Baroness, Lady Blake, about the objectives. We had long and specific discussions about the difference between the words “minimise” and “prevent”. I think the House understood clearly from my approach that I was being carefully guided by our legal advisers. It is right that we should be, and it is also right that we found a word that would be suitable in how the noble Baroness saw the Bill being presented. We want to make sure that we get the language right. It is important that we have remained in our current function to ensure that there is flexibility for the registrar to perform her duties while at the same time sending the appropriate signal.

The noble Baroness, Lady Bennett, rightly commented on the need to continue to review the situation as we see it. I hope that the noble Baroness has been reassured by my attitude to the Bill as it has progressed through the stages in this House. My point was to ensure that we do not deluge businesses with unnecessary obligations at this stage before we know how this process will transpire. I am also very aware of the dangers of being too prescriptive. Technology changes and the activities of criminals change, and it is important that we assess the situation as it stands and work out how to ensure that we can confront those challenges as and when they arise.

I turn specifically to the amendment tabled by my noble friend Lord Agnew, Amendment 57. Reporting by Companies House is an extremely important element of its activities, and I agree that it is important that Parliament is informed about the implementation and delivery of the reforms that we are undertaking. That is why the Government brought forward an amendment in the other place to that effect, which is now Clause 187. I am aware of the comments made about the cultural and operational changes linked to Companies House’s new responsibilities. I hope that through meeting the registrar we felt a sense of reassurance that the head of investigations is extremely dedicated to his task. We believe that the amount of money we are applying to Companies House and the fees, which we will discuss later, will amply cover expenditure, and could be increased if necessary. It is up to Companies House to ensure that it presents to the Government its funding requirements to ensure that it can do its job and perform its tasks.

It might be helpful for me from the Dispatch Box to go through some of the points formally so there is a record of what we expect Companies House to report when it has finished reporting on what it is intending to do—the inputs—and then turn our attention to the outputs, which is the difference between what it is obliged to report to Parliament for the first three years of operation, I think, and what we then expect to be business as usual.

From the discussions with Companies House to date, I can commit that, subject to the successful implementation of the necessary information systems, early reports will cover items such as: the number of documents rejected for not being properly delivered or for a discrepancy; rejected incorporations and name changes; the number of documents removed from the register for being inaccurate, incomplete or fraudulent; and the number of times the querying power is used and the resulting actions taken by Companies House. We are also looking into how we might report on the number of times Companies House has shared data with other organisations and vice versa. I would be happy to explore with Companies House officials how they might incorporate some of the new items in this amendment into its reporting without the need for this statutory requirement, and of course we listen to all sides of the House about other areas where noble Lords feel it would be beneficial for Companies House to report.

17:00
However, I hope that I have convinced my noble friend Lord Agnew that his amendment is not the best way to achieve his intended effect. The Government’s report will be comprehensive, and a statutory list of specifics is likely to become out of date quickly. I therefore urge him not to move his amendment.
Amendment 49 would insert new requirements to the manner in which the registrar should carry out her analysis function and how she should share evidence with the relevant law enforcement agencies. The Bill already provides that the registrar must carry out analysis where she considers it appropriate, and she has the relevant powers to query information and exchange information with law enforcement agencies for the purposes of crime prevention and detection. I understand that my noble friend would like to see the mandatory prescription of the use of those powers and a risk-based approach in legislation. However, the Government are firmly of the view that to do so would unnecessarily restrict the registrar in making judgments about how to make best use of her resources.
Although the Bill does not explicitly require the registrar to take a risk-based approach, it provides that she must carry out analysis where she considers it appropriate and gives her relevant powers to query information and exchange information with law enforcement agencies for the purposes of crime prevention and detection. The Bill provides the registrar with functions and objectives which have been carefully drafted to allow her to do everything she can within the resources at her disposal without imposing upon her duties which there can be no guarantee she will be capable of attaining. It is imperative that we afford the registrar sufficient discretion to focus her efforts on the areas of highest risk. In doing so, she will be implicitly operating in a risk-based fashion. It is the intention that the risk-based approach will be informed and driven by an intelligence hub in Companies House. Utilising ever-more sophisticated data science methodologies, the hub will only expand over time in its ability to identify strategic and tactical economic crime threats.
I was pleased that there was an opportunity for noble Lords to hear from the registrar in person earlier this month, and what she said, in my personal view, was very encouraging. The commitment is there, and the plans are well advanced. It is a significant task we are giving her, and I do not wish to unnecessarily tie her hands as she goes about it. I therefore ask my noble friend not to move his amendment.
Amendment 1 agreed.
Amendment 2
Moved by
2: Clause 1, page 2, leave out lines 11 to 13 and insert—
“Objective 4 is to prevent companies and others from—(a) carrying out unlawful activities, or(b) facilitating the carrying out by others of unlawful activities.”Member’s explanatory statement
At the moment the registrar’s fourth objective is to minimise the extent to which companies and others carry out unlawful activities etc. This amendment makes it an objective to prevent companies and others from carrying out unlawful activities etc.
Amendment 2 agreed.
Clause 4: Proposed officers: identity verification
Amendment 3
Moved by
3: Clause 4, page 4, line 7, leave out “206(7)” and insert “207(1)”
Member’s explanatory statement
This amendment corrects a cross-reference in Clause 4 of the Bill.
Amendment 3 agreed.
Clause 30: Registered email addresses: transitional provision
Amendment 4
Moved by
4: Clause 30, page 22, line 8, leave out from second “the” to end of line 9 and insert “meaning given by section 1060(3) of the Companies Act 2006.”
Member’s explanatory statement
This amendment changes the definition of “the registrar” so it does not refer to the Companies Acts (which is itself not defined).
Amendment 4 agreed.
Clause 36: Disqualification of persons designated under sanctions legislation: GB
Amendment 5
Moved by
5: Clause 36, page 26, leave out line 26 and insert “and Article 15A of the Company Directors Disqualification (Northern Ireland) Order 2002 (see section 3A of the Sanctions and Anti-Money Laundering Act 2018)”
Member’s explanatory statement
This amendment makes it clear that a person who is subject to director disqualification sanctions will be so subject both for the purposes of section 11A of the Company Directors Disqualification Act 1986 and for the purposes of Article 15A of the Company Directors Disqualification (Northern Ireland) Order 2002.
Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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My Lords, the amendments in this group relate to the new director disqualification sanctions measure introduced in Committee. This measure created a completely new type of sanction in the Sanctions and Anti-Money Laundering Act 2018 called director disqualification sanctions. It will be unlawful for a designated person subject to this new measure to act as a director of a company. I welcome the support this measure received from this House in Committee.

Government Amendments 5 to 11 address some technical drafting concerns raised by Northern Ireland officials. The amendments clarify that the definition of a

“person who is subject to director disqualification sanctions”

encompasses disqualification for the purposes of the Company Directors Disqualification Act 1986, which applies in England, Wales and Scotland, and the Company Directors Disqualification (Northern Ireland) Order 2002, which applies in Northern Ireland. This does not alter the legal consequences of the measure but simply clarifies that the definition relates to both Great Britain and Northern Ireland legislation.

The amendments also make clear that the Department for the Economy in Northern Ireland will now be required to maintain information about individuals subject to the new director disqualification sanction in the department’s register of disqualified directors. This mirrors the requirement for the Secretary of State to update the UK-wide director disqualification register, ensuring consistency between GB and NI legislation.

Lastly, these amendments clarify when a designated person, or a person acting on the instructions of a designated person, is responsible for the debts of a company. The current drafting does not address the liability of a third party who acts on the instructions of a designated person. These amendments therefore specify the circumstances in which a third party acting under instructions from a designated person may be liable and clarifies the defences that may relieve the designated person or the third party from personal liability.

The amendments mean that a person will not be responsible for debts incurred when they could not reasonably have known they were subject to director disqualification sanctions. And a third party who acts on instructions that were given by a person who they did not know was subject to director disqualification sanctions, or who they reasonably believed was acting under the authority of a licence, will similarly not be responsible. As a package, these amendments improve the coherence of the new director disqualification sanctions measure.

Government Amendments 52 and 53 amend Clause 101 of the Bill, which inserts new Section 1132A into the Companies Act 2006. Government Amendment 83 inserts into the Bill after Clause 169 a new clause which amends Section 39 of the Economic Crime (Transparency and Enforcement) Act 2022. Both new sections allow the Secretary of State to make regulations which confer power on the registrar to impose a financial penalty on a person if satisfied, beyond reasonable doubt, that the person has engaged in conduct amounting to an offence. These amendments align the drafting with the drafting of Clause 202 of this Bill, which inserts new Section 17A into the Sanctions and Anti-Money Laundering Act 2018. These amendments mean that regulations must provide that no financial penalty may be imposed on a person in respect of whom criminal proceedings are ongoing, or if a person has been convicted of an offence. At the moment, it is the other way around, so criminal proceedings cannot be continued once a penalty is imposed. This is clearly unhelpful, as without amendment, prosecutors’ discretion to prosecute could be infringed upon.

Government Amendment 50 relates to the setting of Companies House fees. It will allow the Secretary of State to take into account additional costs incurred, or likely to be incurred, in relation to the new disqualified directors sanction which the Bill is introducing. Specifically, this amendment will ensure the costs of delivering the licensing function for this sanction can be covered by Companies House fees. Without this amendment, the costs of this licensing regime would fall on the taxpayer. We have made great strides through this legislation to require those that benefit from incorporated status to contribute towards maintaining the integrity of the register and a healthy business environment. It therefore seems reasonable for this to extend to the funding of the licensing regime that enables sanctioned directors to remain compliant and continue lawfully to carry out certain activities within the limitations set out in the licence.

I hope noble Lords will support these amendments. I beg to move.

Lord Fox Portrait Lord Fox (LD)
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My Lords, again this is a group of amendments with which we can thoroughly agree, which is a nice position to be in. Government Amendments 5 to 11 speak for themselves in the sense of tidying up the situation in Northern Ireland. The one amendment that is worth dwelling on a little bit is government Amendment 50, which gets to the point around resources and having sufficient resources for Companies House to be able to do what it needs to do.

There is a certain irony that, if the Companies House team is successful, there will be fewer companies on the register. So one of the things they will need to consider about fees is that they will be reducing the number of companies or the amount of income that will come per company. One of the issues in setting them is that, if estimates of 5% of companies being fraudulent are right, there will be 5% fewer companies paying the annual renewal. Some people, and some organisations, put that number much higher, so I suggest that the Government think about the success that Companies House will hopefully have in order to set a fee that does not become self-defeating if it removes companies.

The more companies the team removes from the register, the less money Companies House receives in annual renewal. That is the point I am making. I am assuming that this number will come quite soon after this Bill becomes an Act, and it would be useful for the Minister to update us on when we think the secondary legislation will come, because, clearly, Companies House and others will rely on this money for planning ahead. I am assuming the money goes to Companies House and not the Treasury, but perhaps the Minister could confirm that.

If the Minister could say a little around the operation of Amendment 50, that would be helpful—so that I understand it even if everybody else already does. He could say a little about how much money and how changeable it will be in the event that more money is needed to support the drive to remove criminality from our companies. I think that everything else is broadly very welcome.

Lord Ponsonby of Shulbrede Portrait Lord Ponsonby of Shulbrede (Lab)
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My Lords, we agree with all the amendments in this group. This group is all government amendments which make minor changes to ensure that penalties align with previous legislation, that they are taken into account when setting fees and that penalties do not stop criminal proceedings, as the noble Lord explained introducing the amendments.

I take the point the noble Lord, Lord Fox, made about Amendment 50. I presume fees can be updated as the situation evolves regarding the number of companies on the register. Nevertheless, we support this group of amendments and look forward to the Minister’s response to the questions asked by the noble Lord, Lord Fox.

Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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As always, I am extremely grateful to noble Lords for their interventions and the points raised in debate.

I turn to government Amendment 50. It is not a technical point, but it would not, in my view, be a point of significant consequence. It is just to ensure that when the Secretary of State has a licensing regime for directors who have been disqualified but whom she may require to perform a director’s duties, such as winding up a business—it is practical to allow disqualified directors in some instances to perform certain functions—the cost for administering that process is met by the fees. I do not imagine that would be a significant component of the Companies House fees. This is a tidying-up point more than anything else. It just means that the taxpayer does not have to pay the bill. If I am wrong in my expectations, I will certainly correct that for the House, but I do not think that is the case. It is a technical point.

We have discussed at great length what we feel the Companies House fees should be. I do not think there is a single similar opinion; every noble Lord in this House has a different view on the exact amount to the nearest 50p it should cost to register a company and to reregister it or confirm the registration each year. The fact is that Companies House now has a licence to propose its budget, which must be agreed. That budget will be met through the fees charged to companies using its services.

The noble Lord, Lord Fox, raised a good point. It is anticipated that some companies will leave the register. I hope that there will not be a significant number of companies forced to leave the register because they are not legitimate companies, but it is right that this investigative power will encourage those companies that should not be on the register to leave. The quantum of the number of companies—I think there are nearly 5 million companies—at any reasonable fee rate, which the discussions established is between £50 and £100, would allow there to be ample funding for Companies House.

To answer the question the noble Lord, Lord Fox, asked about what happens to any excess money raised by fees, there is only one place excess money raised by anything in this great nation of ours goes: His Majesty’s Treasury. We would clearly wish to avoid that. We would rather make sure that the fees were set at the right level.

To end on a serious note, we are not looking to have a fee rate. This is why the Government have been careful not to hypothecate fees for Companies House activity with other activities. It is not right, in our view, to charge legitimate businesses excess amounts of money to cover other things unrelated to their Companies House registration. We have tried to set this in the right fashion. I think this will result in the right outcome. I hope very much that the House will support what are seen as largely technical amendments.

Amendment 5 agreed.
Amendments 6 and 7
Moved by
6: Clause 36, page 27, leave out lines 4 to 15 and insert “where—
(i) the instructions are given by a person whom they know at that time to be subject to director disqualification sanctions (within the meaning of section 11A),(ii) the giving of the instructions does not fall within any exception from section 11A(1) created by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018, and(iii) the instructions are not authorised,(but see subsection (3A)).”Member’s explanatory statement
This amendment ensures that a person who acts on instructions that were given by a person that they did not know was subject to director disqualification sanctions would not be responsible for all of the relevant debts, and is otherwise consequential on my amendment to page 27, line 16.
7: Clause 36, page 27, line 16, at end insert—
“(f) after subsection (3) insert—“(3A) But—(a) a person who is subject to director disqualification sanctions (within the meaning of section 11A) is not personally responsible under subsection (1)(a) for any relevant debts of the company incurred at a time when the person did not know and could not reasonably have been expected to know that they were subject to director disqualification sanctions;(b) a person is not personally responsible under subsection (1)(c) for any relevant debts of the company incurred at a time when the person reasonably believed that the instructions were authorised.”;(g) after subsection (5) insert—“(6) Subsection (7) applies where a person (“P”) at any time—(a) was involved in the management of a company, and(b) acted on instructions where—(i) the instructions were given by a person (“D”) whom P knew at that time to be subject to director disqualification sanctions (within the meaning of section 11A),(ii) the giving of the instructions did not fall within any exception from section 11A(1) created by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018, and(iii) the instructions were not authorised,unless P reasonably believed at that time that the instructions were authorised.(7) For the purposes of this section P is presumed, unless the contrary is shown, to have been willing at any time thereafter to act on any instructions given by D.(8) For the purposes of this section instructions are “authorised” if they are given under the authority of a licence issued by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018.”” Member’s explanatory statement
This amendment means that a person is not responsible for debts incurred when they didn’t know they were sanctioned, or they reasonably believed they were acting on instructions under a licence. A person who acts on instructions given by a sanctioned person is presumed to be willing to do so thereafter.
Amendments 6 and 7 agreed.
Clause 38: Disqualification of persons designated under sanctions legislation: NI
Amendments 8 to 11
Moved by
8: Clause 38, page 28, line 24, leave out “(see section 3A of that Act)” and insert “and section 11A of the Company Directors Disqualification Act 1986 (see section 3A of the Sanctions and Anti-Money Laundering Act 2018)”
Member’s explanatory statement
This amendment makes it clear that a person who is subject to director disqualification sanctions will be so subject both for the purposes of section 11A of the Company Directors Disqualification Act 1986 and for the purposes of Article 15A of the Company Directors Disqualification (Northern Ireland) Order 2002.
9: Clause 38, page 28, leave out lines 36 to 46 and insert “where—
(i) the instructions are given by a person whom they know at that time to be subject to director disqualification sanctions (within the meaning of Article 15A),(ii) the giving of the instructions does not fall within any exception from Article 15A(1) created by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018, and(iii) the instructions are not authorised,(but see paragraph (3A)).”Member’s explanatory statement
This amendment ensures that a person who acts on instructions that were given by a person that they did not know was subject to director disqualification sanctions would not be responsible for all of the relevant debts, and is otherwise consequential on my amendment to page 28, line 47.
10: Clause 38, page 28, line 47, at end insert—
“(f) after paragraph (3) insert—“(3A) But—(a) a person who is subject to director disqualification sanctions (within the meaning of Article 15A) is not personally responsible under paragraph (1)(a) for any relevant debts of the company incurred at a time when the person did not know and could not reasonably have been expected to know that they were subject to director disqualification sanctions;(b) a person is not personally responsible under paragraph (1)(c) for any relevant debts of the company incurred at a time when the person reasonably believed that the instructions were authorised.”;(g) in paragraph (5), in the closing words, after “given” insert “by”;(h) after paragraph (5) insert—“(6) Paragraph (7) applies where a person (“P”) at any time—(a) was involved in the management of a company, and(b) acted on instructions where—(i) the instructions were given by a person (“D”) whom P knew at that time to be subject to director disqualification sanctions (within the meaning of Article 15A), (ii) the giving of the instructions did not fall within any exception from Article 15A(1) created by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018, and (iii) the instructions were not authorised,unless P reasonably believed at that time that the instructions were authorised. (7) For the purposes of this Article P is presumed, unless the contrary is shown, to have been willing at any time thereafter to act on any instructions given by D.(8) For the purposes of this Article instructions are “authorised” if they are given under the authority of a licence issued by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018.””Member’s explanatory statement
This amendment means that a person is not responsible for debts incurred when they didn’t know they were sanctioned, or they reasonably believed they were acting on instructions under a licence. A person who acts on instructions given by a sanctioned person is presumed to be willing to do so thereafter.
11: Clause 38, page 28, line 47, at end insert—
“(5) In Article 22 (register of disqualification orders and undertakings), in paragraph (3), after sub-paragraph (c) insert—“(d) persons who are subject to director disqualification sanctions within the meaning of Article 15A;(e) any licences issued by virtue of section 15(3A) of the Sanctions and Anti-Money Laundering Act 2018 that authorise such a person to do anything that would otherwise be prohibited by Article 15A(1).””Member’s explanatory statement
This amendment ensures that the register of disqualification orders kept by the Department for the Economy in Northern Ireland includes details of persons who are subject to director disqualification sanctions and any licences that allow those persons to act in Northern Ireland.
Amendments 8 to 11 agreed.
17:15
Clause 46: Register of members: information to be included and powers to obtain it
Amendment 12
Moved by
12: Clause 46, page 35, line 29, after “changes” insert “and, at the time of the change, it is a non-traded company”
Member’s explanatory statement
This amendment means that only non-traded companies are required to keep old information about their members (eg old addresses).
Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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My Lords, before we turn to the amendments tabled by my noble friend Lord Agnew of Oulton and the noble Lord, Lord Vaux of Harrowden, I shall briefly outline government Amendments 12, 13, 14 and 15 in this group. Clause 46(4) amends Section 113 of the Companies Act 2006, including by inserting new subsection (6A). This will require all companies to retain information about a member in their register of members where it changes, and to note the date on which the information changed and was entered into the register by the company. The requirements apply only prospectively, not retrospectively. The government amendments target the scope of this requirement, so it applies only to non-traded companies, to ensure that excessive burdens on traded companies with large numbers of shareholders are avoided.

However, these amendments do include a power for the Secretary of State to make regulations which allow for a full or partial reversal of this scope restriction, allowing this requirement to retain old information and note the dates of changes to also be applied in future to traded companies, should it be judged to be useful and proportionate. In considering all the amendments in this group, I remind noble Lords that the UK already has one of the most open and accessible shareholder registers in the world. Disclosure of shareholder information is far from a global norm. In fact, the UK is one of relatively few international countries to have any publicly available shareholder information for companies not listed on its stock exchange. Noble Lords will know that many countries do not even disclose major shareholders or beneficial owners publicly.

The UK led by example with its public register of PSCs. We were the first G20 nation to institute such a register, back in 2016, and we have been a strong voice ever since in promoting the importance of collecting and sharing beneficial ownership information. Numerous jurisdictions, including the EU, the US and Australia, have been influenced by our approach. But a responsible Government must weigh carefully the benefits of further transparency regulations, and the inevitable rules, forms and penalties that would follow, against the costs and impact. The Government support the publication of accurate and useful shareholder information and we are one of the most open countries in the world in this respect—but do we need to go further, and if so how far? What really are we seeking to achieve?

There are over 10 million shareholders of UK companies. At a time when this Government are looking to reduce regulatory constraints on business, even small cost changes to shareholder obligations could very quickly add up to a large drag on our economy. I ask noble Lords to reflect carefully on the value of the amendments we are about to discuss. I beg to move.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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My Lords, I shall speak to the amendments in this group in my name, Amendments 16 and 17. I should remind the House of my interest in the register as a non-practising member of the Institute of Chartered Accountants in England and Wales. I also take the opportunity, since it is the first time I have spoken so far, to thank the various Ministers and their officials, and indeed the registrar and her staff, for their constructive engagement and the generosity they have shown with their time. The engagement process on the Bill has been exemplary. We are helped by the fact that this is generally agreed to be a fundamentally good Bill: we are all on the same side here, just trying to ensure that it is as good as it can be.

These two amendments are designed to improve the transparency of ownership of our companies, to ensure we know who really owns or controls them. I remind the House of the words of the Minister at Second Reading:

“The use of anonymous or fraudulent shell companies and partnerships provides criminals with a veneer of legitimacy and undermines the UK’s reputation as a sound place to do business”.—[Official Report, 8/2/23; col. 1250.]


I think we all agree with that.

One of the classic ways to hide the real ownership of a company is through the use of undisclosed nominee arrangements, where a shareholder is named on the register but is in fact holding the shares on behalf of another person. At present, while the company must try to identify any persons with significant control, or PSCs, according to the guidance, all it really needs to do is look at its shareholder register: if there is no shareholder with 25% or over, it can reasonably conclude that there is no person of significant control. For example, if a company has five shareholders, each with 20%, the company can reasonably conclude that there is no person with significant control that needs to be named or verified.

However, what if those five shareholders were in fact holding the shares on behalf of a single third party? That third party would then control 100%. There is an obligation under the PSC rules for that third party to tell the company, but a dishonest actor probably would not do so. The problem is that there is no obligation for the person who is acting as the nominee to disclose that fact, which makes it far too easy for a dishonest actor to hide their identity. The company has the right to ask the nominees, but, remember, the company in my example is controlled by the dishonest actor—so it will not do that. If it is asked, it can point to the fact that it has followed the guidance, having checked its register and not found anyone with a share of 25% of more. In fact, all the dishonest actor has to do to hide their ownership is find five willing people who are prepared to have their name on the shareholder register and hold the shares on behalf of the dishonest actor. There is no comeback for these nominees. They have no obligation to disclose.

Where does one find five such willing people? I suggest that noble Lords would find it interesting to google “nominee shareholders”. They will find pages and pages of businesses that will do this, with few questions asked, for around £200 to £300 a year. They advertise specifically that the nominee service is for the purpose of hiding the true identity of the shareholder. In passing, it is worth saying that many of the people offering such services are the same people who will be the authorised corporate service providers and will carry out the ID verification under this Bill. That introduces an interesting conflict, but I stress: under the current proposals, these people will be doing nothing wrong.

Amendment 16 aims to close this loophole by making it a requirement for shareholders to state, as well as their name and address, whether they are—or, importantly, are not—acting as a nominee. If they are acting as a nominee, they would have to provide the name and address of the person on whose behalf they are holding the shares. I said that it was important that they should state that they are not holding the shares on behalf of someone else; that is because they would then have to lie actively if they are a nominee but do not disclose it. I believe that there is a real difference between lying actively and just keeping quiet passively—that is, turning a blind eye, as has happened all too often in the past.

This simple step of making people declare whether they are a nominee should make it much more difficult for dishonest actors to find people willing to act as nominees. They will need to find someone who is willing actually to lie on the record rather than just to keep quiet. Having this information will make it much easier for companies to identify hidden PSCs. Knowing which shares are held by nominees will also assist Companies House and organisations such as Transparency International to focus their attention where the risk is greatest.

We have heard the Minister telling us that we have to be careful not to create too great a burden on legitimate businesses. I agree with him, but I do not think that this would do that. Shareholders already have to provide their name and address. I struggle to understand why it would add any material extra burden to have to make a simple declaration—perhaps even as simple as ticking a box—and to provide the details of the actual beneficial owner. I really do not see that as adding any significant additional effort. In any event, there are significant benefits that arise from a company structure; it really cannot be too much to ask that the beneficial owner of the shares is disclosed in return for having those benefits.

I turn now to my second amendment in this group, Amendment 17. The Bill introduces a welcome identity verification requirement for persons with significant control, but that applies only to shareholders who own 25% or more. I should say that I know the Minister will correct me on that point, because it also applies to those who might have below 25% of the shares but otherwise exert control. He would be right, but in practice the 25% level is the driver. As my previous example shows, it is quite easy to structure a company so that there is no apparent 25% shareholder. There is certainly a legitimate debate to be had over where the correct level to trigger identity verification should lie, but I do not hear many people arguing that it should be as high as 25%.

Amendment 17 would reduce the level to require identity verification from 25% to 5%. Why 5%? There are a number of precedents. For UK listed companies, 3% shareholdings must be disclosed, with an exemption for fund managers, who must disclose at 5%, so 5% is deemed of sufficient importance for all listed companies to disclose. The rules around entrepreneur relief, which gives a reduction in capital gains tax payable on a disposal, state:

“A company is your personal company if you hold at least 5% of the ordinary share capital and that holding gives you at least 5% of the voting rights in the company”.


So tax rules consider that 5% gives sufficient influence for the company to be treated as your personal company, and there is a high degree of consistency supporting a 5% level. As I say, though, there is potentially a debate to be had about that level.

Again, I am sure we will hear that we should not create an undue burden on innocent parties, so let us consider the impact of that. I understand that the average number of shareholders for UK companies is two, so for the average company the amendment would create no additional burden; they already have to verify the identity of their shareholders. It would apply only where a more complex shareholder structure has been created with a greater number of shareholders. Yes, it would create a little more work for them, but in fact it would only increase the maximum number of ID verifications required by a company from a maximum of four to a maximum of 20, which should be easily manageable. We are not talking about companies having to verify hundreds of IDs.

Both these amendments would make a significant difference to the transparency of the register, helping to ensure—to get back to the Minister’s words that I referred to earlier—that we make it more difficult for criminals to use anonymous or fraudulent shell companies. I will listen carefully to what he has to say in response, but I give notice that I intend to divide the House on at least Amendment 16 unless he is able to provide very strong assurances.

Lord Agnew of Oulton Portrait Lord Agnew of Oulton (Con)
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My Lords, I support Amendments 16 and 17 from the noble Lord, Lord Vaux. I shall also speak to my Amendment 19.

I do not want to repeat everything that the noble Lord has said, but I received a letter from my noble friend the Minister yesterday on this subject that included the subheading, “Transparency over shareholders and nominees”, and one of the arguments that the Government are making is that this could cause a significant cost to the economy. We have just heard from the noble Lord, Lord Vaux, that that is, frankly, a fantasy; if the average number of shareholders per company is two—perhaps the Minister could confirm that, but it is certainly my instinctive understanding—then what is the cost?

In any case, that should be put against the cost to the economy of the fraud and economic crime that is happening at the moment at an increasing rate. We have endlessly reminded ourselves that 40% of all crime in this country is now economic crime. I know from my time in government that the loss to fraud in government alone each year—this is the bottom-end estimate by the NAO—is £30 billion, and a lot of that is facilitated through the holes in the Companies House structure. I urge the Minister to think hard about this because it is a great opportunity, at minimal cost to the economy or to business, to make a substantial change.

Lord Fox Portrait Lord Fox (LD)
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I shall speak to Amendment 16, to which I have added my name, and I support the noble Lord, Lord Vaux, in his clear outline as to why this is an elegant solution. It is so because it would push the onus on to the supplier of the service and make them decide whether to lie or tell the truth. A lie detector, in a sense, for dishonest actors is a very good way of exposing this practice. It is not unreasonable to know who is behind a company; in fact, it is perfectly reasonable that we should.

Amendment 17 from the noble Lord, Lord Vaux, also contains an important point: at what point does the cut-off come? It will be interesting to hear what the Minister has to say about the continuum between 25% and 5%. The Government have chosen 25%, which is a very large number when you think about it. The numbers breakdown given by the noble Lord, Lord Vaux, is clear that it would not mean that a huge number of people had to be identified, even if his suggestion of 5% was adopted by the Government.

If the noble Lord chooses to move Amendment 16 then it is safe to say that we on these Benches will support it, and we will wait to hear what the Minister has to say on other matters.

17:30
Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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I thank the Minister for his comments on the government amendments. We support Amendments 16, 17 and 19. They would significantly help improve the integrity of the register. This issue has been raised in amendments throughout the passage of the Bill. While we welcome many of the other changes that the Government have made and the manner in which they have collaborated with colleagues to make the Bill stronger, the issue of nominees represents a weak point in the Bill. We must know which bad companies and actors are acting fraudulently in order to fight fraud, corruption and economic crime.

A point that has repeatedly been made is that, as things stand, shareholder information is incomplete. It is difficult to identify the real owners of certain companies, which reduces the reliability of shareholder information published by Companies House, which we are all determined to improve. That undermines the corporate register as a whole.

As I said, we support Amendments 16, 17 and 19. I was struck by the comments of the noble Lord, Lord Agnew, about the cost of fraud to the economy, which we need to keep front of mind when we are told to be concerned about the cost of putting these measures in place. I confirm that, if the noble Lord, Lord Vaux, is minded to test the opinion of the House on Amendment 16, these Benches will support him.