Wednesday 15th January 2025
(3 days, 10 hours ago)
Grand CommitteeGreat British Energy Bill 2024-26 View all Great British Energy Bill 2024-26 Debates Read Hansard Text Amendment Paper: HL Bill 43-IV Fourth marshalled list for Committee - (14 Jan 2025)
Viscount Trenchard (Con)
At the point when the Committee decided to adjourn its deliberations on Monday, I was about to make a brief intervention in support of my noble friend Lady Noakes and the noble Lord, Lord Vaux. As my noble friend Lady Noakes explained, GBE will be a private company, which would normally allow it nine months in which to file its accounts. As my noble friend explained on Monday, Amendment 88 changes that to six months, in line with the requirement for public companies. GBE may not be a public company technically, but it certainly is a company of huge interest to the public. It is therefore obviously right that the company should be required to prepare its accounts in accord with the rules applicable to public companies, rather than taking advantage of the more lenient requirement applicable to private companies.
In his remarks in the House yesterday, the Minister said that he recognised that it was the role of the Opposition to scrutinise legislation. But I ask the noble Lord: is it not actually the role of the whole House to scrutinise legislation, including the Government’s own Back-Benchers? He probably did not mean it when he said that it was the role of the Opposition.
The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)
The point was that I was responding to a comment made by the Opposition Chief Whip about scrutiny. But of course I very much take the point that this is a matter for the whole House. The very fact that my noble friend Lady Young spoke to this group shows how effective that scrutiny can be.
Viscount Trenchard (Con)
I thank the Minister for his kind explanation, which certainly clarifies that. As far as my interventions on Monday are concerned— I spoke at length and several times—I take issue with and very much resent being accused of having filibustered. If the noble Lord looks at my contributions, he will find that they were all different.
I suggest that one reason why there have been so many amendments to the Bill is that so little was included in it. It is very thin Bill, but it has £8 billion of public money. Many of us are puzzled that GBE is being established effectively with £8 billion of public money, whereas Great British Nuclear, which has no public money to speak of, continues to operate in a kind of silo. I recognise that the noble Lord attempted to reassure the Committee about how GBN and GBE will work together, but I do not think that they can be described as comparable organisations.
I had intended to support my noble friend Lady Noakes and the noble Lord, Lord Vaux, on Amendment 88, and I added my name to it. I think that it is necessary because although GBE is intended to be structured as a public company, it will have only one shareholder, the Secretary of State. As my noble friend explained on Monday—she is well known as an expert in these matters—we must be sure that GBE will be managed according to the standards that would be expected by shareholders in public companies. That is why changing the nine-month provision for filing accounts to six months is so necessary.
I have also added my name to Amendment 89, in the names of the noble Lords, Lord Vaux and Lord Cameron, and my noble friend Lady Noakes. It is particularly important that the accounts must comply with the stipulation in proposed subsection (d), to provide
“an assessment of the extent to which”
any investments made or partnerships entered into
“have encouraged additional investment by the private sector”.
It is clear that the very long incubation period for nuclear projects places them outside the criteria for many private sector investors, but some public investment can be effective in unlocking private investment through match funding, as the Rolls-Royce SMR programme has already shown.
I also support Amendment 92, in the name of my noble friend Lady Noakes and that of the noble Lord, Lord Vaux, which would ensure that the Comptroller and Auditor-General must audit GBE’s accounts.
Lord Offord of Garvel (Con)
My Lords, I speak in support of Amendments 88, 89 and 92, which stand in the names of my noble friends Lady Noakes and Lord Trenchard and other distinguished colleagues, including the noble Lords, Lord Vaux of Harrowden and Lord Cameron of Dillington. These amendments, although technical in nature, are vital to ensure that Great British Energy operates with the highest standards of transparency, accountability and good governance. This is not simply a matter of administrative precision; it is the fundamental issue of public trust.
Amendment 88 ensures that GBE files its reporting accounts within the same timeframe required of public companies under Section 442 of the Companies Act 2006. This alignment with established statutory requirements is essential. It demonstrates that GBE, although a public body, will not be afforded preferential treatment or lesser obligations than private enterprises. The public expect and deserve this parity, especially given GBE’s role as a steward of taxpayers’ funds.
Amendment 89 introduces additional requirements for GBE’s annual reporting accounts. Crucially, it provides the Treasury with the flexibility to define additional reporting requirements over time. This ensures that GBE can adapt to evolving priorities and maintain accountability as it grows. It is worth emphasising that comprehensive and transparent reporting is not an administrative burden; it is a cornerstone of effective governance. This amendment guarantees that GBE will meet not only the letter of the law but the spirit of public accountability. By ensuring this level of scrutiny, we are demonstrating a commitment to good governance that transcends political or ideological divides but sends a clear message that public funds and the public interest will always be protected.
Lord Hunt of Kings Heath (Lab)
My Lords, I am grateful to noble Lords who spoke in this debate, both today and in our deliberations on Monday. It seems quite a long time ago since then, and I am looking forward to a very constructive engagement today and welcome the contributions that all noble Lords are going to make.
Let me say at once that I very much understand the importance of information being provided in order to judge the performance of GBE and of it being held to effective account. There is no disagreement at all between me and other noble Lords on this. Noble Lords will know, as the noble Baroness, Lady Noakes, explained very clearly in her remarks on Monday, that her Amendment 88 requires GBE to file its annual reports and accounts within six months from the end of its accounting reference period. As she said then, and as noble Lords have repeated, this aligns with the Companies Act 2006 for public companies whose shares are publicly traded. Of course I agree that a six-month filing period is appropriate for public companies. Financial markets need up-to-date and timely information on the performance of a company, as do its range of stakeholders and shareholders, to help them make informed decisions when companies are seeking to raise capital.
I also understand why noble Lords wish this discipline to be applied to GBE, but it is a private limited company owned wholly by the Crown. It is not unreasonable for the Government to say that, on that basis, we should be in line with the Companies Acts requirements, which set a nine-month filing period for private limited companies. I should also say that this is an arrangement applied to most government-owned companies: for example, the National Wealth Fund, the National Energy System Operator and the Low Carbon Contracts Company. I know that the noble Baroness, Lady Noakes, was concerned about the filing deadline, but it is also the case that the vast majority of these organisations, government-owned companies, file their accounts well in advance of the statutory requirement.
I understand the point that the noble Viscount, Lord Trenchard, made about public interest in Great British Energy, and I welcome that. Indeed, I want GBE to be well-known and seen as spearheading the drive we wish to see in relation to Clause 3 and the statement of priorities in Clause 5. We wish GBE to be as successful as possible.
My point is that, in a sense, what is in statute in relation to the Companies Act is a minimum requirement because, as GBE is owned by the Secretary of State, it will be subject to the usual mechanisms that apply in the public sector. They are put in place to ensure that the public interest is discharged and proper public accountabilities are in place.
On Monday, the noble Lord, Lord Teverson, made an interesting point: one of the concerns some people have is that, because of GBE’s structure and because it is publicly accountable, it will be subject to a considerable number of the controls put in place for bodies that fall within public accountability. The key question is: can we ensure that GBE has sufficient operational independence to perform effectively in its work? There are a number of issues here around the way it will work in future.
I should also say that the annual report and accounts are not the only means of scrutinising the funding allocated to GBE. All funding to GBE must be voted on by Parliament; because of that, it will be scrutinised through the supply and appropriations debates in the other place.
Amendment 89 in the names of the noble Lord, Lord Vaux, and the noble Baroness, Lady Noakes, proposes specific topics to be included in the annual reports and accounts of Great British Energy, as well as the granting of an additional power to His Majesty’s Treasury to require further information. I can confirm that much of the proposed content will already be included and publicly available in the annual report and accounts, as required by Clause 7, and will be laid before Parliament. As an example, the financial assistance details under new paragraph (a), proposed by this amendment, will be included in the accounts of GBE. Details are likely to include issued share capital and items on the balance sheet of the company, such as borrowing from government if that method has been utilised.
The noble Lord, Lord Vaux, and my noble friend Lady Young of Old Scone were concerned that Great British Energy would need only to follow the provisions of the Companies Act in preparing its annual report and accounts. However, I can assure them that that is not the case. GBE will adhere to the additional reporting requirements for government-owned companies over and above the reporting requirements under the Companies Act. These include the obligation to follow the Treasury’s directions on accounts through the powers extended in the Government Resources and Accounts Act 2000, laid out in the government financial reporting manual and related “Dear Accounting Officer” letters. The most recent of these account direction letters requires bodies to give a true and fair view of the state of affairs, including net resource outturn, the application of resources, changes in taxpayers’ equity and cash flows for the financial year.
Furthermore, GBE will be required to report on its governance around exposure to and risk of climate-related scenarios in its operations, as set out by the Task Force on Climate-Related Financial Disclosures. Finally, any future funding of GBE will be subject to agreement through a government spending review, or another mechanism, as the Government see fit.
Amendment 92 in the name of the noble Baroness, Lady Noakes, proposes to require the Comptroller and Auditor-General to be the external auditor of Great British Energy; I think she said on Monday that it is a probing amendment. I am very happy to reassure noble Lords in this case. It is already the case that the Comptroller and Auditor-General will be the external auditor of Great British Energy. The company will also need to comply with the provisions set out in the Treasury’s Managing Public Money document, which requires the Comptroller and Auditor-General to be the external auditor for non-departmental public bodies such as Great British Energy. The requirement will also be set out in the framework document for Great British Energy, which we will debate shortly.
Amendment 90A, in the name of my noble friend Lady Young, seeks to require additional reporting from Great British Energy. Again, I assure her that much of the information that she seeks will be provided in GBE’s annual report and accounts, as a matter of course. The annual report and accounts will include key achievements and milestones, general business information relating to its strategic direction, a review of the company’s performance, challenges and future outlook, as well as financial statements and resourcing levels. It will also include reporting in line with the recommendations of the Task Force on Climate-Related Financial Disclosures.
GBE may also make more information available through reporting, such as when projects or investments are announced. We want to set this company up to be transparent and accountable, with a reporting regime appropriate to its company basis and status. The accountability of Ministers to Parliament for its performance will also be in place.
We very much take the point about the need for this organisation to be transparent and accountable. In the light of this debate, I will set out how this all comes together in detail and send a note to noble Lords. I hope that provides some greater reassurance.
Lord Vaux of Harrowden (CB)
I realise that Monday is quite a long time ago now and that the noble Lord has probably forgotten this, but I asked a specific question then. The impact assessment for the Bill says that, because the Bill does nothing but create the company, “no quantification of benefits” and costs
“has been provided at this stage”,
and that those benefits and costs
“will be subject to future spending reviews and business cases”.
I asked whether those future spending reviews and business cases would be made public.
Lord Hunt of Kings Heath (Lab)
I am not sure that I can answer that point in detail. The impact assessment is built around the legislation, rather than the future activities of GBE. May I take that specific question away? Clearly, the funding that the Government provide Great British Energy will have to be in the public domain and part of the normal process of dealing with a spending review and the financial consequences and flows of money that follow it. I am happy to look into that in more detail, if the noble Lord would like.
Lord Vaux of Harrowden (CB)
That would be very kind. The issue is that, if the Bill had been done in the normal way and included the detail of what GBE was going to do, the impact assessment would have covered those activities. However, those things are not included in the Bill so are not covered by the impact assessment. When the statement of strategic priorities and the detail of what the company will do are published, there will be no impact assessment on them, other than the spending reviews and business cases. It is important that they are made public, as if they had been part of the impact assessment that would have happened if this had been done in the usual way.
Lord Hunt of Kings Heath (Lab)
My Lords, as I said, I think we have acted properly with the impact assessment, which is based on the Bill. GBE has yet to commence its work. I have said that I will write to noble Lords detailing how we see GBE being held to account, in terms of its reporting and accountability, and I will add some more information about how that relates to the statement of strategic priorities in Clause 5.
Baroness Young of Old Scone (Lab)
I hope that in writing this note, which I welcome, the Minister will give us an account of how GBE will report on the strategic priorities set by the Government, and that they will include not just climate but environmental and biodiversity targets. They are the twin crises that GBE is helping to solve.
Lord Roborough (Con)
The noble Lord mentioned that the minimum requirement was the nine-month reporting window under the Companies Act. Could he give us an idea now of what he sees as a desirable reporting timeframe? If he would like to reflect, perhaps he could include those thoughts in his letter.
Lord Hunt of Kings Heath (Lab)
I do not think so. Clearly, there is a statutory requirement. All I was saying is that our experience in my department is that the bodies that have a similar discipline have generally reported well within that figure. I am certainly happy to say that one would always hope that an organisation such as this would report in a timely fashion, but I cannot go any further than that.
Lord Vaux of Harrowden (CB)
My Lords, the noble Baroness, Lady Noakes, regrets that she is not able to be here today, because this was scheduled after she already had other commitments, so, with the leave of the Committee, I will channel the noble Baroness to wrap up. I thank all noble Lords who have taken part in this constructive debate and the Minister for his constructive response.
Common themes are emerging throughout our discussions on the Bill, and the subject of transparency and accountability is probably the major one. I know that the noble Baroness will be disappointed by the response to shortening the reporting deadline to six months, which does not seem overly onerous. I was encouraged, I think, by what the Minister said about the reporting requirements and I look forward to receiving the letter he has spoken about. However, he did not refer in his answer to a couple of things that were in the amendment and are really important.
First, it is important that GBE reports on the investments it has made, and I do not think he mentioned that. Secondly, as a number of noble Lords mentioned, the key issue is that of additionality—in other words, what impact GBE is having on crowding-in private investment alongside the public investment. As I said on Monday, anyone can spend money. If this is to be in any way positive, it needs to attract private investment that would not otherwise have happened. It is really important that that is measured in the same way as it has to be by the National Wealth Fund. I think it is true to say that the National Wealth Fund, because it has the obligation to report on additionality, is actually performing rather well on additionality.
Lord Hunt of Kings Heath (Lab)
My Lords, I think I said by implication that I consider those matters that I would expect the company to report on.
Lord Vaux of Harrowden (CB)
I am reassured to hear that and I look forward to receiving the letter. We may need to come back to this, and I hope the noble Lord will be willing to sit down, discuss the overall questions around accountability and transparency and, I hope, put something forward himself that will strengthen what is, if I am honest, a somewhat thin Bill. With that, I beg leave to withdraw the amendment.
Lord Offord of Garvel (Con)
My Lords, I thank my noble friend Lady Noakes, in her absence, for her amendments in this group. In fact, this amendment, Amendment 93, ties closely with Amendment 125 in my name, which would ensure that this Bill does not come into force until a financial framework document has been published. Together, these amendments address an essential issue in the governance of GBE: the need for proper financial oversight and clear frameworks that ensure that this body is held accountable. That is the reason why I support Amendment 93 and why it is so critical to the Bill—because it would require the Secretary of State to prepare a framework document that sets out not just the operating principles but the financial principles through which GBE will pursue its strategic objectives.
Without this clear framework, GBE would operate without the financial clarity and accountability required to protect public funds and to ensure that GBE’s financial practices align with the UK’s broader energy strategy. A financial framework is not just a bureaucratic detail; it is fundamental because the energy sector is complex and fast-moving. GB Energy will be responsible for substantial public investment. Without this financial framework, there is a risk of financial mismanagement and inefficiency or lack of transparency. The framework simply provides clear guidelines on budgeting, expenditure, revenue generation and risk management; it also ensures that GBE’s financial decisions align with the Government’s energy and climate goals, such as achieving net-zero emissions and maintaining energy security.
Lord Hunt of Kings Heath (Lab)
My Lords, I am grateful to the noble Baroness, Lady Noakes, and the noble Lord, Lord Vaux, who spoke in her absence. As the noble Baroness raised earlier on in our debates, her amendment inserts an additional clause requiring the Secretary of State to prepare and publish a framework document setting out the principles underpinning the relationship between the Secretary of State, my department and other relevant public bodies and also requires financial and operating principles to be included in that document.
Lord Vaux of Harrowden (CB)
In effect, under the Bill GB Energy will take a chunk of the activity of the National Wealth Fund—approximately a third of the total value, in fact—and put it into another entity. As I said, the National Wealth Fund’s framework document includes quite a lot of information around requirements to make financial returns and, in particular, the additionality principle. Therefore, because we are, in effect, moving a chunk of the National Wealth Fund’s activities into a different entity, it would presumably be appropriate that that remains subject to fairly similar levels of governance and control. Could the Minister perhaps say a little about the expectation on financial returns and additionality, which he has not mentioned in his response so far?
Lord Hunt of Kings Heath (Lab)
My Lords, by implication, we would expect the organisation to be as transparent as possible and to cover the sort of areas that the noble Lord mentioned. It is also fair to say that, given the comparisons being drawn between Great British Energy and the UK Infrastructure Bank, in the case of the UKIB, the framework document was published before Royal Assent. The point is that the organisation was operational before Royal Assent, but this Bill is being brought to Parliament before we have operationalised the company, so there is a distinction. As I said, noble Lords can be reassured that there will be a stringent framework document to ensure proper accountability. I am searching to find something else to say to give comfort, but I have to say that this is as far as we can go. Having said this from the Dispatch Box, it has to happen.
Returning to the part of the amendment that would require the relationship between GB Energy and other relevant public bodies to be included in the framework agreement, noble Lords will know that that is not typically part of a framework document, but GB Energy’s relationship with relevant public sector bodies will of course be part of delivering its objectives. Again, the partnerships will be undertaken in accordance with GB Energy’s operating principles and, where appropriate, we will provide definition to those relationships in the upcoming statement of strategic priorities. As part of its annual reports and accounts, we will of course expect GB Energy to report on activities undertaken as part of its public sector partnerships. We expect it to enter into a number of partnerships or relationships with other public bodies, but that is not appropriate for the framework document.
The other point to make here is that GBE will be accountable to Parliament, with a statement of strategic priorities laid before Parliament, and the accounting officer of Great British Energy, and Ministers, will be accountable to Parliament for the work and performance of the company. Members of your Lordships’ House will be able to ask questions and debate, and I have no doubt that Select Committees will wish to examine the chair and chief executive of the organisation from time to time, which seems wholly appropriate and will provide the public accountability that needs to go alongside the normal accountability that a private company would expect to operate, within the legislation that it will be covered by. We need to remember that it is also publicly accountable alongside the accountability that it needs to discharge as a private company.
The issue I come back to is that we have to ensure that it has enough operational independence. A push-back from noble Lords might be to ask: will it be overly constrained? We have to get the balance right between proper accountability and reporting and—dare I say it —what I hope will be an entrepreneurial approach to the formidable task it is being given. That is why the appointment of the incoming chair has been so important —to give us that expertise and experience.
As noble Lords will see, it is very difficult for us to agree to Amendment 121A, which would defer commencement of most of the provisions in the Bill until a framework document had been laid before Parliament. We do not think it possible to produce a framework document without the active involvement of the company itself. That is probably as far as I can go on this interesting area, but I can assure noble Lords that there will be a fully fledged framework document, which I think will cover all the issues that noble Lords are concerned about.
Lord Vaux of Harrowden (CB)
My Lords, I thank all noble Lords who have taken part in this short debate, and the Minister for his response, which is helpful and encouraging—I understand his point. However, I think he put his finger on the fundamental problem with the Bill, which is precisely what he said: the company is being established before we really know what it is going to do and before it starts to operate. Therefore, there is no scrutiny of those things at the moment. When he says that there is accountability through, for example, the statement of strategic priorities, it is not strictly true. It gets laid before Parliament, but there is no debate, approval or anything. The framework document will not even be laid before Parliament.
Lord Hunt of Kings Heath (Lab)
My Lords, of course, that is a fair point but, equally, I would say, as a Minister accountable to Parliament, that the opportunity for noble Lords to ask questions and take part in debates is considerable. I would expect that GBE and any statement of priorities will be fully part of the rough and tumble of life in Parliament. Anyone who has been involved in a company organisation such as that will know that parliamentary accountability really does bite and is effective.
Lord Vaux of Harrowden (CB)
The Minister is right on that—I cannot disagree—except, again, that accountability is only as good as the information on which one bases it. If there is no information, or if it is really thin, it is hard—
Lord Hunt of Kings Heath (Lab)
My Lords, I do not want to intervene constantly, but I think noble Lords will be awash with information about GBE, its performance and activities.
Lord Vaux of Harrowden (CB)
I am very encouraged to hear that but there is nothing in the Bill that says that. If one is honest, what tends to happen is that if something is really successful, we will be awash with information telling us how successful it has been. If it is less than successful, I wonder how much information we will see. Fair enough, but there is a wider discussion to be had between now and Report on transparency and accountability, and I hope the Minister will be open to that. With that, I beg leave to withdraw Amendment 93.
Earl Russell (LD)
I thank the noble Lord. I would be keen to hear what the Minister has to say in response to that amendment.
Lord Hunt of Kings Heath (Lab)
My Lords, this has been a very interesting debate and I am grateful to noble Lords for what they have said. I will start with Amendment 102, tabled by the noble Earl, Lord Russell, and supported by the noble Viscount, Lord Trenchard. As he said, the amendment focuses on Great British Energy’s relationships with its key stakeholders and would require the company to publish a report every two years detailing its relationship with a number of named public bodies.
As I have already said, we of course expect and want Great British Energy to enter into a number of partnerships or relationships with other public bodies. This will include public bodies beyond those highlighted by the noble Earl, including, for example, those operating in the devolved Administrations—although I agree with him very much about the importance of the relationship with the Crown Estate.
I think it was implied in what I said earlier that we are absolutely certain, as part of the rigorous reporting requirements that the organisation will need to take part in through its annual reports and accounts, that it will report on activities undertaken as part of these partnerships. That seems to me a perfectly sensible request, which I can affirm readily. In view of that, I am not sure that you need a separate report, but we can make it very clear to GBE that we expect it to report on this regularly. We have already publicly committed to setting out how Great British Energy and the National Wealth Fund will collaborate and complement each other. I can assure noble Lords that we have made the same commitment on Great British Energy’s relationship with Great British Nuclear.
In terms of Great British Energy’s relationship with Ofgem and the National Energy System Operator, again, we would expect GBE to be subject to the same legal and regulatory frameworks as other entities. Clearly, when it comes to the Crown Estate, I readily say that, of course, GBE will report on its relationship, just as the noble Earl said. The Crown Estate will be doing similar, and we hope that there will be a consistency of approach in their reports. I am sure that there will be.
Turning to Amendments 94 and 103, which would require independent reviews of Great British Energy’s effectiveness, I thank the noble Lords, Lord Offord, Lord Vaux and Lord Cameron, and the noble Baroness, Lady Noakes, for putting their names to them. We all agree that Great British Energy needs to be accountable, transparent and clear about how it is delivering against its objectives and the statement of strategic priorities. The Bill already ensures that GBE will provide regular updates through its annual reports and accounts. These documents will be laid before Parliament, ensuring public accountability. Clause 5 provides that GBE must “act in accordance” with the priorities set out by the Secretary of State. To ensure this, Great British Energy must publish a strategic plan on how it will deliver those priorities, and it will update this plan regularly.
On the question, generally, of a review, I certainly understand the point that noble Lords have made and agree that reviews are important. I am prepared to consider the principle of a review between Committee and Report. I would not want to get into a debate about how regular those reviews should be. It is important that GBE has a good run before it is subject to such a review. Equally, I do not think you want a review happening on a regular annual basis because that would detract from its ability to perform effectively, but I understand the principle of a review. I will take this away without commitment at this stage, but I am happy to talk to noble Lords between now and Report about it.
Coming back to additionality, we obviously agree that it is an important principle, and we would expect Great British Energy to learn from the UKIB/National Wealth Fund approach. Of course, GBE has rather a wider role than the National Wealth Fund, particularly in that it is not just an investor but a developer, and it has an important future role to play in trying to get rid of some of the barriers to investment that we have seen in the energy sector.
Having said that, I think additionality will be covered. Equally, we accept that undertaking reviews from time to time is important. But they should not be done so frequently that they lose impact in what they are there to do. I hope noble Lords will accept that I have tried to be constructive in my response to these amendments.
Lord Offord of Garvel (Con)
I thank noble Lords for their contributions to the debate on this group, and I thank the Minister for listening to these concerns, which, as always, are to do just with the review and governance of GB Energy for it to be held to rigorous and proper account. I thank the Minister for considering how he deals with this. In the meantime, therefore, I beg leave to withdraw the amendment.
Earl Russell (LD)
I thought the noble Lord had moved on; I apologise for interrupting.
Earl Russell (LD)
I thank all noble Lords who have taken part in the discussion on this group of amendments, and I thank the Minister for responding to me; I apologise for interrupting him. I appreciate everything he said, and I appreciate that there will be reports on GB Energy and that there are lots of opportunities for parliamentary scrutiny. It is appropriate that we ask these questions. The amendments in this group and others look to go a bit further to ensure that certain things will be reported on.
In response to the discussion on the previous group, the noble Lord, Lord Hunt of Kings Heath, asked me whether we were looking for a separate report. In my mind, this is about making sure that GB Energy produces a really good-quality annual report that covers a broad range of areas and is open and transparent about its activities.
Lord Hunt of Kings Heath (Lab)
Perhaps I may intervene. In the discussion on the first group of amendments, I promised to write a letter to noble Lords focused on financial information. It might reassure noble Lords if I pick up that challenge and say that we should perhaps also try to encompass the annual report arrangements. If that would be a sensible way forward, the letter will set this out very clearly in writing so that noble Lords can see it after Committee but before Report.
Earl Russell (LD)
That would be greatly appreciated and would really reassure us. That was the point that these amendments were trying to get to, so I thank the Minister.
Lord Frost
“The Chair of Great British Energy(1) The Chair of Great British Energy may not be appointed until the appointment has been scrutinised by the Treasury Committee of the House of Commons, or any successor committee.(2) The Chair of Great British Energy must be based full-time at the headquarters of Great British Energy in Aberdeen.(3) The Chair of Great British Energy must undergo an annual review on their performance and—(a) this review must be carried out by external auditors;(b) this review must be submitted to the Secretary of State and laid before Parliament.”Member’s explanatory statement
This would require the Chair of Great British Energy to undergo pre-appointment scrutinisation, to be based at Great British Energy’s headquarters full-time and to undergo an annual review of their performance.
Lord Frost (Con)
My Lords, in moving Amendment 98 I will also speak to Amendment 99 in my name. As it is the first time I have spoken in Committee, I take this opportunity to declare an interest as the director of the company Net Zero Watch.
I have a couple of preliminary remarks before turning to the text of the amendments. These two amendments very much echo themes that we have been debating at length over the last day or two. They are amendments to make up for the lack of detail in the Bill and to ensure, as my noble friend Lady Noakes pointed out the other day, that this company is subject to the same degree of scrutiny that large public companies would expect to face. With the Bill, we are creating a company with precious little oversight or scrutiny as normally understood in company law, and with an idiosyncratic version of the normal governance and accountability arrangements that go with a normal company. Of course, this fact is why nationalised public companies are typically so badly run.
The only detail we have had on the ground covered by these two amendments is in the founding statement, which says:
“Led by its own CEO, Great British Energy will be overseen by an independent fiduciary Board, rather than ministers, benefitting from industry-leading expertise and experience across its remit. Trade unions will also have a voice and representation within Great British Energy”.
Although Ministers both here and in the Commons have commented on that, they have not gone beyond what that statement says, and we are still left rather unclear about how these arrangements are to work, other than to say that normal company law will apply. As I say, that is not quite enough, and these amendments are designed to fill the gap here.
I turn to the text of the amendments. Amendment 98 is designed to set out a few minimum requirements for the themes that we have been talking about: transparency and accountability. Amendment 98 would make clear that there must be a chair and, more importantly, that the appointment of the chair would require a degree of parliamentary scrutiny, in this case by the Treasury Committee. As has been noted, we have already trespassed slightly on this ground, and the Minister noted that this degree of scrutiny would be going beyond precedent. He read out the Cabinet Office guidance on this subject, which is interesting but not decisive for this House and the legislators.
Certainly, the degree of parliamentary scrutiny is dictated by the very political nature of this job, and quite a political figure has been appointed to it as the current chair. He has not been shy in giving us his ambitions for the company. He told the Guardian on 17 October that he thought it should become a “national champion” and
“a longer-term operator in … areas, such as floating offshore wind”.
I do not know whether that is the Government’s view of the development of GB Energy—it might or might not be—but they are statements by the chair and, by making them, he is coming into the arena of political debate about the company. Therefore, some sort of political process in his appointment seems logical. I cannot help noting that he has made broader reflections on politics, populism and progressivism, and he has been a quite a critic of Brexit in the past. Of course, he is entitled to have these opinions but, once you get into the political field, you must expect to face a degree of political scrutiny of your appointment. That is why this amendment would require such public scrutiny.
Similar thoughts are behind the other part of this amendment: the requirement for a publicly available review of performance against the purposes of GBE, and that this should be done independently. Once again, we come back to the point that has been touched on at length: that this is an unusual company and that normal accountability mechanisms are not there. There is only one shareholder, the content of the board is uncertain and, as it stands, there is no requirement in the Bill for directors of any kind at all—although I will come on to Amendment 99. This is a public company, fulfilling absolutely classical public goals, so there must be accountability to the public in how it is run.
Proposed new subsection (2) would require the chair to be based full time at the headquarters of the company, which has been said to be Aberdeen. The Government have made a virtue of that fact, at some length, when talking about GBE. They also confirmed, in October, that the new chair would be based in Manchester. It is not unusual for a non-executive chair to be based somewhere else, but the current chair role is not exactly a non-executive one; it is quite hands on. I struggle to see how one can run the company in quite that way.
The Government say that he will
“regularly spend time in Aberdeen”.
That is good and important, obviously—but this is a new company. It needs leadership as it is built up. If the taxpayer is going to get value for money out of the chair, his salary and the process, he should be where the company is when he is working.
I wish to record that Amendment 99 is a copy of an amendment tabled by Andrew Bowie MP and debated in the Commons—although perhaps it was not fully debated. Again, this comes back to the fact that we are dealing with an unusual company. What is being created is, in many ways, more like an executive arm of HMG than a genuinely independent company. The description that the Minister just gave about the role of the CEO rather confirmed that. It sounded much more like the role of the Permanent Secretary of a department, responsible to Parliament as accounting officer, than the role of a genuine CEO of a company.
The Bill is literally silent on appointment processes, content of the board and so on. The amendment is designed to fill that gap, to give clarity on numbers, and to make it clear that there must be non-executives as well as executives, that there must be a CEO as well the chair, that there can be no repeated appointment beyond defined limits and so on. That is a bare minimum. There already are some provisions in the Bill connected with the articles of association, so the line of principle about what is right to include in the Bill and what is not has already been passed. I hope that, with that in mind, the Minister will consider that these are serious amendments designed to deal with potential weaknesses in the corporate governance and accountability of GB Energy. I look forward to hearing his response.
Lord Vaux of Harrowden (CB)
My Lords, I was not going to speak on this, but I just point out very quickly that the other Act that has a clause that is not quite the same but similar to Amendment 99 is the UK Infrastructure Bank Act. As I have already pointed out, that is the really analogous organisation to Great British Energy, so it must be appropriate, I think.
Lord Hunt of Kings Heath (Lab)
My Lords, I am grateful to the noble Lord, Lord Frost, for initiating the debate on his Amendment 98, where he proposes to place a number of requirements on the role of the chair of the board of Great British Energy. I agree that the chair, the board and the chief executive officer have major responsibilities. I must say to him though that I do not recognise GBE as being an executive arm of my department. It is very interesting that he said that, because the noble Lord, Lord Teverson, made the interesting remark on Monday that there is a risk in having too many controls and reporting arrangements in relation to GBE, detracting from what we need it to do. We do want it to have operational independence, albeit working within the context of Clauses 3 and 5 of the Bill, the requirements under the Companies Act and the accountability arrangements I have already referred to. We need very highly skilled people at the top of GBE to find their way through this in order to ensure that it actually delivers on the things we want it to deliver on.
At the risk of inviting the noble Lord, Lord Hamilton, to intervene, I take his point about winners and Governments: this is the whole point of having an organisation that is not part of government—but, of course, it is owned by government—and being able to really get on with the job that needs to be done.
I will address pre-appointment scrutiny of the chair in relation to Amendment 101 soon. Amendment 98 requires the chair to be a full-time position based at the headquarters of Great British Energy in Aberdeen. I must say that it would be highly unusual to specify that a company’s non-executive chair should be full time or based formally at an organisation’s headquarters. Looking at the Grand Committee, almost all noble Lords here have taken roles as chairs or non-executive directors of organisations that can be based very far from where they are resident. Frankly, if we were to adopt this principle, we might inhibit the appointment of high-calibre people, notwithstanding that Aberdeen is a very fine place to live and work, as I know from the experience of having a family member working in the offshore oil and gas industry from there.
I do not think that a full-time chair is appropriate; I think it is perfectly appropriate to have a part-time, non-executive chair in that role, as the noble Lord, Lord Frost, has already remarked. Having an interim chair does not preclude having a very lively presence—and a jolly good thing too. I do not think we should insist that that should be a full-time role.
My main board experience is in the public sector, in the National Health Service, and I have been around in the NHS for long enough to know the problem of chairs who come in on a daily basis and inhibit the proper role of the chief executive. I would be wary of encouraging that development in GBE; I am sure that it will not happen.
Again, in relation to the annual review of the chair’s performance by external auditors, which is to be laid before Parliament, first, we will of course ensure that there are annual performance reviews for Great British Energy’s chair. This aligns with best practice followed by other public bodies, and my department is well used to doing this in relation to a number of the bodies it oversees. The review will typically be performed by a senior official in the sponsoring department, supported by the senior independent director on the board, who will have deep insight into the chair’s performance over the year.
Of course, there will also be regular meetings between the responsible Minister and GBE, as there is in my department between Ministers and other organisations, as would be expected. In a sense, these are also part of the accountability mechanism. However, I acknowledge the expectation of the noble Lord, Lord Frost, that Parliament will have a strong interest in the chair’s performance. I fully anticipate that the relevant Select Committees will call on them on a regular basis to provide evidence and, of course, I fully expect the chair of GBE to accept those committee’s invitations.
Amendment 99, also in the name of the noble Lord, Lord Frost, would place certain requirements on the composition of Great British Energy’s board. As noble Lords have said, it largely replicates provisions in the UK Infrastructure Bank Act. We made clear in our founding statement that GBE will be an operationally independent company, overseen by an independent board. We do not think that it is necessary to legislate these provisions, since established governance documents, such as the UK Corporate Governance Code and the Governance Code on Public Appointments, already apply.
The UK Corporate Governance Code, published by the Financial Reporting Council, sets out best practice in relation to corporate governance. Although it applies formally to listed companies only, it is standard practice for government companies to comply with it or, where they do not, explain why. The Governance Code on Public Appointments provides clear guidance for ministerial appointments, which are regulated by the Commissioner for Public Appointments and should be followed even where roles are not formally within the scope of the commissioner. I can give an assurance from the Dispatch Box that Great British Energy will comply with these codes, ensuring best practice in corporate governance.
GBE will also be required to follow corporate governance best practice to help guide the composition of its board. This will have an impact on the number of directors required at each stage of GBE’s development and operation. We think that, having given those assurances, there needs to be a degree of flexibility at this stage about how GBE goes forward in relation to the composition of its board. The noble Lord’s amendment would also place standard requirements on when an individual should cease to be a director. I can assure him that such provisions already exist, including in the Companies Act 2006, and that they will, as is common practice, be replicated in GBE’s articles of association.
Amendment 101 in the name of the noble Earl, Lord Russell, proposes to require all appointments by GBE to be scrutinised by the Energy Security and Net Zero Committee in the other place before they come into effect. This is similar to new subsection (1), proposed by Amendment 98. Noble Lords will know that Cabinet Office guidance on pre-appointment scrutiny by House of Commons Select Committees provides clear guidance on the criteria and process to be used in these circumstances. It sets out that decisions on the scrutiny of individual posts should be made between the Secretary of State, the chair of the relevant committee and the Cabinet Office. It is not common practice for this to be set in primary legislation.
The guidance gives the criteria of the types of roles which may be in scope. Importantly, it sets out the principle that the posts which require pre-appointment scrutiny are, most typically, the chair or equivalent of the organisations. None of the roles identified in the guidance as requiring pre-appointment scrutiny are in government-owned companies of the kind that GBE will be. No public body currently appears to have its full board subject to pre-appointment scrutiny. Where individual roles are scrutinised, it is done following agreement between the Secretary of State and the committee chair.
From our point of view, the calibre of Great British Energy’s director appointments will be of great importance. We want GBE to succeed, so we want the highest calibre of people to be appointed as chair, to non-executive positions and to the chief executive officer role. We anticipate that recruitment for the substantive board will begin over the course of this year, and we will ensure that recruitment is undertaken in a manner which aligns with best practice. I can assure the noble Earl, Lord Russell, and the noble Lord, Lord Frost, that in line with Cabinet Office guidance, any relevant public appointments to Great British Energy will be discussed with the appropriate Select Committee chair. I hope that I have been reassuring regarding this.
Lord Frost (Con)
My Lords, I thank the Minister for his comprehensive and understanding response, and I thank other noble Lords who spoke in support of these amendments. I have two very quick points in response.
First, I note what the Minister says about the likely degree of independence of Great British Energy. We will have to see how that turns out, but I make the point, which was not really dealt with in his response, that there will always be an area where the company thinks that something is operational, but the Government believe it is political. That is where it is important to have clarity on relationships and how accountability works, so I am not entirely persuaded that the Bill gets this right at the moment, but I hear what he says.
Lord Hunt of Kings Heath (Lab)
I am not sure that you can legislate for this. I understand what he says, because as Ministers, we have relationships with a number of key bodies at the moment. We have formal relationships, there are accountabilities, reports and meetings, but we also build up trust, understanding and working closely together. It is difficult to legislate for that. In saying that we want GBE to work, it has to feel operationally independent, or it is not going to work. We cannot micromanage it, but on the other hand, we are setting the tramlines in the context in which it operates. It is hard to go much further than that, in reality.
Lord Frost
Obviously, there is a degree of judgment and practice in how these things are done. There is also a degree of judgment on the extent to which it is desirable to fix the framework within which these judgments and relationships operate, which is probably the area of disagreement.
On the question of where the chair is based, the amendment may not be perfectly drafted. I think there is a difference between “based at” and “resident at”. The point of this amendment is to make sure that the business of the company, when transacted by the chair, is very firmly in Aberdeen, the HQ of the company, and not dragged elsewhere by the fact that the chair may not be resident there. This may not perfectly deal with that point, but it is an important point all the same, so I welcome the Minister’s comments on it. I will reflect on whether any of this is necessary at Report, because it is part of a wider discussion, but for the time being, I beg leave to withdraw the amendment.
Earl Russell (LD)
I apologise; I thought that it was acceptable. The noble Lord should have intervened earlier if it was not. I would not have done it if I had known that it was not acceptable, so I apologise to the Committee.
Lord Hunt of Kings Heath (Lab)
We certainly got the noble Lord’s point.
This has been an interesting debate with which to finish today’s proceedings. I start with Amendments 106, 107 and 115. The debate between the noble Lords, Lord Teverson and Lord Hamilton, on the benefits of oil rigs and other structures for fish populations allows me to say that other energy infrastructure can also have a positive impact on nature. We know, for instance, that wind farms can coexist with farmland easily. We have examples of solar meadows, which is a practice of growing wildflower meadows on solar farms. I have heard talk of green corridors, where beautiful new pylons are built to extend the grid. I am not being facetious here, as we need to look at ways in which energy can contribute to nature recovery. It is an important point to make.
I agree on the importance of our coastal communities and commercial fishing, as reflected in Amendments 106 and 107. Amendment 115 would require GBE to consult annually with the commercial shipping sector and fishing industry. I would expect GBE to provide regular updates on its work on such issues through its annual reports and accounts. We know that the projects that Great British Energy is likely to be involved in will all be subject to relevant regulations, including environmental impact assessments. There will be statutory stakeholder engagement to understand the potential impact of development. In line with other energy developers, GBE will consider the impact and risk of its activity on the commercial shipping sector and fishing industry, as it will other affected stakeholders. I will draw these remarks to the attention of the chair of GBE, so he can understand the importance of the issue that the noble Lord, Lord Offord, has raised.
In relation to coastal communities, there will be many opportunities in the energy sector in the future. We talked about the challenge of the North Sea transition. We obviously hope that, as jobs reduce in the oil and gas sector, the people involved can take up other jobs, some of which I hope will be in the wider energy sector. But overall, GBE has an important contribution to make in this area.
On Amendment 114, the noble Lord, Lord Teverson, raised an important point on the Ministry of Defence and security agencies. Clearly, to ensure resilience, GBE will have to consider the impact and risk of its activity on offshore installation, including its pipeline and cable connections, within the context of relevant security regulations and hostile state action. It is a very important and serious matter. All nationally significant infrastructure projects, which include projects in the energy sector over 50 megawatts, undergo rigorous scrutiny to monitor and mitigate security risks. In the end, these decisions fall to Ministers to make in relation to development consent orders.
There was an interesting debate on air defence issues between the noble Lords, Lord Teverson and Lord Hamilton. I have to say that my department is working very closely with the Ministry of Defence on these issues. We are talking closely and working to ensure that our own offshore wind ambitions can coexist alongside air defence. MoD programme NJORD will deliver an enduring radar mitigation solution, which will prevent turbines from interfering with MoD radar systems. In the context of our more general working relationship with the Ministry of Defence, it will be a responsibility of GBE to consider and consult relevant stakeholders. My department will of course ensure that that happens appropriately.
Amendment 118, tabled by the noble Baroness, Lady Bloomfield, would place a nature recovery duty on Great British Energy. Let me say at once that we are absolutely committed to restoring and protecting nature and meeting our Environment Act targets. We want GBE to focus on its core mission to drive clean energy deployment, but I assure the noble Baroness that the projects that GBE invests in and encourages will be subject to all environmental and climate regulations, in the same way that every other company is.
I draw her attention to our recently published Clean Power 2030 Action Plan, which dedicates an entire section to
“Integrating clean power and the natural environment”.
I was going to quote from it, but I do not think I need to do now. We are launching an engagement exercise in 2025 to invite communities, civil society and wider stakeholders to submit their ideas on how we can best encourage nature-positive best practice into energy infrastructure and development. Feedback from this exercise will allow the Government to better understand how we can integrate nature restoration through the clean power 2030 mission. We very much agree with the substance of what the noble Baroness said.
Lord Teverson (LD)
As the Minister will know, terrestrially, there is now biodiversity net gain, which came through the Environment Act and is applied to terrestrial developments. I do not think this is for the largest of them yet, but that is due to happen. I understand it is the Government’s intention to introduce marine biodiversity net gain regulations. I presume GBE will be subject to those.
Lord Hunt of Kings Heath (Lab)
My Lords, I am going to have to take advice on that as I do not have the information. However, if there are regulations which apply to companies, GBE will be expected to comply, and to act consistently with general government policy towards biodiversity. I will write to him about that in some detail.
On community benefits, I take the point of the noble Earl, Lord Russell, and other noble Lords. In our manifesto, we committed to ensuring that communities which live near new clean energy infrastructure projects can directly benefit from them. We are considering at the moment how to effectively deliver community benefits for those who live near new energy infrastructure, which includes new energy generation and transmission technology. We are developing guidance on community benefits for electricity transmission network infrastructure and onshore wind, which we will be publishing in due course. We are also reviewing our overall approach to community benefits, both to ensure consistency and quality and to ensure that communities are properly recognised and are able to come with us on our net zero and clean power journey. This includes looking to existing examples in Europe and further afield to see what has worked elsewhere. I look forward to updating the House on our approach to community benefits shortly.
The role of Great British Energy has been set out in its founding statement, and our commitment to putting local communities at the heart of the energy transition is a very strong component of what we are doing. The local power plan will support local communities to take a stake in the shift to net zero, as owners and partners in clean energy projects. They are important in themselves, as there is a huge appetite in many localities for community power, engagement and involvement. I agree that seeing a tangible benefit for local communities is important in itself, but it is also growing general support for the move to clean power and net zero, which is very important indeed.
We take the noble Lord’s point. It is clearly important, we are working on the details and will be publishing further information in due course. In my first week as a Minister in the department, I visited Biggleswade onshore windfarm, a small windfarm with 12 turbines. The company there is voluntary and there is a good practice trade guideline of paying £40,000 a year to the local community for such things as the local parish church, the community hall and other things. It was really good to see and is an example of what can happen.
Lord Offord of Garvel (Con)
I rise to close this group and indeed this sitting of the Committee today. It is worth saying that the chairman of Great British Energy, Jürgen Maier, has acknowledged the importance of communities. He used the words that GBE should be considered “a three-party partnership”, involving the private sector, the public sector and the community. If we also take account of the Labour assurances that have been given to communities along the way, I see no reason why we cannot consider these amendments further at the next stage, but for now, I beg leave to withdraw the amendment.