Arrangement of Business
The Deputy Chairman of Committees (Lord Geddes) (Con)
My Lords, if, as I am told is probable, there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Nuclear Installations (Compensation for Nuclear Damage) (Amendment) Regulations 2025
Lord Wilson of Sedgefield
That the Grand Committee do consider the Nuclear Installations (Compensation for Nuclear Damage) (Amendment) Regulations 2025.
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
My Lords, the regulations were laid before the house on 19 May 2025 and the Government have published an Explanatory Memorandum alongside them. This instrument makes technical changes to the way the Convention on Supplementary Compensation for Nuclear Damage, known as the CSC, will operate in the UK upon the UK’s accession to this treaty. These changes streamline the operation of the different conventions as well as the domestic implementing legislation.
Nuclear power is central to this Government’s mission to become a clean energy superpower and a key part of our industrial strategy to revive Britain’s industrial heartlands. It provides clean homegrown energy, creates thousands of jobs and complements other technologies by providing stable and reliable electricity to the grid. To drive forward new nuclear and deliver on our mission, the Government made a series of bold commitments in the recent spending review. A £14.2 billion investment was announced to build Sizewell C, ending years of delay and uncertainty and creating 10,000 jobs. The Government have also pledged over £2.5 billion for the small modular reactor, or SMR, programme over this spending review period. Rolls-Royce SMR has been selected as the preferred bidder to partner with Great British Energy – Nuclear to develop these reactors. Together with Hinkley Point C, these announcements represent the biggest nuclear rollout for a generation, delivering more nuclear to the grid than in the past 50 years.
Participation in nuclear third-party liability, or NTPL, treaties is important for supporting nuclear development while also safeguarding the interests of potential victims in the highly unlikely event of a nuclear incident. NTPL treaties ensure that minimum levels of compensation are available to victims of a nuclear incident, that claims are channelled exclusively to the operator of a nuclear installation, and that claims are channelled to the jurisdiction in which a nuclear incident has occurred.
The UK is currently party to two NTPL treaties: the first is the Paris Convention on Third Party Liability in the Field of Nuclear Energy, which is referred to as the Paris convention; the second is the Brussels Convention Supplementary to the Paris Convention on Third Party Liability in the Field of Nuclear Energy, also known as the Brussels supplementary convention. These two treaties are implemented domestically in the Nuclear Installations Act 1965. The Paris convention sets a minimum operator liability amount of €700 million. An additional €500 million of compensation is available above this to compensate victims in a Brussels convention country, together with a shared international fund of €300 million, made up of contributions from Brussels convention members—again, used to compensate damage in Brussels states.
To remove some potential barriers for investors in the nuclear supply chain, and to support exports, we are now pursuing accession to another NTPL treaty, the Convention on Supplementary Compensation for Nuclear Damage, known as the CSC, which is under the auspices of the International Atomic Energy Agency. The UK is the first Paris convention member to seek to accede to the CSC. Accession to the CSC will expand by 11 the number of countries the UK has NTPL treaty relations with. This expansion will remove some potential barriers to inward investment and support UK exports in the future.
CSC accession will enhance the UK’s attractiveness as a destination for nuclear investment and support the successful delivery of future projects. This is because the mutual respect of the principles of NTPL treaties will apply to more countries. In the highly unlikely event of a nuclear incident, accession to the CSC will also increase the amount of compensation available to victims. The CSC establishes a shared international fund made up from contributions of the contracting parties to compensate victims of a nuclear incident. A country’s contributions are calculated based on installed nuclear capacity and UN contribution rates, expressed in special drawing rights. At present, with the UK as a member, the shared international fund would be approximately £120 million, with the UK’s contribution being £7 million. To date, there have been no calls on this fund.
As we are the first Paris convention country to seek accession to the CSC, there is no established path for countries seeking participation in both conventions—the UK is a pioneer in this respect. To enable CSC accession, provisions were included in the Energy Act 2023 to amend the Nuclear Installations Act 1965, which provides for the UK’s participation in the various NTPL regimes. Our initial approach has been to reflect the minimum national compensation amount required for claims under the CSC at £300 million special drawing rights, or SDRs, equivalent to €370 million, by setting this as the liability limit for operators. This was to come out of operators’ existing financial security provision.
This instrument makes a technical change to the way the CSC will operate in the UK upon accession to the treaty. This technical amendment will align the operator liability limit under the CSC with that of the Paris convention: that is to say, it will create a single first tier of compensation available under both conventions, with a limit of €700 million. This remains within the existing financial security provided by operators, meaning there will be no increase in the liability burden for operators. For sites with lower liability levels, namely low-level sites and intermediate sites, their financial security requirements will also remain unchanged. This approach will simplify the operation of the different conventions and the classification of claims in domestic legislation. It will benefit the administration of funds by ensuring that the CSC shared international fund comes into operation only once the operator financial security limit of €700 million is exhausted. It will continue to ensure that the additional funds available under the Brussels supplementary convention and the CSC go only to those entitled to make a claim under these conventions.
In conclusion, this instrument makes a technical change to the way the CSC will operate in the UK. We continue to work towards CSC accession, which will support the delivery of new nuclear projects and exports, while continuing to safeguard the interests of victims in the highly unlikely event of a nuclear incident. This Government have been clear on our support for nuclear, and these measures contribute to creating the best possible investment climate. I beg to move.
Earl Russell (LD)
My Lords, we very much welcome these changes and we thank the Government for taking a world-leading approach here. The Government seek a resurgence of nuclear power, both large-scale reactors and SMRs, as part of their plan to decarbonise our energy generation and reach net-zero goals. It is absolutely right that the appropriate compensation be available to any potential victims associated with these undertakings.
We welcome this statutory instrument and recognise its critical role in ensuring that a minimum amount of compensation is available to victims in the unlikely event of any nuclear incident. We also strongly support the principle that claims are channelled directly to the operator of the nuclear installation in the country concerned.
These regulations are a small, technical, yet important amendment to the Nuclear Installations Act 1965. Their primary purpose is to implement the Convention on Supplementary Compensation for Nuclear Damage, known as the CSC, within the UK. The move is particularly significant as the UK is a pioneer in this respect, being the first Paris convention member to seek to accede to the CSC.
At the heart of these changes is a simplification and alignment of our nuclear third-party liability regime. Currently, the UK is a party to the Paris convention and the Brussels supplementary convention. This instrument makes a technical change to align the compensation under the CSC with that of the Paris convention. This means that any claims brought under the CSC, or under both the CSC and the Paris convention, will have a cap of €700 million. Critically, this operator liability aligns with CSC claims.
This approach simplifies the operation of the different conventions and the classification of claims in domestic legislation, and will help bring clarity and certainty to the wider industry operating in the UK. It is important to note that this revised liability remains within the existing financial security provided by operators. Importantly, this means no increase in their liability burden. For potential victims, however, accession to the CSC will increase the amount of compensation available through a shared international fund. With the UK as a member, this fund would currently stand at approximately £120 million, with the UK’s contribution being £7 million.
From a broader perspective, participating in nuclear third-party liability treaties such as the CSC is essential for supporting nuclear developments while safeguarding the interests of potential victims. The extension is intended to remove barriers to participation for inward investment and support UK exports, helping to enhance the UK’s attractiveness for inward nuclear investment, thus supporting the successful delivery of planned projects.
If the Minister does not mind, I have two small questions I would like clarification on. First, the Explanatory Memorandum says that the CSC
“would not impose additional liability on nuclear operators”,
but
“there is a risk that the insurance industry may choose to increase operators’ annual insurance premiums as a result of accession. It is unknown how much premiums might increase by, if at all”.
Given the intention behind the instrument, which I welcome, and the plans to build further nuclear power facilities, what measures will the Government take to ensure that the insurance industry does not take advantage of these changes to unduly put up premiums? What methods will the Government use to monitor any increases in insurance premiums that could come into being as a result of this measure?
Finally, I absolutely welcome the fact that the UK Government are doing this but, since they are now in a world-leading space on this, what action, if any, will they take to encourage other nuclear countries to follow the route they have taken? Will any consideration be given to asking other nuclear countries and their companies that are working in the UK to follow these examples in relation to any contracts they may have with us, currently or in the future, as part of their contracting process?
The Earl of Effingham (Con)
My Lords, I thank the Minister for introducing this instrument. As we have heard, it is intended to facilitate the UK’s accession to the Convention on Supplementary Compensation for Nuclear Damage—the CSC—by raising the liability limit for nuclear operators under the regime. Although the change is framed as technical, it raises broader questions that merit further attention.
First, on the process, there appears to have been no formal public consultation on this measure, and although His Majesty’s loyal Opposition recognise that key stakeholders in the industry were consulted, nuclear liability is not just a matter for industry; it is also a matter of deep public interest. We would welcome the Minister’s assurance that the Government will maintain transparency as and when the CSC framework is implemented, particularly in relation to how claims are assessed and public communications are relayed in the event of a nuclear incident.
Lord Wilson of Sedgefield (Lab)
My Lords, I am grateful for the valuable contributions and the insightful questions. As I said, this is a technical issue, so it is only right that it be looked at technically and in detail.
I say to the noble Earl, Lord Effingham, that a formal public consultation was not undertaken for this draft statutory instrument. The amendment is technical in nature and does not introduce new policy, which is why there was no public consultation. However, we have engaged extensively with international partners and key stakeholders throughout the development of the approach. We recognise that there will be many impacts resulting from the changes required by operators and insurers as a result of CSC accession—an issue raised by the noble Earls, Lord Russell and Lord Effingham—so we will work with them in advance of accession to the treaty. I will write to the noble Earls on this more technical point.
I welcome the support of the noble Earl, Lord Russell, for the SMR programme and the changes. We will keep support for our nuclear sector in view all the time. The CSC is important because it includes another 11 countries that can be part of this process and that can be confident in the UK. They will, therefore, help to enhance the supply chain going forward, which is one of the reasons for doing this—other than, obviously, looking after particular incidents that might happen.
Many countries recognise the benefits that establishing a trading relationship can bring for industry, investors and potential victims of nuclear incidents. Contracting parties to the Paris convention are interested in the UK’s approach to CSC implementation as we are the first Paris convention country to seek to do this; we expect other states to be supportive of the UK’s accession to the CSC. Operators have discretion to cover their nuclear liabilities using a range of financial mechanisms. Officials are in regular contact with nuclear operators and insurers through an annual review process of operations arrangements.
To drive forward new nuclear and deliver on our mission, the Government made a series of bold commitments in the recent spending review, including a commitment to Sizewell C and the delivery of SMRs. Key to supporting these projects and our wider ambitions is creating the best possible investment climate for nuclear.
As I have set out, accession to the CSC will expand by 11 the number of countries with which the UK has NTPL treaty relations. This expansion will remove some potential barriers to inward investment and support UK exports in future. CSC accession will enhance the UK’s attractiveness as a destination for nuclear investment and support the successful delivery of future projects. It will also increase the amount of compensation available in the unlikely event of a nuclear incident.
This instrument makes technical changes to the way the CSC will operate in the UK upon accession to the treaty. It aligns the compensation from operators available under the CSC to that of the Paris convention, to which the UK is already a party. This does not increase the liability burden for operators as claims made under the CSC will be met from their existing financial security. It simplifies the operation of the different conventions, ensures that shared international funds are used only once the operator’s liability limit has been exhausted, and continues to ensure that the international funds available under the Brussels supplementary convention and the CSC go only to those entitled to make a claim under those conventions.
Contracts for Difference (Miscellaneous Amendments) (No. 3) Regulations 2025
(2 days ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Lord Wilson of Sedgefield
That the Grand Committee do consider the Contracts for Difference (Miscellaneous Amendments) (No. 3) Regulations 2025.
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
My Lords, the Government have committed to achieving clean power by 2030 and the contracts for difference—CfD—scheme will play a key role in achieving that ambition. The clean power action plan, published in December last year, outlined several key reforms to the CfD scheme ahead of allocation round 7 opening this August. Following a robust public consultation process, we published our consultation response, which set out that legislative changes are needed to enable the Government to reach clean power 2030 and enable a fair price for consumers.
The draft SI will enable changes to the allocation process to ensure that our clean power 2030 ambitions are met and that consumers pay a fair price. It amends the Contracts for Difference (Allocation) Regulations 2014 budget publication process and the information that the Secretary of State will have access to during the allocation round. With access to anonymised bids and by changing the budget publication process, the Secretary of State will be able to set budgets for CfDs that maximise good value capacity deployment for clean power 2030 and avoid the outcome seen in allocation round 6, where an unspent budget for fixed-bottom offshore wind meant that a potential opportunity to secure additional projects at a good price was lost.
These amendments mean that the Government can bring forward renewable capacity that represents value for money, which will benefit consumers by moving the country away from volatile fossil fuel prices. The instrument also amends regulations to enable the costs of the clean industry bonus to be included in the Ofgem price cap. There needs to be a specific provision in the relevant regulations that allows the CIB to be counted as a specific bill cost as part of wider CfD costs. This is a technical change; the rest of the CIB regulations are already in place. It will ensure that the price cap captures all the relevant factors that might impact on it.
These draft regulations represent an important step in ensuring that we achieve clean power 2030 and protect bill payers now and into the future. They make the necessary amendments to enable the CfDs to adapt as we head towards clean power 2030. This will enable us to maximise renewables deployment at a fair cost to consumers. I beg to move.
Lord Frost (Con)
My Lords, I declare an interest as an unpaid director of the campaign group Net Zero Watch. I think the Secretary of State for Energy is at the moment giving a Statement in the Commons on the state of the climate and energy in which he promised—or, at least, briefed—that there would be some radical truth telling. It may be useful to do a bit of that ourselves in this discussion. In particular, there are two areas of concern before I come on to the detail of this instrument.
First, the Government’s policy is based on the incorrect belief that renewables are cheaper than gas. There are different figures out there, of course, but independent commentators show that if you include all the subsidy costs, grid balancing costs and capacity market costs, onshore wind is about twice as expensive per megawatt hour as gas, offshore wind is two and a half times as expensive, and floating offshore is three times as expensive. Even solar, which is perhaps the most of viable of any of these renewables, is 50% more expensive. That is the first incorrect belief.
The second incorrect belief is that prices will go down rather than up, which has been very well debated recently. According to data from the International Energy Agency, Britain had, as is well known, the most expensive industrial and domestic energy prices in 2023. The data for 2024, in so far as we have it, shows that we have the most expensive industrial energy prices in Europe, and now only the fourth most expensive domestic energy prices. However, gas prices are about average for Europe, which strongly suggests that, contrary to everything that is said, gas prices are not driving the high costs. In fact, it is the subsidy, the balancing costs, the capacity market and the inflated capital costs—all of which, by the way, the OBR predicts will increase rather than decrease over the next few years. All those are driving higher prices.
The Government have to pretend to believe the things that I just outlined; I do not know whether they really believe them, but they certainly have to pretend to. The problem is that doing so makes it difficult to run a proper renewables policy, and that is why AR6—allocation round 6—was such a fiasco. As the Explanatory Memorandum says, AR6 constituted a
“budget underspend for offshore wind”.
Alternatively put, renewables producers would not supply at the prices that were offered, so there was an underspend. If renewables are as cheap as the Government say they are, why should that be the case?
Therefore, the Government badly need AR7 to be a success. They need this vast expansion of renewables, whatever the cost, if they are to decarbonise by 2030. But developers are getting cold feet; we saw it in AR6, and we have seen the cancellation of projects since then. Hence this statutory instrument is a different approach. It is very complex and obfuscatory, in the way we have come to expect, and there are many technicalities, but the core of it, as various commentators have set out, is that instead of setting a budget and seeing what capacity the Government can get for the money, they are setting a capacity ambition, seeing what bids come in and then seeing what they have to pay to get that capacity. That is why the Secretary of State needs this anonymised data early and why they need to delay publishing the budget until all this has been assessed. The Government hope that no one will notice what is going on if it is done in this technical way in the statutory instrument, but I am afraid it is a scandal, because we will see prices and budgets go up, and we will not get a proper explanation for it.
I have two other points to make on the instrument. The consultation on it, which the Minister referred to and described as “robust”, involved developers, electricity traders—I quote the Explanatory Memorandum—
“businesses operating in the offshore wind sector”
and “environmental groups”. Those, of course, are all producers. What about actual businesses that have to use energy or electricity and have to deal with the increased energy costs and complexity that come as a result? We know what the consequence is and we know why they did not consult them. It is because they know that prices will go up. We know that because, in the industrial strategy announced a couple of weeks ago, the Government have had to pick sectors and subsidise their energy costs to make their operations viable.
My second point is about the security risk of all this. We all saw what happened in Iberia a couple of months ago as a result of excessive reliance on renewables. The Government say that they are investing in nuclear, gas and, to the extent they can, storage, but, of course, none of this will be ready by 2030.
I shall finish with three questions. First, can the Minister tell us how much the Government expect to spend on the AR7 budget? If prices are falling, why will it not be less than AR6? Can he tell us how much consumer prices are expected to fall as a result of the constant fall, as we are supposed to believe, in the cost of renewables? Secondly, if they did not consult consumers of electricity on this SI and the new methodology, can they commit to doing so in future on similar instruments? Thirdly, can the Government tell us how they expect to fill the gap in production that renewables create before the new gas, nuclear and storage come online well after 2030?
Earl Russell (LD)
My Lords, before I turn to the SI, I will respond to a couple of the points the noble Lord, Lord Frost, has made. We shared a Select Committee, so I absolutely respect the noble Lord’s right to say what he wants to say. The noble Lord argued for the need to include all costs, but part of the calculations of using or continuing to use fossil fuels is that we do not continue to account for all the consequences of burning fossil fuels. The OBR has just this week said that that far outweighs any cost that we might spend on renewable energy. Prices are going down: solar and wind are the cheapest forms of energy, and they provide constant energy security. The noble Lord knows that gas sets the market price 96% of the time.
On the regulations, we broadly welcome this plan to bolster our nation’s energy security and accelerate the transition to clean power. We commend the Government on their intention further to update and reinforce the contracts for difference process that has been the backbone of our nation’s renewable energy transition. These draft Contracts for Difference (Miscellaneous Amendments) (No. 3) Regulations 2025 represent an important update intend to fine-tune the CfD process to bring about a more efficient use of budgets, improve the bid management process and consider extra support for the UK industry.
We particularly welcome the continued focus on boosting our domestic industry through the clean industry bonus, CIB, referred to in these regulations as the “sustainable industry reward”. The first round of the CIB was a success, more than doubling its budget from £200 million to £544 million and leveraging up to £9 billion of investment in UK supply chains.
I agree with the Government: this is an unprecedented amount earmarked for UK factories and ports, particularly in our country’s poorest areas, fostering jobs and growth through the supply chains. We also support the intention for these costs to be accurately included in the Ofgem price cap, as these regulations ensure, which aids future transparency and fair accounting.
The regulations make three main changes. First, they amend the contract budget notice publication process for price and pot notices and the final contract budget notice signing within the allocation framework. Secondly, they amend the information that the Secretary of State has access to. The Secretary of State now gains access to anonymised strike price bids at any time, supported by an estimated budget to improve budget management and help prevent underspend. Finally, they include clean industry bonus payments in the Low Carbon Contracts Company’s calculations.
We generally welcome the spirit behind these notifications. I have some questions for the Minister. The first seeks to ensure that we get value for money and consumer costs. The changes will allow the budgets to be set at a price that balances value for the consumer with the development ambitions. However, given the significant investment involved—allocation round six was a record-breaking £1.5 billion for 127 projects generating 7.2 gigawatts, and AR7 is due to be even larger—how will Ministers ensure that the new-found flexibility generally translates into lower strike prices for offshore wind and ultimately lower costs for consumers? How can we be certain that value for money is not sacrificed in the rush to pursue record capacity?
Turning to competitive tensions and the risk of bid inflation, while the Government intend to review anonymised bid information and maintain anonymity, there is a risk that bidders might aim to obscure true costs and competitive tensions could be perceived as lacking, potentially leading to higher clearing prices, especially if there is a perception of an unlimited budget for AR7. Will the Government clarify what controls there are on the powers to mitigate any possible negative impacts from these changes?
Finally, turning to monitoring, evaluation and swift course correction, the Explanatory Memorandum details plans and processes for evaluations, robust monitoring and a post-implementation review five years after these changes take place. Five years is a long time in a rapidly evolving marketplace. I ask the Minister for reassurance about the specifics on the key performance indicators that will be rigorously tracked to assess the effectiveness of these legislative changes after each allocation round. How will any insights from each round and their implications lead to changes in processes before the next round?
We need to be careful that we do not get any market distortions from these regulations. I do not think that will be the case, but there is a need within the evaluation process to check that that is not happening.
We support the ambition to make Britain a clean energy superpower. This will help bring down bills, provide energy security, green jobs and growth and help get us off the rollercoaster of dependence on international gas markets. The Government need to bring forward proposals to lower energy bills, although that sits outside this SI. I simply seek reassurance on the points I have raised with the Minister.
The Earl of Effingham (Con)
My Lords, I thank the Minister for setting out the purpose of this instrument. These regulations make what may be described as technical adjustments to the CfD regime. However, in practice, they signal significant changes to the principles that underpin the scheme’s operation: transparency, predictability and fairness. The CfD mechanism has been a cornerstone of our low-carbon transition, driving record levels of renewable deployment, while securing value for consumers. That credibility depends on its rules being clear, impartial and competitively neutral.
This instrument makes three changes that in His Majesty’s loyal Opposition’s view merit particular scrutiny. First, as highlighted by my noble friend Lord Frost, it allows the Secretary of State to view anonymised bid data before finalising the budget for an allocation round. This breaks the long-standing principle that all participants bid on a level playing field based on pre-published terms. Ministerial discretion inserted into the process after seeing how the market has responded risks undermining confidence in the integrity of the auction.
Secondly, as also flagged by my noble friend Lord Frost, by delaying the publication of the final budget until after that review, the Government will have the ability to shape outcomes post hoc. However well-intentioned, that is potentially a slippery slope. It introduces uncertainty, opens the doors to perceived political interference and may ultimately deter long-term investors who value predictable rules-based frameworks.
Thirdly, the decision to reclassify the costs of the sustainable industry reward so that they are now recovered through Ofgem’s price cap means that these costs will be passed directly on to consumers. At a time when the cost of living is rising and households are under pressure, the perception is that a stealth measure introduced without full parliamentary scrutiny or a fully transparent impact assessment should not be made. What safeguards will be put in place to ensure that this new discretion over budgets does not distort the process or erode trust among participants? Has the department undertaken any modelling of how these changes might affect bidding behaviour, strike prices or project delivery timelines? What assurances can be given to consumers that the inclusion of new costs in the price cap calculation will not place additional upward pressure on their energy bills?
In conclusion, although these changes may be framed as flexible and technical, they represent a shift in the balance of power from an impartial auction model to one in which Ministers can influence the outcome after bids have been seen. That raises fundamental questions about fairness, efficiency and consumer protection. We urge the Minister to explain why such discretion is necessary and how its use will be accountable to Parliament.
Lord Wilson of Sedgefield (Lab)
My Lords, I thank noble Lords again for a good debate, with some incisive observations made by noble Lords opposite. This Government are steadfastly committed to deploying renewables in order to achieve our ambition for clean power by 2030 and to protect bill payers both now and in future. The instrument under discussion today will enable us to adapt CfDs so that they can support the delivery of our ambition for clean power by 2030 at the lowest cost to consumers.
Having said that, let me respond to the questions posed by the noble Lord, Lord Frost. In an unstable world, the only ways both to guarantee our energy security and to protect bill payers permanently are to keep energy bills down for good and to speed up the transition away from fossil fuels towards home-grown, clean energy. During periods when wholesale electricity prices are higher than the fixed CfD strike price awarded, generators pay the difference back into the scheme, which can help reduce energy bills. This happened when wholesale electricity prices spiked during the energy bill crisis of 2022-23; over that winter, CfD payments reduced the amount needed to fund government energy support schemes by around £18 for a typical household. The budget underspend that has been referred to is a result of the allocation—
Lord Wilson of Sedgefield (Lab)
To continue with my response to the noble Lord, Lord Frost, on the budget underspend referred to as a result of the allocation round process, budgets had previously been set without knowing how much capacity can be procured, creating uncertainty around the renewables capacity and the price at which it can be secured. These reforms respond to that challenge. The parameters for allocation round 7 will be published in the coming weeks. As part of our consultation process, we engaged with consumer groups to ensure we obtained a wide range of views on the impact of these changes.
The noble Lord mentioned that the Secretary of State is giving a Statement today. I also draw the noble Lord’s attention to a speech the Secretary of State gave at the recent Global Offshore Wind conference, where he noted the importance of securing fair prices for consumers through AR7 and beyond.
To answer the points from the noble Earl, Lord Russell, to ensure value for money, we have consulted on several reforms for AR7 so that competitive tension is maintained. The response to this consultation will be published soon. We will also publish our auction parameters in the coming weeks, which will aim to ensure consumers get the most value from this round. We will review the specific policy after the conclusion of AR7 and inform stakeholders of our use of these powers for future allocation rounds.
In answer to the noble Earl, Lord Effingham, key parameters such delivery years and strike prices will be published before the opening of the allocation round. Developers will still have the key information they need to submit their minimum viable bid. We will be publishing how we intend to use these powers for AR7 in the forthcoming government response, alongside other measures to drive value for money.
The playing field remains level. The auction will remain entirely impartial, and bids seen will be entirely anonymous. This allows current powers to revise the budget to be used in a targeted and careful manner, with specific consideration given to the cost to consumers.
On the noble Earl’s point about transparency, this proposal has been subject to a full consultation in which the Government engaged with consumer groups, developers and other key stakeholders. We also published our impact assessment for these regulations in May alongside our response. The key considerations for the CfD are set out in the Energy Act. They will still be to ensure that costs to consumers are minimised, that we have security of supply and that we decarbonise the electricity system.
The draft regulations before the Committee today will enable the Government to achieve clean power by 2030 at a fair cost to consumers.
Transport Act 2000 (Air Traffic Services) (Prescribed Terms) Regulations 2025
(2 days ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Lord Hendy of Richmond Hill
That the Grand Committee do consider the Transport Act 2000 (Air Traffic Services) (Prescribed Terms) Regulations 2025.
Relevant document: 28th Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)
My Lords, the UK’s airspace is a vital piece of our national infrastructure that is essential to economic growth, connectivity and national resilience. Last year, there were more than 2.4 million flights using UK airspace, but despite a significant rise in air traffic demand, the structure of our airspace has remained largely unchanged since the 1950s, when there were around 200,000 flights a year. This means that today’s flight paths remain largely based on a system that relies on a network of outdated ground-based navigation beacons. As a result, aircraft today fly less efficient routes and are unable to take advantage of modern aircraft technology and performance. This leads to increased fuel consumption, a greater risk of delays and, as a result, higher carbon emissions. The National Air Traffic Service—NATS—has estimated that, without modernisation, by 2040 one in five flights could face delays of more than 45 minutes.
A plan to fix this has been set out by the Department for Transport and the Civil Aviation Authority—the CAA—in the form of the airspace modernisation strategy. The regulations being considered today are one part of enabling that plan to happen. Modernised airspace will enable greater capacity in the air, improve resilience to disruption and help UK aviation to achieve net-zero greenhouse gas emissions by 2050.
The draft regulations will be made under powers conferred by the Transport Act 2000. Under that Act, the Secretary of State may modify prescribed terms in an air traffic services licence. This instrument designates as prescribed any term specifying air traffic services authorised under a licence and any term specifying the area in which those services may be provided. In practice, this will allow the Secretary of State to modify the terms in the air traffic services licence granted to NATS (En Route) plc, known as NERL, in order to create and fund a new UK airspace design service, or UKADS for short.
The airspace modernisation strategy is a long-term plan designed to ensure UK airspace remains safe, efficient and capable of meeting future demands. It includes changes to flight paths to enable better use of the UK’s airspace.
The approach adopted in the UK until now has seen individual sponsors—usually airports—design and progress their own proposals for airspace change through the CAA’s CAP1616 airspace change process. This approach recognises the crucial role that airports play in airspace design, but also creates fragmentation and delay, particularly when multiple airports have overlapping airspace designs and competing priorities. This is especially an issue around London, which currently has 11 airports in the programme and some of the most complex airspace in the world.
Lord Kirkhope of Harrogate (Con)
My Lords, in the new spirit in the House of declarations of interests, I declare mine at the outset. I do so as a private pilot, a former director of Newcastle airport and the author of an investigation into lower airspace, which was brought about at the request of the then Transport Secretary Sir Grant Shapps. It was primarily to do with lower airspace, but it highlighted a number of things.
I will not speak for long, but I want to ask the Minister a few questions. I welcome very much what is being proposed, but I wonder to what extent it can be delivered. It is extremely complicated because it deals with a very complicated situation in relation not only to lower airspace but to upper airspace, the whole area of control zones around airports and the historic position of airports themselves as sponsors of changes to airspace. This has always been an area of great concern, particularly to general aviation, which is rather more random in its representation. Unlike the airports—which have their own clear bodies to represent them and the institution—airlines and others, general aviation is a bit more haphazard and therefore in need of protection, if I may put it that way, from government.
These proposed changes have enormous implications for those involved in general aviation—and business aviation too—first, by removing individual effort and the sponsors that exist currently, particularly the airports themselves. I hope that there will be sufficient objectivity in the decisions that are taken to maintain GA’s position in any redesign mechanism. There have been concerns over the years that, because of the sponsorship by airports and their own determination to hold on to airspace and control zones for their own commercial benefit as well as—they claim—for safety and security, we have seen a diminution in parts of the country of the convenience and ability of general aviation to operate.
The south-east of England is a classic case. I am lucky in that I fly mostly in the north and in Scotland, where we do not have control zones for much of the territory. This makes it a much freer situation for GA, and that is very helpful. I note that there is to be an initial stage—if you like—of these processes, which will concentrate on the London area. I hope, therefore, that the views and feelings of GA will be fully taken into account in the redesign that might take place.
Secondly, it seems to me, and one of the criticisms has been, that, “What we have, we hold”, appeared to be the attitude of a lot of those who sponsored airspace controls. Very rarely do people seem to want to give up anything. Changes in technology, which are referred to in the Explanatory Memorandum and have been dramatic over the last few years, seem to suggest that some airports currently have airspace controls that are unnecessary and could be yielded up for use by general aviation, certainly in terms of routing and so on. I would like to know whether there will be sufficient protection for them.
Thirdly, on the question of airports, the initial stages of proposals from the airports produced a rather mixed outcome. Some airports appeared to be quick off the mark and willing to take part in a modernisation proposal; others seemed more reluctant. Therefore, I wonder to what extent these proposals will be able to go ahead in a way that produces something comprehensive, rather than, as we currently have, a bit of a mishmash of circumstances. It is awfully important that all these elements are brought together—and with the support of the various people who have been involved so far in sponsoring and directing these events. Will the Minister comment further on that?
Finally, on the timescale, we have been doing this for quite a long time. This measure is welcome but we were making progress way back before we had the Covid situation. Unfortunately, things seem to have become rather slow. That is inevitable, I suppose, but I would like to see some kind of clear timescale so that we can bring matters to a head and finalise a comprehensive scheme to which all parties are signed up.
Baroness Pidgeon (LD)
In many ways, it is quite extraordinary that no single organisation in the UK is currently responsible for creating a modern and integrated airspace design. As we have heard, across the country, airspace change proposals are sponsored by individual bodies—usually airports or air navigation service providers—and, in more congested areas, such as London, there are multiple overlapping ACPs, each with a separate sponsor.
Aviation law is governed by an international system of rules set by the International Civil Aviation Organization. In many ICAO contracting states there is one entity, usually a public body, responsible for airspace planning and design; that same body is also responsible for air traffic services and air navigation. This clearly makes it much easier to deliver airspace change that benefits the whole state’s airspace than is currently possible in the UK.
We therefore welcome this SI, which changes licensing rules to allow a single new UK airspace design service to be created and to oversee both airspace modernisation and changes to use of airspace. We welcome steps to better co-ordinate a disjointed system of managing airspace but, of course, we will hold the Government to account to ensure that modernisation works for all our communities and for our environment. It is important to bring airspace into the 21st century, to deliver flight paths that cut emissions and to ensure that journeys are quicker, quieter and cleaner. However, with any changes there will be winners and losers. The Government must recognise this and work with communities as airspace is modernised—not least in congested areas, such as London.
We must also ensure that airspace modernisation reflects the needs of our communities, recognising the impact that noise and air pollution can have on people and on nature. I think in particular of residents in Richmond and other west London boroughs who suffer greatly because of flights relating to Heathrow and are fearful of any changes. I ask the Minister: how do the Government plan to ensure that the new UK airspace design service works openly and transparently with communities that are impacted by aviation, genuinely engages and consults, and is a trusted, independent voice in this area, because there is a lot of suspicion in many communities? Also, will this new organisation be subject to freedom of information legislation?
Baroness Pidgeon (LD)
My final question, before I was interrupted by the Division Bell, was: what is the timescale for the development of this new service and its first project tackling the complex London airspace?
Lord Moylan (Con)
My Lords, in general we welcome this statutory instrument. We welcome the prospect of a more rational organisation of airspace—who could do otherwise? However, there are considerable problems and the Minister needs probing on some of them. I am grateful to my noble friend Lady Foster of Oxton, who is not in her place because she is detained on a train that has been diverted and which has delayed her. She would have been here; as noble Lords will know, during her many years in the European Parliament, she worked on all the Single European Sky legislation. She has supplied me with some questions, and some of my speech has been helped by her: I want to acknowledge that, because that has been very useful.
The first question has to go to cost. How much extra will the airlines have to pay, over and above their current payments for air traffic control services? They are going to be recharged for this. Is it going to be a smooth sum, or will it be lumpy and go up and down as costs are incurred? The Minister says it will be small and that, indeed, they may save money in the long term, once it is all done. However, there are so many things that the Government say are going to be small and will save you money in the long term, but they never do. So can he be more precise than simply saying “small” and give us a better clue of how much it will be, perhaps as a percentage of what they currently pay?
Another question has to do with the timescale for achieving this; here, I refer to the comments of the noble Baroness, Lady Pidgeon. It looks as though it will take years, not simply because of complexity—we grant that the work will be complex—but also, if one looks at page 5 of the Explanatory Notes that accompany the statutory instrument and the number of stages that have to be gone through to achieve a CAA decision on airspace change, it could take many years to do the work. Can the noble Lord give an estimate of how long it might be before, even for the London area, we see these changes brought into effect?
Returning to the charges for a moment, will foreign carriers that enter UK airspace be asked to pay towards this? If so, how will they be charged? Then there is the big question of how these changes are going to be integrated with neighbouring airspace and air traffic control arrangements, particularly the Single European Sky arrangements. Do they need to be, perhaps because they are en route? It might be that they are wholly within domestic airspace and that integration is therefore not needed, but some words from the Minister on that when he comes to reply would be helpful.
There is another question, about skills. I do not doubt for a moment that many of the people involved in airspace planning in the UK are very skilful, but UK Research and Innovation’s Future Flight Challenge said:
“The skills and knowledge needed for the airspace designers for any ACPs associated with enabling new airspace users will likely be different to the airport based changes”
to which we are accustomed. Where are the skills going to come from? Can we be guaranteed that we will have the right skills and the right people in place to do this work in a timely fashion?
Next, I want to build on some remarks made by my noble friend Lord Kirkhope of Harrogate, who referred to general aviation and smaller airports—he did not refer to smaller airports explicitly, but I shall. With this new all-singing, all-dancing, powerful body that will set these new rules for flights, it will be very easy to ignore the particular needs of smaller airports. I note that, in the consultation so far, there have been some very worried remarks from airports such as Biggin Hill and Farnborough about how their interests are going to be looked after as this work proceeds. Again, some consolation from the Minister would be very helpful.
Finally, I come to the public. Any change in flight paths can have a devastating effect on communities that live under those flight paths, particularly if they are close to an airport. The question of public engagement by NERL as it proceeds with this work is going to be crucial to its successful implementation. I would like to hear the noble Lord say that that there will be a plan from the outset for transparent public engagement on the proposed changes, and the possible changes, so that communities, local authorities and their representatives can be fully engaged. He may say that this could make it difficult to get the work done, but my view is that we have a choice: either we tackle this problem early on and hope to deal with it as we proceed, or we proceed in relative silence, with a lack of transparency, and run into a massive problem at the end, a problem that might, in various locations, be so powerful that it results in making the changes politically unimplementable. I would like to hear about the public engagement strategy, because of the powerful effect that these changes might have on local communities; otherwise, if the Government can pull this off, it will take many years and it will improve things, but there is a great danger, in my view, of it all going horribly wrong somewhere along the line.
Lord Hendy of Richmond Hill (Lab)
My Lords, I thank all noble Lords for their consideration of these draft regulations. I will now attempt to respond to the specific points raised.
I was pleased to hear the noble Lord, Lord Kirkhope of Harrogate, welcome these proposals. He referred to general aviation, as did the noble Lord, Lord Moylan. We recognise the key role of general aviation and the value that it brings, both economically and as a pipeline for people to learn to fly. The UKADS will take account of the needs and views of general aviation as it develops its designs. Of course, London has some of the most complex airspace in the world, and the UKADS will provide the guiding mind to help deliver modernisation in this very complex area.
Lord Moylan (Con)
The question about timescale was not about when the work would begin; rather, it was, I think, about when it was likely to result in some fruit.
Lord Hendy of Richmond Hill (Lab)
I thank the noble Lord for his intervention. I will write further on what we can say about the projected timescales of conclusion. It is enough to note for now that this work is extraordinarily complex, particularly since we are seeking to address the airspace around London, which is one of the world’s most congested spaces. I will write to all noble Lords on what we currently envisage the timescales of this to be, so far as we can estimate them.
I was delighted to hear that the noble Baroness, Lady Pidgeon, also welcomes this statutory instrument. In respect of local communities, which are clearly very important, aircraft noise is a considerable issue in some communities. I should declare my interest in that I live in Richmond, so I am familiar with the circumstances of this—although I have got used to it, as I did when I lived in Hayes and Ealing when I was growing up.
The first thing to say is that modernisation is expected to benefit those who use and are affected by UK airspace, including residents living near airports. The UK ADS will progress airspace change proposals through the CAA’s CAP1616 airspace change process, as current sponsors do now. This includes requirements to engage with local communities and to factor in environmental considerations. Airports will continue to play an important role in strengthening community relationships by working in partnership with the UK ADS to deliver consultations and to ensure that local voices are meaningfully represented. The CAA and the department expect, by the September of this year, to consult on a package of changes that will make the process for airspace design decisions more proportionate. People affected by airspace change will continue to have a say and any changes will retain the important principles of a transparent, evidence-based process.
Airspace modernisation is expected to result in a further reduction in the average noise levels per flight, as aircraft climbs and descents could become quicker and quieter with route changes that better utilise the capabilities of modern aircraft. Modern technology and navigation systems also make it possible to set much more accurate flight paths, which navigate more accurately around population centres. However, noise impacts will also depend on other factors, such as planning decisions, traffic growth or airline route choices. Airports will still be expected to develop and implement robust noise action plans, which will be subject to oversight and review by my department and the Civil Aviation Authority.
The noble Baroness, Lady Pidgeon, asked whether the new body could be subject to freedom of information requirements. It will be a body in private hands, but the Civil Aviation Authority and the Department for Transport will be subject to FoI requests. She, too, asked about the timescale. I have already said that I will write to noble Lords to make an initial foray into that area.
On the questions raised by the noble Lord, Lord Moylan, and the nature of the charges, in November 2024, the Civil Aviation Authority set out illustrative costs of approximately £20 million per annum. This is broadly equivalent to approximately 2% of the 2024 UK en-route charges paid by airlines—for illustrative purposes, this is approximately £7 per flight or 5p per passenger. The CAA has taken into account feedback received and is currently consulting on detailed proposals for the new charge, with final charges depending on the chosen regulatory model and actual service costs.
The noble Lord asked whether charges will be paid by foreign airlines: they will. They will pay through the existing industry mechanisms, the same as the en-route rate paid for services today. He asked about skills. This is a challenge around the world. UKADS and NERL have skills and facilities in house. We will maintain what we have, and by creating a new guiding mind, we will enable better use of the skills and experience we already have in house. I will write to the noble Lord further about integration with the European system.
I believe I have answered all the points that have been raised, but if there are any further points, I shall be happy to write to noble Lords.
Without these regulations we will not be able to establish the UK Airspace Design Service and deliver the benefits that airspace modernisation can bring. Those measures will help us deliver fewer delays for passengers and quicker, quieter and cleaner flights over the UK. This will lead straight into the Government’s commitment to innovation, sustainability and economic growth. I hope noble Lords will join me in supporting these measures.