Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Viscount Stansgate) (Lab)
My Lords, if there is a Division in the Chamber we will adjourn this Committee for 10 minutes. However, that is extremely unlikely.
Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024
(2 days, 7 hours ago)
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Lord Leong
That the Grand Committee do consider the Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024.
Lord in Waiting/Government Whip (Lord Leong) (Lab)
My Lords, these regulations were laid before the House on 22 May 2024. I shall speak also to the Unique Identifiers (Application of Company Law) Regulations 2024, which were laid before the House on 31 October 2024. These regulations form part of a programme to implement the Economic Crime and Corporate Transparency Act 2023, which I will refer to as the 2023 Act. The 2023 Act is a landmark piece of legislation which delivers the most significant reforms to Companies House in more than 180 years to protect the public from fraud and deliver real benefits to the business community.
There has already been much progress since the 2023 Act was passed, including the introduction of stricter rules and checks to help Companies House cleanse the register. The two sets of regulations we are debating today will help to implement perhaps the most important change to the UK’s company registration framework in the 2023 Act: requiring identity verification for those setting up, running and controlling companies. Through amendments to the Companies Act 2006, the 2023 Act establishes two ways in which an individual can verify their identity, either directly with Companies House or via an authorised corporate service provider—ACSP. These providers must be supervised for anti-money laundering purposes and be registered with Companies House.
I will set out specifically what the two instruments will do. The Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024 set up the legal framework that underpins identity verification. The identity-verification procedure involves an individual delivering specific information to the registrar or to an ACSP. This must include their name and date of birth and any other further information specified in the registrar’s rules, which are a form of tertiary legislation. Given the technical and increasingly evolving mechanisms for identity verification, it would be inappropriate to list in these regulations every single identity document that must be provided to the registrar or ACSP or every single step an individual must take. Instead, the registrar is enabled to specify the requirements in a more suitable format and to adapt or tweak the detail quickly where necessary. Companies House has published a draft version of the registrar’s rules, which have been shared with Members today. I hope they provide a useful example of what evidence and steps might be required from applicants. When the registrar or ACSP receives all the correct information from an applicant, they will grant the identify verification application if they are satisfied that the information provided is true.
That is the broad legal process for identity verification. In practice, Companies House will use the GOV.UK One Login platform to deliver the identity-verification service. One Login is a cross-departmental verification platform, enabling users to have a single login and verified identity for multiple government services. An individual will create an account and can verify their identity using a range of evidence, such as a passport or driving licence, or through knowledge-based verification questions based on their credit record or banking information. The process also includes checks to make sure that the individual matches the picture on their photo ID. For most people completing the purely digital route, the process will take a matter of minutes. Individuals can also complete the process in person at a post office.
If an individual decides to verify via an ACSP, the ACSP must follow the legal procedure established in these regulations and in the registrar’s rules. Companies House will issue guidance to ACSPs to explain how the procedure should be applied in practice and what checks they must perform on the information received. This will ensure that both routes achieve the same level of assurance in identity verification. Once an ACSP verifies an applicant’s identity, they will deliver a verification statement to Companies House to confirm that they have followed the correct procedure. The verification statement will be published alongside the applicant’s appointments on the register to maximise transparency. Alongside the verification statement, ACSPs must give the registrar information about the evidence they relied on to verify an individual’s identity. This means that Companies House will not lose access to crucial identity data if someone uses an ACSP, and will provide them with assurance that identity checks have been completed correctly.
The regulations add other checks and balances to the ACSP regime. ACSPs will be required to maintain records relating to identity verification for seven years from the date when they determined the identity-verification request. The registrar can suspend and deauthorise an ACSP if they consider that they are not fit and proper to carry out the functions of an ACSP. The registrar can perform spot checks on ACSPs and ask them to provide information about their identity-verification obligations. All those provisions combined ensure that Companies House has the tools at its disposal to ensure that the ACSP regime is as effective and robust as possible.
The second set of regulations, the Unique Identifiers (Application of Company Law) Regulations 2024, are technical and apply provisions on unique identifiers contained in the Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024 to other entities. A key mechanism underpinning the operation of identity verification is the use of unique identifiers, or personal codes, that are used to identify individuals who have had their identity verified, as well as registered ACSPs. The first set of regulations will enable the allocation of unique identifiers to individuals associated with companies. These regulations give the registrar powers to allocate unique identifiers to ACSPs and individuals associated with other entities—namely, limited partnerships, limited liability partnerships, companies authorised to register, unregistered companies and Scottish qualifying partnerships. Identity-verification requirements will eventually apply to other entities registered at Companies House, so it is necessary that we make these regulations to ensure that the requirements can operate in practice.
I want to provide an update on the timings of identity verification. Companies House published its outline transition plan in October 2024, which confirmed that it aims to start requiring identity verification from autumn 2025. In a few weeks, ACSPs will be able to register, and individuals will be able to voluntarily verify their identity with Companies House, giving people lots of time to complete the process before legal requirements start. I beg to move.
Lord Jones (Lab)
My Lords, I rise on the principle that the Executive should be accountable. I shall be brief. I thank the Minister for shedding some light on these dense and complicated regulations. They are obviously of help to the department, to Ministers and to business, but I dare say the Chancellor of the Exchequer was not reading them on her recent outward journey to the People’s Republic of China.
I found the factsheet helpful, and I acknowledge the strong statements therein. It states that the requirements will
“make it challenging for individuals to create a fictitious identity, or fraudulently use another person’s identity, to set up or run a company”,
and talks about being
“registered with a UK supervisory body for anti-money-laundering purposes”.
As the Minister implied, economic crime is debilitating to the nation and, without a doubt, we have problems with it in Britain.
Who is the registrar and when was she or he appointed, for what term and at what salary? Is Companies House running smoothly, so as to cope with requests and approaches from directors and people with significant control? Are there bottlenecks or significant hold-ups, perhaps even labour disputes? Are there impediments to those who file? How many money laundering cases did the registrar take to court in 2023 and 2024? These questions are designed to be helpful. If they are not answered immediately, perhaps there might be a letter.
Lord Fox (LD)
My Lords, I thank the Minister for his explanation. For those of us who worked on the economic crime Bills, this is a welcome development. I am interested in the timeline, because it seems some time ago that we debated the Bill, which I believe has become an Act, and we find ourselves looking to the autumn of 2025 before some of these vital identity-verification processes will reach the statute book. I certainly do not blame the Minister, because he is new to this, but what is behind the delay and how many more statutory instruments are we due? I think there are still quite a few on the stocks. When can we expect them and what functions will they unlock? When we debated the original Bill, I think we all felt this to be a real and present issue that needed immediate, or near-immediate, attention. Clearly, things are dragging on and I wonder what is causing that.
Further to the noble Lord’s comments about the functioning of Companies House, we were absolutely clear that this would be a culture change for Companies House, which will cease to be a filing cabinet and start having to investigate and verify what is coming across its desk. The previous Minister was confident that funding was in place and that the process to create that new culture was under way. We would benefit from the new set of eyes from the Minister, if not now then perhaps in a separate meeting where we can review the functioning, including the future functioning, of Companies House—a follow-on from the meetings that were so helpful during the formulation of the Bill.
Lord Sharpe of Epsom (Con)
My Lords, I too thank the Minister for his explanation. These regulations are clearly a crucial step in modernising and strengthening the UK’s corporate governance. Building on the Companies Act 2006, they were laid before Parliament, as the noble Lord, Lord Leong, noted, by the previous Conservative Government in May 2024 to address the growing concerns about corporate fraud and business registration transparency.
The regulations introduce unique identity verification for individuals involved in setting up and controlling companies and will ensure that the integrity of the business registration process is robust. The initiative aims to combat the use of fraudulent or stolen identities in business dealings and will make it harder for individuals to engage in corporate fraud. The core aim of the regulations is to ensure that only properly verified individuals can establish and control companies. The registrar is granted the authority to impose further requirements on applicants, with the flexibility to adapt as identity-verification technologies evolve.
The regulations also introduce unique identifiers for verified individuals and authorised corporate service providers, streamlining the registration process and ensuring that the Companies House register remains accurate and reliable. I think I was the Minister whom the noble Lord, Lord Fox, referred to. I sincerely hope that the funding remains robust, as it was a few months ago. I look forward to hearing an answer to that question.
The ACSPs are now subject to stricter oversight, including anti-money laundering regulations, with provisions for suspension or deauthorisation if they fail to meet required standards. I will come back to that in a second. The noble Lord, Lord Fox, also asked why we need ACSPs. They, or their equivalents, are common in many jurisdictions and they provide an incredibly useful service to people who wish to set up a business but have neither the time nor the inclination to get into the weeds of doing so and prefer to subcontract it. I think it is perfectly reasonable that ACSPs exist and they just need to be properly verified.
While the intention behind the regulations is clear—they improve the integrity of company registration and prevent fraud—there are several areas where further clarification is required. Given that the regulations were last discussed under the previous Government, I would like to understand how the current Government intend to address the evolving nature of identity-verification technologies.
In addition, these regulations impose new obligations on ACSPs, particularly in terms of record-keeping and in providing additional information to the registrar. Although these measures are essential for transparency, I ask the Government, as the noble Lord, Lord Fox, also asked, to clarify how these new duties will be enforced. What penalties will be applied to ACSPs that are found to be non-compliant and what measures are in place to ensure that these rules are upheld consistently across all service providers?
I am also concerned about smaller businesses and individuals who may be impacted by these additional verification processes. Will the Government ensure that the new regulations do not create undue burdens on smaller enterprises, which may already be facing significant challenges in meeting regulatory and other requirements?
Finally, while the power to suspend or deauthorise an ACSP is necessary to combat fraud, I would like assurances that proper safeguards will be in place to protect service providers from unjust penalties or removal.
In conclusion, these regulations are important reforms to strengthen the UK’s business environment and combat fraud. As with any regulatory framework, careful consideration is needed on enforcement, monitoring and adaptation, so a review process will be essential to assess the regulations’ impact on businesses of all sizes to ensure that they deliver their intended benefits without imposing unnecessary burdens.
Lord Fox (LD)
With the Committee’s permission, I have just one question that I had meant to ask the Minister. It is around the obligation to retain identity information over seven years, which the noble Lord just mentioned. In the event of the ACSP going out of business, what is the expectation of how that information, which would not otherwise be retained, would be retained for the potential use of Companies House?
Lord Leong (Lab)
I thank all noble Lords who have spoken for their valuable contributions to the debate. I will respond to some of the points raised but, if I do not cover some, I will ensure that I write.
As to my noble friend Lord Jones’s question about the registrar, the current Registrar of Companies in England and Wales is Louise Smyth. I will write specifically on his other, quite technical questions.
The noble Lord, Lord Fox, raised a few questions, so I ask noble Lords to bear with me while I go through them. His first question was on the timeline. Identity verification will be required from approximately 7 million people in year 1. Since the Act received Royal Assent, Companies House has been busy cleaning the register. From March to November 2024, Companies House removed around 50,400 registered office addresses, 39,600 office addresses and 36,700 addresses of persons with significant control. It redacted around 37,100 incorporation documents to remove personal data used without consent and removed around 7,800 documents from the register, including 800 false mortgage satisfaction filings, which have previously required court orders.
Companies House has been really busy since the Act received Royal Assent, putting this in place. It has also employed more people to do this work, increasing its workforce from 1,400 to 1,700, with another 100 due to be in place before the end of the year. We need people to do this and Companies House is getting those people.
In answer to the question about funding from the noble Lord, Lord Sharpe, Companies House has been investing in new capabilities to prepare for the implementation of these reforms, as part of its wider transformation programme. This includes £108 million of funding for transformation across previous spending reviews and increased fees to fund a course of measures. As noble Lords know, incorporation fees have now gone up to £50 and any filing fees for confirmation statements have gone up from £15 to £34—so that is extra funding coming in.
In addition, funding of £20 million has been awarded via the economic crime levy for new intelligence cells in Companies House and the Insolvency Service, allowing both agencies to plan to step up their anti-money laundering work. A significant amount of preparation has been undertaken to reach this point, including system development, recruitment and training.
I shall move on to the couple of other questions that were asked. On the statistics, I mentioned earlier that something like 7 million unique officers or directors will need to be identified by spring 2025. The annual cost to a UK business of verifying this identity is estimated to be close to £19.50 in ongoing operational expenses.
Companies House is very experienced in dealing with a high volume of transactions. For example, in 2023-24, it processed something like 14.2 million filings. Companies House has been preparing customers, and there is a lot happening in the education and engagement process; in fact, the Companies House website shows a timeline when this is done, thus informing stakeholders about the introduction of these identity-verification requirements.
Various questions were asked about ACSPs. Let me go through them. A firm will not be able to register as an ACSP unless it is supervised under the UK’s anti-money laundering regulations, and the registrar will not accept applications if the applicant is not fit and proper. From then on, the ACSP must be supervised under the UK’s anti-money laundering regulations at all times. Companies House and the supervisors will regularly share intelligence and changes to an ACSP’s supervisory status; Companies House can suspend or deauthorise any ACSP if it thinks that it is no longer fit and proper to perform these functions.
In answer to the question from the noble Lord, Lord Fox, about what happens to an ACSP if it goes bust or closes, the ACSP must keep records of all of these IDVs for at least seven years. So records will be kept. I assume—I am looking at my officials now—that these records will eventually be passed over to the Registrar of Companies, but I will confirm that point in writing.
Lord Fox (LD)
On Companies House’s right to suspend an ACSP, what right of appeal does the ACSP have in those circumstances? Does it go to judicial review? What happens?
Lord Leong (Lab)
I do not want to go down that legal route. Based on normal administrative law, I assume that judicial review would apply, but I will come back with a more definitive answer in writing, if I may.
As I mentioned earlier, ACSPs will be required to keep records relating to the identity-verification checks they complete and to respond to Companies House’s spot checks. Failure to comply will be a criminal offence.
The noble Lord, Lord Fox, asked how many more SIs we will see. All I can say is that a mix of SIs will be laid in spring this year—before the summer, I assume—including ones applying reforms to limited liability partnerships. I hope that that satisfies the noble Lord.
In respect of the question from the noble Lord, Lord Sharpe, about enforcement, currently, if an individual officer does not comply to have their identity verified, sanctions are applied. It can be either a financial sanction or a criminal offence; that applies also to ACSPs.
I hope that I have answered all noble Lords’ questions. If not, I will definitely write to noble Lords.
Unique Identifiers (Application of Company Law) Regulations 2024
Lord Leong
That the Grand Committee do consider the Unique Identifiers (Application of Company Law) Regulations 2024.
Reporting on Payment Practices and Performance (Amendment) (No. 2) Regulations 2024
(2 days, 7 hours ago)
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Baroness Gustafsson
That the Grand Committee do consider the Reporting on Payment Practices and Performance (Amendment) (No. 2) Regulations 2024.
The Minister of State, Department for Business and Trade and Treasury (Baroness Gustafsson) (Lab)
My Lords, these regulations amend the Reporting on Payment Practices and Performance Regulations 2017 and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 to introduce requirements for in-scope businesses to publish certain information twice per financial year about their retention practices, policies and performance where retention clauses are included in construction contracts.
Tackling late payments is critical for the UK economy’s growth and productivity. Fifty-six million hours are wasted each year by businesses chasing late payments, imposing a considerable and unfair burden on small businesses. Long payment terms and late payments are a causal factor in an estimated 50,000 UK business closures each year.
This Government are committed to addressing the issue of late payments. In September, we announced a package of measures to improve payment practices and help small firms. This included the launch of a new Fair Payment Code and announcing our intention to bring forward legislation to make it a requirement for large businesses to include payment reporting in their annual reports. We will also be launching a public consultation which will consider additional legislative measures to hold large businesses to account on their payment performance and to support small businesses and the self-employed. We have also prioritised this statutory instrument, originally proposed by the previous Government, which was withdrawn due to the general election and which we have now reintroduced.
Prompt and fair payment has long been an issue in the construction sector, and particularly affects small businesses in the supply chain. This includes the practice of cash retentions, or firms deducting a percentage of the value of a payment being made to a supplier. Holding retention money is a long-established practice in construction contracts. While originally introduced as a form of insurance against contractor insolvency and defective work, it is controversial and can often lead to smaller contractors losing money. Construction contracts do not offer any protection against the loss of retention if the employer becomes insolvent. Furthermore, sums, which are often deducted at each tier of the supply chain, may be subject to late or partial return or even non-payment.
These regulations seek to increase transparency in relation to retention practices, payment and performance under construction contracts, thereby incentivising larger businesses to improve retention payment practices. This will provide small business suppliers with better information so that they can make informed decisions about who to trade with, negotiate fairer terms and challenge late retention payments.
Before I outline key elements of the statutory instrument, it may be helpful to explain the legal context. The Reporting on Payment Practices and Performance Regulations 2017 and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 were introduced to bring transparency around the payment practices of large businesses. These regulations require businesses above certain size, turnover and balance sheet thresholds to publish information twice yearly on certain statistics, including their average payment times and the percentage of payments not made within the payment period, and information on their standard payment terms. The increased transparency has helped small businesses to make informed decisions before entering contracts with their large suppliers, while the extra scrutiny has helped to reduce payment times.
Build UK, a representative organisation for the construction industry, has benchmarked construction businesses on their payment performance since 2018. For its tier 1 contractors, improvements show the average time to pay an invoice has reduced from 45 days to 30 days; invoices paid within agreed terms have increased from 63% to 85%; and invoices paid within 60 days have increased from 82% to 96%.
Last April, the 2017 regulations were extended for a further seven years to 6 April 2031. Two new reporting metrics on the value of the invoices paid during the reporting period and the percentage of disputed invoices were also introduced to provide even more clarity regarding the payment performance of large businesses. Specific reporting on retentions held under construction contracts is not currently required. These regulations intend to rectify this omission.
This measure has been developed following extensive consultation with firms at all tiers of the supply chain, as well as with construction clients. A clear majority of the firms which responded to the public consultation in 2023—around three-quarters of the 120 respondents—favoured the introduction of a reporting requirement on retentions. Firms within the supply chain have told us they face challenges in understanding policies on the withholding of retentions and what the mechanisms are to secure their release. Many feel that they cannot ask for this information, in case it jeopardises their commercial relationships. This measure will bring greater transparency to the retention policies, practices and performance of larger businesses that are party to construction contracts.
I will now outline the key elements of this statutory instrument. It amends the 2017 regulations and introduces requirements for in-scope businesses to publish certain information twice per financial year about their retention practices, policies and performance, where retention clauses are included in construction contracts. The measure will apply only to large companies and limited liability partnerships which already have a duty to report on their payment practices and performance and which use construction contracts.
In the first instance, reporting will require a statement on whether the company’s payment practices and policies include or do not include retention clauses. Where a company makes a statement that retention clauses are included in its construction contracts, further information must be submitted. Details will be required on: whether retention clauses are included in all its construction contracts; whether its standard payment terms include retention clauses or whether they are used only in specific circumstances, which it would need to describe; whether there is a contract value under which no retention clause is included, and that value; whether a standard rate of retentions is applied, and that rate; whether there is a practice of using retention clauses no more onerous than those which it is subject to; and a description of the process for the release of retentions withheld.
Two metrics will also be required: the percentage ratio of the amount of retention withheld from the company by its clients as against which the company holds on its suppliers; and the percentage ratio of the amount of retention the company withheld from gross payments made to suppliers as against the gross amount paid to suppliers during the reporting period. These metrics will help provide smaller firms with better information about a large business’s retention payment practices. It will help illustrate the company’s approach to fair payment and a sustainable supply chain and incentivise larger businesses to improve retention payment practices.
In conclusion, this measure both addresses a clear request made by the industry and has been developed in conjunction with the industry. It is robust and proportionate and will provide small firms in the construction supply chain with useful information that will enable them to take decisions about entering into contracts and to understand how to ensure that retentions owed to them are paid. It will also create a clear incentive for firms to improve their payment performance in relation to retentions. I hope the Committee can see the benefits that these regulations provide and agrees with the introduction of this affirmative statutory instrument. I beg to move.
Lord Aberdare (CB)
My Lords, I am delighted that this second set of amendments to these important reporting requirements—I am trying to prevent my teeth from chattering in the cold—focuses on the damaging issue of cash retentions in the construction sector, which was not covered by the first set of amendments that we debated on 26 February last year. Could the Minister, whom I welcome to her post, confirm that that first set of amendments has now come into effect from 1 January this year? I am delighted that the new amendments will take effect from St David’s Day, 1 March. I also welcome the fact that the reporting will take place via an online service so that the information will be available to suppliers on the website as soon as business is publishing.
As we have heard from the Minister, resolving issues such as late payment and cash retentions is vital for smaller construction firms, particularly as the Government are seeking to build 150,000 homes a year while insolvencies among construction businesses continue to be higher than in most or all other sectors. The failure of major players such as ISG can have a devastating impact on small businesses in their supply chains.
The Government’s commitment to support SMEs, including through the reporting measures such as those that we are considering today, as well as the new Fair Payment Code and the promise of a small business strategy to be published this year, is much needed and very welcome. The regulations will provide transparent data about the practice of retentions and the level of late payment for this aspect of construction contracts. Having consistent comparative data concerning retentions will represent significant progress towards increasing the accountability of larger construction companies that subcontract work to smaller firms in the sector. Those subcontractors will be able to gain an understanding of the payment practices of larger companies to help them decide whether or not to do business with them.
I will not comment on the detail of the requirements which the Minister has outlined but I welcome the requirement for a named director to confirm approval of the figures reported, so that it is clear where the responsibility lies. However, that raises the question of the enforcement of these regulations. Will the Minister say something about how robust the data provided will be, given that the requirement is for self-reporting, and whether there will be any process for fact checking the data reported? What mechanisms might be put in place to ensure that the reporting requirements are met and what penalties might there be for not reporting as required or misreporting? Most importantly, can she say anything about what plans there may be in her department to end the damage caused by retentions altogether, either by banning them outright or by ensuring that funds withheld are ring-fenced in a way that protects small firms from never receiving the sums owed to them at all—or receiving a reduced amount or late amounts?
These regulations are a welcome step forward but I hope to hear more from the Minister about what further steps the Government will take to tackle the obstacles preventing small construction firms from contributing as fully as they could and should to the Government’s construction and house-building goals, and especially whether, how and when they might finally take action to bring to an end the pernicious practice of retentions.
Baroness Neville-Rolfe (Con)
My Lords, I rise to speak from the Back Benches and welcome the Minister to her seat. I was also once a Business Minister and, in my second coming, a Cabinet Office Minister, and I was very much involved in trying to get rid of the curse of late payment. That included the changes to the Procurement Act requiring public sector suppliers to pay their own suppliers on time. That was meant to complement the timely payment by government procurers, which was one of the few positive legacies of Covid. The Government are pretty good at paying on time, although you have to keep departments up to scratch. I am disappointed only that the Government chose to delay the implementation of the Procurement Act and to downplay in the draft guidance note the role of small business, which noble Lords will know that I championed from the Back Benches and later when, surprisingly, I returned to the Front Bench as a Minister.
I rise today to support the noble Lord, Lord Aberdare, on cash retentions—an issue that he has campaigned on for many years. I associate myself with his good questions on transparency, enforcement and, perhaps more importantly, the Government’s intentions on the broader issue of cash retentions. That has been an abiding problem in the sector for many years. I remember that I promised a review, but I left government too soon to be able to carry through the consequentials. I hope the Minister will take his comments seriously.
Lord Fox (LD)
My Lords, it is useful to have heard from the noble Lord, Lord Aberdare, and the noble Baroness, Lady Neville-Rolfe, as they have made it their business to address this issue over a number of years. I am pleased that they view this instrument with some positivity and I am happy to concur.
For too long, we have seen large companies use the cash flow of small companies to bolster their own cash flow. This happens not just in the construction sector, but it has been particularly apparent there. Of course, in some famous cases, such as Carillion and others, it became an industry unto itself and the core purpose of the organisations seemed to be to run cash flow on other people’s profit and loss accounts.
We have moved on some way, but I call into question the Minister’s comment—I also welcome her to her place—that it enables companies to make informed decisions about whom to trade with. In many cases, these companies already know what treatment they will get from those they trade with. They do not have a choice about with whom they trade, if they wish to continue in business. Sanctions and whistleblowing on those companies becomes an issue, as they dare not call foul because they will not get contracts in the future. That is the nature of the relationship: it is an abusive relationship, almost literally, between the contractor and the lead company. We need to understand the nature of that relationship to put into context some of the things we are talking about here.
Without wishing to sound nerdy, the average payment time can hide an awful lot of sins. Standard deviation could be more useful—as the noble Baroness will understand—because companies can be played against others.
I also wonder, rather suspiciously, whether retention becomes something else. It would be easy to look at this from the other end of the telescope, call it a completion bonus and retain that instead. We have to be a bit careful about naming things rather than describing them.
I was happy to be reminded of those halcyon days when we were working on the Procurement Act and of the mercurial rise of the noble Baroness from critical Back-Bencher to Front-Bench proponent. I ask a simple question: would it be legal, under current procurement regulations, for me as a local authority to refuse to take on a contractor which was in all other factors equal to a competitor bidder but had reported poor retention and payment numbers? Is it legal for me to turn it down on those terms?
Lord Sharpe of Epsom (Con)
My Lords, I join other noble Lords in welcoming the Minister to her place. The construction sector in the UK is not only one of the largest but one of the most vital industries underpinning our economy, as both noble Lords noted. In 2022, the sector achieved a turnover of £487 billion and employed over 3 million individuals, representing about 8% of the UK workforce. Its contributions are therefore fundamental in driving economic growth, fostering innovation and advancing development throughout the nation.
However, the sector is also characterised by considerable fragmentation. There are over 444,000 businesses engaged in a broad spectrum of work, ranging from contracting and product supply to associated professional services. The fragmentation is compounded by complex, multi-tiered supply chains, as major projects often involve 50 or more firms working collaboratively.
This brings us to the topic of retention sums, which are a long-standing practice in the construction sector. Retention—as it is still called for now—sums serve as a financial safeguard and ensure that work meets the required standards. Typically, half of the retention is released upon project completion while the remaining portion is withheld until the expiration of the defect’s liability period, proving additional assurance that all specifications are met. That, at least, is the dictionary definition of retention.
Given the current practices within the sector, we need to focus on the amendment introduced by these regulations. They all come into force on 1 March 2025 and apply to the financial year starting on or after 1 April 2025. The changes impose specific reporting requirements for qualifying companies and limited liability partnerships operating within the sector. The amendment extends existing reporting regulations and requires qualifying companies to disclose detailed information about their payment practices, policies and performance in relation to retention clauses in construction contracts.
Companies will be required to report on whether retention clauses are included in their contracts, the percentage of retention withheld and the procedures followed for releasing these sums. Additionally, businesses will be asked to disclose the contract value thresholds under which no retention clause applies and outline the standard rate of retention typically applied in their agreements. By 1 March 2025, qualifying businesses will be obliged to publicly report on their payment practices, specifically concerning retention clauses in construction contracts.
It is important that this amendment acknowledges the significant challenges caused by fragmentation within the construction sector, which of course affects businesses of all sizes. We understand that the aim of these regulations, as the Minister noted, is to enhance transparency by requiring businesses to report not only the inclusion of retention clauses but whether their retention practices align with industry standards or are more onerous than typical practices. Furthermore, companies will be required to provide clear descriptions of the processes that they follow to release retention sums, which is intended to ensure greater clarity and fairness for all parties involved. However, there are several important points on which further clarification is needed.
These amendments are said to provide increased transparency, fairness and clarity within the construction sector, but can the Government explain the mechanisms by which the regulations themselves will be enforced? How will compliance be monitored and what penalties will be applied to businesses found to be in breach of the new requirements? Additionally, while the new regulations seek to promote fairer payment practices, can the Government elaborate on how they plan to ensure that large companies are not able to exploit their market position, despite the new transparency measures? Will there be any safeguards in place to prevent larger firms imposing even more burdensome retention clauses on SMEs?
The regulations are presented as a solution to the ongoing issue of delayed payments, which have long caused a financial strain on SMEs, yet how will the Government measure the effectiveness of these changes? What evidence is there to suggest that requiring businesses to disclose their retention practices will have a significant impact on the cash-flow issues faced by smaller companies? As an aside, the noble Lord, Lord Fox, has raised an important point about how we will judge these companies in future, based on these particular metrics. These are not, of course, the only things by which one should judge a company or its potential to complete a project successfully and efficiently, so will there be some way of measuring that as well? If that has not been considered, it is something that should be.
While these measures are presented as steps towards promoting better cash-flow management and financial security for smaller businesses, we would urge the Government to further clarify how the regulations will be implemented and monitored to ensure that they achieve their intended outcomes. Will there be a review process to assess whether these regulations are having the desired effect on industry practices and the broader economy?
Baroness Gustafsson (Lab)
My Lords, I am grateful for the support for these regulations from across the Committee. I thank the noble Lords and noble Baronesses present for their constructive comments on this measure. Allow me to try to address each of the questions that they asked in order.
First, we heard from the noble Lord, Lord Aberdare. He asked a number of questions, the first of which was: have the previous regulations come into effect yet? The answer is yes; they came into effect and required a report as of 1 January 2025.
The noble Lord’s second question was about how the regulations will be enforced and how the accuracy of the data will be monitored. For that, the Department for Business and Trade will implement a more visible compliance and enforcement approach with non-compliant businesses going forward. Businesses that do not take action to meet their reporting obligations will be prosecuted.
We had a question, supported by the noble Baroness, Lady Neville-Rolfe, about why we would not just abolish retention payments altogether—that is, why are we taking this measure forward and not abolishing it in its entirety? The Government are aware of the impact that retentions have on the supply chain. We are very committed to going further to tackle poor payment practices: in September 2024, we announced our plans to consult on new legislative measures. Now, as part of that consultation, we intend to consult on measures that will address poor payment practices.
Moving on, I refer to the questions asked by the noble Lord, Lord Fox: does defining retention create a potential loophole for companies? Will they suddenly be redefined as completion bonuses? This is one of the arguments in favour of taking this sort of measured, proportionate approach, because we will be able to identify any unintended consequences of some of this legislation, but a key aspect of addressing the naming convention is that it is very clearly defined in a schedule not by what it is called but by the behaviours that it exhibits. Of course, we will monitor this and make sure that, if it requires an update, we will do so accordingly.
The noble Lord, Lord Sharpe, asked what the penalties are for failure to comply. The penalty for a breach of the 2017 regulations is an unlimited fine where a company fails to report or makes a false report.
Lastly, the noble Lord, Lord Fox, asked about sanctions, whistleblowing and the imbalance of power in the supply chain. I say in response that the imbalance of power in the construction supply chain is an ongoing challenge; that is widely understood and acknowledged. However, through the introduction of payment reporting measures for retentions and the enforcement of them, we will be able to create an incentive for firms to improve their payment practices in relation to retentions, as has happened following the introduction of the payment reporting regulations. As I talked about in my introduction to this instrument, we have seen the number of businesses paying within 60 days improve from 82% to 96%, so we should be encouraged that we are supporting correct behaviours with regard to policy.
This Government are committed to making sure that we tackle late and long payments. We want the UK to be the best place in the world for both large and small businesses to thrive. This work on retention payments aligns closely with the department’s wider policy on late payments and will strengthen the existing payment reporting regulations. It will provide for enhanced transparency in relation to the practice of withholding retentions—a practice that, as we have heard, is all too often unfair to small businesses and can, of course, be subject to abuse. It will also provide information to small firms and the construction supply chain about the policies and performance of firms that they are considering working for, enabling them to make better-informed decisions and to secure the payment of moneys due.
Lord Fox (LD)
Before the Minister sits down, I asked a very specific question around public procurement. I ask it again: if I am a public procurer and two bidders are more or less the same—or exactly the same—in their bid, but one of them has late payment, am I legally allowed to use late payment as the reason for not accepting that bid? Secondly, developing that question, if the late payer has the cheapest bid, can I also use late payment and retention payments as a reason for not awarding to that bid?
Baroness Gustafsson (Lab)
I apologise for not addressing that specifically. My understanding is that this information will help support a party in a commercial negotiation and will, ultimately, form part of its decision-making. As regards the technicality of whether one could legally use that as a way in or out of a contract, I will make sure that we write to the noble Lord on the specifics of that.
Lord Fox (LD)
It is really important because we are seeing, not necessarily under the Procurement Act but under the NHS, major legal tussles over the misapplication of the assumed rules of contract awards—not least in clinical waste disposal, where another six or seven health authorities are being taken to court. This is expensive; it will cost the public and the Exchequer. So it is important that we and public procurers understand from the outset whether this is window dressing or material to the procurement process.
Baroness Gustafsson (Lab)
I acknowledge that. I agree wholeheartedly with the noble Lord about the importance of getting that clarification; we will be sure to write to him in that regard.
Free-Range Egg Marketing Standards (Amendment) (England) Regulations 2024
(2 days, 7 hours ago)
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Baroness Hayman of Ullock
That the Grand Committee do consider the Free-Range Egg Marketing Standards (Amendment) (England) Regulations 2024.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, these regulations were laid before the House on 21 November 2024. This instrument has been laid to amend existing legislation governing egg marketing standards to enable free-range eggs to be marketed as such for the duration of mandatory housing measures, which restrict the access of laying hens to open-air runs.
Currently, when free-range hens are placed under mandatory housing measures due to disease outbreaks such as avian influenza, the egg marketing regulations allow their eggs to continue to be labelled as free-range for 16 weeks only; this is known as the 16-week derogation period. If the mandatory housing measure lasts for longer than 16 weeks, eggs from those hens must be labelled and sold as barn eggs. The requirement for egg producers and packers to relabel free-range eggs as barn eggs once the 16-week derogation period is exceeded is difficult to implement in modern automated packhouses. This adds significant logistical and packing costs to the industry.
This SI aims to remove the 16-week derogation period so that free-range egg producers and packers can label and market eggs as free-range for the duration of a mandatory housing measure, however long that may last. During mandatory housing measures, egg producers still have the higher operating costs of maintaining their free-range egg system, with the additional cost of having to ensure that hens are also temporarily housed indoors. The normal laying period of a productive free-range laying hen in the UK is around 90 weeks. This SI will remove the derogation, which affects only a small part of a laying hen’s productive life, with all the other free-range criteria still needing to be met—except access to open-air runs.
In 2024, Defra held a joint consultation on these proposed changes with the Scottish Government. Some 70% of respondents supported the removal of the derogation. The removal of the 16-week derogation period has already come into force in Scotland. Following their own consultation exercise, the Welsh Government have also announced that they will introduce legislation to remove the derogation.
In 2023, the EU amended its egg marketing standards regulations to remove the 16-week derogation period, which, through the Windsor Framework, applies also to free-range eggs produced in Northern Ireland. Without this SI, the introduction of any mandatory housing measures that last longer than 16 weeks—during, for example, an avian influenza outbreak—could be detrimental for English free-range egg producers and result in an increase in free-range eggs being imported from the EU and Northern Ireland. This could have a significant negative long-term impact on the English free-range egg industry. This SI restores alignment with the EU and Northern Ireland.
It will also ensure that free-range egg producers and packers do not incur additional costs for adhering to government-imposed housing requirements. Outbreaks of avian influenza usually occur during the winter months—as was the case in 2021-22 and 2022-23, resulting in the introduction of housing measures for poultry that, in both cases, lasted longer than the 16-week labelling derogation period: for an additional six weeks in 2021-22, and for an additional seven weeks in 2022-23. So it is imperative that this SI is in place for the rest of the winter period and beyond.
We continue to uphold the high standards expected by UK consumers and businesses. The change contained in this statutory instrument will safeguard our Great British egg industry. I beg to move.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I thank the Minister for her introduction to this fairly straightforward SI, which allows, during an outbreak of avian flu, for poultry that are normally free-range with access to open-air runs to be kept in barns for an additional period of time. The current derogation’s continuous limit of time during which birds can be kept in barns and still be labelled as free-range is 16 weeks, as the Minister said. During the avian flu outbreak in 2021-22, the period was extended from 16 weeks to 22 weeks. During the 2022-23 outbreak, it was again extended—on this occasion, to 23 weeks.
The UK is 90% self-sufficient in egg production. As markets for eggs need to be strictly in alignment with the EU’s for the purposes of trade, it is important that UK regulations closely match those in operation in the EU. As 94% of UK egg exports go to the EU, it is important that our egg producers are not at a disadvantage during outbreaks of avian flu. Removing the 16-week derogation limit will ensure that UK producers have parity with the EU; I fully support this move.
However, as the UK seems to be affected by avian flu on a fairly regular basis during the winter months, I wonder whether there is likely to be a maximum number of weeks when birds need to be kept in barns and still be labelled as free-range. Six or seven weeks is a short period by which to extend the derogation but the effect of increasing the derogation, as happened in 2022 and 2023, meant that it was for nearly 50% of the year. Can the Minister give reassurance that this derogation will not be extended any further? I note that she said that the Government will extend it for “however long” is necessary. It is difficult to see how the consumer is likely to be persuaded that eggs that have been barn raised for30 weeks of the year, say, can still be labelled as free-range. As we all know, free-range eggs attract a premium on the price the consumer pays.
I turn briefly to the subject of the consultation that took place between 9 January and 5 March 2024. Eighty egg producers, 20 egg packers and 49 members of the public responded. The response from the public is amazingly small, which raises questions. How was the consultation conducted? Where was it advertised? Given that consumers are very exercised about the conditions in which poultry are kept, and that many choose free-range eggs over barn eggs because they believe the birds have a better quality of life in the open air, I am surprised that more did not respond to the consultation. Perhaps the Minister can give details of how engagement with the public on the consultation was conducted.
Despite that query and concern about the derogation limit being extended to beyond 50% of the year, I support the SI but feel that avian flu is not going away, and egg producers need a way of dealing with the effects that it has on their business, as well as consumers needing reassurance that they are getting what they pay for in buying free-range eggs.
Lord Blencathra (Con)
My Lords, on Thursday this week the Minister and I will be discussing how we save the planet, so this important subject is good practice for that mega-issue.
I am grateful to the Minister for setting out simply the unfortunate need for these amendment regulations. The Official Opposition support them. As she has pointed out, under the current regulations, eggs can be marketed as free range for a maximum of only 16 weeks if the hens are shut inside; after that, they are to be called barn eggs. However, as we have seen in recent years, housing restrictions for free-range hens due to Chinese avian influenza outbreaks have often exceeded the 16-week limit. Within 2021-22 and 2022-23 the outbreaks required measures for 22 and 23 weeks respectively. That has caused significant logistical and financial challenges for the egg industry, and the amendment rightly seeks to address those issues.
The amendment is essential, as the Minister has said, because the EU has removed its 16-week limit and, unless we do likewise, our producers will be at a huge disadvantage. We would be importing eggs from the EU labelled “free range” while ours had to be downgraded to barn eggs. As long as there is a trading market in eggs in Europe, we need to stay consistent.
On consistency, I was going to ask the Minister about Wales because, when I drafted my speech last week, I was under the impression that Wales was possibly going to stick with the 16-week rule, but I am delighted that it seems all four countries of the union will now be at the same level of derogation.
I want to ask about enforcement. Producers in areas where there is a danger of Chinese avian flu will benefit from this amendment, but can the Minister assure us that it will not be possible for these measures to be abused, so that free-range eggs will be permitted to be advertised as such only when hen housing has been mandatorily restricted, not for any other reason?
While this amendment is necessary at the moment, what if anything has the Chief Veterinary Officer said to Defra about how long these lockdowns may be necessary? I appreciate that that is a difficult question to answer and some of it is guesswork, but I hope that Dr Middlemiss will be able to remove the restrictions as soon as she thinks it is safe to do so. We, the Government and the industry must not get into the cosy rut of maintaining these lockdowns unnecessarily. We have already had a six-month one and if we have lockdowns that last a lot longer, as long as may be necessary, we will need to take a serious look at the definition of “free range”.
I understand that in the consultation 66% of respondents felt that the proposal would cause little or no confusion among consumers. Of course not, since how are consumers to know how long the hens have been shut inside in the first place while the eggs are still labelled free range? I am not worried about consumers being confused but I am worried about misrepresentation.
That brings me to my last point. As the Minister knows, the definition of “free range” is a bit farcical in any case—or perhaps it would be safer to say not what most people would think free range actually is. I recall in 1990, as a junior Minister in MAFF, three different supermarket directors marching into the ministry to demand that we adopt their own various definitions of free-range eggs, when we entered into negotiations in the EEC later that year. They varied from chickens getting a sniff of fresh air occasionally for a few minutes each day, to their being let out on a tiny patch of grass, to roughly the current definition that henhouses have little pop-out holes where the chickens could theoretically go out if they wanted to but, in many cases, the majority do not. No matter how unfree the range is, that is the current definition in Europe and we cannot get out of step with it. I suspect that there is no mood in Europe to change that definition and I hope that we in the UK will not take unilateral action to tighten it further, even if some animal welfare groups may demand it.
As the noble Baroness said—I believe this too—if hens are confined inside for six months, nine months or even more, consumers have a right to know that their eggs are not really free-range. On how we address that, I am glad that the Minister is in charge and that it is not me back in MAFF, as it was in the old days, having to tackle this problem. Nevertheless, we are where we are; I support the amendment and what the Government intend to do here.
Baroness Hayman of Ullock (Lab)
I thank noble Lords who took part in this short but important debate. As someone who keeps free-range hens—only a small number of them—I am very pleased that noble Lords have supported this SI because it is extremely important to have clarity for the industry on this matter. I thank noble Lords for their pertinent and helpful questions; I will do my best to respond to them all in turn.
On Wales, as the noble Lord, Lord Blencathra, said, the Welsh Government have now indicated that later this month they will lay an SI to remove the 16-week derogation period. Subject to the Senedd’s approval, we expect the regulations to come into force in February this year.
On enforcement, the Animal and Plant Health Agency’s egg marketing inspectors conduct risk-based and random checks on domestic and imported eggs at farms, wholesalers, distribution centres and packing centres. Local authorities also conduct checks at retailer level. The inspections ensure that only free-range eggs are labelled “free-range” during mandatory housing measures.
As to the necessity of mandatory housing measures, I receive regular updates and advice from the Chief Veterinary Officer about all decisions on when to introduce, amend or lift regional or national avian influenza prevention zones, which mandate enhanced biosecurity, and on when to extend them to include housing measures. In fact, I am meeting the Chief Veterinary Officer tomorrow to discuss a number of issues, including this one. Such decisions are always based on risk assessments containing the latest scientific and ornithological evidence and veterinary advice. Restrictions will therefore apply only while the risk remains.
In recent years, as I said earlier, the longest periods of mandatory housing measures being in place were in 2021-22, when it was for 22 weeks, and in 2022-23, when it was for 23 weeks. As I mentioned in my opening speech, the normal laying period of a productive free-range hen in the UK is around 90 weeks, so 23 weeks—the longest period— is actually a short period in that laying hen’s productive life.
Both noble Lords asked about the length of mandatory housing and its impact on the meaning of “free-range”. I fully understand why that question is being asked, but we do not have any intention of reviewing the definition of “free-range”. If we decide to do so, we will need to assess how amending our regulations would affect the UK internal market, our industry and our trade with the EU as our biggest export market.
The noble Baroness, Lady Bakewell, asked specifically about consultation. Defra ran a joint consultation with the Scottish Government. It was open between 9 January and 5 March 2024. This eight-week consultation was held to obtain a comprehensive understanding of the views of the industry and the general public on the intended purpose of the removal of the 16-week derogation period. It was an open consultation run on Citizen Space, and it was published and advertised through a press release and by contacting key stakeholders.
A question was also asked about reducing the risk of confusing or misleading consumers. We are encouraging retailers to place signage where eggs are displayed for sale that informs consumers of the imposition of mandatory housing measures, the impact that this will have on marketing free-range eggs and, notably, that the rest of the free-range criteria continue to be met, except for access to open-air runs. We believe that that kind of transparency will benefit consumers and is in the best interests of producers and retailers. The important thing is to have transparency, so that everybody understands the situation and can make purchasing decisions bearing it in mind.
In conclusion, I hope noble Lords fully understand the need for this instrument. Again, I thank them for their support. We need to enable free-range eggs to be marketed throughout the duration of any government-imposed mandatory housing measure to allow for trade to continue. The removal of this derogation will reduce additional logistical and financial pressure for egg producers, in the event of a mandatory housing measure.
Aligning with the devolved Governments and the EU also ensures that English producers are not put at a disadvantage if mandatory housing measures come into force. When they are put into place, we of course take the welfare of the hens into consideration. As I said before, it affects only a small part of laying hens’ productive life, so we are confident that animal welfare standards will be maintained and that consumers will be assured that the welfare of the laying hens is still a key priority during any mandatory housing measures.
We also must do our part to support our great British egg industry by ensuring that it has a level playing field with trading partners such as those in the EU, which have adopted similar provisions for their free-range egg producers. I hope that I have answered all the questions but will check Hansard to make sure. If I have missed anything, I will respond in writing.
Combined Authorities (Borrowing) and East Midlands Combined County Authority (Borrowing and Functions) (Amendment) Regulations 2025
(2 days, 7 hours ago)
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Baroness Taylor of Stevenage
That the Grand Committee do consider the Combined Authorities (Borrowing) and East Midlands Combined County Authority (Borrowing and Functions) (Amendment) Regulations 2025.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, these regulations were laid before this House on 19 November 2024. The other place debated them on 8 January 2025. The regulations relate to the York and North Yorkshire Combined Authority, the East Midlands Combined County Authority and the North East Mayoral Combined Authority. Via Section 1 of the Local Government Act 2003, they will enable these authorities to borrow money for use against their relevant functions.
Presently, the York and North Yorkshire Combined Authority and the North East Mayoral Combined Authority are already able to borrow against their transport functions, and the York and North Yorkshire Combined Authority is able to borrow against its police and fire authority functions. The East Midlands, as a combined county authority, is unable to borrow against any of its functions.
The regulations before us will enable the York and North Yorkshire Combined Authority, the North East Mayoral Combined Authority and the East Midlands Combined County Authority to make use of borrowing powers for purposes relevant to their current and future functions. This will bring all three authorities in line with existing combined authorities and fulfil commitments made in their original devolution agreements.
On consent, I bring it to the Committee’s attention that all three authorities and their respective constituent councils have given consent to the conferral of borrowing powers. Similarly, the three authorities have agreed their respective debt caps with HM Treasury for 2024-25.
The regulations will also confer the East Midlands Combined County Authority’s constituent councils’ general power of competence for economic development and regeneration upon the combined county authority. The power will be held concurrently with the East Midlands constituent councils; the East Midlands Combined County Authority will be able to exercise the general power of competence only in relation to economic development and regeneration. The conferral of this power will fulfil the East Midlands’ original devolution agreement and enable the combined county authority to support local businesses and charities, as well as strengthening the area’s visitor economy.
As the conferral of the general power of competence for economic development and regeneration upon the East Midlands constitutes a new power, Section 48 of the Levelling-up and Regeneration Act 2023 applies. I can confirm that the requirements under Section 48 have been met, and that the East Midlands Combined County Authority and its constituent councils have consented to this conferral.
I come to the final part of these regulations, which will make amendments to the East Midlands Combined County Authority Regulations. Specifically, these are by: first, amending a typographical error so that the combined county authority is the local housing authority for housing needs, laundry facilities, shops, recreation grounds and housing purposes, and with respect to buildings acquired for housing purposes; secondly, enabling the mayor of the combined county authority to arrange for a committee of the combined county authority to exercise mayoral functions; thirdly, allowing non-constituent members of the combined county authority to have voting rights in an authority committee; and, finally, clarifying the voting arrangements for the combined county authority, including the requirement for a two-thirds majority to pass its mayoral budget. These amendments have been discussed with the East Midlands and its constituent members, with the councils and the combined county authority consenting to the amendments being made.
These regulations, which are supported by the authorities and their constituent councils, are a necessary step in fulfilling the original devolution agreements that had been reached. Devolution across England is fundamental to achieving the change that the public expect and deserve: growth; the more joined-up delivery of public services; and policies being done with communities, not to them. I commend the draft regulations to the Committee.
Baroness Pinnock (LD)
My Lords, these are important changes to the devolution in the three mayoral authorities referenced by the Minister. In general, I and my party support devolution, of course, but we remain concerned about the mayoral system being adopted across England because of the way in which it concentrates too much authority and decision-making in the hands of one person. So, it is a “yes” to devolution, but mayoral authority may need some adjustment to make it more democratic, particularly as it is happening in this statutory instrument, with more powers being extended to mayoral authorities—hence budgets becoming enlarged, sometimes substantially. It seems to me that, if there is more capital borrowing, there will be a requirement to fund that borrowing, and there will therefore be an increase in the mayoral precept. My first question for the Minister is this: will there be a cap on either capital borrowing or mayoral precepts so that we understand the extent of the borrowing and the cost to the taxpayer?
Baroness Scott of Bybrook (Con)
My Lords, this SI is a key step in advancing the devolution agenda, continuing the work set out in the Levelling-up and Regeneration Act 2023 under the previous Conservative Government. As we have heard, it extends the borrowing power to the York and North Yorkshire Combined Authority, the North East Mayoral Combined Authority and the East Midlands Combined County Authority, empowering them to invest in critical areas, such as housing, regeneration, transport, education and health. This is part of a broader effort to decentralise power from Westminster and empower local authorities to shape their own futures, which His Majesty’s Official Opposition support.
In terms of economic development and regeneration, the regulations grant the EMCCA the general power of competence to support local businesses, tourism and other sectors. This is a notable shift, allowing the EMCCA and its constituent councils to carry out more comprehensive projects, including potentially accessing grants from central government, but we must ensure that, while these powers enable growth and development, there is robust accountability in place to ensure that resources are used effectively and in the best interests of those local communities.
A public consultation was conducted regarding the proposed changes, particularly focusing on the economic development and regeneration powers of the EMCCA. While the feedback was largely positive, with no significant objections, it is important to note that support for these new powers was not overwhelming. The absence of major concerns from stakeholders, including the House of Lords Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments, suggests broad acceptance, although this should not be construed as unanimous approval.
I have a number of questions for the Minister. While the regulations aim to empower local authorities, several questions need to be answered to ensure these powers are used effectively and responsibly. On effective devolution, the work of the Levelling-up and Regeneration Act promoted decentralisation, but how much autonomy will local authorities truly have under these regulations and at what point will central government oversight become excessive? On oversight, without a statutory review clause noted, how will the Government ensure accountability for these new borrowing powers? Are there safeguards in place to ensure that borrowing is managed prudently? Finally, on regional equity, could the new powers create disparities in regional development, potentially leaving smaller regions behind? How will the Government ensure that these powers, to be granted to certain areas, do not exclude or disproportionately benefit specific regions at the expense of others?
Baroness Taylor of Stevenage (Lab)
My Lords, I thank both noble Baronesses for their participation and broad support for this SI. I will address some of the questions raised. The noble Baroness, Lady Pinnock, asked about the powers of mayors; I simply point to the success of existing mayoralties, delivering real things for their communities that have made a huge difference—in transport, skills and, in some places, health economies—in the areas where people live. Of course, you can only really do that if you are part of the community that you are representing, and the Government’s push for devolution is to help those local areas with skin in the game to have the powers and funding they need to drive their areas forward, particularly for growth but also for the conditions for the people in their areas.
We now have the Council of the Nations and Regions, which is a very important body for driving forward growth in our regions and nations. It is very important that every part of the UK has a seat around that table. That was the thinking behind the English devolution White Paper—it is still out for consultation, so we will see what comes back from that.
On capital borrowing, it will be the responsibility of mayors to drive growth in their areas, but I realise that borrowing will have to be paid back. Debt caps have been agreed with the Treasury. There has been an extensive process to agree them, and it has been done on the basis of what is affordable for those areas within their current envelopes.
The noble Baroness spoke about powers in relation to housing and planning. The English devolution White Paper set out strategic and investment powers, and possibly development corporations that mayors will have powers over. Planning powers on a day-to-day basis will stay with the constituent local authorities, which is right and proper because they are the people on the ground.
The noble Baroness also spoke about local government funding. The last person in the world who would underestimate issues in local government funding is me. I lived with them on a daily basis for many years. There have been substantial steps forward in funding for local government. In spite of a very difficult financial settlement this year, our Secretary of State has achieved significant additional funding for local government. Off the top of my head, I think the figure is £3.7 billion altogether for local government, and I am sure that officials will wave at me if I am wrong. We know that will not solve all the problems. We have to increase growth in the country to improve that situation more substantially. I have just been given a great big written note which I am supposed to read, while I talk at the same time, but that is not possible, so I will answer off the top of my head and, if I do not answer all noble Lords’ questions, I will respond later in writing.
On the Levelling-up and Regeneration Act and non-constituent members, the noble Baroness is quite right that we had substantial debates about them during the passage of the Bill. For one type of authority, there are not voting rights, but for the other type of authority, there are voting rights. As we move into the full picture of devolution, there will be further consideration of that. It is right that in mayoral combined authorities the upper tiers will take the decisions. How they decide to involve their constituent members will be broadly up to them. I have heard some really creative ideas, such as having key committees chaired by the constituent councils. As we move into a picture where we have all unitary authorities, I think we will continue to look at that and review it.
I thank the noble Baroness, Lady Scott. The three of us are part of the LURB club who sat through many hours debating the Bill. I agree with her about what a key step this is and that the East Midlands Combined County Authority will need to undertake the more comprehensive projects that were set out in its devolution agreement, and it needs these powers to do that. Of course we need robust accountability for all of them.
There was some consideration of consultation, but extensive consultation had already taken place on this so, having looked extensively at what had been done before, it was felt that there was no need for further consultation. I take the noble Baroness’s point that support was not overwhelming, but there was enough support for us to feel comfortable that we could go ahead.
The question about autonomy is important. The way that we have set out the picture in the English devolution White Paper is that, the more established an authority becomes, the more autonomy it will have. It is perhaps the opposite way from what the noble Baroness suggested. Central government oversight will not overwhelm those authorities once they are established. Look at some of our more established mayoral authorities: Greater Manchester is always the standard example and it has extensive powers and funding to lead the way for growth, transport, skills and so on. We want to see that with the more established authorities. The more established they are, the more they prove themselves in terms of accountability of all kinds, especially financial, and the more powers they will get.
On accountability and safeguards for borrowing, that is why debt caps have been set with the Treasury. They have been looked at very carefully. The White Paper also sets out a wider process of accountability which may, depending on what comes back from the consultation, include something like local public accounts committees to have oversight at local level of what is going on within mayoral combined authorities.
I hope that answers all the questions but, if not, I will go through Hansard and make sure that we respond.
Baroness Scott of Bybrook (Con)
I asked how we would ensure regional equity.
Baroness Taylor of Stevenage (Lab)
I thank the noble Baroness and apologise for missing that. She will have seen that one of the adjustments we have made to the local government finance settlement that came out just before Christmas was to slightly reshape the spending to meet need. There will be more news on that and more discussion about it as we go into the spending review in the spring.
That is an important point because having a champion for a local area on its own will not be enough. We need to make sure that we are addressing the key disparities, and there are some enormous disparities that we heard much about during the passage of the levelling up Bill in health, employment, standards of living, housing, and so on. The devolution aspect of this project means that local areas have far more autonomy to make the changes that will make a difference to them. The spending review will take all that into account and, I hope, reshape the way that the distribution of finance is done so that we make it more equitable generally. If there are further contributions to the spending review as we go through it, I will be pleased to hear them.
These regulations deliver on the commitment made in the devolution deals agreed with York and North Yorkshire Combined Authority, the East Midlands Combined County Authority and the North East Mayoral Combined Authority to provide them with borrowing powers against their functions. The conferral of borrowing powers will provide all three authorities with the opportunity to further invest in their services and functions to the benefit of those who live and work across their geographies. In short, I believe the regulations and the powers that it confers will make a significant contribution to the future economic development and regeneration of York and North Yorkshire, the east Midlands and the north-east by providing those three authorities and all the people who look after them with the tools to shape their futures, driving growth and higher living standards across their geographies. I commend the draft regulations to the Committee.
House of Lords
Immigration: Human Rights
(2 days, 7 hours ago)
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Baroness Chakrabarti
To ask His Majesty’s Government whether they plan to give greater priority to those with well-founded human rights claims in the immigration system.
The Minister of State, Home Office (Lord Hanson of Flint) (Lab)
Any foreign national in the United Kingdom can make an asylum or human rights claim should they be unable to return to their country of origin. The UK has a proud history of protecting vulnerable people. All claims are decided on individual merits. Protection status is granted to those in need.
Baroness Chakrabarti (Lab)
I am very grateful to my noble friend the Minister for that clear Answer. Does he further agree with me that rather than demonising refugees while simultaneously increasing economic migration, including to very low-skilled employment, as the last Government did, His Majesty’s Government should prioritise those in genuine need of humanitarian protection or family reunification, including via safe legal routes to the UK?
Lord Hanson of Flint (Lab)
I am grateful to my noble friend. The UK has a proud history of providing protection to those who need it, in accordance with our international obligations under the refugee convention and the European Convention on Human Rights. She will know that we are proposing an immigration White Paper shortly, which will look at some of the issues she has mentioned. She will also know that the Government are extremely keen to ensure that we crack down on illegal migration and on those individuals who are brought to this country to undercut the working conditions, pay and other benefits of individuals who are here with asylum and refugee status, and who are approved and working, and also the population of the United Kingdom as a whole. She makes a very important point.
Lord German (LD)
My Lords, in hearing claims, one of the biggest problems in the past has been the number of claims that go to appeal, therefore making the system much lengthier than it needs to be. What steps are the Government taking to ensure that, when an asylum case is heard, they get it right the first time rather than having to go further on in an appeal? I draw attention to my interests; I am supported by the RAMP project.
Lord Hanson of Flint (Lab)
The noble Lord makes an extremely important point. It is not the Government’s intention to drag out the appeals procedure, or indeed the claims procedure. We have been trying since July to speed up the consideration of asylum claims. We have put additional staff in to do that. We want to get the decisions right first time, obviously, and that is an important part of the Government’s proposals to reduce both the asylum backlog and the dependency on hotels, which reached record levels under the previous Government.
Lord Alton of Liverpool (CB)
My Lords, in developing the helpful answer he just gave, can the Minister tell us what is the backlog of the outstanding number of cases? How long does it take to clear them on average? Rather than expecting people to subsist on around £7 a day, should we not look again at the opportunity to work while those claims are being considered?
Lord Hanson of Flint (Lab)
The total number of asylum claims waiting for an initial decision has fallen by 22%, from 125,173 at the end of September 2023 to 97,170 at the end of September last year. That figure of 97,170 cases, which relate to approximately 133,000 people waiting for an initial decision, is down 22% on the previous year but is 13% higher than in the previous quarter. We are trying to get the number down for the very reason mentioned by the noble Lord, Lord German: that a large number of those cases will potentially go to appeal. That number includes individuals in hotels. The problem is that the previous Government put a moratorium on dealing with those issues. We are now trying to clear that backlog and give people a decision. Whether it is to stay or go, a decision is needed.
Lord Davies of Gower (Con)
Can the Minister reassure the House that any increased prioritisation of human rights claims will be accompanied by rigorous checks to ensure that individuals who pose a risk to national security are not admitted under such provisions? Furthermore, what steps are His Majesty’s Government taking to ensure that prioritising certain asylum claims does not place undue strain on local communities, public services or housing availability?
Lord Hanson of Flint (Lab)
The Government want to secure a decision on asylum claims. In doing that, we also want to ensure that the security of the United Kingdom is paramount. Therefore, security checks will take place. It might be of interest to the noble Lord to know that 16,400 people have been removed from the United Kingdom since July of last year. That figure is up by 24% over the previous quarter, when he had stewardship of this office in his Government. We will ensure that, as he says, we look at the issues that successful asylum claimants and refugees experience in relation to work and employment. As my noble friend mentioned, it is important that, when those individuals are successful, they can get into work and contribute to some of the jobs required to be filled by people in this country today.
Baroness Jones of Moulsecoomb (GP)
My Lords, there are likely to be more refugees because of climate change—people who are fleeing drought and floods. Do this Government see that, as a massive consumer still driving climate change, we have a duty to those refugees, as well as to refugees from war zones?
Lord Hanson of Flint (Lab)
I agree with the noble Baroness that climate change is a potential driver. The noble Lord, Lord Alton, has mentioned this on a number of occasions as well, and we agree that those issues drive asylum and refugee claims. She might be interested to know that the highest numbers of people claiming asylum last year were from Pakistan, Afghanistan and Iran. However, I accept her point; we need to address the wider climate change issue in relation to those who claim asylum or refugee status in this country
Lord Dubs (Lab)
My Lords, I have been waiting 14 years to say to a Home Office Minister, “I like his answers”. The Minister mentioned a forthcoming White Paper on asylum and refugees. Can he use his influence to ensure that the rights of children who are asylum seekers to join their families here will be high up on the list?
Lord Hanson of Flint (Lab)
I am really pleased that the noble Lord likes the answers—we have been waiting 14 years to give them, and it is a great pleasure to be here. We are progressing on the matter of child migrants; there are specific issues that we will look at on that. The number of unaccompanied child migrants is currently approximately 4,000, which is still too high. We need to look at the points that the noble Lord has mentioned. I hope that I will be able to give him some satisfactory answers in the future.
Lord Roberts of Llandudno (LD)
My Lords, about eight years ago, we had a crisis in Syria. Some 3,000 unaccompanied children were refused admission into the UK, even though some of us had worked hard to try to get them homes. Can the Minister tell us whether there is any information whatever about what happened to those kids? We would all be happy to know that.
Lord Hanson of Flint (Lab)
I am grateful to the noble Lord, Lord Roberts, for that question. He will know from previous discussions and debates on the issue of unaccompanied children that we have identified that around 90 children have gone missing. It is the priority of the Government to find out where they are. The prime responsibility for their safeguarding initially fell on Kent County Council. It is an important issue and one we need to address. As part of future considerations, we will continue to do that.
Baroness Butler-Sloss (CB)
When looking at refugees, could the Minister include victims of modern slavery with positive decisions and those who are victims of forced marriage? I declare an interest in the register.
Lord Hanson of Flint (Lab)
The noble and learned Baroness makes an extremely important point. Victims of modern slavery should be central to any policy determination. This Government will support the efforts of the previous Government and the previous Home Secretary—who is now a Member of this House, the noble Baroness, Lady May of Maidenhead—who introduced what is now the Modern Slavery Act. We will ensure that those rights are upheld and that victims of modern slavery have that aspect of their lives taken into consideration when their asylum or refugee status is considered.
Lord Lexden (Con)
My Lords, in view of the increasing threats to journalists in different parts of the world, are the Government contemplating action to give effect to the recommendation of the Media Freedom Coalition, of which the UK was a founding member, that an emergency visa scheme should be introduced for journalists and other defenders of human rights at serious risk of harm?
Lord Hanson of Flint (Lab)
I understand the point the noble Lord, Lord Lexden, makes. As I said, the Government will prioritise and look at the most urgent cases first. If there are urgent reasons why a journalist’s case needs to be examined over and above anybody else’s, they will be considered. The issue of priority is there for the Government to consider.
Driving Tests: Secondary Market
(2 days, 7 hours ago)
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Lord Young of Cookham
To ask His Majesty’s Government whether they plan to ban the secondary market in driving tests.
The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)
The Driver and Vehicle Standards Agency has announced measures to review the driving test booking system. It launched a call for evidence on 18 December seeking views on the current rules to book tests. This will lead to consultation on improving processes with potential future legislative changes. On 6 January, the same organisation also introduced tougher terms and conditions for driving instructors booking and managing car driving tests for their pupils.
Lord Young of Cookham (Con)
I am grateful for that Answer, but I think the answer to my Question is no—although it was very skilfully camouflaged. This is a racket. Middlemen are hoovering up slots on the DVSA website and then charging learner drivers a premium to access them. I googled this morning “Book your driving test earlier”. I got eight hits on the first page, with lots of inducements: “You can receive a test a month earlier than you would usually find on the DVSA website” and “Get your driving licence faster with early test bookings”. Another one said, “Book a driving test quicker with our booking system”. Trustpilot reveals that some of those are scams, with people paying £90 and not getting a test. Last month, the previous Secretary of State said:
“we will review and improve the rules around booking tests, including”,
as the Minister has just said,
measures to ban the resale of driving test appointments”.—[Official Report, Commons, 18/12/24; col. 52WS.]
Why do the Government not just get on with it and ban this racket?
Lord Hendy of Richmond Hill (Lab)
I thank the noble Lord for his research. He is right that there are some people making money out of this and they should not do it. My Answer was not just no; one of the considerations in working through what needs to be done is that we do not inadvertently make it more difficult for legitimate people looking for tests to book them. Less than one-quarter of total test bookings in September last year had been swapped from one licence to another, which means that swapping affects only a minority of tests.
The real answer is to reduce the length of time it takes to get a test. Currently in England, it is nearly 21 weeks. The Government have a target to reduce that to seven weeks by the end of December this year. For this purpose, we are recruiting 450 extra driving examiners on top of the 1,456 full-time equivalents there already are. That will make a very substantial difference, with the aim of obviating any activity as he describes and getting people tests when they can take them.
Baroness Pidgeon (LD)
My Lords, given the disparities in driving test availability that the Minister has just mentioned, will he consider incentivising local authorities to help address these shortages by supporting additional mobile driving-test centres in areas with high demand or limited access?
Lord Hendy of Richmond Hill (Lab)
I thank the noble Baroness for her question. The issue with the availability of tests is very substantially related to the availability of driving examiners, rather than the locations in which they are conducted. As I said, the additional 33% increase on top of the current number of full-time equivalent driving examiners is the thing that will make a real difference.
Baroness Hayman (CB)
My Lords, the current situation is grossly unsatisfactory for learner drivers. The noble Lord who asked the Question referred to a cost of £99; I have knowledge of someone who paid £400 simply to get a local, quick driving test. Many people are suffering because they need that. Can the Minister tell us, as well as recruitment, what his department is doing to ensure that industrial relations are better between driving examiners and the department, in order to get us back to the situation—which we have never got back to—as it was pre-Covid?
Lord Hendy of Richmond Hill (Lab)
One consideration in improving the relationship between driving examiners and the DVSA is to have enough of them to conduct tests on a basis where people do not feel excluded or significantly delayed. It is not the only action the Government are taking: my honourable friend the Future of Roads Minister made a Statement in the other place on 18 December with a seven-point plan, all of which is designed both to help people get tests when they need them and to reduce the amount of time it takes between applying for a test and actually taking one.
Lord Moylan (Con)
My Lords, I thank my noble friend who, after a lifetime of bicycling, offers greater advocacy for learner drivers than the Government appear interested in doing—possibly he is looking for a driving test himself at this late stage. During the previous Government, in the last 18 months, the DVSA issued 283 warnings and 746 suspensions, and closed 689 alleged businesses all over this scam. None of this enforcement activity has been mentioned by the Minister. Has it been dropped? Has the DVSA gone slack under a Labour Administration, while they are focusing on consultations and reworkings of processes?
Lord Hendy of Richmond Hill (Lab)
As a matter of fact, the statistics I can quote back to him are that 344 warnings and 791 suspensions have been issued, and 811 business accounts have been closed since the new Government took office. I think that comprehensively demonstrates that there has been no such slackening off and that the DVSA is on top of this. The real answer, however, is to reduce the amount of time it takes to get the test in the first place so that people do not feel very early in their learning journey that they have to book a test long in advance of it taking place. The Government’s aim is to get that down to seven weeks by recruiting a large quantity of driving examiners, to whom I previously referred.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, does the Minister recall that there was a civil servant who drove all the way to Barnard Castle to test his eyesight for driving? Can the Minister take time out from his very busy schedule to advise Mr Dominic Cummings that he should stick to driving and improving his driving, rather than trying to undermine the elected Government of this country in association with Elon Musk?
Lord Hendy of Richmond Hill (Lab)
I have no need to do that; my noble friend has just done it for me.
Lord Grayling (Con)
My Lords, the Minister has just said that 25% of tests appear to go through some of these third-party sites. My noble friend has also said that some of these sites are genuine scams. Why is it that any driving test can be booked anywhere except on the official DVSA website? Why can he not just sort that?
Lord Hendy of Richmond Hill (Lab)
One of my colleagues said, sotto voce, “For the same reason that you did not”, which is perhaps not an unreasonable point.
Lord Hendy of Richmond Hill (Lab)
This system has to allow people to book tests at the time that they need them. I did not say that 25% had been through one of these websites; I said that a quarter of total test bookings had been swapped from one licence to another. Of course, the reason why you would go to a driving instructor who has a number of pupils is that a driving instructor can apply for a test for one pupil and then transfer it to another if the second pupil is making faster progress than the first. That is how it should be. The number of people going through these agencies is clearly more than zero and, since it is, we should do something about it. But we have to do that in a way that does not prevent driving instructors from running decent businesses and also allows people to change their bookings when they need to. That is what takes time and care, and that is what the DVSA is working on.
Lord Watts (Lab)
My Lords, would it not be possible just to allow driving instructors to book on behalf of someone else and make it illegal for anyone else to do it?
Lord Hendy of Richmond Hill (Lab)
I thank my noble friend for his question. Many tests are booked by the applicants themselves, and there cannot be any reason why you could not be able to do that, as a potential holder of a driving licence. Equally, driving instructors have to be able to run a business, and one of the benefits of going to a registered driving instructor is that they have some flexibility in tests for their pupils.
Lord Hannan of Kingsclere (Con)
My Lords, secondary markets almost always develop as a consequence of state failure, and this is no exception. We all know people affected—I have two children who have been. The state failure, and the explosion in these websites, began with lockdown. Is not the ultimate answer to get these and indeed other government employees to come back to the office?
Lord Hendy of Richmond Hill (Lab)
The one thing that driving examiners cannot do is work in an office.
Lord Hendy of Richmond Hill (Lab)
That must be self-evident. The real answer to this whole issue is to reduce the amount of time it takes from an application to the test occurring. If, as we expect, we can reduce that with the recruitment of 450 driving examiners, the first of which are about to start doing driving tests—and if we can reduce it from the current 21 weeks in England to seven weeks by December—we will have obviated the problem.
National Insurance: Charity Sector
(2 days, 7 hours ago)
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Baroness Sater
To ask His Majesty’s Government what assessment they have made of the impact of the increase in National Insurance contributions on the charity sector.
Baroness Sater (Con)
I beg leave to ask the Question standing in my name on the Order Paper and refer your Lordships to my registered interests.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Baroness Twycross) (Lab)
The Government highly value the charity sector and its positive contribution across society. However, as noble Lords are aware, we have had to take a number of difficult decisions on tax, welfare and spending to fix the public finances, fund public services and restore economic stability. The Government publish tax information and impact notes for tax policy changes, which give a clear explanation of the policy objectives and an assessment of the impacts. This was published on 13 November 2024.
Baroness Sater (Con)
I thank the Minister for her Answer. In an open letter to the Chancellor, co-signed by 7,361 charities, the National Council for Voluntary Organisations gave as its initial estimate of the impact of the proposed increase in the employer national insurance contribution on charities an additional annual bill of £1.4 billion. This will have a devastating impact on the sector and the services it provides. Does the Minister agree that we have to protect our valuable charity sector by exempting it from this damaging national insurance increase in the same way that the Government are protecting the public sector from the impact of these increases?
Baroness Twycross (Lab)
I have not seen the workings out where the sector arrived at the figure, but I am not trying to play down its concerns about the NICs increase. It is a usual approach for the Government to support the public sector with additional employer NICs costs, as was the case with the previous Government’s health and social care levy. The Government have committed to provide support for departments and other public sector employers only. I know that Ministers have met voluntary sector representatives and are aware of the sector’s concerns. There are other measures within the suite of the tax regime—including exemptions from business rates, for example—that are among the most generous of anywhere in the world.
Baroness Grender (LD)
My Lords, can the Minister explain why this Government have decided to tax charities through national insurance contributions and yet to persist at the same time with the Conservative Government’s unfair tax relief to banks, using Rishi Sunak and Jeremy Hunt’s cuts in bank surcharges—an estimated £4 billion a year in effect given away due to cuts in the bank levy since 2016? Why not return those taxes to 2016 levels, stop this tax rise on charities and tax the banks instead?
Baroness Twycross (Lab)
Without wanting to repeat what my noble friend Lord Livermore would have said had he been here, we inherited a £22 billion black hole. I appreciate the sector’s concern, but, regrettably, as part of the Autumn Budget, the Government had to take a number of difficult decisions on tax and welfare spending. I know the Chancellor highlighted this decision as one of the hardest she had to make in respect of the Autumn Budget.
Lord Sikka (Lab)
My Lords, does the Minister agree that the impact of national insurance contributions on the charity sector can be alleviated by levying national insurance on capital gains and dividends?
Baroness Twycross (Lab)
That is a matter for the Chancellor, and I will pass on my noble friend’s suggestion.
Lord Farmer (Con)
My Lords, the state contracts out important family services work in prisons to charities, as they are more trusted by families and by the prisoners they are visiting. However, these contracts are so skimpily financed that increased, unbudgeted NI costs will likely mean many charities are forced to hand them back to the Government. Will additional funds be made available to bridge that shortfall so that agreed work can be delivered without risking charities’ financial integrity?
Baroness Twycross (Lab)
The noble Lord gives a powerful example of the valuable work that charities undertake. It is hugely difficult for this Government to find ways of filling the £22 billion black hole. The Charities Minister has met representatives and we are keen to work with and hear from individual charities where they have concerns, so if the noble Lord has specific examples that he would like to share with me, I ask him to get in touch.
Lord Watts (Lab)
My Lords, has the Minister received an apology from the Opposition for crashing the economy, driving public services to the worst state they have ever been in and for not coming forward with any solutions as to how we can address these problems? They left us to make difficult decisions that we do not want to make, but it is their mess.
Baroness Twycross (Lab)
My noble friend makes an important point. I have not personally received an apology. I would not necessarily expect such an apology to come to me; I would expect it to be made to the nation.
Lord Scriven (LD)
My Lords, in the middle of this political shenanigans going on, the average hospice in this country will be hit by a £200,000 funding gap based on the Government’s national insurance contribution rise. What advice would the Minister give to managers of hospices who are now looking at either laying off staff or reducing services?
Baroness Twycross (Lab)
The noble Lord will be well aware of the Secretary of State for Health’s commitment to hospices, including supporting the hospice sector with a £100 million boost for adult and children’s hospices to ensure they have the best physical environment for care and £26 million to support children and young people’s hospices. I am not playing down how hard it is going to be for organisations to find the additional revenue, but not all organisations will find that their NICs bill increases.
Lord Randall of Uxbridge (Con)
My Lords, I refer to my entry in the register as a trustee of several charities. Can the Minister say what discussions she has had with her Secretary of State about the presumed job losses there will be in the sector and the lack of delivery caused by this increase in national insurance contributions?
Baroness Twycross (Lab)
I think we need not to talk ourselves into a corner on this, where we assume that things are going to be as dire as they might be. In response to the question put to my noble friend Lady Taylor, who is here today, let me say that we would not have made the choice unless we had to, but there is a need to protect small businesses and charities, which is why we have more than doubled the employment allowance to £10,500 and extended it to all eligible employers. The OBR expects about 250,000 employers to gain from the changes and a considerable number to see no change at all, so more than half of all businesses, including charities, will not see the rise that the noble Lord suggests will happen.
Baroness Meacher (CB)
My Lords, having worked with the National Association of Citizens Advice Bureaux some years ago, I am very conscious that most bureaux operate on an absolute shoestring. Will the Government consider exempting these small bureaux and other small charitable organisations from the national insurance rise? Many of them simply will not be able to deal with it and they will go out of business.
Baroness Twycross (Lab)
I hope it is reassuring to the noble Baroness that the smallest charities and organisations should not see a rise in their national insurance contributions. If she has examples of citizens advice bureaux where they think this is not the case, I ask her to let me know. I am hugely aware of and in awe of the work that the citizens advice bureaux do in supporting some of our most vulnerable citizens.
Baroness Neville-Rolfe (Con)
My Lords, the increase in NICs is highly regressive and the very general impact note does not make that clear. It disproportionately affects charities employing those on lower incomes or working part-time and, unfortunately, the employment allowance barely scratches the surface of the problem that has been created. Does the Minister think it is right to target the lower-paid in this way through the NICs changes?
Baroness Twycross (Lab)
My understanding of the NICs change is that it is about employer increases. This Government have not increased the tax paid by workers, including national insurance.
Adult Social Care: Long-term Workforce Plan
(2 days, 7 hours ago)
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Baroness Pitkeathley
To ask His Majesty’s Government what steps they are taking to develop a long-term workforce plan for adult social care, similar to the NHS workforce plan.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, as the social care system in this country is failing, we are therefore launching an independent commission into social care to gain cross-party consensus and lay the foundations for a national care service. The commission will look at how we recruit, retain and recognise the workforce, building on work that is already under way to provide a career structure, to give care professionals greater skills and to legislate for the first ever fair pay agreements.
Baroness Pitkeathley (Lab)
I thank my noble friend the Minister for that response and remind her that, when it comes to social care, time really is of the essence. Does she agree that one of the real problems we face is the great difference in status between those who are employed in the NHS and those who are employed in social care? Could next steps, therefore, including the work of the commission, include looking towards developing a workforce that is much more flexible, so that it can actually work across both disciplines—for example, working with a patient in hospital and following them when they are discharged into social care—for the benefit of patients, users and their families?
Baroness Merron (Lab)
My noble friend is right that it is important that we have a workforce built around the needs of patients, rather than patients having to be worked around the needs of the workforce. I certainly hope and intend that, as we go forward, we will see much more of this flexibility. I share her view that time is of the essence and I also know that my noble friend and your Lordships’ House also understand that it is very important that we get this right.
Lord Scriven (LD)
My Lords, the turnaround rate for social care staff was about 30% last year, so retention is clearly an important issue. However, the Government have not helped the situation since July by cutting £115 million from the adult social care training budget. What will the Government do to mitigate this cut and try to help retention within such a vital service?
Baroness Merron (Lab)
Retention is absolutely crucial. I was looking—as I know the noble Lord also does—at the vacancy rates and they are currently running at some 131,000. However, I was interested to note that they are not actually the best measure of capacity, or lack of it, because those vacancies can reflect new roles and short-term vacancies because of anticipated staff turnover. So I have had to rein myself in when looking at the relevance of vacancy rates.
On retention, there is a whole range of factors. In the immediate, I say to the noble Lord that we are professionalising the workforce by expanding the national career structure and have developed and launched a level 2 adult social care certificate qualification.
Lord Kamall (Con)
My Lords, as the Government and the NHS introduce new workforce patterns to take account of changes, surely they should also take account of advances in technology. Recent years have seen the successful testing of virtual wards in the NHS to treat and monitor patients who can be discharged from hospital but who require further care. They can be monitored in their home, freeing up capacity in hospitals. Given this, what are the Government and NHS doing to extend virtual social care to monitor care for social care patients? It would allow them to remain in their home for longer, where they are more comfortable, and it could be one of the many ways to alleviate workforce shortages in the social care sector.
Baroness Merron (Lab)
I myself have seen some tremendous examples of the use of technology in allowing people to be in the right environment for themselves and their situation. I assure the noble Lord that we are continuing to work to develop medical technology, not just getting it rolled out and applicable but developing new medtech where necessary.
Perhaps I could use this opportunity to make an allied point. We have also published new guidance on safe delegation to care staff, which I hope will also help professionalise the workforce. We are working to support that across the country. That includes, for example, having care staff taking blood pressure. These are simple but obvious measures that I think work for everybody.
Lord Laming (CB)
My Lords, the Minister will realise that the workforce in social care is not as varied as in the National Health Service. However, that is not to underestimate the fact that there are staff working in clients’ homes, day centres, residential units and office-based organisations. Will she ensure that, when the workforce is being considered in social care, it will be considered in the round and not just in a narrow way?
Baroness Merron (Lab)
I can give that assurance to the noble Lord, and I am glad he has identified to your Lordships’ House the wide range of circumstances in which the workforce might be. For the benefit of your Lordships’ House, I should add that, in their manifesto, the Government made a commitment to
“ensure the publication of regular, independent workforce planning, across health and social care”.
We are currently developing advice on the options about how to fulfil this commitment for adult social care, which will take account of the point the noble Lord made.
Lord Turnberg (Lab)
My Lords, one of the major problems is that most care workers are employed by privately owned care homes, both large and small. Many of these employees are on zero-hour contracts—it is a mess. How does one ensure that we have a national workforce plan if we have all these workers in various organisations? We must bring them all together and have a centrally regulated qualification that is nationally recognised. I hope I am not boring my noble friend by asking the same question: when are we going to get a nationally recognised qualification and registration?
Baroness Merron (Lab)
My noble friend is never boring and certainly does not bore this Minister. I very much take the point about the difference between the social care workforce and the NHS workforce, because the majority of the jobs in social care, as my noble friend says, are in the independent sector and the Department of Health and Social Care does not have the levers to ensure a development pipeline. However, this is a challenge for us to meet, not something to turn away from: it is a matter of working across the whole of the workforce, no matter where they are from.
On professionalisation, I agree that we need to enhance skills, because care needs to be of the right quality. I mentioned earlier the development of the care workforce pathway, which is a new career structure, and also that the level 2 adult social care certificate qualification has been confirmed.
Lord Evans of Rainow (Con)
My Lords, will the long-term workforce plan include the voluntary sector and the army of unpaid carers, such as family, friends and neighbours—in other words, care in the community rather than in care homes?
Baroness Merron (Lab)
The workforce plan will be about employed members of staff. On unpaid carers, I am glad to remind your Lordships’ House that, from April, we will be increasing the carer’s allowance weekly earnings limit from £151 to £196, which is the largest increase in the earnings limit since the carer’s allowance was introduced in 1976. I hope that gives some indication of the mode of direction of this Government in respect of unpaid carers.
Lord Palmer of Childs Hill (LD)
My Lords, was the Minister listening to the answers to the previous question on the problems with the charity sector? Does she believe that the restrictions on revenue in the charity sector will have an effect on her department as well?
Baroness Merron (Lab)
I was indeed listening very closely to the questions put to my noble friend, and have been asked them myself on a number of occasions in this House. On national insurance contributions, the Chancellor did take that into account when deciding the funding for the Department of Health and Social Care, and made available up to £3.7 billion of additional funding for social care authorities in 2025-26. In addition to other further uplifts, I want to identify the £86 million uplift in disabled facility grants that will promote independence and allow some 7,800 adaptations to be made to homes in the very near future.
Great British Energy Bill
Monday 13th January 2025
(2 days, 7 hours ago)
Lords ChamberRead Full debate Great British Energy Bill 2024-26 View all Great British Energy Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 43-III Third marshalled list for Committee - (9 Jan 2025)
22:08 - Division on Baroness Williams of Trafford’s Motion - Ayes: 122 / Noes: 120 - Motion agreed.
Lord Offord of Garvel
“(1A) The Secretary of State must give a specific direction to Great British Energy that it must report to the Secretary of State on the progress made by Great British Energy towards the strategic priority of reducing household energy bills by £300 in real terms by 1 January 2030. (1B) A report under subsection (1A) must include a projection of how Great British Energy’s activities are likely to affect consumer energy bills over the following five years. (1C) A report under subsection (1A) must be made within two years of the day on which this Act is passed, and annually thereafter.(1D) The Secretary of State must lay a report made under subsection (1A) before Parliament.”Member's explanatory statement
This amendment would require an annual report to be laid before Parliament on how Great British Energy’s activities are contributing towards taking £300 off consumer energy bills.
Lord Offord of Garvel (Con)
My Lords, I rise to move Amendment 59 and to speak to Amendments 60, 61, 63, 65, 69, 70, 72 and 76 in my name.
Amendment 59 requires an annual report on how Great British Energy’s activities are contributing to reducing consumer household energy bills by £300. This frequently repeated claim, that the purpose of Great British Energy is to save each household £300 on their energy bills, seems conspicuously absent from the legislation, which states that the “objects” of Great British Energy are only to facilitate, encourage and participate in the production of energy,
“the reduction of greenhouse gas emissions … improvements”
in
“energy efficiency, and … measures for ensuring security of … supply”.
It is imperative that the Government be held accountable for their promises. The Secretary of State has reiterated that clean energy will deliver cheaper energy, and this has been repeated in this House, in the other place, on the campaign trail, in videos and on leaflets. It is therefore important to enshrine accountability for that ambition in the Bill that creates the institution of Great British Energy. We must introduce a mechanism by which the Secretary of State and Great British Energy are accountable to households for their pledge to reduce bills through investment in renewables, and for their specific promise to reduce household bills by £300 per household.
Amendment 60 in my name also seeks to introduce a mechanism by which the Secretary of State and Great British Energy are held accountable. Amendment 60 holds the Government to their word by requiring Great British Energy to report to the Secretary of State on the progress made towards creating 650,000 new jobs—another election pledge.
Amendment 61 in my name introduces a specific strategic priority for Great British Energy to develop UK energy supply chains and requires that an annual report be produced on the progress of meeting this strategic priority. It is essential that our transition to net zero does not increase our reliance on foreign states, particularly hostile foreign states. I am sure we can all agree that we want the so-called “clean energy” transition to utilise British industry, whereby offshore wind turbines and solar panels are produced by domestic manufacturing companies and erected by British workers. It is with that in mind that I bring Amendments 61 and 76.
Amendment 61 requires a fixed percentage of materials sourced or purchased as part of any investment made by Great British Energy to be produced in the UK and supplied from UK manufacturers. The transition to net zero presents our country with a great opportunity for investment and job creation; we must ensure that it is domestic companies and the British people who benefit from the increased investment promised by Great British Energy.
We must not outsource our energy transition. Amendment 72 in my name requires Great British Energy to report on the impact it has on imported energy. The Government’s target to achieve clean energy by 2030 must not increase our reliance on imported energy, which risks jeopardising our energy security and exposing British consumers to price spikes. It is already concerning, given that the hike in the windfall tax to 78% is already cutting investment in UK natural resources and oil and gas production, and will make the UK increasingly dependent on imported supply.
The distribution and transmission of electricity is intrinsic to the production of clean energy as set out in Clause 3. It is therefore critical that Great British Energy should take all reasonable steps to ensure that access to the national grid is ready for any energy infrastructure invested in by Great British Energy, and Amendment 65 in my name works to do just that.
The “Great Grid Upgrade” is without doubt a necessary component of our journey to net zero by 2050. Currently, new energy infrastructure—new wind turbines and new solar farms—have a significant wait time for grid connection. That is why the previous Government commissioned the Winser review, setting out recommendations on how to reduce this timeframe. The previous Government accepted advice on all areas—all 43 recommendations—to ensure that we could continue the work to drive down construction and connection times.
Despite the work that we on these Benches initiated in government by accepting these recommendations, the timeframe for obtaining grid connections for a new project can be as long as 10 years. In fact, a project without grid connectivity today might not come online until the mid-2030s, well beyond the Government’s ambitious goal of grid decarbonisation by 2030. It is therefore essential that the development of the national grid coincide with the development of renewable energy production.
Amendments 69 and 70, in my name, require GBE to report to the Secretary of State on the impact of each investment on carbon emissions and on the progress made by GBE towards reducing those emissions. I am grateful to my noble friends Lord Petitgas and Lord Trenchard, whose Amendment 80 would require Great British Energy to produce a quarterly unaudited and an annual audited report, including on the rate of returns for and the carbon emissions resulting from each investment. I support my noble friends’ amendment, which neatly covers both emissions resulting from, and the rate of return of, each investment. I expect that the latter will be debated thoroughly in the following group.
Supposedly, Great British Energy is to be established to drive the Government’s clean energy by 2030 goal and net-zero target, yet the Bill makes no provision for reporting on the impact of each investment on carbon emissions, which is critical if the Government are to achieve that pledge. Amendments 69 and 70 in my name, and Amendment 80 in my noble friend Lord Petitgas’s name, seek to rectify that, as does Amendment 85A in my noble friend Lord Hamilton of Epsom’s name, which I wholeheartedly support.
Finally, I return to the strategic priorities of Great British Energy as set out under Clause 5. As I have discussed previously, it is critical that we have sufficient oversight of and reporting measures on the financial assistance provided to Great British Energy. In that vein, Amendment 63 requires Great British Energy to report on the projected cost of fulfilling all its strategic priorities.
I trust that the Minister has listened to and carefully considered the array of issues raised in the amendments in my name and in those in my noble friends’. We must not lose sight of the sweeping powers that the Bill provides to the Secretary of State in issuing Great British Energy with directions over which Parliament will have no oversight. We must give due consideration to the purpose and impact of each direction. I beg to move.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, Amendment 77 in my name
“would require … 75 per cent of all materials purchased as part of an investment by Great British Energy”
to be produced in the UK. I will speak only briefly, as my noble friend Lord Offord of Garvel’s Amendment 61, for which I thank him, similarly requires a fixed percentage of materials sourced or purchased as part of any investment made by Great British Energy to be produced in the UK and supplied by UK manufacturers. However, I will make some additional points.
It is essential that the race to clean energy by 2030 and net zero by 2050 benefit British industry. As my noble friend Lord Offord explained, we must not outsource our energy transition. I draw attention to the warning from the former head of MI6 that the courting of Chinese investment risks handing power to Beijing. Up to 40% of solar panels in Britain are produced by companies linked to forced Uighur labour in eastern China. Furthermore, Chinese businesses have funded or provided parts for at least 14 of the 15 offshore wind projects in, or about to be in, operation. Firms owned by the Chinese Government have large stakes in three projects, together producing the energy for 2 million homes. While the Government’s energy agenda is overly ambitious, it could benefit the domestic manufacturing industry if we look to prioritise British industry over that of foreign states.
I am sure that the Government will have no hesitation in supporting my amendment, considering that the Secretary of State has repeatedly said that Great British Energy will deliver jobs for the British people. Can the Minister tell the Committee what impact Great British Energy will have on British industry? Will he confirm that the Government’s clean energy targets will not increase our reliance on foreign supply chains?
Viscount Trenchard (Con)
My Lords, I declare my nuclear power-related interests, as stated in the register. I support my noble friend Lord Offord of Garvel, who has moved Amendment 59 which, together with other amendments in this group, seeks to align the objectives of GBE with claims made by the Government before the general election as to what GBE would achieve for consumers.
I think it is fair to say that the pledge to cut consumers’ bills by £300 per household was a specific promise, and it was repeated often. I understand that the £300 pledge was made on the back of a report by the energy think tank Ember, but that it was based on the energy price cap that applied in 2023. Is it not also based on the less ambitious plan for transition to net zero, to which the previous Government had committed? However, the previous Government had not planned on setting up GBE. Will the Minister please explain where the savings figure of £300 came from, and whether the Government still support it? In that case, is it not right that it should be made a specific objective of GBE?
Will the Minister also tell the Committee whether my noble friend Lord Frost was correct in his warning, in his debate on 14 November, that NESO’s figures predicting the cost of electricity generated from offshore wind were rather optimistic at £44 per megawatt hour? My noble friend told your Lordships that recent payments to offshore wind farms under contracts for difference suggest that the real cost may be three times as much, at some £150 per megawatt hour. If that is so, NESO’s report on the Government’s plan to decarbonise the grid by 2030 may need some adjustment.
I still do not understand why the Government choose to subsidise only wind and solar schemes rather than nuclear. If consumers are required to subsidise only intermittent sources of energy, it follows that the total energy mix will be disproportionately dependent on intermittent sources. We need much more nuclear, which should not be seen as an add-on, to ensure that we can keep the lights on when the wind does not blow and the sun does not shine. It should be seen as a core and important part of our firm baseload energy system.
Indeed, we were once global leaders in nuclear power, but we now have a severe shortage of skilled workers with experience in the sector. Those we have are relatively old, and we need to train many more younger workers in nuclear technologies, and rebuild the supply chain. I am talking not just of gigawatt scale large plants like Hinkley Point C and Sizewell C, but small SMRs and AMRs which are flexible and very cost effective. That is why I have added my name to Amendment 61, also in the name of my noble friend Lord Offord. We must ensure that we benefit from the so-called clean energy transition, which is particularly relevant in the case of nuclear technologies. It is right that GBE, as a publicly owned company, should report annually to the Secretary of State on progress in re-establishing supply chains as a strategic priority.
There is not much about nuclear in the Government’s new publication Clean Power 2030 Action Plan, published on 13 December. It refers to GBE’s founding statement published in July. That document explains GBE’s five functions, of which building supply chains in “every corner of the UK” is listed fourth out of five, in two short paragraphs. “Working with GBN” is listed last, in a short single paragraph.
I have also added my name in support of Amendment 63. It is essential that GBE must understand what fulfilling its strategic priorities will cost—otherwise, how can the Secretary of State exercise his powers of direction in a responsible manner? Similarly, Amendment 65 would ensure that GBE must not waste money by investing in schemes that are too far from a grid connection or have no cost-effective access to the grid and no realistic prospect of acquiring one in a timely manner.
I have also added my name to Amendments 69 and 70 in the name of my noble friend, who has eloquently explained to your Lordships the purposes of these amendments: namely, to require GBE to consider carbon emissions from each investment and to do the same in respect of its whole investment portfolio, reporting to Parliament annually. We may not agree on the absolute prioritisation, regardless of cost and damage to our industrial base, of the elimination of all fossil fuels from our energy generation system, but we can all agree that it is a good thing that public money should be spent in such a way that increases clean power at the expense of less clean power—that is, as long as the benefits gained justify the cost. The Committee will have a chance to debate this matter in the next group.
Among the investments that GBE will make, I very much hope there will be some investments in nuclear power schemes, particularly in SMR and AMR technologies. As the Minister told your Lordships in his briefing before Second Reading, he does not expect GBE to make investments in nuclear, at least initially. I think this is because the Government think that it is not possible to deploy any of these new technologies before the 2030 target for clean power. The 13-page press release accompanying the release of the Clean Power 2030 Action Plan contains “nuclear” only once, explaining that the Government’s clean power mission is the solution to this crisis,
“by sprinting to clean, homegrown energy, including renewables and nuclear”.
But the action plan’s sparse references to nuclear comprise only a single reference to the GBN-led SMR programme, and a reference to the extension to the life of the four existing AGR reactors as a stopgap measure. I cannot find any evidence that the authors of the action plan see nuclear as playing much of a role in sprinting to clean energy.
I have also put my name to Amendment 72, which requires an annual report by GBE of its impact on the amount of imported energy. In preparing for this debate on Saturday morning, I took a look at the National Grid’s energy dashboard, which revealed at 10.15 am that we were drawing 14.7% of our electricity from imports, which is too high. Indeed, the name of the Minister’s own department emphasises the importance of energy security. The winter sun was shining brightly, but solar contributed only 4.3% and wind a mere 8.8%, less than the 11.4% generated by our existing, ageing nuclear power stations. Noble Lords will appreciate that the electricity grid accounts for around 20% of total energy consumption, which means that wind power on Saturday morning was supplying around 1.76% of the country’s total energy requirement, and solar less than 1%, even on a sunny day. Overreliance on intermittent energy sources does not help energy security—quite the reverse.
I have added my name to Amendment 80, tabled by my noble friend Lord Petitgas. Of course, it must be right that GBE should be required to produce quarterly accounts and audited accounts annually. As far as the requirements for reports on carbon emissions are concerned, the amendment duplicates Amendments 69 and 70. If the Minister can assure the Committee that the Government will bring their own amendments to satisfy these requirements, I am sure that such duplication can be avoided.
Lastly, I support Amendment 85A in the name of my noble friend Lord Hamilton, which seeks to achieve substantially the same result. Amendment 80 is also necessary to ensure proper scrutiny of GBE’s decision-making process with regard to its investments. Will the Minister explain his view on GBE’s role as a potential investor in joint public and private partnerships?
Lord Berkeley (Lab)
My Lords, Amendment 74 in this group is in my name. It seeks to ensure, in the creation of GB Energy and the delivery of its objectives, a specific consideration of decarbonisation challenges faced by the 1.7 million households in the UK that are not connected to the gas grid—I declare an interest in that I am one. An awful lot of other people—including many noble Lords opposite, I am sure—are not connected to gas and will have to use electric. The amendment provides for direction to be given to GB Energy to review the decarbonisation challenges that these households face but also, importantly, to consider the solutions that exist to help them do so practically and affordably. They include the value of adopting renewable liquid fuels.
Taking into account the recommendations of GB Energy, the amendment would also require the Secretary of State to implement existing measures within the Energy Act 2023 that would help off-grid households—namely, to hold a consultation on the benefits of introducing a renewable liquid heating fuel obligation or RLHFO. This measure secured all-party support in the last Parliament but has not yet been implemented. I hope that my noble friend will look at this again.
To go into a bit more detail, the challenges facing off-grid households, which are mostly in the countryside, are their existing energy efficiency, location, age and construction. As many noble Lords will understand, this means that these households will face substantial challenges to decarbonise using technology based on electrification. The research undertaken by the department and the Scottish Government shows that installing a heat pump in such a house, including full retrospective costs and the cost of servicing, will cost off-grid homes on average over £21,000, which is unaffordable for many.
I am concerned that there will also be an impact on the local grid. We tend to forget about the local grid. If everything is to be heated by electricity, placing unmanageable pressures on the grid, we need to have a good grid. In the National Grid’s Future Energy Scenarios report, the scenario “Leading the Way” has estimated that to achieve clean power by 2030, 1 million properties in the UK will require a solution other than electric heating, due to the high cost of local networks.
There are probably several solutions, but the one I want to describe briefly is that renewable liquid fuel can make decarbonisation affordable and practical for off-grid consumers, significantly reducing emissions and delivering on the carbon budget. It will help deliver clean power by 2030 and the commitment that no one who does not want to will be forced to remove a boiler.
In Cornwall, where I live, a fuel distributor has successfully created the country’s first renewable liquid fuel village, in the coastal village of Kehelland, converting homes, businesses and the local church and schools to a fuel called HVO. It has been a fantastic success in helping residents to reduce their carbon emissions and allowing them to play their part.
I appreciate that my noble friend’s ministerial colleague in the other place gave evidence on this issue the other week, but she referred to issues of supply and cost to consumers. I was concerned to hear that the department may be delaying the Energy Act consultation. I hope that is not the case, because this consultation needs to go ahead. I know that the industries that support off-grid households found that she said something rather surprising, given that there is clear evidence that should reassure my noble friend and his colleagues.
Lord Petitgas (Con)
My Lords, I rise to discuss Amendment 80. It proposes that GBE be required to produce both quarterly unaudited and annual audited reports. These should disclose the rate of returns for each investment and the carbon emissions resulting from each investment. This amendment is a matter not only of transparency but of accountability. It will ensure that taxpayers are fully informed about how their money is being spent.
Let me address first the rationale behind requiring disclosure of carbon emissions. This is standard practice. Indeed, the Secretary of State has compared GBE to Ørsted in Denmark; Octopus in the UK is another possible comparison. Both companies measure scope 1, 2 and 3 emissions, following certain protocols. These align with the Task Force on Climate-Related Financial Disclosures and EU taxonomy. Will the Minister confirm whether GBE will follow the same practice and taxonomy?
The principle behind the amendment in my name on financial returns is abundantly clear: if the Government are going to use public funds to invest in energy projects, they must be duty-bound to report the results of those investments. This proposal is an essential part of providing insight and knowledge of the operation of GBE. It is a principle of good governance to avoid taxpayers writing blank checks; it aligns with the notion that taxpayers should know not only how their money is being spent but how it is being invested and managed to ensure it delivers adequate returns.
I remind the Committee that GBE will be not an operating company but an investing company owning minority stakes in a large number of projects of different sizes. This will be complex, and the only way to track and measure performance will be to look at individual investment returns. I also remind the Committee that there is no investment committee yet set up and no reference—it looks as if the Secretary of State, ultimately, is in charge of making decisions on these investments. I have never seen this in an investment company. No private equity firm would be run like this.
Operating companies produce classic annual reports and accounts, but GBE will be more akin to a permanent capital venture fund. Therefore, its annual report and accounts really should be supplemented by disclosure of the rates of return on its investments.
I will address a comment made by the Secretary of State during the Bill’s Second Reading in the other place. He made an interesting argument about the potential of state-owned companies. In his own words:
“State ownership is the right idea for creating wealth for Britain”,
as GBE’s investments
“will help generate return for the taxpayer”.—[Official Report, Commons, 5/9/24; col. 456.]
GBE, he argued, would not only contribute to energy security but create jobs and foster economic growth. While I am encouraged by the potential for GBE to generate wealth and drive the economic growth that we need badly, I will ask the Minister to clarify a few points in relation to this statement.
First, if GBE is indeed intended to generate returns for the taxpayer, can the Minister confirm the expected rate of return on investment for these projects? In particular, will these returns be sufficient to justify the use of £8.3 billion of taxpayers’ money? To be clear, the £8.3 billion of capital for GBE will be borrowed by the Government. I do not need to tell your Lordships this as it is everywhere, but the long-term gilt yield stands now sadly at 5.5%—up more than 50 bps in the last three weeks. Infrastructure returns typically are above 10% and venture capital is above 15%. Therefore, the benchmark that GBE should be aiming at must be in the range of 10% to 15%.
We all know that we get what we measure. I worried when I read the evidence given by GBE’s chairman-elect, Jürgen Maier, in the Public Bill Committee debate in the other House on 8 October, when he said that GBE’s success will ultimately be measured by the number of projects it is able to finance and the quantum of energy it is able to deliver to the grid. So are we measuring returns or the number of projects? Therefore, it is critical that we understand the financial viability of these investments and ensure that they will not end up being a burden on the public purse.
Secondly, there is significant concern about the risk of GBE becoming a dumping ground for less profitable or riskier energy projects, especially those that private sector companies are unwilling to back. I should add that there was no shortage of capital for net zero when I was in No. 10, so I have to assume that GBE will back transactions that are perhaps less profitable. This concern was raised in Committee and by my right honourable friend Claire Coutinho, who questioned whether the Government’s aim to derisk projects could result in throwing taxpayers’ money into unprofitable ventures.
Representatives of energy trade associations such as RenewableUK and Energy UK have also raised questions. In particular, Adam Berman from Energy UK identified what he described as two competing priorities for GBE: making profitable investment and addressing problems in the energy system arising from market failures. He said that the company might struggle to resolve this potential conflict if it was not addressed in the Bill. Can the Minister provide assurances that GBE will not be disproportionately directed towards these high-risk, low-return projects, which could undermine the Government’s goal of creating wealth for Britain?
The Secretary of State and the honourable Member for Rutherglen, Michael Shanks, have cited Ørsted as a model and precedent for GBE. Ørsted is not only an operating company—it is the main energy entity in Denmark—but is 49% owned by the stock market. Its equity is researched by 20 investment banks, creating public and financial scrutiny each quarter. That is certainly a very different picture from GBE. GBE will invest in illiquid, minority positions, yet will be a large operation, at £8.3 billion of capital. Incidentally, this is about half the market value of Ørsted. This compels us to scrutinise it seriously and to ensure disciplined governance and oversight.
In summary, it is crucial for the Minister to provide further clarification on the financial viability of the investments to be made by GBE, the risks involved, and how the Government will ensure that taxpayers’ money is used wisely. Transparency and accountability, as we have discussed through Amendment 80, will be key to answering these questions and demonstrating that GBE is indeed acting in the best interests of the British taxpayer.
Lord Alton of Liverpool (CB)
My Lords, I support the remarks made by the noble Lord, Lord Offord of Garvel, and the noble Baroness, Lady Bloomfield, and Amendments 60 and 61, which they spoke to, particularly what the noble Lord said about reducing our dependency on foreign states. I will not repeat the remarks I made on day one in Committee, or indeed during our debate on China on 20 December, but I will add two or three germane points to what has been said to the Committee this afternoon.
Since we had our debate in Committee, I have sent the Minister a report by Ignites Asia that identifies funds run by global managers who had at least £1.4 billion linked to 14 solar and EV companies using slave labour in Xinjiang—a point referred to by the noble Baroness, Lady Bloomfield. These amendments are primarily about accountability; Parliament has a right to understand on a regular annual basis, as the noble Lord said, precisely how what will become the Great British Energy Act is working out in practice. It has a right to know what we are doing about supply chains and around the objective to create, as Amendment 60 mentions, some 650,000 jobs. How are we getting on with those things and how are we doing on the other side of the coin?
Already we are seeing the loss of jobs—in companies such as Vauxhall, for instance—not because of fair competition or trade, which most of us in this House support, but because of unfair trade that is based on massive subsidies for companies operating in China that use slave labour. We will never be able to compete on fair terms with companies that do that, but we aid and abet those practices by simply turning a blind eye to what is happening. As well as looking at the jobs we might gain, let us look at the jobs we are likely to lose.
We should think seriously about the supply chain question. The amendment I tabled for day one did not come out of thin air. I am glad to say it had been promoted as an idea in earlier debates in another place by Sarah Champion, chair of the House of Commons International Development Select Committee. That shows that it is a bipartisan and bicameral concern. People from all parties and none have anxieties about the kind of things that can go on in our supply chains and the lack of resilience and increase in dependency implicit in this. I remind your Lordships of the excellent report produced in 2023 by the Joint Committee on Intelligence and Security, chaired by Sir Julian Lewis MP, which reminded us of the massive security dangers we have to address as a result of the threat that the People’s Republic of China undoubtedly poses to us.
We should learn the lessons of the pandemic. We bought billions of PPE items with millions and millions of pounds of public money—taxpayers’ money—when many of those products could have been made in this country by British workers. We have to be a lot more careful than we have been so far. The noble Lord, Lord Offord of Garvel, is right to point us in his amendment towards justifying the case made by the Government in favour of the Bill.
I tabled a Written Question to the Minister that I hope he will be able to answer, if not today during our oral exchanges then at least in writing before Report, about how many solar panels we intend to buy to fulfil the ambitions of the Bill: how many, and at what cost? What are the alternatives? Can they be made elsewhere? Only this morning I heard from a company that operates out of South Africa that says it can produce solar panels without any of the risks involved in using slave labour from Xinjiang. There must be others—we should be doing more to look for those alternatives.
We have to take the issue of genocide more seriously than we have, not least because of what we would be placing on the shoulders of those companies that will be encouraged through this legislation to buy these products. They can be prosecuted under the 2015 legislation that was promoted in an incredibly enlightened way by the then Home Secretary, the noble Baroness, Lady May, who we referred to in our Question Time exchanges earlier today. The Joint Committee on Human Rights is about to embark on a new inquiry looking at supply chain transparency and the effects on modern day slavery. I hope that the noble Baroness might be one of those who comes to give evidence.
We have to take this issue more seriously. There was a good example of pre-legislative scrutiny when both Houses looked at this, amendments were made and there was a coming together; that should happen again this time. The House of Commons declared that a genocide is under way in Xinjiang. This is the crime above all crimes. I do not need to convince the Minister of this—I know that—but it seems that I have to convince the Government. Whenever Mr Miliband is questioned on this, he simply says, “We care about human rights”. We all care about human rights, but this is the crime above all crimes. The 1948 convention on the crime of genocide requires us to prevent, to protect and to punish. We do not do any of those things very well.
Lord Hamilton of Epsom (Con)
My Lords, it is always a great pleasure to follow the noble Lord, Lord Alton. We have to admire his doggedness in bringing up the question of slave labour in China. As we are totally dependent on so many different exports from China to this country, it is something that we have to bear in mind all the time. I wish him the best with his endeavours, although I do not hold out an awful lot of hope, as the problem is that China produces everything so much cheaper than anywhere else.
I support my noble friend Lord Petitgas in his amendment. He has outlined the real problem of investing billions—let us face it, it is billions—of pounds of taxpayers’ money in energy projects. The problem is that the only ones that will become available for the taxpayer, and for the Minister to make his decisions upon, will be projects rejected by the private sector.
The fact is that the people who invest in renewable energy are not the people who particularly believe in renewable energy; they believe in making money. The whole technique when putting up a wind farm or a wind turbine is that you test the amount of wind, look at the feed-in tariff from the consumer, do your cash-flow adjustments from there, borrow the money and put up the turbine.
My Amendment 85A is to do with the whole question of emissions, about which I am very worried. My amendment says that there should be an annual report,
“which must include information on carbon emissions resulting from each of”
Great British Energy’s
“investments in renewable energy technology”.
We have reached the point where we have to look much more closely at the whole question of renewable energy. People think that, if you put up a wind turbine and the wind blows, that is all free, and that you do not create any carbon emissions in putting up a wind turbine. I am afraid that is not true: you do. You create a tremendous carbon footprint when you create the steel. I gather we cannot make it in this country any more, so we have to import it, and there is an increase in carbon emissions when bringing it in. At the end of the day, a serious carbon imprint is involved in putting up a wind turbine. The great advantage of a wind turbine is that, once you have got it up, from thereon in the chances of creating a carbon imprint are rather less.
The same applies to solar panels. As we have discussed, solar panels are highly likely to be manufactured in China, and they have to be transported here. The Chinese are creating massive carbon emissions with their industry, which we basically exported to them. When we talk about carbon emissions, we are talking about global emissions; we are not talking about individual emissions here.
My real problem is with growing crops and trees which then get burned. Because these are a renewable resource, this is then taken as a renewable source of energy. I have a slight problem with that. Take the very extreme example of oilseed rape, which is grown in this country. When you come to think of it, you create a carbon imprint when the tractor tills the field and sows the crop. I am not an expert in the growing of oilseed rape, but I suspect it needs spraying and fertilising and so forth. All of this adds to the carbon impact. The seeds that come off oilseed rape are then compressed to produce a form of vegetable oil, which is then refined. All of this has a carbon footprint. Eventually, it is burned. I gather that it is proposed to be used for aircraft as a substitute for aviation fuel. When you burn aviation fuel, you are creating a carbon imprint.
This does not affect national Governments quite so much because the whole business of the carbon imprint of aviation is not counted against the targets for a particular country. The problem of CO2, as we know, is a global problem. If we want to clean up the planet generally, we cannot ignore aviation.
Many of us also have quite serious worries about Drax power station. For a long time, it was importing the offcuts of North America’s timber industry to burn at the power station. There is obviously a serious carbon imprint involved in cutting down trees, stripping the unwanted bits off them and loading that on to ships, which bring it over the Atlantic to this country. Have we really taken into account the CO2 emissions this whole process at Drax power station creates? It is rumoured that Drax has moved on to saying that it can take all this bark and stuff and turn it into aviation fuel. That will have the same problems as using oilseed rape. There is a massive carbon imprint all the way through.
We are trying to talk about reducing the carbon imprint, and it strikes me that with some forms of renewables we are increasing the carbon imprint unnecessarily. Surely what we should be doing is looking at hydrogen and seeing if we can get that down to a more manageable cost. That could be used in its compressed form in aircraft, heavy vehicles and so forth. The great advantage of hydrogen is that, when it is burned, it produces no carbon. I worry that, although we think we are doing something to help the planet, we are not. If we take that extreme example and go on looking for aviation fuel from oilseed rape in perpetuity, then, in the name of some renewable crop, we will be having very large carbon emissions right the way through the process, in perpetuity.
We have to look at the whole question of renewable energy and what form it takes. We need an audit which tells us how much carbon imprint is being made by producing fuel in this way, whichever fuel it is, so that we can make a more objective judgment about whether this is helping the climate and helping to meet CO2 and net-zero targets, or doing the precise opposite.
Lord Bruce of Bennachie (LD)
My Lords, I rise briefly to speak to Amendment 60, and also to Amendment 74, tabled by the noble Lord, Lord Berkeley. Amendment 60 relates to the Government’s projection of 650,000 jobs. This is to be achieved over five years, when we achieve net zero. It is a very ambitious target. I hope it can be achieved, but there are questions related to where those jobs will come from, whether we have the skills and whether jobs will be lost in the process as well.
I make no secret of the fact that I live in the north-east of Scotland and I represented the constituency of Gordon for 32 years. I have monitored the oil and gas industry from its very early days in the North Sea right through to the present, and the massive contribution it has made to the UK economy throughout that time—not just in terms of money but in terms of technology, the balance of payments and skills. I accept that the Government have said that we will continue to operate our North Sea oil and gas fields and that we will continue to have oil and gas in the mix, to and through net zero.
My basic concern on jobs is that we do not expand jobs in renewables at the expense of the naturally declining jobs in oil and gas: that we do not accelerate that process, especially as we do not quite know how fast we can achieve this creation of jobs. We do know right now that we have at least 200,000 people employed directly in the oil and gas industry, and many more in the supply chain, which, of course, is also part of the supply chain for the renewables sector. Not all of the skills are directly transferable, but many of them are. Provided that the transition is orderly, just and sensible, it will be possible for the decline in the oil and gas industry to be orderly while we expand the renewables sector and hopefully deliver the jobs that the Government are looking for.
I was surprised that, when I suggested that we were going to have oil and gas in the mix to and through net zero—which all projections from all sources say we will—there were people who thought we should just shut down our oil and gas now. There are people who say that. When I asked, “Why would you do that?”, I was told, “Well, you can set an example to the world. Yes, we will need oil and gas, but plenty of other people produce it, so we will just import it”. So we close down our own industry and then import it from other people—further away, with a higher carbon footprint and less efficient—so undermining UK technology and expertise. So my plea is: let us have the jobs, but not at the expense of existing jobs. Let us have an orderly transition that maximises them both.
I was at an awards ceremony for the industry in Aberdeen last month, and what impressed me was the wonderful array of bright, young people engaged in the sector who were very committed to the transition to net zero. But they were equally aware that oil and gas were part of the transition and that many of the supply-chain companies were now investing in technology relevant to the industry, including subsea connections, cabling and electronics. A lot of the things that have been developed in the North Sea are transferable to oil and gas, and that is a welcome factor; but let us not accelerate the loss of jobs while we build the new ones up. That is the simple point that I wish to make.
Turning to the amendment of the noble Lord, Lord Berkeley, I am in the same situation as him, so I declare an interest. I live in a village in Aberdeenshire where we do not have gas. In the dying days of the nationalised British Gas, I was involved in a fairly high-profile argument with the then chair of British Gas, Sir Denis Rooke, making the point that he and his company, in the run-up to privatisation, were not interested in extending the gas network. I had some success: I sort of shamed him into it and managed to get some substantial extensions in the dying days of British Gas in my own constituency. I was also right that, once British Gas was privatised, there was no more extension of the gas network beyond what already existed. Those were the days when everybody wanted gas, and gas was the option.
For many parts of the country, however, gas is not an option and the main alternative is oil. The House of Commons produced an interesting report at the end of last year, which I had a look at. I point out to the noble Lord, Lord Berkeley, that it says that the number of households off the gas grid is 4.5 million—a higher figure than his. I do not know which is right, but it is quite a lot.
It then did an analysis of the proportion of households that use oil for central heating. In England and Wales, it was 3.5% in total; in Scotland, it was 5.1%; and, in Northern Ireland, it was 49.5%. I suggest that that is an issue. The other point—and, again, I thank the House of Commons Library for this—is that it gave a constituency analysis. The overall figure does not quite focus on some of the communities that are much more dependent—ones that I know well—so I picked out three constituencies to give the House an example. The highest was Caithness and Sutherland, where 31% of households have oil central heating. The second-highest was my former constituency of Gordon and Buchan, at 26%, while the neighbouring constituency of West Aberdeenshire and Kincardine was 22%.
Lord Howell of Guildford (Con)
My Lords, I declare an interest, as in the register, in connection with energy-related companies. I will raise two questions on Amendments 59 and 65 in this bunch of amendments before the Minister starts to wind up—if that is what is coming next. I know that Amendment 59 is about household energy bills, but I start by observing that, as far as industrial energy bills are concerned, it is a disgrace—frankly, it was not much better under the previous Government—that, according to government figures, we now have some of the most expensive electricity prices in the entire world. That cannot be right. It obviously undermines our competitive power and economic growth. Obviously, therefore, it is holding back the whole investment in the energy transition and it is a classic case of shooting ourselves in both feet. That is the electricity scene.
As for household energy bills, there is an irony here, because the truth, as I shall try to demonstrate in a few words, is that the best chance of keeping down domestic energy bills, with all the other circumstances, many of which are completely unpredictable, is not through anything that Great British Energy is empowered to do at present, as the Bill stands. It lies in cutting down the colossal costs of having standby facilities in standby production from some combined cycle gas generation, but even more in having some cheaper forms of nuclear development than those we have had in the past—or indeed in the present, because all our current nuclear developments are wildly over cost.
The key lies in getting private money into shorter-term, smaller and more flexible, nuclear modules. That is what we should be doing; it is what many other countries doing, and it will be the way in which to greatly reduce the overall cost of having a reliable energy supply for a modern industrial nation, which includes facilities for 3,000 hours a year when the wind does not blow. Today is probably one of them, as my noble friend Lord Trenchard was arguing. A strong, intermittent standby system has to be there, and we know it is very expensive, by definition, if it is not being used all the time. We cannot sell electricity all the time—on the contrary, in many cases, as we can read in the newspapers today and yesterday, colossal sums of taxpayers’ and consumers’ money have to be paid in order to not produce electricity. There is a fatal difficulty here that we have to resolve.
The point is that, if we want costs to be held down, the way to do it is by making sure that private money can be mobilised, which it can for smaller nuclear reactors, whereas we all know that private money does not wish to touch with a barge pole a so-called replica of the gigantic Hinkley C EPR design, which is a difficult design and bound, although it calls itself a replica, to be miles over cost and cost-forming of the Government at Sizewell C as well. That is a way to ensure that costs and energy bills stay up, and that is the opposite of what we are trying to achieve.
The simple answer to this bit of the excellent Amendment 59, which I totally support, is that, if we can now begin to get a grip on the whole nuclear side and bring GBN together with Great British Energy and work in a serious approach to managing our, at present, wildly costly and unmanageable energy supply, we will begin to get a chance of getting that £300 off bills. Personally, I think it going to be very hard to achieve, but that is the one way it can be done—by getting private money in, because the Government have not got any money and have to go to the consumer, the taxpayer and the borough to get the money. We all know what that is costing, and all of it ends up in charges on taxpayers and working people and their hard-earned earnings.
That has to be answered, if this is going to stand. I hope that the Minister will go to his colleagues in the department, and maybe in the Treasury as well, if he can get any response from them, and point out that this just does not make sense. It does not fulfil the aims that the Government want, the Opposition want and all parties want. As the noble Lord, Lord Alton, and others have said, this is not a bipartisan issue, at least in this House, because we all know on both sides of this House that this does not make sense—and this viewpoint should be passed on to the Secretary of State politely within the department, so he can modify his approach, particularly on the nuclear side, where I worry a great deal that we are on the wrong track. We are heading to the wrong track, while others are racing ahead. That is all I wanted to say on Amendment 59.
Amendment 65 is interesting, because it is really about the level of demand that the National Grid will be able to meet. Many people—again, bipartisan—are worried that the estimates that seem to be in the mind of the department are miles too low. The figure of 200 gigawatts is being pushed around—others say 300 gigawatts. Today, there is something more in the newspapers that should make the Government think again on this one. We are told that we are going to have colossal data centres. Indeed, it says in one newspaper that we will have one of the world’s biggest data centres to move into the age of AI, modern innovation and investment and the kind of society and industrial and consumer pattern that will have in the second half of the present century. That is what we must be doing. Bit data centres are hugely expensive in energy demand; they drink up energy in colossal volumes—and that is on top of the hope or ambition of the Government for decarbonised, clean energy by 2030, or maybe 2035. Maybe it is to be 95%; there are all sorts of modifications coming out all the time. On top of that, I think that this demand will push up any reasonable estimate from 300 gigawatts to 500 or 600 gigawatts. We are moving into a hyper-electric, super-electric age and data centres will add vast amounts of demand to the system.
There are 40 million cars and trucks in this country still running on petrol; they will need to move over to EV as well. The chances of having a National Grid system fully invested to meet that kind of demand on even the 2050 timescale, let alone 2030 or 2035, is very small indeed. Does the Minister accept that, as we move into this all-electric age, there will be considerable increases in demand and that, if there is going to be effective supply for them, we must have the conversation and, what is more, the detailed explanations implied in Amendment 65. GBE should be able to go to the National Grid and say, “Can you link us up?”. The many industrial firms thinking of going over from gas-fired furnaces to electric furnaces should be able to go to the National Grid and say, “Can you link us up?” What answer are they going to get? Are they going to be told, “Come back in 15 years”, or are they going to be told, that it is all right and that we are investing to meet these colossal demands for increased electricity from every kind of energy transition, the related digital underpinning and the necessary data centre operations, which we now know we have to have in order to compete in the 21st century? Is that realised? That is my question on Amendment 65. Many other excellent comments have been made, but those are the two on which I would greatly value an answer from the Minister.
Lord Cameron of Dillington (CB)
My Lords, I support the last speaker on Amendment 65. When I saw Amendment 65 in the name of the noble Lord, Lord Offord, on the readiness of the National Grid for this brave new world, I realised that this is probably the key amendment to the Bill in terms of the success of Great British Energy. I am not sure that putting it into the Bill will actually make a ha’porth of difference, but there is no doubt that the issue is going to decide whether GBE is a success or not.
We need to quadruple, if not more, the size of the National Grid network, both to get power to all those new electric cars and heat pumps, et cetera, and to take power from all those new wind farms, solar roofs, et cetera, but with all the objections to the wires and pylons, I cannot see the National Grid delivering the necessary increase in this network any time soon. So, as the amendment states, GBE can really invest only in projects that have a guaranteed connection, however worthy they may be in other aspects. If no connection is likely to be in place by the time of the completion of the project, then GBE should probably save its money.
Lord Roborough (Con)
My Lords, I refer the Committee to my register of interests, including in solar and wind energy development and ownership, as well as as an investor in energy-related equities and as a farmer and lands manager.
I shall speak in particular to Amendment 80 in the name of my noble friend Lord Petitgas, but also support Amendments 85A in the name of my noble friend Lord Hamilton of Epsom and the amendments listed in the name of my noble friend Lord Offord of Garvel. These amendments put detail to the questions I posed to the Government, in my response to His Majesty’s gracious Address, regarding financial reporting and accountability.
Great British Energy is tasked with investing taxpayers’ money to allow taxpayers to benefit from the financial returns from the energy transition, as well as to accelerate and stimulate that transition. It must be right, as with any publicly listed company, that the company is accountable to its owners for its performance. That requires high-quality financial reporting. Listed companies report unaudited financials quarterly and audited annual reports—which also include carbon emissions accountability, as my noble friend Lord Petitgas pointed out. The first effect of Amendment 80 would be to bring GB Energy in line with those requirements.
The second effect would be to introduce a more granular analysis of the returns from each investment. This is usual with investment trusts and common in private equity. I see no reason why GB Energy should not report in equally great detail. Fully commercial organisations may choose not to do so to protect commercial confidentiality. However, in GB Energy’s case, it must be desirable to highlight where returns are the greatest in order to direct more private sector capital into those areas and help achieve the primary purposes.
It is also essential that GB Energy is fully accountable to Parliament on an individual investment basis, as well as holistically. This is taxpayers’ money, which could have been used to avoid destroying farmers’ and family businesses’ desire to invest and grow. That places a heavy burden of responsibility for GB Energy to perform well. The Minister may suggest that this is too expensive and cumbersome, but I point out that listed companies measured in the tens of millions of pounds are well able to comply without issue. GB Energy appears unlikely to be an operating company but more of an investment company. That should make these obligations straightforward to comply with, while ensuring that its investee companies and projects also have to keep accurate and timely books to allow GB Energy to comply.
The Minister may suggest that UK company registration requirements to lodge accounts are enough, as has been said in previous groups. Anyone familiar with those accounts will know that they tend to be published around nine months after the close of the financial year, are annual only and contain the least possible information to comply with registration requirements. There is little here that can be helpful in assessing performance.
Amendment 80 creates financial and climate reporting discipline that will then have to be extended throughout the organisation, to all of the investee companies, to everyone’s advantage. Examples of successful government investment in the private sector are hard to find. If this Government are confident that this will be the unicorn, surely the Minister will welcome the amendment, which will create many opportunities to showcase that success.
I also add my voice to Amendment 65 in the name of my noble friend Lord Offord of Garvel, and I have many of the same concerns as my noble friend Lord Howell and the noble Lord, Lord Cameron of Dillington. While this may almost seem like stating the obvious, there are a number of issues around grid connection, and I would be most grateful if the Minister could update us with progress. The first is the issue of nameplate grid capacity. Does the National Grid’s £35 billion investment plan from 2026 to 2031 fully address this need? And, given the increase in the UK Government’s borrowing costs and likely impact on UK companies, does the Minister anticipate any refinancing requirements to build out this transition?
The second is the human capacity of distribution network operators to work through projects with developers, to plan and deliver the grid connection. I understand there is a lack of capacity in this area and it is possible that DNOs could be prioritising their own projects at the expense of third parties. They do not appear to be meeting obligations, which is costing developers millions in delays and cost increases. I understand the bottleneck is largely human capital, which exists in Europe but of which there is not enough in the UK. The Minister has discussed training in previous groups, but would it not be also wise to fast-track visa applications for skilled operatives? Is the Minister confident that his Government have a plan that can deliver beyond 2030, as anecdotally the grid queue analysis and action that has been taken appear to have sacrificed confidence in developments beyond that timeframe in order to meet 2030 commitments?
Under the national electricity system consultation, I understand developers have been given only three weeks to consult on up to 16 documents per project. These developers need to see more resources and more evidence of planning beyond that timeframe in order to keep a strong project pipeline alive. Can the Minister update the House on the impact these actions have had on the developer community? Is he satisfied that the capital and talent are still available in that sector to meet his Government’s objectives?
I entirely agree with my noble friend Lord Hamilton of Epsom’s comments on the sustainability of biofuels. Displacement of food production in favour of growing energy crops risks causing higher prices for everyone. I draw the Minister’s attention to the US blending mandate, which has been in place for several decades and has led to around a quarter of the US corn production going into bioethanol for blending with gasoline. This has had a structural impact on food prices around the world and simply displaces one problem into another.
I disagree with my noble friend Lord Hamilton on green hydrogen, unfortunately, as its cost simply seems to be too high for most applications. Around one-third of the energy is lost in electrolysing water into green hydrogen, and another third is lost in turning it back into electricity, giving it a structural disadvantage versus other forms of energy.
Baroness Noakes (Con)
My Lords, I want to offer a slightly different perspective on this group of amendments. All the amendments in this group, and indeed some later groups, involve a series of rather worthy things—for which there are to be reports or other consequences—to be achieved by giving a direction to Great British Energy. While I support the amendments on the basis that they are probing amendments, I find it difficult to support the structure of the amendments themselves.
It seems to me that, by using the power of direction in Clause 6, the amendments would undermine the nature of that power and subvert the effectiveness of the power of direction, which is a long-standing feature of the control framework for public corporations. Powers of direction for nationalised industries were commonplace when nationalisation took hold from the 1940s onward. I do not know whether they existed before that, but they certainly have a pedigree of nearly 80 years. The first one of which I am aware is in relation to the Bank of England Act 1946, which nationalised the Bank of England. They have been a feature of public body legislation ever since, except in relation to bodies which are created as regulatory bodies.
The power of direction was never conceived as a mechanism for giving routine instructions to public bodies, which is what all the amendments in this group and the subsequent groups are trying to do. In fact, throughout the history of nationalised industries, the power of direction has almost certainly not been used. In relation to the Bank of England, I asked the previous Government fairly recently whether they would like to give up the power of direction over the Bank of England and whether they had used it since 1946; the answer was that they had never used it since 1946, but they definitely wanted to keep it. The fact that a power has not been used does not necessarily have any meaning, because it is designed as a backstop power for use in extreme circumstances. The mere fact of its existence can be a powerful weapon in the hands of the Government of the day.
It should be an uncontested fact that the Government ultimately call the shots in relation to public corporations, however much operational independence they claim to be handing over to them when they set the bodies up. The board of a public body should be very wary of not following the wishes of the Government of the day, unless those wishes conflict with their legal and statutory objectives.
I will always defend the ability of the Government to give directions to a public body, because public bodies should not be above the Government of the day. I think there are far too many public bodies, but if we have to have them, we must have an effective power of telling them what to do when necessary. I would definitely not want that core power to be diluted by being cluttered up with a lot of more day-to-day matters, which is partly what the amendments in this group and subsequent amendments do.
The concerns of my noble friend on the Front Bench and indeed other noble Lords who have drafted these amendments would be better met by placing specific requirements in the Bill, rather than by cluttering up the power of direction which has a very special place in the control framework for public bodies.
Lord Ashcombe (Con)
My Lords, I support my many noble friends in their amendments in this wide-ranging group. I declare my interest as an insurance broker in the energy industry for Marsh.
In the Labour manifesto under the section entitled “Make Britain a clean energy superpower”, its second mission to rebuild Britain, there is a plan to create 650,000 jobs by 2030. This will obviously need to include the supply chain, as the number of jobs required for running energy projects will never reach this amount.
In the Great British Energy Founding Statement, we learn:
“Backed by a capitalisation of £8.3 billion of new money over this Parliament, Great British Energy will work closely with industry, local authorities, communities and other public sector organisations to help accelerate Britain’s pathway to energy independence. That means installing thousands of clean power projects across the country, crowding in investment for next-generation technologies, and providing vital support to accelerate large-scale projects”.
For new money, we can read taxpayers’ money.
When taxpayers’ money is being spent, it simply cannot be thought of as a blank cheque, in this case with a large upper limit. It is imperative that there are checks and balances in the system to ensure that money is spent wisely to the benefit of the country. I suggest to the Minister that some of these measures might include the following: the need to demonstrate the benefit in each venture towards the £300 saving so heavily touted in the run-up to the general election; the need to demonstrate the benefit in each venture towards the creation of 650,000 jobs on the back of this clean energy drive and again touted in the run-up to the general election; and the need to ensure that grid connections, as have been mentioned, to connect the new generating assets are available as and when needed, something that has been very difficult to achieve in the past. That would also prevent ludicrous curtailment payments. The costs from NESO to do this are enormous—I believe I am right in saying some £40 billion a year until 2030.
The measures also need to show the net effect of carbon emissions and the reductions being made as the years progress, which is what this Bill is all about. However, it is especially important to consider not only scope 1 emissions, being direct greenhouse gas emissions that occur from sources that are controlled or owned by an organisation, and scope 2 emissions, being indirect greenhouse gas emissions associated with the purchase of electricity, steam, heat or cooling but also—and possibly most importantly—scope 3 emissions, being the greenhouse emissions resulting from activities from assets not owned or controlled by the reporting organisation but that the organisation indirectly affects in its value chain. My noble friend Lord Hamilton talked about one specific example. In my opinion, this has specific reference to solar panels, which are manufactured predominantly—some 85%—in China, and wind turbines, of which 60% are manufactured in China, which has certainly not demonstrated any restraint in curbing emissions. Then, there is the subsequent voyage to the final destination. Let us not forget what the noble Lord, Lord Alton, said.
There is also the need to show a reduction in imported energy—both via electrical interconnectors and hydrocarbons as LNG or by pipe from Norway and the continent—balanced against the production of our own North Sea gas and being allowed to continue to search for more off our abundant coasts.
Further, there is the need to show that a significant percentage of the materials used in any work done is generated in the UK and the need to demonstrate that we are becoming more self-sufficient in power generation—something we have not got to yet. Finally, but of no lesser importance, there is the need to demonstrate financial return to the benefit of the taxpayer.
In a number of these amendments, various timeframes have been suggested to produce a fair audit trail for Parliament and the taxpayer. Without them, who will know the real benefits of all this expense? Does the Minister agree that measurement provides results and therefore helps to determine the way forward?
Lord Berkeley of Knighton (CB)
My Lords, perhaps I may add a few words to some of the comments from the noble Lord, Lord Hamilton of Epsom. He mentioned the carbon cost of steel, but there is one other element we should not forget. I understand that building pylons to take power overground is cheaper than putting it underground, but I plead with the Minister to accept that there are areas that we should try to protect. In fact, in the long term, it is probably as cheap, if not cheaper, to put power lines underground. I recognise the dilemma that the Minister is in, but we should look at the aesthetic value of what we are talking about, as well as the financial one. I believe that there are some areas of the United Kingdom that we should protect at all costs.
Lord Fuller (Con)
My Lords, I will speak briefly in support of my noble friend Lord Hamilton of Epsom on carbon accounting. He said that he does not know very much about oilseed rape, but I do. About 20 years ago, in some of the very earliest stages of emissions reduction, I was involved commercially in that.
My noble friend asked that we should have pilot plants and studies to see whether the energy balance of oilseed rape can be done, as if it has never been done before. I can tell your Lordships that pilot plants were set up on Teesside, at enormous expense, and analysed to death. Although this is not a debate on farming, I can say that, at normal yields, when all was said and done, after the ploughing, sowing, fertilising, spraying, harvesting, processing and transportation, you came ahead on a carbon basis only when or if you burned the straw that otherwise would have been left behind in the field. Of course, at low yields, you spent more carbon on growing it than you got back at the end.
I make no other comment save to say that my noble friend is correct that, often, superficially attractive green energy schemes, when you boil them down, cost more carbon than they yield. That is important to look at because, otherwise, we could sleepwalk into an enormous waste of public funds through GB Energy, chasing projects that do not hit the target—which, of course, is to allow us to be more sustainable in future.
Earl Russell (LD)
My Lords, I will speak very briefly. If I may, I will call out the elephant in the room on this Bill. We have had 10 groups of amendments turned into 18 groups on this final day in Committee—over half of the groups that we are discussing today are the result of one party degrouping amendments. We have spent over two hours speaking to the first group of amendments, and we have 18 groups to speak to today. I have heard a lot of speeches, but in the case of many, I could not tell which amendment they were even speaking to.
I will say just this: we support the Government and the Bill. This is an extremely important Bill. I am pleased to see action taken on these measures after the Conservative Party failed to do anything about it, left bill payers vulnerable to the increase in bills as a result of the war in Ukraine and ended up spending £40 billion of taxpayers’ money subsidising bill payers for no long-term benefits. In this group, we are generally supportive of Amendments 61, 65, 69, 70 and 74. For groups that we feel were unnecessarily degrouped, we will probably not make comments.
The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)
My Lords, I am very grateful to the noble Earl, Lord Russell, because it seems to me that we have “enjoyed” what essentially has been a rerun of previous debates, with Second Reading-type speeches, when the key concern, as the noble Baroness, Lady Noakes, suggests, is Clause 6 and the power of direction.
So I do want to come back to the intent of Clause 6. First, we want GBE to be operationally independent. A founding principle of GBE is that it should be independent as far as possible in executing its functions. The Bill is focused on making the minimum necessary provisions to establish the company. At Second Reading, some noble Lords opposite accused the Government of drafting the Bill in a way that meant we would use Clause 6 to micromanage GBE. We have always maintained, as the noble Baroness, Lady Noakes, rightly pointed out, that this is a backstop provision, yet now noble Lords opposite seek to micromanage both the Government and GBE by these various amendments, most of the issues in which we have already debated.
Secondly, we have set up GBE as a company for long-term success and as an enduring institution. Some of the amendments, which include short-term targets, would be wholly inappropriate in legislation. Indeed, it would be more appropriate for the Secretary of State to set priorities via the statement of strategic priorities in Clause 5, of course within the framework of Clause 3.
My third point is the intended use of the power in Clause 6. Let me make it absolutely clear, as I have done in the past, that the power to give directions to GBE is intended only for urgent or unforeseen circumstances. These amendments would widen the intention unnecessarily. The noble Baroness, Lady Noakes, is right about the relationship between government and such organisations. She and I have both had experience in relation to the NHS; it is a slightly different set-up, but we are talking about the relationship between a government department, the Secretary of State and public bodies. She will know that there the Secretary of State has always had a power of direction, but I think it has had to be used only a handful of times. The reason of course is that chief execs of NHS bodies understand that the Secretary of State is able to set the overall direction of the National Health Service without having to call on what is essentially a backstop power.
My fourth point on a number of the amendments is that the existing reporting requirements are set out in the Bill, which makes provision for GBE to produce and publish an annual report and accounts. They will undergo external audit; they will contain information on the activity of the company over the year; and they will also include reporting in line with the recommendations of the Task Force on Climate-Related Financial Disclosures. GBE may also make information available through reporting, such as when projects or investments are announced. We think that that is sufficient accountability.
On some points raised by noble Lords on Amendment 59, we believe that in an unstable world, the only way to guarantee our energy security and protect bill payers permanently is to speed up the transition from fossil fuels to home-grown clean energy. This is consistent with advice from the Climate Change Committee and it is why we have set an ambitious target to reach clean power by 2030, which the independent NESO considers achievable. We believe that the key role of BGE is focused on driving forward deployment.
I say to the noble Viscount, Lord Trenchard, and the noble Lord, Lord Howell, that I agree with them on the importance of nuclear power. But I say to the noble Lord, Lord Howell, that this is the second time he has tried to divert the Government from supporting Sizewell C. I say to him that this is a massive development and we are moving to final investment decisions over the next few months. It will produce 3.2 gigawatts, it is a replica of Hinkley Point C, 80% above ground, and we have the regulated asset-based approach which will bring in private sector expertise and disciplines. So, in agreeing with him on the importance of small modular reactors and advanced nuclear reactors, we should not underestimate the potential of Sizewell C—and indeed Hinkley Point C when it comes on line, I hope at the end of this decade.
Of course I take the points that data centres will need a lot of electricity, that grid capacity issues are vital and that we need more investment in the grid. I also take the point made by the noble Lord, Lord Berkeley of Knighton, about the beauty, or not, of pylons. I of course accept the point he makes, but we are going to have to have more pylons. None the less, they will have to go through vigorous planning and meet environmental protection requirements.
On jobs and Amendment 60, GBE aims to revitalise the UK’s industrial areas and we think that, by situating its headquarters in Aberdeenshire—which I am sure the noble Lord, Lord Bruce, will welcome—it will be able to leverage the skilled workforce available there and throughout Scotland. More broadly, we have set up the Office for Clean Energy Jobs to promote clean energy employment and focus on skills development and training in the core energy and net-zero sectors.
Amendments 61 and 76 concern supply chains, which are of course very important indeed. GBE’s founding statement has already made it clear that my department expects the company to prioritise the development of supply chains and to report to government on progress. To come to the noble Lord, Lord Alton, of course we have debated these matters over the years and I absolutely understand where he is coming from. But it will be for GBE as an operationally independent company to determine the projects and technologies it chooses to invest in, in accordance with its objectives. It will be expected to respect human rights under the Human Rights Act 1998 and it will be subject to the provisions on forced labour and supply chains, both under the Modern Slavery Act 2015 and the Procurement Act 2023.
We recently set out our Clean Power 2030 Action Plan, which requires significant deployment of solar electricity—noble Lords are right on that. Developing sustainable, diverse and resilient solar supply chains, free from forced labour, is important for the Government. As the noble Lord, Lord Alton, knows, we also have the Solar Taskforce, which will be looking at these matters.
On Amendment 63 on the cost of fulfilling the company’s strategic objectives, I can assure the noble Lord, Lord Petitgas, that the Secretary of State will set ambitious but achievable objectives for Great British Energy that can be achieved through the funding envelope. GBE will be backed, as noble Lords will know, by a capitalisation of £8.3 billion over this Parliament, and its objective is to crowd in additional private sector investment. However, it will be subject to HM Treasury’s value-for-money guidelines and, like existing publicly financed institutions, its investments will be subject to safeguards and risk assessments.
On Amendments 69, 70 and 85A, on the impact on carbon emissions of GBE’s investments, the company is committed to advancing the deployment of clean energy to aid the Government’s goal of decarbonising our electricity system by 2030. The amendments would require a report to be produced for every investment made by Great British Energy, which seems neither proportionate nor effective. On importing energy into the UK, we acknowledge that reliance on imported fossil fuels presents economic and security risks, as evidenced by the situation following the Russian invasion of Ukraine. The best response is to increase domestic power generation through renewable energy sources and nuclear power, while simultaneously transitioning to more sustainable methods for heating homes, fuelling vehicles and powering industry. These can substantially mitigate our exposure to volatile international markets and energy price fluctuations. We see GBE as being at the heart of those efforts.
Lord Hamilton of Epsom (Con)
Does the Minister accept, however, that converting oilseed rape into aviation fuel does not produce clean energy?
Lord Hunt of Kings Heath (Lab)
My Lords, we rely on agreed definitions as to whether an energy is clean. The noble Lord mentioned biomass and Drax. He will know that the Government’s view, which his party also took when in government, is that the carbon absorbed by the forestry that replaces what has been transported to Drax more than covers the carbon expended in the process of bringing it to Drax, including the use of shipping. For 14 years, the party opposite accepted that this was an appropriate definition.
I turn to my noble friend Lord Berkeley’s amendment, on the risk to off-grid households and the value of renewable liquid fuels to these households. The noble Lord, Lord Bruce, also covered that point, and I listened with great care to what both had to say. Clearly, we want fuel-poor and off-gas-grid homes to benefit from the transition to net zero. The current energy company obligation includes incentives to deliver measures such as low-carbon heating to off-gas-grid rural homes in Scotland and Wales. Phase 2 of the home upgrade grant provides energy efficiency upgrades and low-carbon heating measures to low-income households living in the worst performing off-gas-grid homes in England in order to tackle fuel poverty.
We recognise that renewable liquid fuels could play a role in decarbonising heat off the gas grid. We therefore expect to prioritise the use of renewable liquid fuels for the small number of homes that are not readily suitable for electrification, as these have the fewest options to decarbonise through alternative low-carbon technologies. My noble friend Lord Berkeley suggested a meeting on this; I am very happy to engage with him and, indeed, with the noble Lord, Lord Bruce.
Amendment 76, tabled by the noble Lord, Lord Offord, and Amendment 77, tabled by the noble Baroness, Lady Bloomfield, relate to sourcing materials for GBE projects from the domestic supply chain. Adding the proposed detail to the Bill would too narrowly restrict the company in carrying out its activities, halting the potential feasibility of projects where UK sourcing is not currently possible.
On jobs, I take the point made by the noble Lord, Lord Bruce, concerning the importance of the UK continental shelf and the need for an orderly transition. My daughter supported her career as a wireline engineer in the oil and gas industry working out of Aberdeen, and I am well aware of the importance of the sector, what it has contributed to the UK economy and the skills and dedication of the people working there. As we have described, we want an orderly and just transition.
GB Energy will be committed to helping drive the growth of supply chains in the UK to accelerate the deployment of key UK energy projects. It is important, however, that we comply with the international trading rules that the UK is bound by, such as prohibitions on requiring local content contained under various agreements under the WTO.
Amendment 80, in the name of the noble Lord, Lord Petitgas, requires the Secretary
Lord Alton of Liverpool (CB)
I am sorry to interrupt the noble Lord, but I wonder if I can press him further on the issue of jobs and the impact on our own economy when countries run, in their own jurisdictions, the kind of slave labour arrangements that I and others referred to earlier. He will have seen the information about the loss of electric vehicle-related jobs because of the flooding of the market—we do not have any tariffs on those vehicles, whereas every other G7 country does. He will know that, in the last quarter, the trade deficit with China was some £32 billion but at no time since 1995 has there ever been surplus on our side of the equation. How can we justify, therefore, pouring more money into the economy of a country that relies on slave labour? It cannot just be left to companies, even Great British Energy, to identify whether a country is using slave labour or not; surely that is a matter for the Government, too.
Lord Hunt of Kings Heath (Lab)
The noble Lord raises matters of great geopolitical importance and importance to the UK’s economy. He will have seen that my right honourable friend the Chancellor has been in China in the last few days, seeking to engage that country in relation to economic co-operation and development, within appropriate security safeguards. We want to see jobs in the energy sector developed as much as possible in the United Kingdom, but equally, we are operating in a global economy. For very good reasons, we are concerned about the introduction of tariffs which may inhibit international trade, and we must also be mindful of the economic value-for-money issues that clearly have to come into play in this area.
Let me return to the Bill and what is appropriate for us to include in it. We believe that this issue is a matter for GBE, working within the constraints set through the statement of priorities and through Clause 3, and also in relation to the further work we are going to do. We have mentioned solar, and noble Lords are right that much of the raw material for solar panels comes from China, although it is British companies working in the United Kingdom that benefit more from the value of the work on solar installations.
Turning to the amendment of the noble Lord, Lord Petitgas, as a publicly owned company, GBE will be held accountable through regular reporting to my department. It will be subject to HM Treasury’s value-for-money guidelines, its investments will be subject to safeguards and risk assessments, and it will invest in the private sector to share risk and reward.
On green taxonomy, a decision about how a potential UK green taxonomy could be used or applied has not yet been finalised. The Government have launched a consultation to gather views on the value of the case for a UK green taxonomy, and it will close on 6 February.
We need to come back to what Clause 6 is for as a whole. It is a backstop which one hopes would never have to be used; it is not a way to encourage the Secretary of State to micromanage a company that we very much want to be operationally independent.
Lord Petitgas (Con)
I want to go back to the point about the company acting independently. There is little bit of confusion about this company being an energy company, as opposed to an investment company. There will be myriad small investments. If it acts independently, which is fine, it needs an investment committee, and I have not read anywhere that there will be one. The chairman-elect is Jürgen Maier. He may know the sector but he is not an investor. So, effectively, taxpayers will be limited partners in an investment company without an investment committee and with a chair who is not an investor, so it is not unreasonable to ask for information about rates of return and to understand exactly how it will be done. If the answer is, “Don’t worry, it’s an independent company but value for money will be done by the Treasury with DESNZ”, that is a different governance process, but the governance of investment and selection to me remains relatively obscure.
Lord Hunt of Kings Heath (Lab)
My Lords, I do not really think I can go any further than the remarks I have made this afternoon. It will ultimately be for GBE’s board to decide how it will arrange its board committees. I have noted what the noble Lord said about an investment committee. I will certainly draw his remarks to the attention of Jürgen Maier, who may not be an investment expert, as the noble Lord suggests, but my goodness me he has a lot of experience in this sector.
Lord Offord of Garvel (Con)
My Lords, in bringing the debate on these amendments to a close, I can deal head-on with the Minister’s comments and those of the noble Earl, Lord Russell, about the time given to the Bill. We have so far had one and a half days in Committee and we have one further day allocated, which will be only two and a half days on a Bill that spends £8.3 billion of taxpayers’ money, has no detail on how that money will be spent and gives endless power to the Secretary of State for Energy. It is entirely reasonable that we scrutinise it. The weekend’s press was full of the energy crisis that we face, with the shortage, storage and national grid issues.
Lord Hunt of Kings Heath (Lab)
My Lords, with the greatest respect, there is no energy crisis.
Lord Offord of Garvel (Con)
As I said, the point of government is to ensure that there is no energy crisis and at the weekend we had reports of there being gas supplies for less than one week, which is concerning to the public. Therefore, it is only fair and reasonable that Parliament debates that in some detail.
Lord Hunt of Kings Heath (Lab)
My Lords, what we had was one company looking for government subsidies using the opportunity to make alarmist headlines.
Lord Offord of Garvel (Con)
The point is that this is a topical debate that the whole of the public are interested in. They understand energy prices like nothing else now. They understand that, in terms of their household budgets, this is a major part of their cost of living and it is only reasonable that we get to debate this.
The amendments in this group are straightforward and simple. They are nothing to do with micromanagement; they are only to do with the accountability and transparency of this new company, which, as my noble friend Lord Petitgas pointed out, is not an operating company. The public think this is a company that makes cheap energy. It is an investment company sitting on one floor of a building in Aberdeen making investment decisions, and we have no idea how it will do that.
At the last election, the Government made promises to working people on this topic: to reduce energy costs, create jobs and drive forward our energy transition. Therefore, taking my noble friend Lady Noakes’s constructive point, we can argue about how we deliver the substance of these amendments, but we should not ignore the substance. Is it not fair and reasonable that we have in the Bill some consideration of government promises made to the public about the cost of energy—£300 in savings, which, incidentally, is £8 billion, the same amount as is being invested in 28 million households at £300—or the fact that 650,000 jobs are to be created? Is it not reasonable that the Bill somewhere talks about the fact that we want a strategic priority for the UK to develop its own energy supply chain? Is it not unreasonable that we have amendments that deal with how we make sure that the supply chain is fair? We have talked about a fair transition: well, where is the fair transition, to pick up what the noble Lords, Lord Bruce and Lord Alton, said, when we destroy our own highly skilled jobs in the north-east or end up using products made under dubious circumstances in overseas territories?
I would argue that all these amendments need to be considered. There is consensus in this House that we need energy security and that we need to get to 2050. The question is: why is this being speeded up artificially when we and the technology are not ready? Why are we doing this artificially?
My final point has been mentioned by many noble Lords so far: none of this works without the plumbing working. The national grid needs a serious upgrade and comprehensive investment to deliver this. If in these straitened times—we are continually reminded by the Government Benches that there is no money—there is a spare £8 billion, should it not be better used by being put into the national grid once and for all? In the meantime, given that we are where we are in Committee, I beg leave to withdraw the amendment.
Lord Offord of Garvel
“(1A) The Secretary of State must give a specific direction to Great British Energy that it must report to the Secretary of State within three months of each investment it makes on the impact that the relevant investment is projected to have on wholesale electricity prices over the following ten years.(1B) The Secretary of State must lay a report made under subsection (1A) before Parliament.”Member’s explanatory statement
This amendment would introduce a requirement that Great British Energy reports to the Secretary of State (and subsequently Parliament) on the projected impact that each of its investments would have on wholesale electricity prices over the following ten years.
Lord Offord of Garvel (Con)
My Lords, I rise to move Amendment 62 and to speak to my Amendments 64, 68, 71 and 75. Aside from the promises to cut consumer energy bills and create 650,000 new jobs made by the Government throughout the election campaign, the British public were assured that GBE would turn a profit for the taxpayer. Yet there is nothing in the Bill that elucidates an investment profile or targeted rate of return. Why not? The British taxpayer must be able to see what the Secretary of State is doing with £8.3 billion of public money.
With that said, Amendment 64 requires GBE to provide an annual report to Parliament on its annual rate of return on investment and a projection of the following year’s expected rate of return on investment. That point was picked by my noble friend Lord Petitgas in the previous group. The company intends to invest in and de-risk projects in new clean energy technologies and it would be useful to see the return on investment of these projects. The point was well made in the last group and this amendment continues to hammer that point home.
During the last election, the Government made countless promises on bills and energy costs—again, a point we heard in the last group—that were rehearsed, debated and put out by the Prime Minister, Chancellor and various Cabinet Ministers, who gave the figure of £300. Once again, it is only fair that we have amendments that hold the Government to account on these promises made to the British people. It is widely understood that the cost of electricity is a matter of serious concern and, again, as has been indicated, it is now the major part of any household’s weekly costs. Therefore, it is deeply worrying that the Government are voting against enshrining these promises in law when they made them so directly to the British public.
The Government have said that GBE is part of their plans to ramp up renewables, which they say will result in cheaper energy. But, again, we do not have the background and analysis. The only analysis we have had so far, from Cornwall Insight, found that in the last contracts for difference, the Secretary of State, on these assumptions, will potentially increase people’s energy bills by £5. So, again, we have conflicting reports from different experts in this space. The Office for Budget Responsibility has forecast that removal taxes will increase by 23% by 2030, again highlighting the cost of this transition to the ordinary consumer. It is with that in mind that I bring forward Amendment 71, which requires GBE to produce and report
“a cost benefit analysis of the price of electricity produced from renewable energy technologies compared to that produced from gas”,
which plays a critical role in energy generation.
I return again to the Government’s promises of 650,000 jobs with no detail as to how that will be deployed, other than the fact that we know there may be 100 or so in the Aberdeen headquarters. I believe that the Government’s punitive attack on the North Sea oil and gas industry will actually cost jobs, as the noble Lord, Lord Bruce, already mentioned in the last group—some 200,000 highly paid, highly technical jobs in the North Sea, which are critical to the transition to the new green energy world for which we all wish.
Finally, Amendment 75 would require GBE to carry out an environmental impact assessment on each investment it makes. The Secretary of State and GBE should give due regard to their role in maintaining the protection of our environment while ensuring that they deliver healthy returns on investment.
I am pleased to speak to this group. I look forward to the corresponding debate. The function of GBE as a type of investment body is central to its operation as a company. It is therefore essential that the Bill makes provision to report on the success and impact of each investment it makes, backed by £8.3 billion of taxpayers’ money. I beg to move.
Viscount Trenchard (Con)
My Lords, I congratulate my noble friend on his clear and well-argued introduction of his amendments in this group, to most of which I have added my name. As he said, the taxpayer must be able to see what the Secretary of State is doing with £8.3 billion of his money. State-owned companies do not have a great track record in realising a strong, positive return on their invested assets.
Unless GBE does that, it is likely to have a negative, rather than a positive, effect on wholesale electricity prices. Amendment 62 will ensure transparency on that. GBE intends to invest in and de-risk projects involving new clean energy technologies. It is clearly necessary to have full transparency as to the rate of return on each of the investments that GBE achieves. The amendment would require GBE to consider every single investment it makes in terms of the impact that it will have on electricity prices in the future. Does the Minister not agree that this would be a good discipline for GBE? Amendment 64 would ensure that we have such transparency on the whole portfolio of GBE’s investments across the board.
Amendment 71 contains a requirement for a cost-benefit analysis of the price of electricity generated by each of its investments compared with that of electricity generated by gas. We certainly need to know that. Many of us think that we are already saddling the consumer and industry with unnecessarily expensive electricity. The grid is always bound to draw electricity from renewable sources when they are available, in priority to gas. This means that gas power stations are constantly being fired up and down, and are seldom operated at full capacity. This distorts the price of gas, which in turn distorts the price of electricity because gas power stations produce much cheaper electricity when operated consistently at or near full capacity than they do under the current modus operandi. The price of gas used in the cost-benefit analysis required by this amendment ought to be the price achievable from constant operation rather than the distorted price resulting from prioritisation of renewable sources.
I also refer briefly to Amendment 75. It is clear that the main purpose of GBE’s collaboration with the Crown Estate is to build a large number of offshore wind farms in coastal waters. This amendment will require GBE to consider carefully the environmental impact of its activities on marine life and inshore fisheries, among others.
The Government have made much of their determination to cut energy bills. Their refusal to accept Amendment 71 and other amendments would show that they are less than certain that their plans will result in lower energy prices. I look forward to hearing the Minister’s response.
Lord Hamilton of Epsom (Con)
My Lords, I was speaking to the noble Lord, Lord Mandelson, the other day. This was when he was chasing around after the chancellorship of Oxford University. I said to him that I thought he would serve his country much better in Washington than in Oxford. I congratulate him on becoming our ambassador in Washington. I think he will do a very good job.
I mention the noble Lord, Lord Mandelson, because a quote attributed to him is that, “When politicians try to pick winners, the losers invariably find the politicians”. People should recognise that the track record of politicians in trying to pick winners is absolutely abysmal. Invariably, political considerations and jobs come into it; profitability is the last thing that is ever considered.
Therefore, it is essential that we support these amendments. They are asking for some degree of accountability for Great British Energy, which will have billions of taxpayers’ money. If we are not very careful, it will go to all the projects that have been rejected by the private sector as not being viable and will invariably lose money. That should be of great concern to us all because it discredits government and wastes taxpayers’ money.
Lord Teverson (LD)
My Lords, can I make a comment on that? I am a trustee of the green share in the Green Investment Bank, which was privatised by the Tories after it was set up by the coalition Government. It was a very profitable operation, although it was fully publicly owned. The issue was that it was almost too conservative in terms of making money under Treasury rules, so it did not make as much of a difference—it did make a difference—as it should have done. One of the risks is that GB Energy could be too conservative because the Treasury is too close to it and will not let it do the innovation that needs to happen for decarbonisation to take place by 2030.
Lord Hunt of Kings Heath (Lab)
My Lords, I want to make just two points. The noble Lord, Lord Teverson, made a very interesting and wise contribution. I say to the noble Lord, Lord Hamilton, that of course I have heard the expression that Governments are not very good at picking winners. That is why we have set up GBE. We will have a company with people with expertise to enable investments to take place within the context we set under Clause 3 and Clause 5 as strategic priorities. None the less, it will have operational independence.
The noble Lord, Lord Teverson, is right; noble Lords in their various amendments are seeking to pin down GBE through excessive reporting requirements. The risk is that GBE, far from being allowed to flourish and develop, will be inhibited and micromanaged. That is why these amendments are wholly inappropriate in relation to Clause 6. The power of direction is not to be used in the way that noble Lords are suggesting; it is a backstop power. What is the point of setting up GBE if we are to undermine its independence in the way these amendments suggest?
Lord Offord of Garvel (Con)
My Lords, as in the previous group, these amendments are not designed in any way to micromanage. There is very little in the Bill that gives us any indication of how this company will operate. As indicated by my noble friend Lord Petitgas, it is an investment company without an investment committee or any investment directors. All that is being sought by these amendments is some level of accountability and scrutiny.
Once again, I say that when promises are made to the public that the Bill will address their concerns, it is not unreasonable that we ask for amendments to be made accordingly. For example, looking at employment in Amendment 68, we are simply asking for a report—as the noble Lord, Lord Bruce, said—on the impact these investments make on employment and bills. Why is that an unreasonable thing to say? We have 200,000 people in highly skilled jobs in the North Sea. They are worried that they are about to be phased out unilaterally and prematurely. Why is it unreasonable to have somewhere in the Bill a requirement that GBE comes to Parliament and explains what it is doing in relation to employment in this key sector?
As we have said before, the Bill has failed to substantiate the promises made. The job of the Opposition is to highlight that and to make it clear that this needs to be debated and scrutinised. That is what we will continue to do. In light of that, for now I will withdraw the amendment.
Earl Russell
“(1A) The Secretary of State may not give specific or general directions to Great British Energy unless they have delivered an oral statement setting out those directions before Parliament.”Member's explanatory statement
This amendment would prevent the SoS from directing GBE unless they have delivered an oral statement to Parliament.
Earl Russell (LD)
My Lords, I rise to open this group of amendments, all on consultation and oversight, and to move my Amendment 66 in this group. Amendment 66 seeks to prevent the Secretary of State from directing GB Energy unless they have previously delivered an Oral Statement to both Houses of Parliament. Our view is that this is a reasonable check and balance on the use of these powers. My amendment does not stop the Secretary of State from giving strategic directions; it simply requires that, before doing so, the Secretary of State must have previously given this Oral Statement to both Houses.
We recognise that, for the Government, this is a reserve power that would be used only in emergencies. We also recognise that the Bill as written requires the Secretary of State to have previously consulted with GB Energy and any other persons the Secretary of State considers appropriate, and that the directions must be laid before Parliament. Our concern is that these are both very powerful controls given to the Secretary of State and, even with the condition to lay the direction before Parliament, that is done only after the direction is given. There is no opportunity for Parliament to discuss in any form the direction given or the reasons for it, or to have any opportunity to amend it before the direction is given to GB Energy. Parliament also has no say or chance to contribute to the form the direction should take. There is no way that Parliament can change the shape of it or amend it. These powers are absolute: GB Energy is directed in statute that it must comply with the directions given under this part of the Bill.
I draw the Committee’s attention to the fourth report of the 2024-25 Session of the House of Lords Constitution Committee, published on 28 November, which says of these provisions that,
“we are concerned that clauses 5 and 6 amount to ‘disguised legislation’. … This is of constitutional concern because there is no parliamentary oversight over the making of the statement of strategic priorities or the directions to Great British Energy”.
I must admit that I have to agree with that assessment. Our view is that, if there is a level of need such that directions from the Secretary of State are required, then there is also a level of concern such that a Statement should be provided to both Houses of Parliament.
When matters have gone this badly wrong, it is also important that Parliament should be given the opportunity to scrutinise what went wrong and why and what proposals the Secretary of State is bringing to make them right again. It is important that Parliament is given the right to look at how the new plans might work in practice and to be able to advise and raise objections with and suggest improvements to the Secretary of State. The Minister may come back on this amendment and may speak of this being a reserve power. He may say that these will be used rarely, if they are ever used at all; but when they will be needed, they will be needed urgently. The Minister may also argue that the Secretary of State would have previously consulted with GB Energy and others as the Secretary of State saw fit. This is all correct, but consultation in private could amount to no more than delivering the unhappiness on behalf of the Government and instructing the direction to GB Energy. These meetings happen in private, and Parliament is not privy to any of this information or the outcomes.
The Minister may also argue that these powers have been used in—and, indeed, directly copied from—the nuclear energy Bill. To that, I might kindly argue that nuclear accidents and nuclear emergencies are of a different order of magnitude to our renewable sector, although I do recognise the need for urgency when it comes to our energy supply and energy security. I also recognise that GB Energy will have a role in the nuclear sector—although that is to be strictly defined as yet—and, if the Minister wishes, a government amendment to my amendment could call for an exemption for either a nuclear accident or a national energy security emergency. I would be interested in the Minister’s response to my amendment, and I would be happy to discuss this with the Minister prior to Report.
For all other cases, my view is that an urgent Statement can be tabled in both Houses in a matter of mere days, and this can run concurrently while the Minister fulfils his other obligations in respect of consulting with GB Energy and others. Our view is that this is a carefully crafted amendment which seeks to balance the need to address emergency issues against the need for proper and full parliamentary scrutiny to take place. These may be reserve powers, but they are absolute powers, and they are under the sole control of the Secretary of State. They are enacted after consultations and are merely reported to Parliament after they have been enacted.
I ask the Government to think carefully. I know that they might feel that these powers are safe in their hands, but how would the Minister feel if, for example, Labour were to lose the next general election and these powers were in the hands of another Administration? I think it is in that light that the Government should reflect on whether there is a need for a further check and balance on these powers.
Turning to the other amendments in this group, Amendment 87, in the names of the noble Baroness, Lady McIntosh of Pickering, and the noble Viscount, Lord Trenchard, goes further than my amendment. It says:
“A Minister must table a motion for resolution in each House of Parliament on any directions given to Great British Energy under this section before the directions are adopted”.
I am generally supportive of this amendment, but I have two concerns about it. First, holding a vote will take more time. Secondly, if Parliament, for whatever reason, decided not to approve the directions, I wonder what the consequence would be, because these directions are only given in emergency situations. That is an unlikely consequence, but I do not necessarily agree that having a vote actually helps in this case. What I am interested in is parliamentary scrutiny and conversation, not Parliament having the right to have a vote on this issue.
Finally, Amendment 86, in the name of the noble Lord, Lord Cameron of Dillington, amends Clause 6 by adding that consultation should take place with the National Energy System Operator, the Climate Change Committee and the Gas and Electricity Markets Authority. This amendment is helpful, but to my mind it does not resolve the issue; the issue is one of parliamentary scrutiny, and Amendment 86 does not provide further parliamentary scrutiny. The heart of this, for me, is simply having greater opportunities for parliamentary scrutiny while not delaying emergency actions. That is what I am trying to balance. I beg to move.
Lord Cameron of Dillington (CB)
My Lords, Amendment 86 in my name is, as noble Lords will realise, very similar to Amendment 56 in the name of the noble Baroness, Lady Hayman, which was spoken to last month by the noble Lord, Lord Ravensdale. The point is that we all have concerns about the overwhelming statutory powers of the Secretary of State to control, and give random formal directions to, GBE. As I said at Second Reading, we are worried that modern politicians are no longer likely to have had experience of running a business, particularly an investment business, which is what this is. On the whole, the same applies to civil servants who might be advising the Secretary of State. They also usually have little experience of the nitty-gritty of day-to-day private sector business and its associated hour-by-hour assessment of risk and, more to the point, when to take that risk. In other words, you cannot always be totally safety conscious.
Probably the key person with whom the Secretary of State should be consulting is a private sector investment analyst, or even a team of private sector investment analysts, as the noble Lord, Lord Petitgas, was saying early on in the previous discussions. That might be hard to spell out on the face of the Bill, so I will leave that one hanging. As noble Lords can sense, however, I am not at all happy that a politics-orientated—maybe even a party- politics-orientated—Secretary of State of either party should be able to give any direction at all on the issue of practical investment to a hopefully business-orientated board of GBE. I support Amendment 68 in the name of the noble Earl, Lord Russell.
The next thing to say is that Clause 6(3)(b) is superfluous. It states that the Secretary of State should consult
“such other persons as the Secretary of State considers appropriate”.
It is legally meaningless. The Secretary of State could take it or leave it. If he consults with no one, he can claim he did not consider anyone appropriate, so he is under no obligation to consult anyone, apart from Great British Energy, as it stands in Clause 6(3)(a). We therefore need some more specific recommendations.
It is of course right that the Secretary of State should have to consult GBE—after all, it will implement whatever direction he or she gives it—but the Secretary of State should also consult NESO. After all, it is responsible for driving the delivery of our power through the national grid and other transmission companies—we discussed this on another group—so, clearly, it needs to be consulted.
Then there is the Climate Change Committee, which is in very close touch with the state of play of the progress to net zero. It is also in touch with the latest science and knows the priorities of what is most needed to get us to net zero. It will have a view on what could or should be the essential focus of GBE, so it should also be consulted.
Then of course there is Ofgem, which represents the consumers and is their voice, so it seems only right that it should also be consulted on any formal direction from the Secretary of State to GBE. There may be others, and I take the point from the noble Earl, Lord Russell, about the fact that my list is of consultants, rather than Parliament, which might be able to influence the direction of the Secretary of State in a more formal way—although I hope that a consultation exercise would also influence his decision-making process.
In his response to Amendment 56 last month, the Minister seemed to say that the amendment was unnecessary because the Secretary of State would be in permanent consultation with all the organisations involved anyway, but he was at that time talking about the consultation on the strategic priorities in Clause 5 and here we are talking about later specific directions given by the Secretary of State to GBE. After all, the Government themselves put Clause 6(3) in the Bill, so they must have thought that highlighting the importance of consultation, and whom it is with, was important and necessary. In my view, they did not make it specific enough, or possibly wide enough, so I hope they can accept that they should enlarge their constituency of consultees.
Viscount Trenchard (Con)
My Lords, I rise first to propose my Amendment 86A as an amendment to Amendment 86, to which the noble Lord, Lord Cameron of Dillington, has just spoken. The purpose of my amendment is similar to that of Amendment 56A, which was debated in an earlier group. I agree with the noble Lord that the Secretary of State’s considerable powers to give directions to GBE should be subject to oversight. The Bill already requires any directions to be published and laid before Parliament, and it requires him to consult GBE and any other person he considers appropriate before giving any direction. The noble Lord, Lord Cameron, rightly proposes that NESO, the Climate Change Committee and the Gas and Electricity Markets Authority should also be consulted. He rightly did not add Natural England and the Environment Agency to the list—I guess because they are not qualified to have authority over the Secretary of State’s directions on energy projects to GBE.
However, both Great British Nuclear—GBN—and the National Wealth Fund should be consulted, because their objectives are associated specifically with the delivery of new energy schemes. In particular, it would have made more sense to have created GBE as a body incorporating GBN from the beginning, which would have provided for more joined-up thinking. It is seriously distortive to the market that GBE is well capitalised, with £8.3 billion of taxpayers’ money, and GBN has no such funding. That is why we do not have anywhere near enough UK-based nuclear companies and consortia going through the GDA process at present. At the very least, GBE should be required to work closely with GBN. The Minister should surely accept that GBN should be able to propose nuclear schemes, which may compete well with renewable schemes. A requirement to consult would make it more likely that that would happen.
Baroness McIntosh of Pickering (Con)
My Lords, I wish to speak to Amendment 87 in my name and to take this opportunity to thank my noble friend Lord Trenchard for lending his most welcome support to the amendment and the noble Earl, Lord Russell, for introducing this little group so eloquently and strategically. He is absolutely right to point out that the difference between his amendment and the amendment in my name and that of my noble friend Lord Trenchard is the difference between an Oral Statement which can just be debated and, in our case, the need for a Motion of resolution in each House of Parliament. To put his mind at rest, I cannot believe that that would need to delay the process at all. It could be called in exactly the same amount of time—probably half a day, an Oral Statement possibly taking an hour, or 30 minutes in each House.
The Minister, who I do not think is replying to this group, said in response to the first group that he believes and hopes that Clause 6 will never be used. But the very fact that it is in the Bill means that it is there to be used should the circumstances arise and I believe that the magnitude is such that it is important to debate it and to carry each House with the Government. I cannot believe that that would be a delaying tactic; I think it is absolutely essential. The noble Lord also, in reference to the question of giving directions, equated the situation to that of the National Health Service. It is clear to me that, were such a direction to be given to the National Health Service, that would be debated in each House of Parliament as well, particularly in the circumstances that the noble Earl, Lord Russell, related of a potentially dangerous one-off situation which we understand Clause 6 envisages.
Words were said earlier about Drax and I do not wish to dwell on that, but Drax is a major contributor to the whole of the Yorkshire and Humberside regional economy. I believe that we should go back to growing the fast-growing willow coppice and—a name I can never pronounce—miscanthus, as that would help Drax to have a local source of produce on which to rely. It would also help the farmers at this very difficult time for them.
On the question of directions and consultation raised by the noble Lord, Lord Cameron, and others such as my noble friend Lord Trenchard, it is important for it to be in the Bill that, before giving a direction, the Secretary of State must consult. Clause 6(3)(b) simply says
“such other persons as the Secretary of State considers appropriate”.
Well, it would be helpful, if there were a situation of some danger, for local authorities to be consulted, because they are the first responders in many cases. I am slightly baffled that they have not been mentioned so far. Do the Government intend to consult them? In previous debates it was also raised by the Association of British Insurers that, in these circumstances, potential and actual investors may need to be consulted if such an emergency were to arise. I do not think they have been mentioned so far. Again, is that something the Government have in mind?
I want to sound fairly relaxed about this, but I do believe that the amendment in the names of myself and my noble friend Lord Trenchard is preferable to the wording of the noble Earl’s Amendment 66 and I hope that the Government will respond favourably to our very modest request that a resolution should be debated in each House of Parliament and potentially voted on before the directions are adopted. I hope the Minister will also respond to my queries about who is to be consulted and why there are not more of them listed in the Bill. With those few remarks, I commend my amendment.
Lord Howell of Guildford (Con)
My Lords, it must be maddening for the Minister that a Bill specifically designed to exclude investment in the nuclear sector keeps on dragging back to the nuclear sector. This is for the obvious reason that these issues are completely and utterly inseparable. Investment in the energy sector generally has got to take account of all the different aspects, and nuclear is obviously one of them.
The Minister raised the question yet again of Sizewell C being a replica, and obviously he thinks I am being very boring on this, but can I plead with him to go back to his department and point out the obvious fallacies in the whole replica concept? If Sizewell C were to go ahead, it would be being constructed in the late 2020s and the early 2030s, probably for completion and producing kilowatts in the late 2030s or later. That will be approximately 25 years beyond the original design of Hinkley C, which was originally conceived under the Blair/Brown Government in the late 2010s.
Everyone in the civil nuclear sector knows that this is a highly fluid situation in which technology is rapidly developing and is going to create, along with the arrival of new things such as AI, a completely new set of designs, which will mean that by the late 2020s the Hinkley design will be frankly out of date. The idea that something that is 20 years old should be replicated is absurd in any advanced technology, and particularly absurd when it comes to electricity generation and civil nuclear power. If one just thinks about it for a moment, one will realise the replica argument carries absolutely no weight at all. I very much hope that any new nuclear installations—whether 300, 500 or gigawatt size—are definitely not going to be a replica of what has occurred at Hinkley C.
This is a view that is held very widely in France, where they say this design is unbuildable and should never be repeated, and it is the view of many other technicians involved in new nuclear development, which I strongly welcome in all sorts of shapes and sizes, but the idea that we should build a replica 20 years after the last one is frankly absurd. Please would the Minister go back to his department and point this out?
Lord Roborough (Con)
My Lords, I rise briefly to support the amendments in this group. It is clear from this and other groups that the mood of the Committee is in favour of fuller accountability to this House of the activities of GB Energy. This is not micromanaging; it is simply accountability and transparency. How the actions that are taken by GB Energy are directed, as is addressed by Amendment 66 in the name of the noble Earl, Lord Russell, and addressed more fully in Amendment 87 in the name of my noble friend Lady McIntosh of Pickering, is an essential part of that.
Financial markets have periods of irrational exuberance where greed triumphs over caution and experience. Most recently, we have seen the ill-fated wave of SPACs: special purpose acquisition companies. They are generally launched with great excitement and fanfare and with very loose objectives and end in disappointment. GB Energy is clearly a serious undertaking and its chances of success will be greatly aided by rigorous discipline and concentration of force. Applying strong parliamentary oversight of its directions can only aid that.
Amendment 86 in the name of the noble Lord, Lord Cameron of Dillington, and Amendment 86A in the name of my noble friend Lord Trenchard, will help in the rigour of those directions. The clause as drafted is simply too vague, as has been pointed out by other noble Lords. There is great and relevant knowledge in the five bodies nominated between these two amendments. It would seem essential for all directions that the Secretary of State should access this knowledge to ensure that these directions are as beneficial as possible.
I ask the Minister: how specific do his Government intend those directions to be? Will they prioritise jobs, bills, net zero or the commerciality of GB Energy itself? Having such directions is vital to ensure that GB Energy does not drift off course and stays aligned with the Government’s will. But the risk of conflicting objectives is confusion and muddle.
Baroness Noakes (Con)
My Lords, I do not support Amendments 66 and 87 in this group, for similar reasons to those that I gave on the first group that we debated today, in that they would weaken the role of the power of direction. The noble Earl, Lord Russell, referred to the fourth report of your Lordships’ Constitution Committee. I am not sure that that report stands up to close scrutiny. It is a very brief report with relatively little argumentation, and it is difficult to understand what the underlying logic really was. I suspect that the committee did not fully take account of the historical role of powers of direction in relation to public corporations, and it may well have reached a conclusion on the basis of a partial understanding of the role of public corporation powers of direction as they are designed.
Lord Offord of Garvel (Con)
My Lords, I thank the noble Earl, Lord Russell, the noble Lord, Lord Cameron of Dillington, and my noble friends Lord Roborough, Lord Howell, Lord Trenchard, Lady McIntosh and Lady Noakes for their contributions on this group. The debate raised critical issues regarding the sweeping powers, as we highlighted, given to the Secretary of State. Why is it that any and all directions that the Secretary of State gives to GBE are hidden from the eyes of the public and lack parliamentary scrutiny? Considering once again that GBE is funded by £8.3 billion of taxpayers’ money, is subject to an unlimited cap on financial assistance and will not cut the British consumer’s energy bills, this is deeply concerning.
Let me turn to the amendment of the noble Earl, Lord Russell. Amendment 66 would ensure that the Secretary of State does not give any direction to GBE without first delivering an oral Statement before Parliament setting out those directions. I am acutely aware of the lack of detail in this legislation, and it is crucial that we have proper oversight of the wider activities of GBE as ordered by the Secretary of State. It is not only I who thinks this: the Government have agreed. In fact, in Committee in the other place, the honourable Member for Rutherglen, Michael Shanks, said that the Government want Great British Energy to be
“accountable, transparent and clear about how it is delivering on its objectives”.—[Official Report, Commons, Great British Energy Bill Committee, 15/10/24; col. 168.]
I therefore see no reason why the Minister should not support amendments that seek to improve accountability and reporting measures in the Bill and ensure sufficient oversight of the objectives, directions and activities of GBE. If the Prime Minister stands by his statement that he would not make a single promise that he was not confident he could deliver, the Minister ought to support these amendments, which would ensure that GBE was indeed “accountable, transparent and clear about how it is delivering on its objectives”.
The UK Infrastructure Bank, referenced by my noble friend Lord Trenchard, was set up with the explicit purpose of financing projects to drive our energy transition, and it already includes rigorous safeguards to ensure that taxpayer money is spent effectively. Governed by strict rules and subject to detailed annual reporting, it provides the public with comprehensive information on its performance and investments. Given that these robust mechanisms are already in place for the Infrastructure Bank, is it not fair—indeed, essential—that GBE undergoes the same level of scrutiny and oversight? If we are truly committed to safeguarding public funds, surely the same level of accountability should applie to all publicly funded energy initiatives.
Amendment 87 in the name of my noble friend Lady McIntosh would require a Minister to table a motion for resolution in each House of Parliament on any directions that are given by the Secretary of State to GBE before the directions are adopted. In a similar fashion, Amendment 66 in the name of the noble Earl, Lord Russell, would prevent the Secretary of State from directing GBE unless they have delivered an oral Statement to Parliament. I am grateful to both noble Lords for bringing these amendments, which will undoubtedly improve the levels of scrutiny and oversight to which the directions which are given to Great British Energy will be subject.
The only details included under Clause 6 are that
“Great British Energy must comply with the directions”
and that:
“The Secretary of State must publish and lay before Parliament any directions given to Great British Energy”.
This is simply not good enough. It is the bare minimum to allow Parliament to have sight of the directions issued to Great British Energy before they are acted on. In fact, it would be negligible to allow Great British Energy to be directed without sufficient parliamentary scrutiny. I therefore trust that the Minister has listened carefully to the concerns raised by Amendments 66 and 87.
Amendment 86, tabled by the noble Lord, Lord Cameron of Dillington, seeks to ensure that, before giving any direction to Great British Energy, the Secretary of State must consult
“the National Energy System Operator”—
known as NESO—
“the Climate Change Committee and the Gas and Electricity Markets Authority”.
I discussed in detail the importance of consultation in our debate on Amendments 56 and 116. As I said, engagement and consultation with the relevant parties is crucial if GBE is to be a success. The Secretary of State must not act in isolation. It is crucial that he or she consults with the relevant stakeholders. I therefore welcome the amendments in the names of the noble Lord, Lord Cameron of Dillington, the noble Earl, Lord Russell, and my noble friend Lady McIntosh. I look forward to the Minister’s response on the concerns raised by noble Lords in the debate on this group.
Lord in Waiting/Government Whip (Lord Cryer) (Lab)
My Lords, I now turn, as you would expect, to Amendments 66, 86, 86A and 87, tabled by the noble Earl, Lord Russell, the noble Lord, Lord Cameron, the noble Baroness, Lady McIntosh, and the noble Viscount, Lord Trenchard. As I have said, and as my noble friend has said previously, Clause 6 sets out that the Secretary of State will be able to give directions to Great British Energy, and that Great British Energy must comply with those directions.
As Great British Energy will be operationally independent, the intention is that the power will be used only when it is really needed. This will ensure that GBE has the space it requires to fulfil its role and deliver its strategic priorities. I draw the House’s attention to the comments made by the noble Baroness, Lady Noakes, in this context.
The purpose of the clause is to ensure that there is a mechanism in place should any urgent or unforeseen circumstances arise. For example, it could be used if the Secretary of State considers that they need to give GBE a direction that is in the interest of national security or otherwise in the public interest. The amendments before us would risk delaying the Secretary of State’s ability to give Great British Energy that direction, potentially compromising national security under certain circumstances.
The noble Earl, Lord Russell, raised the perfectly reasonable points of accountability and scrutiny. I am not impugning his motives—or the motives of anybody else who has tabled amendments—but if there was an issue of national security that perhaps took place at the start of a recess, it would seriously hamper the Secretary of State’s ability to act.
The noble Earl also raised, interestingly, the possibility of Labour losing the next election. It may come as a shock, but we are not actually planning to lose the next election. However, the mechanism of accountability and the decisions of this Government and future Governments are subject to the views of voters. That is part of the democratic process. We might not like a future Government exercising the directions we have put on the statute book, but that probably applies to past Governments as well. It is part of the democratic process and the process of accountability and scrutiny.
The amendment in the name of the noble Baroness, Lady McIntosh, would take this point further by requiring the resolution of each House, which I genuinely do not think is practicable. However, to ensure transparency and accountability, any directions given to Great British Energy will be published and laid before Parliament before they are given.
Further, Clause 6 requires that the Secretary of State must consult GBE and other persons considered appropriate, before giving directions to GBE. This means that GBE’s management and its board—yet to be appointed—will have the opportunity to express any reservations they have about the direction to Ministers before any such direction is made. If appropriate, this could include the National Energy System Operator, the Climate Change Committee—which has been consulted by successive Governments—the Gas and Electricity Markets Authority, Great British Nuclear and the National Wealth Fund, as well as groups not referenced in Amendment 86.
The noble Lord, Lord Cameron, mentioned at least two of the organisations on that list; he mentioned others too, as I think did the noble Viscount, Lord Trenchard. We could end up with a list as long as your arm of bodies that have to be consulted, which would seriously hamper the Secretary of State’s room for manoeuvre.
Finally, it is not unusual for a Secretary of State to be able to direct an arm’s-length body and such powers are found in several pieces of legislation—again referenced by the noble Baroness, Lady Noakes. In the specific context of government-owned companies, such powers are, for example, included in the Energy Act 2023, which created Great British Nuclear, where named stakeholders are also not included in the directions clause.
For these reasons, I hope the noble Earl recognises that adding this detail would not be beneficial and will withdraw his amendment.
Earl Russell (LD)
In my speech, I recognised the needs of national emergencies or an energy emergency. One of the options I offered the Government was to allow them to amend my amendment to exempt those situations from the need to give an Oral Statement. Will the Minister respond to that specific point, please?
Lord Cryer (Lab)
The noble Earl makes a fair comment. However, what he is putting forward is far too prescriptive. There are plenty of precedents for Secretaries of State being able to operate in this way.
I am starting to sound like the secretary of the Baroness Noakes fan club, but the noble Baroness, Lady Noakes, pointed out that there is the ability to summon the Secretary of State before a Select Committee. There are various Select Committees which have the ability to summon Secretaries of State after the fact. Ministers of all Governments might not be that keen on appearing before Select Committees, but they do not have a lot of choice in the matter. In the vast majority of cases when they are summoned, they appear before the Select Committee and give an account of their actions.
Earl Russell (LD)
I thank the Minister for responding, and I thank everybody who spoke in the debate: the noble Lord, Lord Cameron of Dillington, the noble Viscount, Lord Trenchard, and the noble Baroness, Lady McIntosh of Pickering.
These are important issues; they are absolute powers. I recognise the point made by the noble Baroness, Lady Noakes, that there are other ways of summoning Ministers and that the whole idea of ministerial accountability is that Parliament afterwards can question Ministers. I think that is a bit of a second-tier kind of accountability, but I recognise that there may be situations where the Government need to act with urgency and even the act of giving a Statement could impede the Government from doing that, whether it relates to nuclear energy, energy security or foreign interference in our energy security. I did, therefore, offer the Government the possibility of amending my amendment.
It is important that we have discussed these issues. They are important powers, and it is important we debate them. I do not think we found an answer or a way forward, but the debate itself has been interesting. I thank the Government.
Lord Fuller
“(1A) The Secretary of State must give a specific direction to Great British Energy that it must not facilitate, encourage or participate in the development of renewable energy technologies on agricultural land classified as grade 1, 2 or 3.” Member’s explanatory statement
This would restrict the types of land on which renewable energy technologies can be developed under Great British Energy’s activities, to protect the most productive and versatile land for food production.
Lord Fuller (Con)
My Lords, Amendments 67, 73, 104 and 105 on the Marshalled List stand in my name. This is the first set of amendments I have brought to your Lordships’ House and, on that basis, if I make some small procedural missteps, I ask the Committee to treat me gently.
The purpose of this set of amendments is to protect the best and most versatile land for food production. That is not to say that solar or renewables are intrinsically bad. It is just that solar and renewable energy should be focused on the poorer land and food production on the best. Having needed to dig for victory within living memory, we cannot afford to forget that having food in your belly ranks above having a roof over your head in the hierarchy of the most basic needs. I am not seeking to be obstructionist, but we have to recognise that we are a crowded island and we all have to eat—and you cannot eat a solar panel.
There are plenty of calls on land use, for housing, for water management and drainage, for amenity and the environment, for factories and transport uses and, of course, for food production. My amendment seeks to balance the tension between energy and food production. It cannot be left to an operationally independent private company—GB Energy—and the directors who have no concern for food to get carried away and undermine the food security of our nation.
It is because of these tensions that the last Government proposed a land use framework, so we can strike the right balance as a nation between these competing land uses. I note we are still waiting for that to be published by this Government, who have exhibited quite a cavalier disregard for anything that happens in the sticks, unless they can cover it with concrete or carpet it with panels.
At this stage I should declare my interests as a director of companies involved in the agricultural supply and farming industries. But this is not about my personal interests. Protecting the best and most valuable land is in the national interest. I am not alone in stating this. The Minister, the noble Baroness, Lady Hayman, talks about food security being national security, and I agree.
Put simply, the UK is not self-sufficient in food and continues to rely on the kindness of strangers to feed it. It is important, because last November I asked a Written Question about how many hectares of solar farms were currently being considered under the NSIP regime. The answer came back that there were about two farms covering 1,400 hectares under consideration. Now, I know in Norfolk alone there are 7,000 hectares and five schemes. It is the same elsewhere. The Government have simply lost control of the numbers on renewables. They are unsighted on the stampede to take our best land out of production and lock it away for a generation. There is an unthinking dash for renewables overlaid by a reckless indifference about one of our largest industries: the food industry, the backbone of private enterprise on our shores. GB Energy has no concern for any of this, but it should. That gets to the heart of why these amendments are needed to the Bill. We cannot afford to be careless with our food supply.
Last year national wheat yield was down 25%, from over 14 million tonnes to about 11 million. It is partly explained by bad weather, but also by so much productive land being temporarily placed in environmental schemes— there was a herd effect. I am pleased to say that plantings have bounced back this season; but that 25% reduction should serve as a warning about the fragility of our food supply.
A casual approach to land use materially affected our ability to feed ourselves before anyone even realised. As I say, the cultivated land has bounced back this year and the damage has been repaired, but when land is converted to solar it is locked away not for one season but for 30 years—a whole generation. That is consequential; we cannot accidentally sleepwalk into locking away our best land. It needs a more planned approach and that is why we need directions.
I am grateful to your Lordships’ Library for providing me with a best estimate of the different types of farmed land here in the UK. In essence, Natural England estimates that, under the classification system established in 1966, about 21% of the land under cultivation and grazing is grade 1 or 2, and 21% is the upper end of good grade 3—the best and most versatile land. If we make an allowance for the lower end of grade 3, I suggest that about half the 8.9 million hectares of farmed land in England could be classified as the most productive and worthy of protection. This is the land that is the subject of these amendments.
I am not going to dwell on the difficulties the Library tells me it had in collating this information, but if we just accept—and be gentle with me—that about half the land is grade 1, 2 or 3, which is the best land, that would still earmark about 4.5 million hectares for non-food uses, including renewables. I am going to refrain from describing this vast area—4.5 million hectares—in the traditional unit of measure, which is probably football pitches. I venture to say that 4.5 million hectares is about two Waleses, or nine Norfolks. I have heard it said that the amount of land that could be devoted to solar, even in the most adventurous scenario, is probably no larger than the area devoted to the UK’s golf courses, but that is to miss the point. If indeed the coverage is much less than 1%, there is nothing to fear from protecting the best land. In other words, if my amendment is accepted, there will still be plenty of the worst land for renewables, just not in the places where the best land feeds us.
Let us move on to the economics. Thanks to this Government, the public now start to realise how farmers work in difficult conditions to eke out a precarious existence in a risky enterprise buffeted by weather and global trade issues. The reward for this all effort is about £200 per acre, often having invested millions in productive plant and equipment such as sprayers, tractors and combines. These farmers are being offered about £900 per acre to sit on the beach, with no-risk, index-linked income streams for 40 years, by giving up farming and installing panels on their land. There are whispers that, should they do this, after a passage of time that land would then be zoned as previously developed land, rather than farmland, and be worth considerably more as a result. You cannot blame landowners for seeking to covert to solar—except that some landowners want to turf off their tenants, and that is no good. It is a completely rational thing to accept, and completely in their private interest to do so. This amendment recognises that, while it may be in their private interest, it is not in the national interest. We cannot have a situation where it is open season for renewables regardless of the wider consequences.
The state exists to arbitrate between the private and public interest, and I say that we cannot be cavalier or careless with our food supply, however much we crave clean energy. We need to strike the balance between eating and heating. That means ensuring that food is preferentially produced on the grades 1 and 2 land, while accepting that grades 4 and 5 can contribute in other ways—that is the way forward. That said, even where grades 4 and 5 land could be contemplated for renewable energy, it is often the case that while some of this is impaired in agricultural terms, it has other values. Some of those values may include amenity value, outstanding landscape value or contribution to a wider social benefit, perhaps in an area of natural beauty. It is for this reason that, even in cases where land may be at the poorer end of production, changes in use to solar or renewables should be consulted on by residents within a 20-mile buffer of the widest proposed land extent. My amendment 104 provides for this stipulation.
Taken together, my amendments seek to establish and enforce the balance and tension between the private and public interests. That is what the state is for: to protect us from the herd effect that can stampede a whole industry in a particular direction before it can be appreciated what is happening, as we saw last spring.
I want to talk about why it is important that GB Energy is constrained by these amendments to the Bill. It is partly because no one in the countryside is prepared to take anything on trust from this Government going forward. Labour does not really understand the countryside—but I tell you, the countryside understands Labour.
Great British Energy is a company. There is to be a fiduciary board, and there are duties under the Companies Act 2006 to promote its self-interest—the private interest. The Secretary of State will be empowered by the Bill to make certain directions, but we would not need these amendments if the nature of those directions were already in the Bill. We should not be surprised if, left uncontrolled, GB Energy acts as company law requires: in the best private interests of the company, not the public interest of the country. It is not scaremongering; it is what we have just seen, having spent hours and hours debating the Water Bill, so there is precedent for wanting these sorts of controls.
My amendments would require the Secretary of State to ensure that GB Energy focuses its activities in such a way that it does not undermine our food security—our national security—and that it acts in the wider national interest and does not pursue its own private interest. There is no such requirement, so it falls to us to ensure that there is.
My amendments are important for another reason, and I want to dwell on an economic reason why they are is so important. I referred to the nature of the contracts being offered to farmers to incentivise them to give up food production and sit on the beach: long-term, state-backed, secure income streams that are index-linked, underpinned by a physical asset in a country with strong property and commercial rights. These are the sorts of investments that pension funds around the world seek out. The parcelling, packaging and collateralising of such assets into derivatives is what Wall Street thrives on. If we do not apply limits, we risk the perverse incentive that would convert much more than 1% of the British countryside—a huge amount of land—into nothing more than a global energy play, with the benefits transferred to offshore territories, controlled from who knows where. The countryside is not there to be collateralised, so GB Energy should be directed to give preference to the hard-grafting and toiling farmers of the best lands, who feed us, rather than driving the countryside in the direction of providing passive income for global investors elsewhere.
Failure to accept these amendments would be a policy designed to kill the family farm even faster than the Government are planning to do so already, transferring control of much of the countryside to Wall Street, while British jobs—proper jobs—and real family businesses are greenwashed out of existence. Rural Britain will be rinsed unless we get a grip here, with its landscape and environment impaired.
To summarise, the stampede for solar is economically rational for individual farmers, but economically illiterate for the countryside and our environment. It is not a matter of food security versus energy security: I know we need to keep the lights on, but we have all got to eat. Food security and energy security can and should be bedfellows, and this amendment provides a sensible framework whereby they can live alongside each other, in the national interest, and with the consent of those most directly affected by the installations.
In essence, GB Energy should be required by statute to prevent a repeat of—a modern version of—the Highland clearances on the lowlands, in an unthinking and unconscious dash for renewables on our best land. GB Energy cannot have operational independence over our food supply without limit or regard to consequence. Can the Minister tell us why the Government would be against this when, under my proposal, we could still have nine Norfolks-worth or two Wales-worth of land to work with, but at least with the security of food in our bellies? I beg to move.
Lord Cameron of Dillington (CB)
My Lords, I sympathise with the amendments on land use put down by the noble Lord, Lord Fuller. He wishes to ensure that in this very densely populated country of England we use our limited available land wisely. England—not the UK—is, I think, the fifth or sixth most densely populated country in the world. That includes countries such as Singapore, which are, in essence, city states. So, it is right that we use our land wisely: per head of population, we do not have much of it. Furthermore, as I have said on several occasions, it is the primary duty of any Government to ensure that they can feed their subjects. I believe that the food agenda comes as high as—if not higher—than the defence agenda, although they are clearly very closely interlinked.
However—I am sure noble Lords could all sense a “but” coming down the line, though I shall try to be gentle with the noble Lord, Lord Fuller, as he requested—I am not certain that this is the right way to approach this issue. Land use must be planned in the round. We all need to step back and examine our needs from land as a whole, which include food, biodiversity, flood relief, forestry, access for leisure and health, much-needed housing and of course energy.
The noble Baroness, Lady Young, and others, including me, have been banging on about this for several years now. We need a land use framework in the round. I am afraid that a uni-purpose focus such as found in the noble Lord’s amendments, however sensible it may seem in today’s circumstances and business, can only limit our ability to sensibly plan a wider, step-back, more holistic strategy.
For a start, circumstances may change. I see our land use framework as a constant work in progress as the world changes around us. Such changes may include the way our food is produced, the latest imminent threats from foreign countries or the importance of energy to our economy—thus, in this context, the ever-changing balance between food security and energy security.
While today the priority of the noble Lord, Lord Fuller, is clearly food security over energy, it may be that in the future grade 3 land, for instance, is superfluous to our food security and better off focused on biodiversity or energy. I am afraid that I am not able to support these amendments, however much as a retired farmer I sympathise with their very good intentions.
Lord Roborough (Con)
My Lords, I support my noble friend Lord Fuller’s Amendments 67, 73, 104 and 105, which I have also signed. I first congratulate him on a polished and passionate introduction to his first amendments.
Amendments 67 and 104 would prevent GB Energy supporting renewable energy projects on, or owning, land that is grade 1, 2 or 3 to prevent the loss of good agricultural land. Amendments 73 and 105 would encourage GB Energy to pursue developments on land that has designations of grade 4 or 5 or on non-agricultural land.
The nationally significant infrastructure projects that have been signed by our Secretary of State have already had a detrimental impact on our best and most versatile farmland. In answer to my Written Question on 2 December about the agricultural impact of the Cottam, Mallard Pass and Gate Burton solar farms, the Minister—who is sitting in his place and is also doing such an able job of shepherding this Bill through this House and Committee—stated:
“For each of these cases, the Examining Authorities’ Reports have been published alongside the Secretary of State’s Decision Letters”,
so I had to find the answers myself. The examining authorities are clear that best and most versatile land, including grade 2, is being lost to existing solar developments. It seems hasty that some of the largest and most controversial solar developments appear to be being signed off with little or no weighting given to the quality of the land or food security. The justification seems to be that the land will be returned to agriculture after 30 or so years, as my noble friend pointed out. Unfortunately, we need to eat for those 30 years.
At Cottam, 5% of the area was best and most versatile land. The report said
“according to the ExA, the Proposed Development would not meet the requirements of the NPPF in this regard and subsequently accorded this a negative weighting”.
At Mallard Pass, 40.7% of this project was best and most versatile land, with the remaining 56% grade 3b —so captured by this amendment but not by “best and most versatile”. The report said
“the ExA acknowledges that there is a corresponding degree of conflict with the Government’s Food Strategy aim of broadly maintaining domestic production at current level, and that there is a potential higher agricultural yield and associated economic benefit from the farming of BMV land that would be lost”.
In answer to my Oral Question prior to Christmas, the Minister, the noble Baroness, Lady Hayman of Ullock, conceded that the Sunnica project had a negative albeit slight impact on farming. In answer to an Oral Question from my noble friend Lord Forsyth of Drumlean, the noble Baroness stated that grades 1 and 2 farmland were not being developed for solar. As my research has demonstrated, this is not entirely true for important grade 2 farmland nor for grade 3a.
It is clear from these examples that the Government’s goal of energy security from renewable energy trumps food security every time. I ask the Minister two questions: with so much land of grade 4 and below in the UK, including in areas with strong solar radiation, why is the Secretary of State so eager to approve sites which undermine our food security? Why are the Government not being straight that this is happening? I had to dig for some time to answer these questions after the replies I was given. Are the Government seeking to hide the embarrassing details of these actions? Research from SolarQ demonstrates that solar development is falling disproportionately on grades 1, 2 and 3 land, and underproportionately on weaker grades. Why is this?
The proposed changes to the National Planning Policy Framework would remove the protection for agricultural land for food production, simply requiring that poorer land be preferred. Given that the current NPPF is already undermining best and most versatile land use, weakening its protection makes a bad situation worse and makes my noble friend Lord Fuller’s amendments even more important.
At present, it seems that this Government will approve any renewable energy project development that anyone cares to put forward, without an overall strategy for where those projects are best placed. Our Government began development of a land use framework that would help inform and clarify this decision-making. The current Government have committed to continuing this work and publishing that framework in the not-too-distant future; I believe consultation is expected to begin at the end of this month. That would allow for an open discussion about our priorities and a rational process for determining where we want our solar and wind energy infrastructure to make sure that each of our limited and precious acres is put to its best use.
It is clear that our best farmland is not being treasured or protected by the Government and it is critical that we use every opportunity to protect it. In the Great British Energy Bill, we have the chance with these amendments to prevent at least part of the industry pursuing damaging developments that are not in our national interest.
I hope the Minister will see the wisdom of putting these protections in the Bill. Would he be willing in his department’s involvement in the land use frame-work also to ensure that renewable energy project development happens on our least agriculturally productive land?
Baroness Young of Old Scone (Lab)
My Lords, this group of amendments pick up the right issue but produce the wrong solution. There is no doubt about it: we need the land use framework to come forward very swiftly to avoid the sort of piecemeal decision-making that we are hearing about, not only on food security and energy but on all sorts of other issues.
To try to task GB Energy with this role is entirely the wrong approach, because the reality is that GB Energy is simply a medium-sized company aimed at investing in a comparatively small number of projects, and again would be a very partial solution to these big dilemmas about how we use the very scarce land we have at our disposition in this country. I want the Minister to press his colleagues in other government departments, because we require a multi-department land use framework that will take a multifunctional look at how we use land. We need not just to look at the strategic spatial energy plan, which will also talk about locational issues and land use in respect of energy; that spatial plan must be nested within the land use framework, and it is increasingly pressing that it comes forward.
The noble Lord, Lord Fuller, asked us to be gentle with him. I will say very gently that in this House we do not talk for 12 minutes on an amendment.
Lord Bellingham (Con)
My Lords, I support my noble friend Lord Fuller, who put forward a very convincing argument, supported by my noble friend Lord Roborough.
I will make three very brief points. First, surely one of the key lessons of the Ukraine crisis concerns food security. That means taking very seriously our attitude to grade 1 agricultural land. I do not agree with the noble Baroness that this is not the right mechanism for trying to entrench the value of that land. This is a narrow amendment that seeks to put the responsibility on Great British Energy, which is, after all, being created by statute. I can think of no better way of trying to curtail the use of this land in ways that undermine food security.
Secondly, I hope the Minister will find time to comment on the point that my noble friend made on tenant farmers. If a landowner, large or small, decides to embark on a solar project, that is something that he has the right to apply for: it is his land and, arguably, farmers are being encouraged to diversify. If there is a tenant on that land—for example, a family who might well have an expectation to go on farming that land for at least one more generation, maybe for 40 or 50 years—under the 1948 Act, the farmer in question cannot be kicked out if the landowner wants the land for farming. However, if the land will be allocated for other uses and permission is given for a solar array on that land, the tenant has no choice but to vacate his farming operation.
Of course, there will be issues with compensation, but we are talking about a situation that could be incredibly damaging and unfair to a group of farmers in this country. It is a large group of farmers, who are already under a lot of pressure because of other government policies. I urge the Minister to look specifically at that point. If he cannot respond to it today, could he ensure that he writes to Ministers in other departments to clarify it?
Finally, the Government have been quite cavalier in appreciating and valuing local opinion. I will give an example from Norfolk. I declare my interest as a landowner in Norfolk, although what I will discuss is nowhere near where I live. There is a group of solar array applications east of Swaffham on the A47. I think there are five sites—my noble friend Lord Fuller will correct me if I am wrong—amounting to 6,000 acres and straddling about four villages east of Swaffham. There is a huge amount of local opposition. Does the Minister think it right that these people should be ignored? Would it not be far better if the applications went through a local planning process? Indeed, there would be an appeal—but, if so, the local residents would obviously have the chance to put their point of view. Currently, there is a feeling that, in the interests of trying to get these key infrastructure projects through, local people are being ignored and cast to one side.
With those few remarks, I support my noble friends Lord Fuller and Lord Roborough, and wish them well with their amendments.
Lord Hamilton of Epsom (Con)
My Lords, first, I assure the noble Baroness, Lady Young, that I will not speak for 12 and a half minutes.
As I have established, I know a little about agriculture but not an awful lot. Something that occurred to me was that if you want to put up a massive solar plant covering a large area of agricultural land, you want low, sloping, south-facing land. That strikes me as precisely the same as the thing you want to grow crops on, so there is a direct conflict here between food production and solar panels. I point that out to the Committee because this is a vexed problem to which there is no easy solution.
Baroness McIntosh of Pickering (Con)
My Lords, I lend my support to my noble friend and congratulate him on moving his first amendment. As in Norfolk, there is a huge problem across North and East Yorkshire, where tenant farmers face being bounced off the land that they currently farm for solar panels. I hope that the Minister responding to this little group of amendments will use their good offices to ensure that solar panels are best built in more appropriate places. I say that as honorary president of the UK Warehousing Association, which has a campaign—of which the Minister, the noble Lord, Lord Hunt, is aware and, I hope, supportive—to ensure that we can get solar panels off the ground, particularly in productive grade 1, 2 and 3 agricultural land, while also helping warehouses to create more of their own energy.
I believe this is a debate to be had. I support those who say that it is perhaps not the role of Great British Energy to do this, but we have to raise this at every turn. If we run out of productive farmland on which to grow food—and to allow tenant farmers of every generation, including new entrants, to enter the market—it would be a very sorry state indeed.
Earl Russell (LD)
My Lords, I will speak very briefly to respond to the amendments in the name of the noble Lord, Lord Fuller. We congratulate him on moving his first amendment—indeed, he got his own group of amendments together, which is to be welcomed. I am afraid that, on these Benches, we cannot support what he is doing; this is just not the right Bill to do it. Even if his amendments were successful, all they would do is limit the powers of Great British Energy to do this stuff; they do not limit any other organisation or body from doing it.
It is very important that the Government come forward with the land use framework as quickly as possible—these are important issues. My understanding is that that Bill should come through in April or around then. These are complicated issues; we are a small island and there is lots of competition on our land use.
Labour also promised us a rooftop solar revolution. We strongly support that and encourage the Government to continue to work on its delivery. France, for example, gets 5% of its electricity from solar panels on car parks. I would like to see this Government replicating that. We have heard about warehouses, but many are constructed to a standard that cannot take solar panels, because the roofs are not strong enough. We must do more to get solar panels into commercial spaces and housing.
I also encourage the Government to do more on the future homes standard. There is uncertainty about whether it will have proper, fit and strong purposes and standards for new-build houses. Then there is the issue of retrofitting existing houses and how we get more energy-efficient measures into them.
I will point out something to the Conservative Benches. The idea that we can either eat or have solar panels is a false dichotomy. I note that, while Amendment 67 applies to agricultural land of grades 1, 2 or 3, Amendment 73 applies to agricultural land of grades 4 and 5, so the Conservatives are covering quite a lot of grades with their amendments. I argue that climate change itself is the biggest issue for us in terms of food security, not solar panels that cover far less than 1% of our land. We have just had the worst harvest since 1988—if not ever, as some people say—and that was because of a continuous wet climate. We have had the failure of the last autumn and winter crops. It is climate change itself that is causing us to have problems with food security—and that is causing massive problems for our farmers.
I welcome the amendments but they are not ones that we can support.
The Earl of Caithness (Con)
My Lords, I apologise to the Committee for missing the first bit of my noble friend’s introduction to his amendments. I take this opportunity to ask the Minister whether he could update the Committee on where we are with the land use strategy. Like the noble Lord, Lord Cameron, I, too, have been banging that drum for some time.
As the noble Baroness, Lady Young of Old Scone, gently chided my noble friend for the length of his introduction, I say to her that he is perfectly entitled to speak for 12 and a half minutes when introducing an amendment. That would not be the case if he were just one of the rest of us.
Lord Ashcombe (Con)
My Lords, I support my noble friend Lord Fuller’s group of amendments. Significant construction projects inevitably bring competing interests. In this case, the clash is between renewable energy development and agriculture, as well as other environmental considerations beyond decarbonisation. Land use, particularly on a densely populated island, must be approached with great care. Currently, we import approximately 40% of our food. While today’s discussions may focus on volatile oil and gas prices, tomorrow’s may shift to the cost and availability of food. This creates a fundamental dilemma. What should take precedence: food or energy?
Food security highlights the need to prioritise high-grade land for agriculture. However, the Government’s plan to build 1.5 million homes—typically on the edge of towns and villages—threatens this priority. Settlements have historically been sited on fertile land, and expanding housing developments will inevitably consume some of it. Essential services such as schools and shops will require further land use, compounding the problem.
Designating renewable energy as part of the nationally significant infrastructure plan risks bypassing legislation designed to protect communities and high-grade land. Restricting onshore renewable projects to grade 4 and 5 land would safeguard high-quality agricultural land and reduce the impact on the more heavily populated areas. According to Solar Energy UK, currently solar installations take almost 20 times the amount of grade 1 land available as opposed to grade 5. I seriously question whether this is the right ratio and ask the Minister whether he believes that it is.
With the Government’s ambitious housing targets, should it not be mandated that all new building, including homes and commercial premises, be fitted with solar panels, as mentioned partially by the noble Earl, Lord Russell? This would make better use of land already out of agricultural use and reduce the pressure while advancing renewable energy goals.
Great British Energy should refrain from developing high-grade agricultural land, nor is there any justification for it to acquire such land unless Amendment 104 is adhered to. Once agricultural land is repurposed for construction, it is rarely restored. At the end of their operational life, renewable projects will leave behind brownfield sites that will probably be redeveloped, permanently altering the land’s use, leading to unintended consequences for the environment.
I draw attention to the potential conflicts between decarbonisation and other environmental concerns—for example, the low-level but persistent noise from onshore wind and solar farms, generated by inverters and transformers, which can disturb rural communities. Biodiversity loss is another critical concern, also highlighted by my noble friend Lord Fuller.
I strongly support the amendments and urge the Committee to carefully balance food security, environmental protection and renewable energy expansion.
Viscount Goschen (Con)
My Lords, I remind the Committee of my interests in that I own a farm in Devon.
My noble friend Lord Fuller has done the Committee a service by raising the issues of planning and land resource allocation more generally in the context of the Bill. I listened carefully to the remarks of the noble Baroness, Lady Young of Old Scone, and I think she is right: this is a very much broader issue than this relatively narrow Bill. None the less, this is an important moment to raise such issues. I very much hope that we will get a substantive response from the Minister when he addresses these considerations.
Baroness Young of Old Scone (Lab)
I was promised by the Conservative Government a land use framework by Christmas 2022; I did not get it. I was promised it by Christmas 2023; I did not get it. I would like it now from a Labour Government.
Viscount Goschen (Con)
My Lords, knowing that the noble Baroness has waited so long puts my noble friend’s 12 and a half minutes into perspective. I dare say the Minister will ride to her rescue very shortly.
This is an important issue. We have had a number of agricultural debates over recent weeks, and one of the key themes has been the need to put food production at the very centre of agricultural policy. The view of the farming community is that that really is not the case at the moment. Farmers need clarity around the policy framework in the context of this Bill and, indeed, more broadly.
I listened carefully to the remarks of a number of contributors that even solar installations are long-cycle, high-capital-intensity investment decisions. There is an issue around whether land taken for solar would ever, in reality, be repurposed for agriculture.
I recognise that this is a broader issue in many respects than the narrow confines of the Bill but it is important for the Government to give us the context.
Lord Teverson (LD)
My Lords, onshore wind has a remarkably small footprint in terms of its use of the land, which seems to get forgotten. I can see 30 wind turbines from my bedroom window; the nearest is about 1 kilometre away. They are excellent: they show that renewable energy is working. We should have more of them, and I hope that the Government will continue to make it easier for these developments to take place towards our 2030 objective of decarbonised electricity.
Lord Offord of Garvel (Con)
My Lords, I speak in support of the amendments in the names of my noble friends Lord Fuller and Lord Roborough—Amendments 67, 73, 104 and 105. In bringing forward these amendments, my noble friends raise the matter of great importance that is the agricultural industry, which has been subject to punitive measures by the Government in the form of the family farms tax raid.
Amendments 67 and 104 prevent Great British Energy from supporting projects on or owning land that is grade 1, 2 or 3 to prevent the loss of good and high-quality agricultural land. Alternatively, Amendments 73 and 105 encourage GBE to pursue developments on land that is designated grade 4 or 5 —essentially, the worst agricultural land. It appears obvious that the Secretary of State, who directs Great British Energy, will support an approach that balances the need for renewable energy with the need to preserve our nation’s food security.
As explained by my noble friend Lord Fuller within his allotted time, the purpose of this group of amendments is to protect the best and most versatile land for food production. I echo the concerns of my noble friend Lord Roborough that some of the largest and most significant solar developments seem to be approved without due consideration given to the quality of the land which is being sacrificed in the process. It is an undeniable fact that grade 2, the best and most versatile agricultural land, is being lost to existing solar developments. That is not merely a matter of farming but of our country’s food security. As my noble friend Lord Fuller so neatly put it, at best Great British Energy may help to turn our lights on and heat our homes, but there will be no food on the British people’s plates.
The question is not whether we should develop renewable energy but where we should develop it. The goal of achieving energy security should not come at the expense of food security. I ask the Minister to give us his full assurance that under no circumstances will the Secretary of State approve developments that undermine our nation’s ability to feed itself.
Recent analysis of land take by ground-mounted solar installations shows a concerning trend: solar developments are disproportionately targeting the best and most versatile land—that is, land classified under grade 1 and 2. Across England, only 17% of land is classified as grade 1, yet 19% of the land used for solar installations falls into this category. This trend violates the general recommendation to avoid productive agricultural land development. In contrast, grade 5 land, the poorest agricultural land, has been disproportionately avoided. That is exactly the type of land that solar projects should be prioritising, yet it remains underutilised. Only 0.5% of solar installations are on grade 5 land, despite such land constituting 8% of England’s agricultural landscape.
The issue is particularly pressing, given the Government’s ambitious target to triple solar power capacity to 50 gigawatts by 2030. As we expand solar energy, more and more land will be acquired. However, unless active measures are taken to ensure that the correct land is used for these installations, we will continue to see the loss of high-quality agricultural land, exacerbating concerns over our nation’s food security. Amendment 73, therefore, is vital: it seeks to ensure that renewable energy development does not come at the cost of our most productive agricultural land.
Lord Hunt of Kings Heath (Lab)
My Lords, I welcome the contribution of the noble Lord, Lord Fuller, on his first set of amendments. Of course, he is right that our food security is very important indeed to this country, just as moving as quickly as we can towards clean power is also very important, and I certainly accept that of course there is a balance to be drawn. Certainly, the importance of maintaining our natural resources to support UK agriculture, and supporting local stakeholder consultation in affairs that affect their surroundings and the quality of the environment, are values that I share with noble Lords who have spoken in the debate tonight. But I must come back to the fact that we are talking about Clause 6 and the issue of whether we should seek to amend Clause 6 in the directions that the Secretary of State can give to GBE.
I repeat what I said in the first two groups: these directions are a backstop where an intervention is needed, not a way in which to develop policy in relation to land use. In response to my noble friend Lady Young and other noble Lords, my understanding is that the Government plan to publish a 12-week consultation on land use early in this year. The consultation will inform the publication of a land use framework in England, to be published later on in this year.
I have also noted constructive comments about the need for us to develop—indeed, some noble Lords wish us to mandate—the use of solar in warehouses and in industrial and domestic properties, and these matters are under very urgent consideration at the moment. But we will always need ground-based solar, as well as onshore wind, as the noble Lord, Lord Teverson, suggested, which of course is why we got rid of what was in effect a ban that the last Government so grievously introduced in relation to that development.
The projects that GBE will be concerned with, that it will invest in and that it will give guidance and encouragement to—because of course that is an important part of its role, too—will be mandated. Inevitably, its job will be to consider government guidance on the most suitable land for renewable energy projects, and any project that it is involved in will be subject to the same rigorous planning processes that currently exist to protect agricultural land, minimise the impact on food security and provide ample consideration for local community interests.
The environmental impact assessment regulations of 2017 require that certain types of projects, including large-scale renewable energy developments, undergo an environmental impact assessment to assess their potential impact on the environment. Developers must also ensure that their projects comply with environmental regulations, which can include mitigating impacts on local wildlife, water resources and soil quality.
Further, the National Planning Policy Framework includes the preservation of agricultural land for food production as a key consideration in its legal framework governing renewable energy projects. It emphasises the need to protect the best and most versatile agricultural land, namely grades 1, 2 and 3a, from development that could compromise its productivity. Developers must consider the classification of the land involved in renewable energy projects and ensure that developments do not conflict with planning policies aimed at safeguarding agricultural land.
On the noble Lord’s suggestion that there is a dash for renewables, yes, there is a dash for renewables—I do not deny it. We have to have a dash for renewables. But that does not mean that existing protections are being overridden. Of course we recognise that poorly sited onshore projects can have impacts on the local area, which is why we will retain important checks and balances to protect the environment.
But, in the end, we come back to why we have Clause 6. It is a backstop power which we hope will never have to be used; it is not a way of seeking to change policy in relation to land use.
Lord Fuller (Con)
My Lords, we have had a good debate that has explored the tensions between food and energy security in the context of the national interest. It has recognised the tensions between the establishment of a private company, GB Energy, acting as it is required to do in its own narrow self-interest, and its responsibilities as a public body with a duty to set the right example.
I have taken from some of the comments that, “Lord Fuller has perhaps played the right notes but in the wrong order”. I am not Morecambe and Wise to my noble friend Lord Roborough, but I would just like to refer to some of the points that have come along.
I am grateful to the noble Lord, Lord Cameron of Dillington, for his comments on the balance of land use and the importance of the “tilted balance”. Please do not misunderstand: my amendments are not saying that there should be no solar or renewables, or that we should have only food production. It is about where we put this thing in the tilted balance.
I am grateful to my noble friend Lord Roborough for shining a light on the fact that, notwithstanding that the Minister said, “Well, there are rules to be followed”, the rules are not being followed. That is why it is important that these amendments are made to the Bill, because we cannot really give the benefit of the doubt: if hitherto they have not been followed, why will they be followed now?
I am grateful to the noble Baroness, Lady Young of Old Scone, but even more grateful to the noble Earl, Lord Caithness, for being gentle with her so I did not have to be.
The noble Viscount, Lord Goschen, talked about the broad picture, and I am grateful to the noble Lord, Lord Bellingham, for his point about tenants, because that has been lost as part of the social fabric in this.
I will be brief. This is such an important issue that I do not feel we can just leave it on trust that the Minister for Energy Security will necessarily dovetail in with the Minister for Food Production to get that tilted balance right. The nation cannot risk GB Energy going rogue, and there has to be a better way with that. It is hard. Energy security and food security can be bedfellows: we are not being fundamentalist about this. At heart, my amendments are about putting food production on the best land, and solar and other renewables on other land.
We have we have fleshed out quite a few details and I know we are in Committee. I hope the Minister will meet with me and colleagues before Report, so that important safeguards can be taken into account in the Bill, if not in Clause 6 then perhaps somewhere else—who knows? I also hope that we may even have the heralded land use framework which the noble Baroness, Lady Hayman, promised before Christmas—but there we are.
On the basis that the Minister will meet me, I am prepared to withdraw these amendments, but in so doing I signal my intention to re-present them on Report, having taken soundings from colleagues that, if we cannot make satisfactory progress towards getting an acceptable way forward, we may need to test the opinion of the House. Meanwhile, I beg leave to withdraw my amendment.
“(1A) The Secretary of State must give a specific direction to Great British Energy that it must re-invest all profits into the company.”Member's explanatory statement
This would require Great British Energy to re-invest all profits back into the company.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I rise to move Amendment 78 and speak to the other amendments in this group on Great British Energy. It is essential that we approach the future of energy in this country with the urgency that it warrants. The energy security of this nation is far too important to be left to chance. Today we have a pivotal opportunity to shape the future of Great British Energy in a way that prioritises transparency, accountability and the long-term benefit of the British people.
My Amendment 78 requires that all profits made by Great British Energy be reinvested in the company. This is a crucial provision that would seem to be self- explanatory. It is designed to ensure that Great British Energy focuses on long-term growth and the sustainable development of the UK’s energy infrastructure. It is crucial. If we are to establish a state-run energy company, it must operate with financial discipline and focus. Reinvesting profits ensures that GBE’s resources are used to strengthen its core business, to innovate and to contribute to the UK’s energy independence, rather than being diverted elsewhere. We must ask ourselves whether we want a national energy company that builds the future of Britain or one that becomes a drain on the public purse, burdened by external obligation?
I turn to Amendments 79, 81 and 82, tabled by my noble friend Lord Petitgas. Amendment 79 seeks to prevent Great British Energy from investing in projects that are reliant on government subsidies. Let it be clear. Subsidies distort markets, breed inefficiencies and create dependency. My noble friend sees this as a critical step in ensuring that Great British Energy operates as a self-sustaining entity. By preventing reliance on subsidies, we are ensuring that Great British Energy focuses on projects that stand on their own merits, fostering true innovation and competition. This is about making Great British Energy a commercially viable entity that does not lean on taxpayer funding but instead drives growth through its own strategic investments.
Amendment 81 introduces a critical measure of accountability and transparency. It requires that all investments made by Great British Energy undergo an independent third-party valuation. We cannot allow public funds to be spent without rigorous scrutiny. Independent valuations, such as the one that the UK Infrastructure Bank endured, will serve as an essential safeguard against potential mismanagement, ensuring that every investment is sound, justifiable and aligned with the long-term interests of our energy sector and taxpayers. This amendment goes beyond the traditional notion of financial oversight. It is about ensuring that every decision made by Great British Energy is transparent, free from political influence and fully accountable to the public. As we are entrusting a significant portion of taxpayers’ money to GBE, it is only right that we have an independent mechanism in place to assess whether the investments are wise and sustainable.
Amendment 82 limits Great British Energy’s investments to UK-registered companies. This is a straightforward yet powerful measure. Britain’s energy security in our national economy must be the top of this Government’s priorities when discussing this Bill. In an age when national security and economic resilience are increasingly under threat, why should we allow public money to flow into foreign companies when it can support British jobs, British innovation and British energy security? Investing in foreign registered companies undermines this goal. We must ensure that any investment of public money supports British interests first and foremost.
I now address the important amendments tabled by my noble friend Lord Effingham, Amendments 83, 84 and 85, which ensure proper governance of fiscal prudence for Great British Energy. Amendment 83 refers to the cost control and prioritisation of resources. It seeks to limit the size of Great British Energy’s delegation to the UN Convention on Biological Diversity, ensuring that taxpayer money is used efficiently and that the company remains focused on its primary mission rather than on unnecessary expenses for international events. Amendment 84 requires Great British Energy to publish its principles and criteria for evaluating investments. This promotes transparency and clarity for universities, companies and innovators seeking backing, while ensuring that the investment process is accessible and competitive.
Finally, Amendment 85, which my noble friend Lord Effingham tabled jointly with my noble friend Lord Trenchard, mandates that Great British Energy does not co-invest with Chinese state-owned companies without prior notice to the International Trade Committee. It requires Great British Energy to not co-invest with Chinese state-owned companies without giving prior notice to the International Trade Committee of the House of Commons. In light of ongoing concerns about foreign influence, particularly from state- controlled enterprises, this amendment would provide a necessary safeguard. It ensures that any such investments are subject to proper scrutiny, maintaining the integrity of our energy sector and the security of British taxpayers’ money.
Lord Petitgas (Con)
My Lords, I support the amendments in my name and those of my noble friends Lady Bloomfield, Lord Trenchard and Lord Effingham. They aim to ensure that the proposed entity, Great British Energy, operates in a manner that aligns with fiscal responsibility, transparency, accountability and the overarching national interest.
Amendment 78, tabled by my noble friend Lady Bloomfield, mandates the reinvestment of all profits back into the company. The reinvestment question is a good test of what GBE is about and its future performance. As I said, GBE is de facto a permanent capital investment vehicle that will be deploying capital in illiquid minority stakes. It is very unlikely that it will ever be able to dispose of those and realise a lot of liquidity, so at best it will deliver some dividends. If it did, it would be best for it to be reinvested, ensuring that the £8.3 billion is the maximum commitment for taxpayers.
My Amendment 79 in my name stipulates that Great British Energy must not invest in projects that are reliant on government subsidies. GBE is already structured as a crowding-in investment, which means that it is likely to take more risk and accept lower returns than the private sector. This is what the mandate of “facilitate, encourage and participate” means to me. There is nothing wrong with that, but the private sector and foreign funds should be attracted to the GB partnership for that reason. Therefore, I see no reason to pile in and give the private capital two bites of the cherry by allowing it to work with GBE with government subsidies.
I spoke enough about Amendment 80 earlier. Amendment 81 builds on it with a firm measure of accountability. By requiring independent third-party evaluations of GBE’s investments, we introduce an essential safeguard against conflict of interest and political interference. Transparency and objectivity in evaluating investments are paramount, especially when the risk of poor decision-making with public funds looms large. As your Lordships know, I am particularly concerned by the lack of detail and definition of investment process and framework within GBE, at least at this stage. I believe that the Minister has taken good note of my concern about the lack of precision on an investment committee.
Finally, Amendment 82 limits Great British Energy’s investment to UK-registered companies. The purpose of this entity, as set out by the Government, is to bolster Britain’s energy security and our national economy. Investing in foreign-registered companies undermines that goal. We must ensure that any investment of public money supports British jobs, British innovation and British interests. This amendment ensures that GBE prioritises domestic enterprises, strengthening the UK’s energy sector and reducing dependency on foreign entities.
I will remind the House of the holy grails that I think we want to achieve with GBE. Number one is energy security; number two is energy sovereignty; number three is economic growth; and number four is low costs for bills and more employment. Indeed, we do not want GBE to outsource, be it our energy security, sovereignty or supply chains. We know it is an incredibly difficult topic because, as a country, we are ahead on decarbonisation, but we are behind in terms of ownership of our own infrastructure. We are also behind in terms of supply chains and we are behind on production of cable, wind turbines and other technology. Therefore, we have a lot of work to do in this area and I think it will be an extremely difficult topic because of supply chains, China dominance and the fact that we are behind on infrastructure and technology.
All these amendments share a common theme: safeguarding taxpayer money, ensuring operational transparency and prioritising the interests of the British people. Conservatives believe in the power of the private sector and market-led solutions and, where state intervention occurs, as in this case, oversight is extremely important. We urge the Government to accept these amendments and commit to ensuring that GBE operates as a responsible, efficient and transparent entity.
The Earl of Effingham (Con)
My Lords, I rise to speak in support of the amendments I have tabled to Clause 6 of this Bill, along with the contributions from the noble Viscount, Lord Trenchard. These amendments reflect three core principles of fiscal restraint, operational transparency and the safeguarding of national interests.
Amendment 83 seeks to limit the number of Great British Energy representatives attending conferences of the parties to the United Nations Convention on Biological Diversity to no more than five. I greatly understand the importance of international collaboration on biodiversity, but we absolutely must be realistic about the need for cost control and proportional representation. These international summits are indeed vital, but we have to recognise also that very significant amounts of taxpayers’ money are spent on travel and accommodation. It is simply not appropriate for Great British Energy, funded by the public purse, to send unnecessarily large delegations. By limiting attendance, this amendment ensures that taxpayers’ money is spent wisely, without detracting from the company’s core mission, which can be accomplished with a lean and laser-focused task force.
Amendment 84 would require Great British Energy to publish its principles, policies and criteria for evaluating prospective investments. One of the most persistent criticisms of government-led initiatives is the opacity with which decisions are often made. Entrepreneurs, innovators, universities and companies across the country deserve clarity when applying for backing from Great British Energy. For example, what metrics will Great British Energy use and what constitutes a worthwhile investment? By requiring the publication of this information, we will not only promote transparency, which should be encouraged, but foster a more competitive and accessible process for any prospective partners. This is good governance in action.
Finally, Amendment 85, tabled jointly with the noble Viscount, Lord Trenchard, addresses the critical issue of national security and economic prudence. It would require that Great British Energy does not co-invest with Chinese state-owned companies without prior notice to the International Trade Committee of the other place. The risks associated with Chinese state-owned companies are well documented. Co-investment with such entities could compromise the integrity of Great British Energy and pose long-term risks to our national security. Furthermore, it would expose the UK to significant economic and political vulnerabilities. To be clear, this amendment does not propose an outright prohibition, but it does mandate a right and proper process of scrutiny. Requiring advanced notice to the International Trade Committee will introduce a layer of accountability which will ensure that such decisions are not made in haste or without proper oversight.
Together, these amendments reflect a responsible approach to managing Great British Energy. They ensure that the company operates in a manner that is transparent, cost-effective and aligned with the UK’s strategic interests. I urge all noble Lords to support these amendments and help guide Great British Energy to be an entity that truly serves the British people both efficiently and prudently.
Viscount Trenchard (Con)
My Lords, I rise to support my noble friend Lord Effingham in his Amendment 85, to which I have added my name. Certainly, there are good reasons to be very cautious in selecting international partners with whom we will co-invest in the energy sector. Chinese state-owned companies are managed under rather different governance systems from those which the London Stock Exchange would consider appropriate for its listed companies. I agree with my noble friend that the Secretary of State should consult the International Trade Committee of another place before considering such co-investment.
Among other amendments in this group, I also support my noble friend Lady Bloomfield of Hinton Waldrist in her Amendment 78, which would ensure that GBE will reinvest all profits into the company. I agree with what she said in her speech, especially as GBE, as a publicly owned company, will not be subject to the disciplines of the marketplace, and its shareholder will be more concerned with achieving policy objectives through GBE than with maximising its return on investments and contributing to long-term growth.
Lord Teverson (LD)
My Lords, I will make a few comments on this. I am rather attracted to the amendment from the noble Baroness, Lady Bloomfield—one worries that, if this were a successful organisation, all profits would disappear back into the Treasury, which would be very unfortunate. I think that is an excellent bonus, but I suspect I probably would not put it in as an amendment to the Bill.
In terms of investment committees, I cannot believe that this organisation will not have a proper professional investment committee, which, I hope will probably have some external members as well. But this misses one of the key points—which I also would not put in the Bill, so I have not put down an amendment—which is the discipline with which the great Green Purposes Company, of which I am a trustee, keeps the feet of the Green Investment Group part of Macquarie to the fire. It is around checking and making sure through proper systems that the investments that are made are truly green and add to low carbon, rather than otherwise. There needs to be a check on that side so that the organisation itself also avoids greenwashing, which is one of the big issues that would undermine the reputation of Great British Energy if it should ever happen. Obviously, we hope that it would not, and I am sure the Secretary of State would not want it to, but there needs to be something within the organisation—an external audit would be good—that includes the impact on greenhouse gas emissions and biodiversity as part of its performance.
In terms of foreign companies, again, I would not honestly see this as being part of the legislation, but I would absolutely say that Great British Energy should be involved in joint venture companies with foreign businesses. That is one of the key areas where we should be able to bring intellectual property back into this country and work together with other nations, as well as strong UK companies. Those joint ventures would be extremely important in terms of the performance of this company.
Lastly, why are we discriminating against the UN convention on biodiversity? It is an organisation that is struggling. I am not disagreeing on how many people we should or should not send to it, but why that and not the United Nations climate change committee or the COPs? I do not get that. It would be very negative for that organisation, for which we are struggling to get international consensus to tackle the real and huge biodiversity problems that we have on this planet, if it was mentioned in a Bill of the UK Parliament. That would be absolutely negative for our international reputation.
The Earl of Effingham (Con)
That is one example of where, to monitor the cost, we need to keep a tight grip on the number of people we send in delegations. It does not aim at that organisation specifically; it is that plus anything else to which GBE might wish to send delegates.
Lord Teverson (LD)
I understand the issue of public expenditure, travel and all that, but the noble Earl specifically names a culprit in his amendment. That is what the Committee looks at and what it tries to get into Bills, so the amendment specifically aims at that organisation rather than the broader canvas.
Lord Hamilton of Epsom (Con)
My Lords, I support these amendments. I have certain reservations about my noble friend Lady Bloomfield’s Amendment 78, because it assumes these investments will make money. I have a bit of a problem with that. The real difficulty, as we have discussed, is that all the low-hanging fruit when it comes to investment in renewable energy has already been picked by the private sector. It does this quite simply by calculating a return on guaranteed income. Therefore, what worries me is that Great British Energy will be left picking up the bits that other people do not want to touch. The chances of it making money are probably quite small. Of course, it will have to count off the losses against the profits, so you need to have something at the end of the day. I know that the noble Lord, Lord Teverson, has achieved something little short of miraculous by investing other people’s money and actually making money, but that is an exception rather than the rule. The chances of Great British Energy squandering billions of pounds of taxpayers’ money are rather higher than it making any profits for anybody.
Clearly, accountability is very important when it comes to these sorts of sums. We should do everything we can to ensure that taxpayers’ money is looked after in the best way possible. Everybody should have great reservations about believing—to come back to the point I made earlier—that politicians are able to pick winners. The record on this has been absolutely abysmal. The chances of more money being lost than made are, I am afraid, very great indeed.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I urge the Minister to give serious consideration to the amendments in this group. They are designed not only to strengthen the accountability and transparency of Great British Energy but to ensure that the promises made to the British public, particularly on national security and economic prudence, are fully delivered. During the last election, the party opposite made numerous promises to the British people, including a commitment that Great British Energy would first and foremost protect and benefit the British people. At the same time, we must remember that this is not just about creating another energy company but about establishing a cornerstone of national resilience—an entity that must operate with the highest standards of responsibility, transparency and accountability to the taxpayers who are entrusting it with significant public funds.
My noble friends’ amendments reflect three core principles: fiscal restraint, operational transparency and the safeguarding of national interests. As we consider these amendments, whether on reinvesting profits into the company, ensuring strict investment criteria or introducing greater scrutiny of foreign involvement, I urge us to draw from the examples set by the erstwhile UK Infrastructure Bank. When the bank was established, it was supported by clear frameworks for accountability, transparency and rigorous oversight, ensuring that taxpayer money was spent efficiently and aligned with national priorities. Let us learn from this experience and ensure that Great British Energy, in its critical role in our national energy strategy, is similarly held to account.
We must remember that the future of energy is not just about ensuring supply but about safeguarding our economy, our security and the well-being of future generations. By taking these steps, we will ensure that Great British Energy not only is accountable to the public but operates with the highest standards of governance, efficiency and integrity. The amendments before us are crucial to delivering that vision and I commend them to your Lordships, but at this stage I beg leave to withdraw my amendment.
Viscount Trenchard
“(1A) The Secretary of State must give a specific direction to Great British Energy that it must consult with Great British Nuclear prior to investing in the production, storage and supply of nuclear energy.”Member’s explanatory statement
This would require GB Energy to consult with Great British Nuclear before it invests in nuclear energy.
Viscount Trenchard (Con)
My Lords, although I have already spoken extensively about the need for GBE to pay much more attention to nuclear power, I am glad that we now have a separate nuclear group of amendments. My Amendment 85B requires GBE to consult with GBN prior to investing in nuclear energy projects. A reader of the Bill and of the Explanatory Notes would probably take the view that it is not the Government’s intention that GBE should have any involvement with nuclear power. The word “nuclear” does not occur in the Bill and occurs only once in the Explanatory Notes, which inform the reader that the Secretary of State’s powers to give directions to GBE are consistent with the powers the Government have to direct comparable institutions such as GBN. Does the Minister agree that it is a bit of a stretch to argue that GBE and GBN are comparable institutions?
We have been told that GBE will be capitalised with £8.2 billion for the purposes of making investments in green energy. As I pointed out at Second Reading, a look at GBN’s accounts shows that it had only £342 million on its balance sheet at 31 March 2023. How can these two bodies be regarded as comparable?
On 17 December, the Minister told the Committee that
“we also need nuclear as an essential baseload for our energy generation, and gas as the flexible energy generation which you can turn on and off”.—[Official Report, 17/12/24; col. 177.]
I will make two observations on the Minister’s statement. First, to use gas power stations only as a balancing item for renewable energy is a very expensive way of using them, because they are constantly being fired up or down. Gas’s role in electricity pricing also distorts the price upwards, in a manner most damaging to the consumer’s interests.
I will not comment on CCUS, except to say that if only the Government would consider a funding commitment for nuclear of even one-tenth of that which they have made for CCUS—£21.7 billion—it would make an enormous difference to the prospects of British nuclear energy projects becoming viable and attracting funding from the private sector.
I was happy to hear the Minister confirm that we need nuclear as an essential baseload for our energy generation, but he has not convinced me that he recognises the urgent need to prioritise new nuclear projects now. He also said:
“Great British Energy and Great British Nuclear are already talking very closely together, and he can be assured that this will continue”.—[Official Report, 17/12/24; col. 209.]
This may be true, but the Government’s intention seems to be for GBE to concentrate initially on its clean energy superpower mission. The statement after the first energy mission board did not even mention nuclear at all. The Minister said at the Peers’ drop-in session before Second Reading that he did not expect GBE to invest in nuclear projects in its early years, and, as I mentioned in an earlier debate, he did not answer the noble Baroness, Lady Winterton, clearly when she asked him whether GBE might invest in an SMR project in South Yorkshire.
It is hard to escape the impression that, besides the two gigawatt projects at Hinkley Point C and Sizewell C, the Government see other nuclear as something that comes later—first SMRs and then later, AMRs—ignoring the important fact that some AMR technologies are more advanced than some SMR technologies. Can the Minister tell the Committee why GBN is prioritising SMRs over AMRs, which is surely an illogical approach, as some AMR technologies are more advanced than SMR technologies? Those that are ready now for commercialisation are being artificially held back.
I blame the Government for continuing the approach of the last Government in failing to recognise the potential of supporting a much quicker move to market for some AMR technologies, which are being sidelined by the limited scope and budget, and the slow pace, of the Government’s AMR research, development and demonstration programme, whose aims are merely to demonstrate high-temperature gas reactor technology by the early 2030s, in time for potential commercial AMRs to support net zero by 2050.
My Amendment 85B would ensure that GBE recognises that nuclear projects must form a part of its early investments. Amendment 85C would require GBE to monitor the impact of its nuclear investments on its ability to attract investment from the private sector in nuclear energy projects. I believe the latter could be substantial. Why does the Minister think that two important gigawatt projects initiated by Japanese companies—Toshiba’s NuGen project and Hitachi’s Horizon project—failed? Does the Minister not recognise how much better our energy security would be if either or both those projects had proceeded to successful deployment?
I have also tabled Amendment 118C, which adds a reporting requirement for GBE to undertake a review of the impact of this Act on the competitiveness of the UK nuclear industry compared to other countries. If GBE working with GBN acts as a catalyst in the adoption of new nuclear energy projects, their competitiveness will progressively increase compared with other countries. In September 2024, the International Atomic Energy Agency revised upwards its annual projections for the expansion of nuclear power for a fourth successive year. World nuclear capacity is now projected to increase by 2.5 times the current capacity by 2050, in the IAEA’s high-case scenario, including a significant contribution from small modular reactors.
The website Global Petrol Prices shows some interesting statistics. The price of electricity for businesses in the fourth quarter of 2024 in the UK was 51.7 cents per kilowatt hour, double that in Germany, where it was 23.5 cents per kilowatt hour, and three times that in France, where it was 17.4 cents per kilowatt hour. RTE, the electricity transmission network of France, showed that last Saturday nuclear accounted for 73% of French electricity generation, hydroelectric power for 12%, solar power for 7%, and wind power a mere 3%. It is very clear that the enormous cost of electricity for British businesses is now massively reducing their competitiveness compared with their French competitors. The more nuclear power we have, the more competitive it will become, and as the cost of electricity falls, the more competitive our businesses will become.
Does the Minister not agree that the economic growth that we all need so urgently can only be achieved by a radical adjustment to our energy policy? We need rapidly to commission more nuclear capacity—large, medium and small. I am not sure that all these amendments are perfect, but if he does not like my amendments as drafted, can he come back with some better ones to ensure that GBE, working with GBN, will ensure that much greater support will be given to nuclear projects so that nuclear can play its proper part—a much larger part—in our energy sector in the decades ahead? I beg to move.
Lord Hamilton of Epsom (Con)
My Lords, it seems quite extraordinary that no reference is made in this Bill to nuclear because, let us face it, if you want to have clean energy generation, nuclear is the only thing that is available at the moment. My noble friend Lord Trenchard must be right when he says that we should be much more seriously considering both small modular reactors and large ones for our energy supply in future, because that is going to be the only way we really get clean energy. I find it quite extraordinary that this has all been parked somewhere separately when it all should be integrated. We should certainly be looking at the potential for nuclear, because that is where the future lies.
Lord Offord of Garvel (Con)
My Lords, I express my gratitude to my noble friend Lord Trenchard for tabling the amendments that we are discussing in this group. All three amendments address a matter that many in this House have questioned—that being GB Energy’s role and involvement in the production of nuclear energy and its relationship with Great British Nuclear. Amendment 85B requires GB Energy to consult with GB Nuclear before it invests in nuclear energy. Amendment 85C requires GB Energy to report on the impact of its investments in nuclear energy and private investments in the UK nuclear industry. Amendment 118C ensures that the Secretary of State reports on the impact of the Bill on the competitiveness of the UK nuclear industry.
Nuclear energy will be critical to achieve the Government’s net-zero targets. However, historically, those on Government Benches have dismissed nuclear’s role in the energy mix. Let me draw on the Government’s own nuclear record. Since the 1970s no new nuclear power stations have been built under a Labour Government. Instead, all nuclear power stations still in operation were commissioned under Conservative Governments. Labour’s longest-serving shadow Energy Minister, Alan Whitehead, even said that we do not need nuclear. I disagree, and I am sure many in this House do too and I call on the Minister to update Labour’s thinking on this matter.
If the Government, via GB Energy, recognise the importance of nuclear, it is only right that they consult with GB Nuclear before investing in nuclear technology. Can the Minister confirm exactly what relationship is envisaged between GB Energy and GB Nuclear? Have the Government already consulted with GB Nuclear on the functions of GB Energy, and if so, will they continue to do so? We urgently need the development of new nuclear sites, as energy generated from nuclear technologies is both reliable and low carbon. Therefore, it is essential that GB Energy and GB Nuclear have a more formal collaboration. Industry bodies such as the Nuclear Industry Association have called for greater clarity on the interaction and relationship between the two organisations.
Lord Hunt of Kings Heath (Lab)
My Lords, it is always good to have a discussion about nuclear energy. The noble Viscount, Lord Trenchard, is ever consistent in putting forward his views. I assure him and the Committee that the Government see nuclear power as having a vital and important part in our energy mix.
I say to the noble Lord, Lord Hamilton, that the fact is that no technology is mentioned in the Bill, and that is quite deliberate—so the absence of nuclear in the Bill should not be taken as an indication that we do not think that it has an important role to play. I say to the noble Lord, Lord Offord, on Labour’s record on nuclear, it was in fact a Labour Government, in 2008, who took the decision that we would go back to new nuclear. Shortly afterwards, I was appointed a Minister of State at the Department for Energy and Climate Change, and I took part in many discussions at that point about how we got the sites, developed the supply chain and attracted investment. The fact is that we were succeeded by a coalition Government, followed by a Conservative Government, and it was not until, I think, 2017 that a final investment decision was made in relation to Hinkley Point C.
I am very proud of the nuclear sector. For all the challenges that Hinkley Point C has had, the fact is that a UK supply chain has been developed. The point about replication at Sizewell C is that that supply chain can then continue to service Sizewell C. We then want to see small modular reactors and AMRs developed, because we see them as having great potential. I say to the noble Viscount, Lord Trenchard, that he has not responded to the points raised by his colleague, the noble Lord, Lord Howell, in relation to Sizewell C. I am sure he will agree with me that, if we were to pull the plug on Sizewell C at this point, it would have a devastating impact on the confidence of the nuclear sector, in this country and globally. Actually—although he is not here—the point about replication is about the derisking of Sizewell C, building on what happened at Hinkley Point C, including the design changes and all the other issues, such as the time it took to develop the supply chain and the productivity issues. The case for Sizewell C is very strong indeed, and we look forward to moving towards a final investment decision over the next few months.
On the relationship between GBN and GBE, we have decided that GBN will remain a separate legal entity. That is important, because it makes sure that we have a body that can focus completely on nuclear energy, but working very strongly together with Great British Energy. The two chairs have met and have, I believe, built a very strong relationship already. I expect them to be able to work in strong partnership in future. I do not think it is necessary to put onerous requirements in the Bill. Certainly, Clause 6 is not the way in which to do it.
The noble Viscount, Lord Trenchard, is concerned about the approach that GBN is taking to the SMR technology selection process. It was instituted by his own party in government, and I think he was critical of his own Government. Well, I am not. I think the SMR technology assessment was absolutely the right thing to do. In September 2024 it concluded the initial tender phase of the process and downselected four companies. We hope for further progress over the next few months.
I recognise the huge potential that AMRs bring, and we will respond to the alternative routes to market consultation. We are obviously very keen to do what we can to attract nuclear company developers in this country.
On the impact of competitiveness, I really do not think the Bill is an appropriate vehicle for those considerations, and nor do I see that being part of Great British Energy’s role. But of course I want there to be a thriving nuclear industry in this country. I want to see us build on the supply chain that has been built around Hinkley Point C and then on to Sizewell C, as I have said.
In conclusion, I hope the noble Viscount will recognise that while he may disagree with elements of the Government’s policy on nuclear, he should be under no misapprehension: we believe that nuclear provides an essential baseload. We will continue to support the industry in the future.
Viscount Trenchard (Con)
My Lords, I thank the Minister very much for his reply, and I thank my noble friend for his intervention. To some extent I am heartened by the Minister’s words, although I remain a little unconvinced by his assertion that he sees nuclear as being so important. There is a fundamental difference between GBE and GBN, in that GBE has £8.2 billion of capital and GBN has only a few hundred million. The two vehicles are completely different, so I would be rather more relieved if the Minister had explained that the capital made available to GBE would equally be available to nuclear projects that GBN might recommend for investment.
Lord Hunt of Kings Heath (Lab)
Can I just respond? Nothing precludes GBE from investing in a nuclear development.
Viscount Trenchard (Con)
I thank the Minister again for his reply. Nevertheless, GBN does not have any money for investment, so GBN is by definition a very different kind of vehicle compared with GBE. In light of the Minister’s reply, I would like to withdraw my amendment for now.
Lord Murray of Blidworth
“(1A) The Secretary of State must give a specific direction to Great British Energy that it must invest in additional energy storage infrastructure to store excess renewable energy.”Member’s explanatory statement
This amendment would require GB Energy to invest in storage for excess renewable energy with the intention of reducing the cost of curtailment of renewable energy in instances of excess supply.
Lord Murray of Blidworth (Con)
My Lords, I rise to speak to Amendments 85D and 85E in my name. I regret that I was unable to speak at Second Reading, but I am pleased to be able to take part in this debate in Committee.
My amendment seeks to address a lacuna in the Bill. As many noble Lords before me have observed, the Bill lacks a vital detail. Parliament is being asked to approve the establishment of a vehicle for the investment of £8.3 billion of taxpayer money, and yet we have no clarity on how this money will be spent. All these decisions will be for Great British Energy to make under the direction of the Secretary of State. We believe that this is a most unsatisfactory way to proceed, and my amendment seeks to probe the Government’s intention on energy storage, as well as giving the Government the opportunity to improve the Bill with a clear statutory duty to invest in energy storage.
Just last Thursday we had a debate in this House on the importance of energy storage, and I agree with the amendments that my noble friend Lord Lilley has tabled. Improvements in energy storage infrastructure will be crucial if we are to continue on our journey to greater reliance on renewable sources of energy. I am pleased that the noble Baroness, Lady Gustafsson, has recognised the importance of energy storage as part of our path to clean energy, as she did last week when she said the Government
“recognises the value of strategic energy reserves as a source of energy resilience and security of supply, balancing system flexibility, particularly during periods of energy supply shortage”.—[Official Report, 9/1/25; col. 845.]
Given the importance of investing in energy storage as part of our long-term strategy, we should surely put this at the centre of this Bill. In fact, the objects of GB Energy, as outlined in Clause 3, include
“facilitating, encouraging and participating in … the … storage … of clean energy”.
It is therefore deeply concerning that the Bill makes no provisions to effect that objective.
Amendment 85E in my name complements Amendment 85D. It is a simple amendment and merely requires an annual report from Great British Energy on the overall cost to the taxpayer of curtailing the supply of renewable energy. This will principally apply to offshore wind, which frequently produces excess supply. Under the current arrangements, the taxpayer pays offshore energy producers to reduce their supply and this has been extremely costly, driving up energy prices for consumers.
In December 2023 the think tank Carbon Tracker estimated that wasted wind power would add £40 to consumer bills, and predicted that this figure would rise to £150 in 2026. Clearly, consumers have a direct interest in us getting to grips with this problem, and the Government would surely agree that the establishment of Great British Energy presents an opportunity to do this. It is therefore critical that GB Energy looks to invest in long-duration energy storage, which would mitigate the increased cost to consumers resulting from wasted energy.
With this said, can the Minister clarify whether the Government anticipate that the Secretary of State will give a direction to GB Energy to invest in energy storage, to ensure we are prepared for what the Germans call Dunkelflaute periods, such as we had just last week when several gas power stations were fired up at great expense to the taxpayer? Do the Government see a role for Great British Energy in helping to improve planning for energy supply deficits in the future? Finally, do the Government agree that improved energy storage infrastructure will reduce our reliance on gas-powered power stations in the future? I beg to move.
Lord Ashcombe (Con)
My Lords, I speak in support of these two important amendments, proposed by my noble friend Lord Murray of Blidworth. Thanks to the Library research team, I have gained greater knowledge of the size of constraint payments to the power producers for either constraining production or to rebalance the system. These payments are not insignificant, and I would like to advise them to your Lordships. The years that I am about to cite run April to March. In 2020-21, the amount was £1,070 million; in 2021-22, it was almost £1.5 billion; in 2022-23, it was £600 million; in 2023-24, it was £1.3 billion; and, in this year from April to October, it was £960 million. This gives a total of £4.78 billion. As mentioned by my noble friend, these amounts get added to the bills of consumers, businesses and households.
Lord Hamilton of Epsom (Con)
My Lords, I am very keen that my noble friend Lord Ashcombe should reintroduce the whole prospect of hydrogen, because I thought that it was rather rubbished by my noble friend Lord Roborough, who said that it was all going to be much too expensive. I think that the future lies in hydrogen, and I hope that it will be developed much more cheaply, so that it can be available for so many different uses, not only in power stations but also in aircraft, heavy vehicles and so forth. As I understood it, it was being developed and the price was coming down, but maybe I am completely wrong on that. I would be very grateful to hear from the Minister what the position of liquid hydrogen is: whether it is still prohibitively expensive and not likely to be a solution to our problems or whether the future lies in liquid hydrogen.
Lord Offord of Garvel (Con)
My Lords, as we have heard throughout the debate on this Bill, as well as in the other debates in this House on the future of our energy, we know that renewable energy by its nature will always be unreliable. It is, by its nature, intermittent. Many of us have expressed concern that this undeniable fact will result in shortages. As has been mentioned by my noble friend Lord Murray, last year Europe in fact experienced several episodes of Dunkelflaute. On the other hand, as has been highlighted by my noble friend Lord Ashcombe, what happens to energy supply in periods of persistent sunshine and wind?
Unfortunately, we find ourselves in a position in which the national grid is unable to cope with excess renewable energy supply. Grid capacity is a particular challenge for the offshore wind sector, because those sites are necessarily located far from sources of demand. Currently, the national grid pays renewable energy generators billions to reduce supply when there is more renewable electricity than the grid can manage. This problem will only be compounded by the Government’s ambition to build renewables faster than we can develop and connect them to the grid.
With that in mind, we should address the fact that the timeframe for obtaining grid connections for a new energy project can reach 10 years. Not only this, but a project without a grid connection today may not come online until well after the Government’s target of grid decarbonisation by 2030. There is no doubt that the renewable energy projects that will supposedly be supported by the establishment of Great British Energy will face the same connectivity difficulties.
As my noble friend Lord Ashcombe highlighted, over £1 billion was coughed up by bill payers last year to pay renewable energy generators to curtail excess supply, including £20 million in one day alone. This will only worsen under the Government’s agenda, and it will be consumers who will bear the cost via their energy bills. If renewable generation is scaled up so rapidly without the grid capacity to transmit it to the areas of high demand, those curtailment payments will only increase. We know that excessive curtailment fees are already being paid to wind farm operators who are generating more power than can be used. This is paid to get operators to switch off their wind farms and avoid overloading the grid. How ridiculous is that? We expect these curtailment costs only to rise under the new Government’s regime, and by 2030 it is possible that there will be a staggering £20 billion a year in subsidies and in maintaining back-up grid capacity. That equates to roughly £700 per household each year.
I turn to the amendments in this group in the name of my noble friend Lord Murray of Blidworth, which I support in their entirety. Amendment 85E requires Great British Energy to
“report annually on the impact of each investment it makes on the levels of curtailed renewable energy in the UK”.
Amendment 85D requires Great British Energy to
“invest in additional energy storage infrastructure to store excess renewable energy”,
and thereby minimise the cost of curtailing excess supply. In tabling these amendments, my noble friend has addressed many of the issues that I have discussed.
It is essential that the establishment of Great British Energy does not cost the taxpayer more than the already allocated £8.3 billion, and that it assesses the impact of its investments on the cost of wasting excess supply and prioritises the means of storing renewable energy. I hope that the Minister will agree.
Lord Hunt of Kings Heath (Lab)
My Lords, I am grateful to the noble Lord, Lord Murray, for Amendments 85D and 85E, which are focused on the issue of renewable energy curtailment. I must repeat, as I said earlier, that this debate is, in essence, about technologies, rather than the appropriate use of the directions in Clause 6. However, I assure the noble Lord that we are determined to increase significantly the deployment of short-term and long-term duration electricity storage to reduce curtailment.
I, too, was present in the debate on energy storage last Thursday, which was very interesting. My noble friend Lady Gustafsson recognised then that a variety of energy storage technologies would be needed to achieve net zero. That includes technologies such as lithium batteries and pumped hydropower storage—which can deploy at different scales and provide output over different lengths of time—and it can include emerging technologies, such as liquid air energy storage and flow batteries. Low-carbon hydrogen, too, can act as a low-carbon flexible generating technology and provide very long duration energy storage.
Today, around 7 gigawatts’ worth of grid-scale electricity storage is operational in Great Britain. This is made up of 2.8 gigawatts of pumped hydrogen and 4.3 gigawatts of grid-scale lithium battery storage. I add that we have announced a long-duration energy support scheme. We will publish a technical document in February. Applications will open in the second quarter, and we hope that the first agreements under the cap and floor system will take place in early 2026. It will be technology neutral, and it will be for projects that could not be built without the cap and floor system.
There are some developments in train: SSE, for instance, is doing exploratory tunnelling in the north of Scotland for pumped-storage hydro. Highview Power has reached FID in terms of liquid air energy storage near Carrington. Points on curtailment costs are well made; we see it as a key priority to accelerate network infrastructure to increase capacity on network and reduce constraints.
I do not think there is a lacuna; the Bill is constructed in the way it is. We have Clause 3 and the strategic statement of priorities in Clause 5. I hope I have reassured the noble Lord that the substantive point he raises is important and accepted by the Government.
Lord Murray of Blidworth (Con)
My Lords, I thank the Minister for his reply and am provided with some reassurance that the Government take storage seriously. However, for the reasons given by my noble friend Lord Ashcombe, the cost of curtailing output is presently substantial, as the Minister conceded. As my noble friends Lord Hamilton and Lord Offord pointed out, the difficulty with the current structure of the Bill is that we are not moving fast enough to secure sufficient storage capacity such that we do not need to make such large curtailment payments.
I urge the Minister to consider inserting in the Bill, at the very least, some form of requirement for reporting in relation to curtailment payments, which would encourage the market in storage capacity. With that, I am content to withdraw my amendment.
Lord Murray of Blidworth
“(1A) The Secretary of State must give a specific direction to Great British Energy that it must report annually on the impact of its investments on the levels of electricity generated from solar technologies in the UK.(1B) The Secretary of State must lay a copy of the report made under subsection (1A) before Parliament.”Member’s explanatory statement
This would require GB Energy to report annually on the impact of its investments on the levels of electricity generated from solar energy sources in the UK.
Lord Murray of Blidworth (Con)
My Lords, I shall speak to my Amendment 85F and support Amendments 85G and 85H in the name of my noble friend Lord Fuller.
Many in the Committee have expressed their concern that the Bill contains no provisions to ensure sufficient accountability and reporting measures. In fact, at present, we have no means to assess the success of Great British Energy in contributing to the Government’s overly ambitious clean energy target by 2030. In previous days in Committee, it was drawn to our intention that the UK investment bank Bill, which is similar in structure to this Bill, had important accountability and report measures. Yet these are removed from this Bill—why is this? The investment bank Bill had a clear and structured framework for accountability and transparency, governed by rules that ensure that taxpayers’ money is used efficiently and subject to rigorous annual reporting, providing the public with the necessary details on its investments and performance. The Great British Energy Bill, on the other hand, lacks any reporting requirements.
This Bill grants sweeping powers to the Secretary of State, backed, as I said earlier, by £8.3 billion of taxpayers’ money. Throughout the election campaign, the Government pledged that that GB Energy would be established in an effort to speed up the delivery of renewable energy. Can the Minister explain how the Government will be held accountable? It is in the public’s interest to introduce accountability mechanisms which allow for oversight of the £8.3 billion being handed over. Ultimately, we say, the Bill grants too much discretion yet lacks proper frameworks to report on the impact of GB Energy’s investments on the levels of renewable energy generated by the United Kingdom.
I am grateful to my noble friend Lord Fuller, who shares my concerns and addresses them in the amendments in his name. He rightly notes that a report on the levels of renewable energy generated by GB Energy and its investments will allow us to assess the potential energy deficit that must be met by sources other than renewables.
We risk jeopardising our energy security if we ramp up renewable at the pace suggested by the Government. This is a matter of paramount importance, and I urge the Minister to listen carefully and to consider the arguments on this group of amendments. I beg to move.
Lord Fuller (Con)
My Lords, I will speak to Amendments 85G and 85H in my name.
In this week of all weeks, when temperatures have dropped to minus 20 in parts of our nation and we are down to less than a week’s-worth of gas, it is time for the rhetoric on renewables to collide with the reality of what it takes to power our economy and protect the comfort and well-being of our citizens. There could not be a better moment to have this debate, with Mother Nature dialling a wake-up call to us all.
We need to be more realistic about the practicality of heating and lighting our homes, grounded in the world as it is rather than how we want it to be. The purpose of these amendments is to ensure that GB Energy takes a structured and quantitative approach to investing in energy production from renewable and wind energy assets. These investment plans would be evidence on an annualised basis, but broken down into monthly segments to reflect the seasonality that we all experience, with mandatory monitoring on a monthly basis. At its heart, my amendment seeks to force GB Energy to use a data-driven approach to address the structural energy gap we get every winter and, inter alia, to use that data to prioritise investments in energy assets that give energy security above the desirability of decarbonisation.
Energy security and decarbonisation are not necessarily mutually exclusive, but when the UK’s energy balance is published monthly, as these amendments would require, it will act as an obvious spur on investments to keep the lights on every month as a first and primary duty. These amendments do not dilute the ambition of GB Energy or abandon the obvious desirability of reducing our reliance on fossil fuels. However, requiring GBE to publish its plans for renewables and to address the predictable gaps that come each year will bring some reality to the rhetoric.
This country is bumping on empty this week—it is a serious matter. We are too reliant on the kindness of strangers to heat our homes. As the noble Baroness, Lady Brown of Cambridge, head of your Lordships’ Science and Technology Committee says, the crux of the matter is the robustness of our plans for
“the doldrums of winter when the sun doesn’t shine and the wind doesn’t blow”.
I am not rubbishing renewables but we need to be less starry-eyed about their ability to make the contribution some have thought they can, especially in winter. The amendments would therefore require GB Energy to be specific about how its investments in renewable and wind energy assets, and the planned additional investments over its existing ones, will contribute to the aggregate energy demand in monthly slices. There is a purpose to this, which is to ensure that when we flick the switch, the light comes on; when we press the button, the motor whirrs into action; and when you open the bill, you should not have to fall over in shock.
I am not interested in adding bureaucracy; NESO has a responsibility to produce these aggregate demands and I do not intend to interfere with those. But we know that there are seasonal variations in sunshine, and as with solar, also with wind; we all know the wind tends to blow harder in the winter as storms barrel across the Atlantic. My amendment will require GBE to take this predictable seasonality into account in its investment plans, to ensure that those investments in renewables can realistically contribute to meeting the energy requirement on a monthly basis, especially in winter. It is also about holding GBE accountable for the hard-nosed business of addressing these predictable structural energy gaps in the way that the noble Baroness, Lady Brown, highlighted, working hand in glove with NESO to address the market failure.
It sounds obvious that this should be the case, but my sense is that the Government are primarily focused on decarbonisation, even if it just ramps up surpluses in the summer that require these constraint payments to pay wind turbines to be switched off. If we are chasing carbon alone, we are missing the point. We need to balance renewables and wind investments in a way that also balances energy markets every month so that we do not run out of juice when it is cold.
This is important, because the total amount of standby generation capacity that we need is scaled by the months with the greatest deficit. It is on not an annual basis but a monthly basis. Because we have these predictable gaps, we pay standby gas power stations millions to keep ticking over, ready to jump into action when needed. Control rooms up and down the country are staffed by people playing patience and waiting for that call. That is expensive. It also underpins the entire speculative subculture in energy markets, in a process that the Daily Telegraph last week called the “gasino”, whereby speculators make a fortune while householders pick up the tab.
My colleagues have noted that the Guardian reported this week that two gas-fired power stations were paid £12 million for just three hours of electricity. We should not be surprised. Running a power station is expensive—there are staff, there is capital and maintenance, with people sitting around waiting for that call—and it is expensive to provide this insurance. The truth is that we are having to pay twice for much of our electricity, once for the renewable capacity, which we hope will boil that kettle, then again to have non-renewables on standby, ready to leap into action so that we can ensure that we can boil that kettle when the mercury falls. The consequence is that we are paying for some of the most expensive electricity in the world. Our costs rose 124% in five years, according to government figures. The UK’s energy price per kilowatt hour was 25.85p per kilowatt hour in 2023—significantly higher than in Germany, France and the US. We are becoming structurally uncompetitive as a result.
If enacted, my proposals would mean that the company’s objectives and functions would be forced by the market and public opinion to rank energy security above the decarbonisation function. That way, our £8 billion investment in GBE will keep the lights on. That is how we get best value from those investments, and we have energy markets that work more efficiently and at lower costs, which is a good thing. I expect the Minister to say, “Well, this is all rather burdensome”, and give ifs and buts and ask why would we need to publish this stuff. However, nobody questions when the OBR on a monthly basis publishes the forecast for the Bank of England. I do not see why, if it is good enough for the Bank of England, the GBE should not be forced to publish its investments as well.
I mentioned in the earlier debate how GB Energy is a private company, but it is established for public benefit. Publicising its plans and monitoring them is for the benefit of the public. It should not be entitled to cloak its activities in secrecy, as a private company established under the Companies Act 2006 would normally be expected to do. Mandating a monthly look at the markets, with a view to reducing the amount of back-up generation that we need, would avoid the perverse incentive to invest in renewables that make the surplus even greater. We do not want to overprovide standby back-up, so we end up paying excessive compensation payments, and we pay people more than is necessary to play solitaire in those control rooms. We do not want to underprovide, so that speculators hold us over a barrel in the short squeeze.
It follows that the requirement to publish the plan, to invest with the purpose of reducing the monthly or the predictable energy gaps, ensures that it brings a dose of reality to the complicated job of not only calculating the gap but doing something about it. That is where GB Energy can have a good, effective and ambitious role. Success looks like GBE publishing the plans and data so that we can see how effective it has been in needing fewer people in the control rooms by minding that gap, seeing fewer people falling over when they open their bill and a realistic, data-driven, balanced energy market that is not held hostage by ideology so much, so that we can move our economy forward—to keep the lights on and keep those motors whirring.
Viscount Trenchard (Con)
My Lords, I support Amendment 85F, tabled by my noble friend Lord Murray and Amendments 85G and 85H tabled by my noble friend Lord Fuller. As I explained in an earlier group, it is very clear that the price of electricity is presently adversely affected by the pricing mechanism applied by NESO, which is the price being determined by the last price of gas as used. If you are using gas only as a balancing item—that is, when the wind is not blowing and the sun is not shining, you fire up a gas power station to make sure the lights do not go out—it is much more expensive. The electricity generated by that last switch on of a gas power station determines the price of electricity, and that has a huge negative effect on the consumer, obviously. That is why these amendments are so necessary.
I would like to ask the Minister if he thinks that it is right that the electricity price is determined by the last firing up of a gas power station, which is being used simply as a balancing item when the wind does not blow and the sun does not shine. As we have seen over the last few days, there have been many days when the proportion of our electricity generated from wind is under 10% and that generated by gas goes above 50%, which means that power stations that are used only occasionally are being fired up, and that is very expensive.
Lord Ashcombe (Con)
My Lords, it is worth stating what is going on out there on the national grid right now. Gas and wind are supplying between 42% and 43% each; therefore, it is the gas price that is driving the price for everything. We are in the unusual position right now where we are exporting electricity to the continent because they need it more than we do. To have 42% driven by gas, with the price at over £100 a megawatt hour at the moment, seems worrying, and what we can do to curtail that must be important; but gas is not going away any time soon, and we have to be careful about how we moderate the reduction in it.
Lord Offord of Garvel (Con)
My Lords, I whole-heartedly support Amendments 85G and 85H in the name of my noble friend Lord Fuller, as well as Amendment 85F in the name of my noble friend Lord Murray of Blidworth. The objects of GB Energy, as outlined in Clause 3, state that they are restricted to
“facilitating, encouraging and participating in ... the production, distribution, storage and supply of clean energy”.
The Minister has made a virtue in this House that the Bill does not focus on any one particular technology or solution, but would it not be correct to assume that GB Energy has actually been set up in an effort to boost the production of renewable energy in the UK? Otherwise, what is the investment of £8 billion to be spent on? The Government say that GB Energy is part of their mission to make the UK a clean energy superpower, but how can we ensure that it delivers on these promises? I have seen in both the previous days of debate in Committee that the details in this Bill are at best scarce, and the Bill makes no provisions to report on the impact of each investment that GBE makes on renewable energy production. How, again, are we supposed to measure its success in delivering for the British people, as promised throughout the election campaign?
It is in the public’s interest to disclose the impact of GBE’s energy investments and activities on the level of energy produced from renewable sources, whether that be solar, wind or hydrogen. It seems incredible that this Bill, which establishes a so-called clean energy company, does not include a means by which GB Energy is required to report on the generation of clean energy. Indeed, this is an alarming oversight.
My noble friend Lord Fuller has rightly outlined an additional reason as to why the reporting on the impact of GB Energy’s investment on the levels of renewable energy generated is so critical. As has been mentioned many times, Europe has recently experienced another dunkelflaute. Just last month, for three consecutive days, more than 60% of electricity generation in the UK had to come from gas, as wind output dropped. At the same time, our partners in Germany paid the highest average price per megawatt since the Russian invasion of Ukraine, with a lack of wind being the main factor behind this escalation.
It is essential that renewable energy generation associated with GB Energy’s functions is closely monitored, if we are to maintain our energy security. The Secretary of State has said that one of the aims of GB Energy would be to improve our energy security— this, too, is mentioned in Clause 3. However, I am deeply concerned that the Government’s tunnel-visioned focus on green energy alone risks threatening our energy security. I am sure the Minister will want to see the successes, maybe even the failures, of GB Energy in helping to generate renewable energy. If this is true, he will have no problem in offering support to the amendments in my noble friends’ names. Ultimately, these amendments require the most basic and necessary levels of reporting.
Lord Cryer (Lab)
My Lords, Amendment 85F in the name of the noble Lord, Lord Murray, and Amendments 85G and 85H in the name of the noble Lord, Lord Fuller, would require the Secretary of State to give GBE directions to regularly report on the impact of its investments on electricity generation from solar, renewable and wind sources in the UK. We have already set out in this debate the need to avoid placing excessive reporting burdens on GBE. Nevertheless, the concerns raised remain pertinent.
It is important for GBE to maintain its operational independence and to ensure its long-term success, which these amendments would hinder. Further, the intended use of Clause 6, as has been repeated again and again, is to give directions for urgent situations only. These amendments would broaden it unnecessarily.
On renewables specifically, I assure your Lordships that GBE will focus on driving clean energy deployment. This will inevitably include a range of renewable resources, including solar and wind. GBE will be an operationally independent company and the exact mix of technologies it chooses to invest in will be determined in due course.
On accountability, which the noble Lord, Lord Murray, and others raised, let us bear in mind that the Secretary of State can be—and is—called before the energy Select Committee at any time. As far as the chief accounting officer is concerned, he or she can be called before the Public Accounts Committee, which, looking at the PAC’s track record, I would have thought is highly likely to take place. As we are all aware, the Secretary of State is also accountable to the House of Commons every few weeks. That includes—and this is pertinent—Topical Questions, which, in a fairly recent change to Question Time in the other place, are included in every Question Time, which means that things that have only just happened that do not have a relevant Question on the Order Paper can be raised by MPs of any party. Of course, annual reports will have to be submitted to Companies House in the usual way. That is set out in statute.
On that basis, I urge noble Lords not to press their amendments.
Lord Murray of Blidworth (Con)
I am very grateful to the Minister for that response to this group. Plainly, I am also very grateful to my noble friend Lord Fuller for advancing his amendments. I suspect that, given the weather forecast, those in the control rooms will be glad to get back to patience and solitaire.
I am also grateful to my noble friends Lord Trenchard and Lord Ashcombe for their contributions. We discerned from those speeches that it is unsatisfactory that standby gas generation appears to be driving the price. I agree with my noble friend Lord Ashcombe that this is necessarily worrying, and it seems appropriate for the Bill to contain a direction that the Secretary of State can require GB Energy to provide clear transparency on what is driving the allocation of these renewable prices. It is therefore vital that a measure similar those proposed in these amendments makes its way into the Bill, and I invite the Minister to so consider. With that, I withdraw my amendment.
Lord Lilley
“(1A) The Secretary of State must give a specific direction to Great British Energy that it must carry out a review on the use of long duration energy storage by Great British Energy and its projected costs.(1B) The Secretary of State must lay a copy of the assessment made under subsection (1A) before Parliament.”Member’s explanatory statement
This would require GB Energy to carry out a review on the use of long duration energy storage by Great British Energy and its projected costs.
Lord Lilley (Con)
My Lords, I rise to move my Amendment 85I and to speak to Amendment 131 in my name and that of my noble friend Lord Reay. Nature abhors a vacuum and Parliament abhors a blank piece of paper, which is what the Bill, in effect, creates in the way of the GBE company. It is a company that has no clear purpose, limits or functions, so it is our duty to write in some clear purpose and constraints, and that is what my amendments, like many tabled by other noble Lords, try to do.
Amendment 85I requires the Secretary of State to review
“the use of long duration energy storage by Great British Energy and its projected costs”.
Amendment 131 says the Act may come into force only when the Secretary of State has published the review.
The Science and Technology Committee of your Lordships’ House produced a report entitled Long-Duration Energy Storage: Get On With It, which we debated last Thursday. This recognised—indeed, took it as axiomatic—that, if we replace fossil fuels entirely with intermittent wind and solar, we will need storage to meet periods when demand exceeds supply. It will be absolutely essential to have that storage. It is not just short-term storage to cover daily peaks in demand, nor even for the medium-term periods the Germans call Dunkelflaute, when it is cold, windless and sunless, which it invariably is at night; there can also be whole years when supply is below average. So some storage needs to be of long duration.
As well as establishing that there will be a need for such long-duration electricity storage, the report evaluated different technologies providing that storage. It concluded that the best approach would be that, when wind and sun are generating more electricity than we need, instead of turning off the windmills, we should use the excess electricity to electrolyse water to create hydrogen that could then be stored in large salt caverns—largely under Chester, I gather—to be used when needed. The committee acknowledged that, by the time the electricity has been converted into hydrogen and then burned to generate electricity again, about 60% of the energy has been wasted—but that is better than wasting all the excess electricity that would be produced by wind.
Unfortunately, the report of the Select Committee provided only the widest possible range of estimates of the likely need for storage. It is literally almost a priceless report, in the sense that it reaches no conclusions of its own as to the likely price of storage, let alone the amount by which it will increase the price of electricity. So Great British Energy will not be able to rely on the Select Committee’s report and will need to carry out its own review, as specified in these amendments, into the amount of storage needed and its cost.
The Select Committee report does however cite a report by the Royal Society that indicates that the potential scale of costs is huge—the capital costs in particular. It says that the capital expenditure required for wind and solar to meet the increased demand when transport and heating have been electrified will be some £210 billion. On top of that, there will be additional capex for long-duration storage of some £100 billion, and investment to strengthen and extend the grid to reach the storage of an additional £100 billion. So, the cost of storage plus grid strengthening will effectively double the capital costs of a fully renewable generating system based on wind and solar. It is, incidentally, hard to see how that can reduce our electricity costs, as the Government originally proposed and claimed ahead of the election was the purpose of GBE. So I am not surprised that the Minister rejected the amendment from my noble friend Lord Offord requiring Great British Energy to set out how it would contribute to the objective of reducing costs.
Clearly, investments on the scale that the Royal Society envisages should not be undertaken lightly. It is highly unlikely that GBE, capitalised at £8.3 billion, will be remotely capable of crowding in private sector capital of £100 billion just for long-duration energy storage alone.
Indeed, witnesses to the report and noble Lords in the debate cast doubt on whether a credible way could be devised to remunerate private sector investors to make it worth their while to provide the storage capacity. The suggested scheme involves setting a floor and cap for the revenues generated by providers of stored hydrogen when they sell and buy electricity during periods when it is needed. Unfortunately, owners of storage will want to maximise their revenues by arbitrage trading as frequently as possible when electricity prices rise and fall. This may mean that they have insufficient gas when a period of shortage of renewable energy continues for a long time, which is precisely what this long-duration energy storage is intended for.
Those in the debate and, indeed, on the committee who pointed out that this problem exists tended to conclude that the logical option was that long-duration electricity storage would have to be provided and owned by the state. I am not an enthusiast for nationalisation but nor am I a doctrinaire opponent if it is indeed the least bad option, as may well be the case. If it is the case, can GBE be the vehicle that would help create such a state holding company? It scarcely seems credible given its capital base of £8.3 billion and potential investment required of £100 billion. Yet, without long-duration energy storage, it will be impossible to replace fossil fuels by renewables. So, the Government must somehow tell us how, through GBE or otherwise, they are going to finance this long-duration energy storage.
The Royal Society report on which the Select Committee relied made some heroic and barely credible assumptions. The costs and deficiencies of electrolysers and gas turbines needed to convert hydrogen back into electricity would fall dramatically, in some instances by up to 90%, over the period between now and 2050. The report that this amendment would require would also surely have to consider whether it might be more cost effective to defer investment in these technologies until those reductions in costs and efficiency improvements had materialised.
That would mean relying on gas, purely as a backup, for a few extra years, but the extra emissions would be small and negligible in the grand scheme of things. The Secretary of State for Energy Security and Net Zero has already reinterpreted decarbonising electricity production by 2030 to mean that, rather than reducing emissions by 100%, it will involve reducing emissions by only 95%. There is a precedent for anticipating a degree of flexibility. I hope, therefore, that any report that this amendment requires GBE to produce will consider that option.
We should remember that when Dieter Helm analysed the Government’s energy policy, he concluded that we have wasted up to £100 billion of taxpayers’ money so far by investing prematurely in immature technologies rather than waiting until they became sufficiently efficient for us to get advantage from that greater efficiency. These amendments would enable us to know the answers to some of those questions before GBE goes ahead and spends any taxpayers’ money.
Lord Swire (Con)
My Lords, I rise briefly to support the noble Lord, Lord Lilley, who makes some extremely good points in trying to put more meat on the bone of the Government’s proposals. It seems to me in a macro way that the Government’s energy policy is all over the place, not least their new desire to attract Chinese investment—have we not been there before? It is causing great concern, not least now to the Security Service.
That apart, whatever the Government decide to do, they will have to dramatically increase storage, as we have heard today. However, there is precious little in this Bill to tell us how that storage will be dealt with, where it will be located, or how that will be handled by planning. We have just heard that some of the storage will be below ground in Cheshire. Other storage will, of course, be above ground.
Lord Reay (Con)
My Lords, I will speak to Amendment 131 tabled by my noble friend Lord Lilley, to which I have added my name. It would require GB Energy to publish a report on the projected costs of long-duration energy storage. I regret that I was unable to speak at Second Reading, for which I apologise.
This is an ambitious Bill that is part of an ambitious policy. It is a policy that is fundamental to a frighteningly large part of our lives: the availability of energy, the dependability of energy supply and the cost of energy. According to whether Governments succeed or fail in these areas, economies sink or swim, and functions slide into dreary and dangerous dysfunctionality. They bloom like an English country garden in midsummer or wither, shrivel and slumber like any garden anywhere on these islands in coldest, darkest, most forbidding winter.
Energy is a policy area to which the precautionary principle should clearly apply. It is not an area where we should make a habit of leaping about in the dark or buying pig after pig in poke after poke or moving forward, fingers crossed, on a wing and a prayer.
It is the very opposite of such an area. It is a subject on which clear-sighted, far-sighted sceptics, expert sceptics, industry sceptics, and seriously sceptical scientists and engineers with the national interest at heart deserve a hearing. The stakes are just too great—the Bill is well named—for turning a deaf ear or blind eye in their direction, as indeed we were forcibly reminded last week. Last Monday, the Secretary of State for Energy was bragging that wind power was the UK’s biggest source of electricity in 2024. He said that it was
“a huge moment on our journey away from energy insecurity”.
Less than two days later, NESO issued a warning that there was a close to 30% chance of power cuts that very evening.
Although the operator managed to eliminate this risk by sourcing back-up power, this came at vast expense, as my noble friend Lord Fuller pointed out, with prices rising to a staggering £5,500 per megawatt hour, around 80 times the average price in 2024—the highest energy prices in Europe. These are costs that the consumer and business in this country must bear, and part of the reason why our energy costs are as high as they are. Our industrial energy costs are four times those in the United States and 46% above the IEA median. The Government’s policy of net zero at any cost will serve only to make this dire situation worse.
As many of us know, the operator last week came very close to disaster, with only 580 megawatts of headroom. This is equivalent to less than a single power station cutting out and, just three hours after the peak, two power stations with a combined capacity of two gigawatts did indeed trip out, exhibiting how close we came to the lights going out. This near-miss should be a wake-up call to this Government and a signal that we need to change course. It should be, but will it be? I confess that I am not holding my breath. As things stand, the Government’s policy to pursue intermittent wind and solar and to neglect baseload power such as gas and nuclear in all likelihood will cause the country to run into severe problems in the future and, as we have seen, power cuts could happen any week.
The Government believe that long-duration energy storage will be able to balance energy supply and demand over time. This early-stage technology, driven by hydrogen, will potentially allow storage of energy from renewables over extended periods of time up to months and years. Battery storage, on the other hand, at present only has the ability to store energy in a small capacity for a mere two hours.
In a debate on the Science and Technology Committee’s report on long-duration storage, held on Thursday in this Chamber, the newly appointed Minister for Investment, the noble Baroness, Lady Gustafsson, stated that
“we are going to need colossal amounts of hydrogen storage”.—[Official Report, 9/1/25; col. 845.]
What this equates to are colossal subsidies at colossal expense to taxpayers—a cost that the Government are currently showing no sign of wishing to calculate.
In theory, wind plus green hydrogen appears to be a sensible idea that uses the output of wind farms when not required for the grid to generate green hydrogen, which then gets converted into electricity. The document that underpins the Government’s promotion of long-duration energy storage is, as my noble friend Lord Lilley pointed out, the Royal Society report produced in 2023. The report estimates that, by 2050, public and private costs required to establish long-duration energy storage in the UK will be £100 billion for actual storage, £100 billion to increase associated grid capacity and £210 billion for the wind and solar capacity required.
Unfortunately, there are multiple issues with the report in terms of its costings and assumptions. The report is based on unfeasibly low costs for hydrogen electrolysers, storage and generation. It assumes no leakage of hydrogen stored underground at high pressure for up to a decade. The return on capital assumption posits that investors will be attracted by a 5% return, but a return of two to three times that would be required in today’s marketplace to invest in a risky, early-stage technology such as this.
This is even without the recent sharp increase in gilt bond yields, with the cost of borrowing rising to the highest level for nearly 30 years, which is making every equity investment more expensive. These costings were produced before the surge of inflation a couple of years ago, which means that they are too optimistic. Even if the costs are achievable by 2050, the infrastructure will need to be built using today’s cost base, which will push up the cost base dramatically.
Substantial hydrogen electrolyser capacity will be required, which will need thousands of engineers that the UK does not possess. Perhaps the Minister could tell us where all these engineers will come from, particularly as there is strong international competition for this capacity from the EU and the US, which have significant hydrogen subsidies.
Even after the construction of a long-duration energy storage system, with its vast cost, the overall grid is likely to remain unreliable. The large storage caverns proposed by the Royal Society will take 10 years to fill and could empty in 12 months of extremely low wind. What happens if you have more than one year of very low wind over the 10-year period it takes to restock the storage caverns? Further questions surrounding the viability of this technology include the possible negative reaction of residents to having large caverns of hydrogen situated beneath their homes. The Government’s pronouncements suggest that they will plough ahead with granting subsidies to energy storage developers without having conducted adequate research on this issue.
At the same time that a calamity has narrowly been averted in the energy markets, we are experiencing a developing crisis in the financial markets. It has become apparent to market participants that the Government’s high-tax, high-borrowing Budget has markedly reduced any chance of growth. With the cost of borrowing rising dramatically, the Government’s spending plans are spreading alarm among investors, including the blank cheque written in respect of their uncosted ideological pursuit of net zero.
With expenditure on renewable subsidies now amounting to £11 billion a year, with an additional £2.5 billion for grid balancing and another £1 billion per year for the capacity market, the UK’s industrial and consumer electricity prices have become among the most expensive in the world. This will only get worse with the Government’s commitment of over £110 billion to connect remote wind farms to the grid.
Given the current economic and financial climate, it is more imperative than ever that the Government produce a report and come clean on the costs involved for the taxpayer of their plans for long-duration energy storage. We need an energy policy in which we can have confidence, and that means that, as an absolute minimum, we need more information, clarity and realism.
Lord Offord of Garvel (Con)
My Lords, I will speak in support of the amendments of my noble friend Lord Lilley. It goes without saying that long-duration energy storage is essential if the Government are to achieve the clean energy targets that will ensure that fossil fuels are phased out. To replace fossil fuel-derived energy, the Government are ramping up renewables—an entirely unreliable source. It is therefore critical that we use long-duration energy storage if we are to maintain the electricity supply.
As has been referenced by my noble friends Lord Lilley and Lord Reay, the Royal Society has estimated that a substantial volume of long-duration energy storage—enough to supply roughly a third of current annual UK generation—could ultimately be needed. It found that a strategic reserve of long-duration storage will be particularly important to address supply shortfalls from renewables in periods of low wind and rain. If the Government are to achieve a fully decarbonised electricity system by 2030, they must make provisions for substantial energy storage to manage the gaps between increased supply and demand. While Britain has just 2.8 gigawatts of long-duration energy storage capacity from four pumped hydro-plants in Scotland and Wales, it is believed that terawatt hours of long-duration electricity storage will be needed to decarbonise the grid in the whole of the UK.
The storage of power increases the flexibility of the grid and minimises likelihood of wasted renewables in cases of excess supply. Therefore, if GB Energy contributes to a large-scale rollout of long-duration energy storage, it would increase the availability of renewable power and may even lower consumer energy bills. The previous Government consulted on policy mechanisms to support low-carbon storage and introduced a target in the British Energy Security Strategy to deploy enough to balance the electricity system. We also moved to reform energy systems, establishing the future system operator, and consulted on a long-duration energy storage business. Finally, the previous Government addressed the challenging economics of long-duration energy storage projects and activity, and they consulted on introducing a cap and floor mechanism to implement additional financial support mechanisms.
Clause 3 states that GB Energy’s objects include facilitating and participating in the storage of clean energy. I therefore ask the Minister to confirm exactly how GB Energy will be involved in the storage of electricity generated from these renewable sources. It is critical as it prioritises the storage of energy to avoid the risk of blackouts, price fluctuations and our reliance on energy imported from foreign states. We cannot afford to compromise our energy security even more by failing to do so.
In conclusion, the development of long-term energy storage technology must occur alongside that of the national grid. We cannot increase our energy storage if we have no means to transmit and distribute the electricity. We face an immense but urgent challenge in scaling up our clean energy infrastructure, whether that be storage or distribution. I look to the Minister to clarify what proportion of the allocated £8.3 billion of taxpayers’ money will be invested in long-term energy storage solutions.
Lord Hunt of Kings Heath (Lab)
My Lords, first, I welcome so many Members of the Opposition to our debate and I look forward to their continuing interest in our deliberations going on this evening. I must confess to being somewhat at a loss, because all the points raised in this debate have been raised tonight in other amendments. What we are seeing is clearly a filibuster, and the degrouping of so many of these amendments on Clause 6 is the visible evidence of this. We have already had a debate on energy storage, which the noble Lord, Lord Murray, moved. We have already debated power lines and planning environmental protections, and we have discussed nuclear power, SMRs and AMRs. I simply do not understand. What is the point of having yet another debate on these issues, which amount to Second Reading discussions about the Government’s energy policy? We are debating Clause 6 directions. This is a backstop provision, normal in Bills of this sort in relation to the bodies that we are talking about, and it is quite inappropriate for us to seek to micromanage GB Energy in the way noble Lords have suggested.
Lord Lilley (Con)
My Lords, I am grateful to the Minister for his non-reply to the debate. The answer to his point about whether it is necessary is that it is impossible to overstate the importance of cheap and reliable energy to the economic growth of this country. If the only way we can have reliable energy is by having hugely costly energy, either because, as the noble Lord, Lord Reay, said, to ward off delays as we saw in recent days costs eight or 10 times what it normally costs or because to prevent that sort of risk involves spending hundreds of billions of pounds, that is hugely important. I am very sorry that the Minister, whom I normally praise for his replies, which are usually fulsome and effective and substantive, has avoided addressing those points, because they are crucially important and they have many aspects and it is important that those many aspects be investigated in the course of these debates in Committee. Obviously, I shall withdraw my amendment, but I hope that none the less that we will force the Government to think seriously about these issues before carrying us further down a route which could make our already very expensive energy even more expensive.
The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)
I cannot call Amendment 86A as Amendment 86 has not been moved.
Baroness Noakes
“(1A) The period allowed for filing the reports and accounts of Great British Energy under section 442 of The Companies Act 2006 is six months.”Member’s explanatory statement
This amendment ensures that Great British Energy files its reports and accounts in line with the period allowed for public companies.
Baroness Noakes (Con)
My Lords, we now move to some more technical aspects of the Bill, compared to some of the really significant issues we have been debating in recent groups. I am sorry that the Minister dealt with these recent groups in such a perfunctory way. We did not get a response of substance at all to the very significant points that my noble friends have been making, and I think it is right that the Government think again about their attitude to whether or not they are prepared to accept proper legislative scrutiny in your Lordships’ House. I hope that we can move to a more constructive phase going forward.
I shall also speak to two other amendments this group. I have Amendment 92, to which the noble Lord, Lord Vaux of Harrowden, has added his name, and I have added my name to his Amendment 89.
Great British Energy will be a company formed under the Companies Act 2006, an Act imprinted in my memory. At the time, in 2006, it was the longest Act ever produced, and it took many months of my life. Under Section 442 of that Act, private companies are given nine months to file their accounts, while public companies have only six months. I am assuming that Great British Energy will be a private company, as there is no ability for its shares to be offered to the public; it will therefore have nine months to file its accounts, and my Amendment 88 changes that to six months, in line with public companies. GBE will be a substantial company, with upwards of £8 billion flowing through it, and it ought to be subject to the same degree of scrutiny that large public companies have.
Many public sector bodies manage to get their accounts out and laid before Parliament before the beginning of the Summer Recess, which gives them nearly four months, which should be plenty of time. Listed companies generally get their accounts out very much quicker, mainly because it makes no sense whatever to spend a long time in the new financial year looking backwards.
I would not normally have thought that an amendment like this would be necessary, but I was shocked to discover this autumn that the National Wealth Fund’s report and accounts for 2023-24 were not signed off until 21 November 2024. I was even more shocked to find that the previous year was only about four weeks better than that, with the report and accounts being signed off on 23 October 2023. I do not think we should tolerate such a laid-back approach to putting the only regular accountability document relating to Great British Energy into the public domain. If six months is good enough for plcs, it ought to be good enough for GBE and, indeed, any other public sector body.
The Government have been very unresponsive to calls in the various other amendments that we have been considering during this Committee for extra reporting going above and beyond what is included in the annual report and accounts. This underlines the need for a very timely approach to the one accountability document that the Government are prepared to concede will exist for Great British Energy—namely, its annual report and accounts.
My other amendment, Amendment 92, is more of a probing amendment. It would require the Comptroller and Auditor General to be appointed as Great British Energy’s auditor. Allowing the Comptroller and Auditor General to do company accounts was, incidentally, one of the minor achievements of the Companies Act 2006, reflecting the trend at the time for increasing use of limited liability companies to carry out public sector activities more extensively. I hope that the Minister will confirm that the Comptroller and Auditor General will be appointed as Great British Energy’s auditor. He is the auditor to the National Wealth Fund, and I cannot see that there could possibly be a case for not using him.
As I said earlier, I also support Amendment 89 in the name of the noble Lord, Lord Vaux. I will not steal his thunder, but I highlight the importance of proposed new paragraph (d) of his amendment, which would require Great British Energy to report on the extent to which its investments have crowded private sector money in. There will be many other measures of success for Great British Energy, but this is a key one. The Government have been very quiet about exactly how Great British Energy will work with the private sector. It is essential that there will be good public reporting to shed light on this area as Great British Energy moves into its operational phase. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, once again we return to the issue of accountability and transparency. I hope the Minister is starting to hear the trend. In this group we are looking at the annual reporting requirements that apply to Great British Energy, and I hope at least that the Minister will agree this time that Clause 7 is the right place to talk about reporting.
I thank the noble Baroness, Lady Noakes, the noble Lord, Lord Cameron of Dillington, and the noble Viscount, Lord Trenchard, for their support on Amendment 89. First, however, I state my complete support for Amendments 88 and 92, tabled and just introduced by the noble Baroness, Lady Noakes. We are talking about a company that is going to be spending £8.3 billion over the next five years, so it must be right that at least the discipline that applies to public companies should apply to GBE in terms of providing timely information and its audits.
The Minister said earlier that he thinks the Bill includes the appropriate levels of accountability and transparency. I find that quite hard to understand. As the Bill is currently drafted, the only reporting that GBE will be required to provide publicly—or to the Secretary of State—is the annual accounts and reports referred to in Clause 7, which need to comply only with Section 441 of the Companies Act 2006, as we have just heard.
The contents of such accounts are quite limited, and they do not have to include much information that will allow Parliament—or other parties—to scrutinise the performance of GBE against its objectives. Indeed, it is not impossible—depending on how the Government choose to finance GBE—that it might even be able to take advantage of small or medium-sized company exemptions to the information it must provide in its accounts, especially given the increase in the limits for those that are going to take effect this April.
The impact assessment that accompanies this Bill says:
“Future benefits will depend on GBE’s future activities and spending decisions which are not in scope of this impact assessment. Therefore, no quantification of benefits has been provided at this stage. All investment into and expenditure of GBE will be subject to future spending reviews and business cases, which will set out in detail the monetised and non-monetised impacts of GBEs activities”.
It says exactly the same in respect of the costs. My first question for the Minister is therefore simply whether, and in what form, those spending reviews and business cases that the impact assessment talks about will be published and reported on. I asked the same question at Second Reading, but I am afraid I did not receive a reply at that point.
In the absence of those spending reviews being published—which I suspect will be the case—and any reporting on actual performance against them, we need something more than the limited information that must be published in the accounts in accordance with Section 441 of the Companies Act. My Amendment 89 seeks modestly to expand those requirements for publishing information by which the success, or otherwise, of GBE can be measured.
Baroness Young of Old Scone (Lab)
My Lords, I rise to speak to Amendment 90A in my name. At the time that I tabled it, it was a simple little amendment at the fag end of a Bill. Instead, it is now an amendment that threatens to be hated by my own Front Bench and is obviously getting between many Members of the Opposition and whatever they have in mind before they can execute it. But I want to speak to what I think is a very sensible little amendment. Great British Energy has an important role; it has considerable public investment behind it and there is, probably across the Committee, agreement that the reporting requirement in the Bill—that GBE would be required only to submit a normal Companies House report—is simply not enough.
With the noble Baroness, Lady Hayman, I tabled Amendment 116, which we discussed earlier in the course of the Bill, which gave an objective to GB Energy, as part of its strategic objectives set by Government, to help to deliver the statutory targets for both climate and biodiversity enshrined in the Climate Change Act and the Environment Act. The Minister promised to reflect further on Amendment 116 between Committee and Report—which assumes that we will eventually finish Committee, which is highly doubtful as we are progressing at the moment.
As a minimum, the Bill should require Great British Energy to report on its achievement of the Secretary of State’s strategic priorities for GBE, including the climate and biodiversity targets, as well as on the progress of community energy. It would be rather strange to determine strategic objectives for GBE without requiring it to report on progress on achieving them.
Baroness Williams of Trafford (Con)
My Lords, it has just gone 10 pm. We are just over half way through the Government’s stated targets for this evening. As the noble Baroness, Lady Young of Old Scone, said, it is highly unlikely that we can finish another eight groups any time soon.
It is a firm convention that the House rises at 10 pm between Monday and Wednesday, and there has been no agreement to the contrary. We have had, thus far to date, one and a half days in Committee against a committed three days. This is a significant Bill; £8.3 billion worth of taxpayers’ money is going into it. We owe it the scrutiny that such public spending, rightly, should deserve. I ask the Government Chief Whip whether he will resume the House now or fairly soon after.
Earl Russell (LD)
Will the Opposition Chief Whip take an intervention? I just want to point out that there have been two and a half days of scrutiny and not one and a half days. She is not correct.
Baroness Williams of Trafford (Con)
I think that the noble Earl was not listening to me. I said that, to date, we have had one and a half days of scrutiny, and tonight would make two and a half days. The Government committed to three days. That was the point I was making.
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
I thank the noble Baroness. I do not know why we could not have had those discussions in usual channels. I have been around all along today. No one has come near my office today to have this discussion—no one at all.
As I said to the noble Baroness—I spoke to her last week and at the weekend—we need to make progress on this Bill. It is an eight-clause Bill. When we started the first day in Committee, we had 13 groups of amendments. When we started today, we had 18 groups of amendments. We have seen lots of filibustering going on today. We need to make progress on the Bill.
Lord Kennedy of Southwark (Lab Co-op)
I am sorry, but lots of degrouping and lots of filibustering is not the way that this House should operate. When I was the Opposition Chief Whip for three years, I did not act like that. I was always fair with the previous Government—
Lord Kennedy of Southwark (Lab Co-op)
I am sorry, but I absolutely was. Every time, we would get to Report stage and if we did not like something, we would defeat the Government, as we did many times, but we never sat there filibustering and wasting people’s time. It is not on. We need to proceed with the discussions tonight and see how much further we get.
Baroness Williams of Trafford (Con)
My Lords, I cannot agree. The Chief Whip is absolutely right that we had discussions on Friday, in which we did not agree, and so no agreement was had. In light of there being no commitment from the noble Lord, I beg to move that the House do now resume.
Lord Kennedy of Southwark (Lab Co-op)
All I can say in response to the noble Baroness is that we have tried to get agreement on this. The House needs to continue with this important work and scrutiny. I oppose the Motion that the House should now resume.