Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Scott of Needham Market) (LD)
My Lords, if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Warm Home Discount (England and Wales) Regulations 2026
(1 day, 8 hours ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Whitehead
That the Grand Committee do consider the Warm Home Discount (England and Wales) Regulations 2026.
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, these regulations were laid before this House on 2 February 2026. The warm home discount scheme has been a key policy in the Government’s approach to tackling fuel poverty and reducing the energy costs of low-income and vulnerable households, ever since its inception in 2011. Last year the Government expanded the scheme, removing the high cost to heat threshold to ensure that around an additional 2.7 million of the poorest households across Great Britain received a £150 rebate off their energy bills this winter, with nearly 6 million households now eligible. The current scheme period ends on 31 March 2026, and new regulations are required to continue the scheme beyond this date.
In September we consulted on continuing the warm home discount scheme up to and including the winter of 2030-31. The consultation respondents, including consumer and advocacy groups, charities and industry, strongly supported proposals to continue the scheme, and to continue to provide rebates via automatic data matching. Today we are discussing these regulations, as well as some additional changes to the scheme, which allow eligible households across England and Wales in or at risk of fuel poverty to continue to receive the rebate for the rest of this decade.
These regulations will extend the scheme in England and Wales for five more years from 2026, until they expire in 2031. The regulations will continue to oblige energy suppliers with more than 1,000 domestic accounts to participate in the scheme. These regulations will ensure that, as is the case currently, energy suppliers with fewer than 1,000 domestic accounts can choose to participate voluntarily in the scheme.
Under the scheme, participating energy suppliers are obliged to provide support to eligible households through a rebate provided directly to their energy bill, valued at £150. Eligibility for the rebate will continue to be set out by the Secretary of State with an eligibility statement, which is published for each scheme year. Following the removal of the high cost to heat threshold and the expansion of the scheme in 2025-26, the Government have committed to maintaining the current eligibility for the rebate in England and Wales, based on receipt of means-tested benefits, for a further five years.
Eligibility for the scheme remains unchanged but these regulations introduce a more streamlined approach to administration, without impacting eligibility. The existing core group 1 and core group 2 will be merged into one core group in England and Wales, with a view to enabling clearer communication and messaging to potentially eligible households. This change was broadly supported by consultation respondents.
We put out a range of communications ahead of and during each scheme year to eligible households, and will continue to do so for the next scheme period. The automatic data-matching process for the core group in England and Wales will continue, using data held and processed by the Department for Work and Pensions, with the majority of eligible households—typically around 96%—expected to be automatically data-matched, meaning that they will receive the rebate without taking any further action.
These regulations set out a range of permitted activities, overseen by Ofgem, through which energy suppliers can deliver towards their non-core obligation of supporting eligible households in fuel poverty or in a group that are at risk of fuel poverty. Permitted activities within industry initiatives include benefit entitlement checks, energy-efficiency measures, energy advice, debt relief and financial assistance payments of £150. Scheme energy suppliers can also choose to dedicate non-core spend towards the park home scheme, which provides eligible households with £150 of support towards their energy bill.
The regulations also introduce changes to the administration of the scheme and enhance consumer protections for eligible households. They include a new provision to enable the Secretary of State to direct suppliers to communicate directly with their own successfully data-matched customers to provide further information about the scheme, including information related to automated decision-making. In addition, the regulations will replace fixed spending targets with annual estimates, based on the number of eligible households expected to benefit from a rebate each winter, to better predict scheme costs.
Tackling fuel poverty is a priority for this Government. We recognise that too many people cannot afford to heat their homes at a reasonable cost. That is why in January we published our new fuel poverty strategy, alongside our Warm Homes Plan, to ensure that many more fuel-poor households are protected by 2030. Through these regulations, the warm home discount scheme will continue to provide vital support for eligible households each winter at the coldest time of year when support is most needed. I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I thank the Minister for introducing these regulations, which I broadly support. I declare my interest as the honorary president of National Energy Action, from which I am delighted to have had a written briefing.
I have a question for clarification at the outset. A piece on the Government’s website titled “Help with the cost of living in 2026” talks of
“an average of £150 off the costs of energy bills”.
It goes on to say:
“This support is on top of the Warm Home Discount Scheme—a one-off £150 discount off your electricity bill—a total package of £300”.
Do people have to apply separately for the £150 off the cost of living and for the £150 from the warm home discount scheme? The figure cited in the regulations, by the Minister and on the GOV.UK webpage is £150. From memory, I thought the figure for the warm home discount scheme was £350. If that is the case, £350 to help those most in need because they are suffering the most from fuel poverty will obviously go a lot further than £150. I do not know whether that is an erroneous memory on my part, but that is what I remember.
The NEA is concerned—this is my wording, not the NEA’s—about one potential consequence of the regulations. The idea is to lift 1 million homes out of fuel poverty, setting new standards for landlords to meet to help do so. However, as we saw with a recent Bill, whose name I forget, under which landlords were meant to improve housing, in fact they sold it because they simply did not have the means to upgrade it. Does the Minister share my concern that instead of rented properties being upgraded at the cost of the landlord or, potentially, with the help of the Government, the landlords may not have the means to do so and therefore the rented properties will go off the market? That is a very real concern.
Is any attention being focused on rural areas? My experience, having been in the European Parliament and represented two separate constituencies in the House of Commons, is that homes in rural areas tend to be less well insulated and more isolated. It is more expensive to heat a house than a flat. Is any particular attention being given to rural areas in that regard? That could make a real difference to reducing fuel poverty.
National Energy Action has a good record on giving advice and doing what it calls hand-holding to guide people through the system; I commend it for doing this. I like to think that I am moderately intelligent but, if I have difficulty in understanding the system, I can understand how tenants and others who wish to apply for the scheme may need help. Have the Government considered offering such help to those who are hopeful of benefiting from the warm home discount—and, indeed, from the cost of living reduction?
Are the Government planning to address the vexed issue of standing charges on energy bills? I know that this is a great theme of the energy champion, Martin Lewis. I never manage to watch his programme because we always seem to be voting here when it is on, but in my experience this is the only utility where the customer is paying up front for the infrastructure to be put in place. Normally, with telecoms and broadband, the customer pays for the infrastructure after it is in place.
The point that I would like the Government to consider is this: all of us can, as consumers, control our unit costs by using less power—that is, less electricity and less gas—and reducing our consumption in that way, but we have absolutely no control over the standing charge. When I go on to Uswitch, I see that it is creeping up: it was 40p per day last year but, this year, it is 50p or 60p per day. We have seen that energy bills are projected to come down from April for three months, but, given the backdrop of the Middle East, there is now an expectation that, if not from July then certainly from the next increase in September or October, people will face the very real issue of finding that they cannot control their household bills.
Finally, National Energy Action refers to the debt mountain. A growing number of households are averaging debt balances exceeding £1,200 a year. This is posing real problems for them. They are paying for last year’s electricity use before they have even saved up for next year’s electricity use. In the words of the NEA, many are trapped in a cycle of paying for last winter’s energy alongside current usage, often with no formal repayment arrangement in place. Are the Government looking at the possibility of trying to address this issue?
In conclusion, as I say when I have already used up all my “finally”s, can the Minister use his good offices to ensure that the warm homes plan is embedded not just in his department’s work but in the 10-year health plan, to make sure that this issue is reflected in health—older people can become unwell if they are not able to heat their houses properly—as well as in the new child poverty strategy, to make sure that there is completely joined-up government at this level? Otherwise, I like the regulations.
Lord Jones (Lab)
My Lords, it is always instructive to follow the noble Baroness. I thank the Minister for his shrewd analytical introduction and his insight. Tangentially, for me, it conjured up memories of chilblains, hot-water bottles and ice on the inside of the windowpanes—the considerable discomforts of a post-war Britain barely out of the VE Day and VJ Day celebrations. It was an era of greyness, rationing and lengthy bus queues—not to mention the frequent and unannounced power station electricity cuts in our ever-cold homes.
These regulations aim to help some 6 million households, with the best part of £1 billion of state money going to fellow citizens. The Minister might be pleased and these regulations are surely to be welcomed in these most uncertain times. Can he say how many Welsh households are in receipt of such moneys? It is the case that Wales is a place of low wages and unusual weather patterns.
Earl Russell (LD)
My Lords, I rise to respond to the Warm Home Discount (England and Wales) Regulations 2026. As we all know, we are at the start of another fossil fuel price crisis, at a time when individuals and the state can least afford it, so bringing down energy bills and speeding up the deployment of renewables must be an absolute national priority. The renewed crisis in the Middle East has once again exposed families and small businesses to the full volatility of the fossil fuel price market. We support the extension of this scheme, but the questions that we want to ask are around its efficiency and its design for the decades ahead. As I said, we welcome the extension of the scheme to 2031 and the improvement in transparency and data sharing that this instrument introduces.
Community matters, as does recognising that fuel poverty remains a persistent, not a temporary, problem. While I appreciate that this scheme was designed and extended before the present crisis, it will need to operate in its aftermath and the continuing process. The regulations fix the core rebate at £150 for the next five years. We all know how dramatically prices can move even in a single winter, let alone over half a decade. Energy markets are in flux at the moment, and these regulations will need to work over a long period of time. What concrete mechanisms will the Government use to review the adequacy of this £150 rebate during the life of the scheme? Are there any circumstances in which Ministers would consider increasing it—for example, if the fuel crisis continues? Without an automatic or at least a clearly defined review process, are we not effectively asking households in fuel poverty to gamble with their warmth in the face of a possible real rise in prices?
Similarly, we welcome the fact that the aggregate non-core spending obligation will rise under this scheme, but it will rise only modestly, from £78 million in 2026 to £84 million by 2030. Taking into account inflation over those years and the levels of fuel poverty at the moment, if the present fuel crisis continues, is there any intention or ability to revisit that non-core spending figure mid-scheme if economic conditions or energy prices continue to accelerate? Do the Government plan to publish an annual assessment of whether the level of support is still adequate in real terms, rather than waiting until 2031, particularly in light of this real change in circumstances?
Both previous noble Lords spoke about energy debt. Many households across the country are carrying unprecedented levels of energy arrears on their accounts. That continuing level of family debt is a real point of contention and a struggle for households. Against that, the industry-wide cap is to write off debts at a mere £6 million, with a £2,000 limit for individual households. That is absolutely welcome, but many families are already beyond those levels. Can more be done, and will there be a review within this programme? How did the Government arrive at £6 million? What assessment was made of the total scale of energy debt and have Ministers considered whether that cap should be more flexible, in case this crisis worsens?
If the Minister will excuse me, I want to go slightly off-piste. I do not like to do that too often, but I really welcome some of the moves in this SI around data and data sharing. A lot more work needs to be done there so that we can target support efficiently and fairly to those who need it most. I have been looking at some of the work that Stonehaven has done. It has been raising arguments about moving from crude, one-size-fits-all interventions to a more nuanced understanding of household vulnerability, looking at income, health, energy use and property characteristics together and setting up a safeguard score for each household, using better data so that help can be better provided. That would mean we could target bill credits, tailored repayment plans and more generous debt relief to those in most severe need.
I have a couple of questions for the Minister that perhaps go a bit beyond this SI. I really encourage the Government to do more work in this area. As they plan for a continuing fuel crisis, improving data sharing between government departments, moving beyond the DWP alone to include HMRC, health agencies and others, would be a really important exercise, particularly for the future.
I note that the Minister said that he is expecting 98% of these payments to be made automatically, but in volume that 2% is still a large number of households that are falling outside the system and bill support. I would like to see the Government doing more on data sharing, particularly multi-agency.
Far too often, people in fuel poverty are also in different kinds of poverty. There really should be a share-once support register, so I would also like the Government to do more on greater working between different utility providers so that, once someone is on a priority register, information can be shared across utilities and people do not have to give the same information over and over again. That is really important and it is something that we should include in Ofgem’s work with suppliers, but it is still a missing piece. Local authorities and charities often know much more about their local residents and households in poverty, so there is much more to do to make this data available and to include local authorities and charities in this process.
I will be brief but, above and beyond this, I think there is a need for more structural reform around these issues. Others have spoken on this, but we need to decouple electricity prices from gas so that consumers feel the full benefits of cheaper, clean power. I really want the Government to look again at the possibility of taking forward a social tariff if the energy crisis continues. We need to do more to support households struggling with energy and fuel poverty.
We welcome this SI. It is good to see these measures extended, as they are really important, but there is so much going on in this space. We welcome this SI as the start of a conversation, not the end of it.
Lord Moynihan (Con)
My Lords, I thank the noble Earl, Lord Russell, for raising the important issue of data. As I see it—but I am happy to be corrected by the Minister—this SI focuses on matching customers, and the data analysis is exceptionally important. It brings our approach to data up to date, because it enables the Secretary of State to direct suppliers to communicate with matched customers identified through automated data matching, and requires suppliers to provide information on eligibility, the use of automated decision-making and where to find the scheme’s privacy notice.
It goes further—again, I welcome this—in replacing annual fixed spending targets with annual estimates reflecting the number of eligible households on qualifying means-tested benefits. As I see it, and this is important and welcome, the SI addresses the need to recognise that data interpretation is not always 100% accurate. The noble Earl, Lord Russell, mentioned the 2%. I hope that was the reason why, under this SI, late rebate notices can be issued after the scheme year in cases where the Secretary of State is satisfied that a customer did not receive the rebate because of an administrative error by a supplier or, indeed, the Government. Data matching is such an important issue and, as it has been raised in the Committee, it would be helpful if the Minister could give us a little more colour on it.
The second point that has come up in conversation today is the question of affordability and whether the £150 warm home discount is sufficient. I was very grateful for my noble friend Lady McIntosh’s comments on that, which I will come to. Maybe the best way to encourage the Minister to respond is to quote from a couple of third-party commentaries that cover this issue. First, the director of policy and influencing at Independent Age, Morgan Vine, stated:
“We welcome the extension of the Warm Home Discount to 2030/31. The older people on low incomes we speak to tell us it is a vital lifeline that goes some way towards keeping their heating on during the coldest months. However, at just £150, the current value of the Warm Home Discount no longer goes far enough, as energy prices remain stubbornly high. We are urging the UK Government to increase the payment to £400 so it better reflects the real cost of heating a home. This increase needs to be delivered via government funding to avoid the cost being put on energy bills”.
I would be grateful if, in his response, the Minister could comment on this statement from Morgan Vine.
Lord Whitehead (Lab)
I thank noble Lords for their valuable and apposite contributions to this debate. They were quite extensive. I will do my best to respond to them, but if I miss anything I will be happy to write to noble Lords.
One particularly important element of this scheme, alluded to by a number of noble Lords, was data and data matching. One of the good things about this programme is that with data matching now as efficient as it is—as the noble Earl, Lord Russell, mentioned—probably 90% of an expanded group of potential recipients can be automatically data-matched. That is, they will not have to do anything more to receive their rebates because they have fallen into a matched category automatically. But 2% is not an insignificant amount. The Government are determined to continue to notify people who are deemed unmatched to contact the warm home discount helpline to determine their eligibility.
On data matching in general, with the actions that the Government are taking in some different areas, it is likely that data matching will become even more efficient. Indeed, the Government are actively pursuing a programme called Kickstarter to analyse how data matching across departments could become more efficient and effective in future.
Noble Lords, in particular the noble Baroness, Lady McIntosh, asked about what money counts as what for this relief. The £150 targeted as coming off energy bills—not that energy bills will not rise but that they will be £150 less than they might otherwise be—has been substantially discharged as far as the changes to legacy charges from levies to the Treasury, causing a £117 reduction in average energy bills next year. That is in addition to the £150 that will automatically go to 6 million households now through this measure. Of course, the funding that has recently gone into the cost of heating oil, particularly in rural areas and off-grid properties, is in addition to all that as well. These are not cross-cutting reductions or rebates: they are all piling up on top of each other.
Baroness McIntosh of Pickering (Con)
I hear what the Minister says, but £117 is obviously not £150. The Cabinet Office’s website—not that of the Minister’s own department—is clearly inaccurate because it leads you to believe that you might get £150 plus another £150, making a total of £300. I am grateful to the Minister for taking the time to explain that that is no longer the case, but I believe that web page should be updated.
Lord Whitehead (Lab)
I am delighted to tell the noble Baroness that I cannot speak for the Cabinet Office’s website, but I take her point that these things need to be clarified as much as possible.
The noble Baroness also asked about standing charges, both generally and in relation to this particular measure. She will be pleased to know that we have announced our intention to move warm home discount costs from the standing charge to the unit rate; Ofgem has confirmed that this charge will be included in the price cap from 1 April 2026. That will offer a cleaner and more accurate basis of cost recovery while addressing widely raised concerns around standing charges. It does not overcome the overall question of whether standing charges should exist at all. Obviously, that is a wider question for review of standing charges and how they impact on the costs of energy in general.
The noble Baroness, Lady McIntosh, the noble Earl, Lord Russell, and the noble Lord, Lord Moynihan, also mentioned debt. That is an important issue, because each consumer pays around £52 a year towards the cost of managing and writing off debt. If the debt were to become unsustainable, it would place an even higher cost on consumers, so we are working urgently with Ofgem to drive debt out of the energy system alongside delivering reforms that put people first. Ofgem has published an updated debt strategy, setting out its near-term actions and priorities to support suppliers to reduce the level of debt in the sector and subsequently lower the cost of managing this for consumers, lowering that £52 a year that is being paid. That includes proposals for a debt relief scheme to tackle debt built up by some consumers during the energy crisis.
Noble Lords mentioned the disproportionate impact of fuel poverty in rural areas and asked whether any additional measures were being looked at on that. This issue is very pertinent in Wales, as a larger number of people are off-grid and in fuel poverty than in England. I am pleased to inform noble Lords that about 300,000 Welsh households will benefit from this expanded scheme, a substantial increase from previously. As far as rural fuel poverty is concerned, some of the additional measures that can be undertaken by energy firms as part of the overall scheme are relevant to making sure that people who are in fuel poverty and in rural areas, and who have higher costs, are adequately addressed.
Noble Lords also asked about the adequacy of the £150. Certainly, the Government will keep that under close review, but we have taken the view that it is £150 for 2026-27, partly because of the substantial expansion of the scheme, how that indirectly falls on customers as a levy and how that can be sustained. The suggestions put forward this afternoon have certainly been heard and are well received, and we will keep those issues under close review.
I hope I have covered most of noble Lords’ points but, as I said, if I get back to my office and realise that I have completely missed a key point, I will try to make up for it by communicating with the particular noble Lord or noble Baroness at the earliest opportunity.
Tackling fuel poverty is a priority for this Government and the views expressed underline how critical it is that we continue to tackle it.
Lord Jones (Lab)
Did I hear the Minister answer the question on paragraph 5.3 of the Explanatory Memorandum about automated data matching and privacy?
Lord Whitehead (Lab)
I apologise to the noble Lord. I am afraid I did not address that question directly, but the privacy notice for the warm home discount is published on the GOV.UK website, where it can be easily accessed. That privacy notice is in line with those from other areas of government with regard to the privacy of people whose data is being shared.
Baroness McIntosh of Pickering (Con)
When this used to be debated next door, there was a real issue of the DWP not being able to share data, so that those potentially most at risk of fuel poverty could not be identified. Has that problem been resolved now? If the noble Lord is not familiar with it, could he take this issue away and let us know? That would be very helpful.
Lord Whitehead (Lab)
Yes, I am happy to take that away. I am aware that, although great strides have been taken in recent years in allowing data sharing to work efficiently across different departments and make sure that people do not keep filling in the same form over and over again, there are still deficiencies in this area. Indeed, the noble Baroness will recall that, when she and I were Members of Parliament many years ago, it seemed virtually impossible that this problem would ever be resolved. We have come a long way in making sure that it works properly now, with the right safeguards in place.
Lord Jones (Lab)
Shall there be an answer to the question about paragraph 5.3 of the Explanatory Memorandum? I am not sure I heard my noble friend answer that.
Lord Whitehead (Lab)
I will have to write to the noble Lord on that because I do not have paragraph 5.3 in front of me. I will certainly send him a letter to that effect.
In essence, this SI is a method of making sure that a much larger group of people receives the discount than has hitherto been the case, which is vital at this time of very high energy prices. It is about making a real impact on fuel poverty and continuing to expand that impact with the measures in the new scheme. It will be done on an affordable and manageable basis and in conjunction with the Warm Homes Plan, which, as the noble Baroness will know, is about driving down bills through energy efficiency and various other measures in homes. Together with those measures, this will make a real impact on fuel poverty over the next period. I urge noble Lords to support the new scheme, which we will have at least until 2030, subject to review. I hope we will see a substantial uptick in people’s warmth and energy welfare in that period, thanks to what is before us this afternoon.
Baroness McIntosh of Pickering (Con)
I am happy that the Minister will write to us, but I do not think he replied to one question. Does he share my concern that many landlords may feel that they cannot afford to do what we are asking them to do with the warm home discount and in the Warm Homes Plan, so they will sell their properties, which will then come off the market?
Lord Whitehead (Lab)
What we are asking landlords to do under the Warm Homes Plan is an extension of some of the work done to uprate properties from band E, whereby landlords could put some money, with some exemptions, into improving their properties for rent. The limit that landlords can put in before being exempted is, I think, about £10,000, but it means a higher level of warmth and efficiency in the home. There is no evidence that large numbers of landlords went out of business or sold their homes under the last scheme in operation, and we are confident that that will not be the case on this occasion.
Contracts for Difference (Sustainable Industry Rewards and Contract Budget Notice Amendments) Regulations 2026
(1 day, 8 hours ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Whitehead
That the Grand Committee do consider the Contracts for Difference (Sustainable Industry Rewards and Contract Budget Notice Amendments) Regulations 2026.
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, after all that, noble Lords have me all over again for this next one. We had a very interesting and absorbing debate on the last SI, with some very good points made, but I hope that this debate can move to a conclusion with reasonable alacrity. I will make a brief opening statement. These regulations were laid before the other place on 5 February 2026. I remind noble Lords that they still carry the legacy name of the policy, but it is now known as the clean industry bonus.
I will cover three points: first, the purpose and direction of the clean industry bonus in the next rounds of bidding for offshore and onshore wind, AR7, AR8 and AR9; secondly, how the regulations will support the continued evolution of the contracts for difference scheme; and, thirdly, why the clean industry bonus funding for offshore wind will now be conditional on applicants signing up to an offshore wind fair work charter and how we are using the policy to help drive a more strategic approach to skills.
I turn first to the scheme. Contracts for difference remain the Government’s principal mechanism for supporting new low-carbon electricity generation. The CfD has a strong track record in deploying renewables at pace while protecting consumers through competitive allocation. But as the offshore wind sector has matured, it has become increasingly clear that delivering clean power at the lowest cost is not on its own enough. We must also secure the industrial capability and resilient supply chains needed to build and maintain that infrastructure here in the UK.
That is the purpose of the clean industry bonus. It will provide additional CfD revenue support for offshore wind developers that commit to investing in UK supply chains, such as factories and ports, or those that invest in cleaner supply chains overall. Funding is allocated through a competitive process run ahead of the main CfD allocation round, with awards made on the basis of value for money and payments released only when commitments are delivered. The record of this is that, in allocation round 7, £204 million was allocated through the clean industry bonus, crowding in up to £3.4 billion of private investment into offshore wind factories, ports and supply chains across the UK. The scale of investment represents a significant vote of confidence in the UK’s supply chain and a strong return on public funding.
I now turn to the evolution of the scheme. These regulations will make targeted, practical improvements to allocation round 8—the next one coming up—simplifying the process for applicants, clarifying rules on budgets and ensuring that the scheme operates smoothly. In particular, the changes will speed up and streamline elements of the application process, reduce administrative burdens, provide a clearer legislative basis for how budgets can be set and communicated, and clarify the position where delivery is disrupted by events outside an applicant’s reasonable control. In addition, the regulations will update the scheme’s sunset arrangements so that the clean industry bonus may be applied only to a round established before 31 December 2028, unless Parliament wishes to prolong it. It is for AR7, AR8 and AR9. The Government also intend to extend the clean industry bonus to onshore wind from allocation round 9, providing a sensible lead-in period for that smaller industry to prepare.
My third and final point is on fair work and skills. The most significant change for allocation round 8 is that clean industry bonus applicants will need to sign up to the offshore wind fair work charter, a tripartite agreement between unions, business and government that aims to raise the standard of job quality in offshore wind and make jobs in the sector more attractive. The charter builds on forthcoming commitments in the Employment Rights Act 2025, in particular by asking that the offshore wind sector proactively implements voluntary access agreements for trade unions. It also includes a commitment to strive for best-practice health and safety standards that go beyond legal minima.
Our commitment to good jobs through the clean industry bonus does not stop at the fair work charter. We are pressing ahead with a skills investment fund that will help develop the skills needed for the clean energy transition. The idea is that offshore wind developers will pool together skills funding and initiatives rather than relying on individual projects trying to address short-term needs. The Government and the offshore wind industry have agreed that they will work together to set it up by 2027 and that it will be funded by existing developer contributions to the supply chain, not by asking for more money. Once that skills investment fund is up and running in 2027, developers will be asked to contribute to it as a condition of taking part in the CIB.
In conclusion, these regulations build on the foundations laid in allocation round 7. The success of that foundation is in front of us. They strengthen and supply the operation of the scheme and introduce provisions of fair work and skills. I beg to move.
Earl Russell (LD)
My Lords, I note at the outset that on these Benches we welcome the direction of travel as set out in this SI. These regulations aim to modernise the contracts for difference scheme and strengthen the clean industry bonus, previously the sustainable industry rewards, ensuring that our transition to net zero is not only greener but fairer and more locally grounded. We note the figures the Minister gave in his speech about just how much funding this SI can help levy into our green industry and our local green economies.
The Liberal Democrats have long championed the principle of clean industry growth that benefits and serves our communities, so we see the extension of the clean industry bonus framework to all CfD allocation rounds before December 2028 as a welcome and sensible move. Likewise, providing greater flexibility in budgets through new minima and maxima can, if well managed, encourage dynamism and adaptability in fast-changing energy markets. But that flexibility must be balanced, and we must make sure that obscurity does not creep in with that.
The move to express CfD budgets in total sums rather than pounds per gigawatt raises a question for us. How will Parliament and the public track whether these funds are allocated efficiently or indeed equitably between technologies and different technologies in different regions? If the Secretary of State can now set sub-budgets for different technologies, will there be transparent reporting mechanisms showing how these powerfully restrictive levers are used and on what evidence they are used?
The Government’s stated aim is to reward clean energy responsibility and community-based industry practices, and we support that wholeheartedly. Yet these regulations also compress the consultation window for future framework revisions from the original 30 days, I think it was, down to just 10. Are officials satisfied that the timescale is adequate, that it will not push out smaller-scale contractors and that they will genuinely be able to compete on a fair and level playing field?
The introduction of fair work standards for developers seeking the clean industry bonus is also welcome. If the green economy is to deliver social renewal alongside decarbonisation, it must be built on fair pay and secure conditions, with workers having a voice in their workplace. Requiring developers to adhere to the fair work charter negotiated with trade unions is overdue but is a very important and welcome reform. Can the Minister give me a sentence or two about how, when these measures come in, the Government plan to monitor and verify that they are being met? What reporting and monitoring mechanisms will exist, and how can the public have confidence in that?
Turning to the force majeure provision, I recognise why the Government have that clause in the contract, but it raises a question. Who makes judgments on that, and what are the objective criteria for making those judgments? Obviously, the Government want clear safeguards, as do we. We want to make sure this clause does not become a loophole through which binding supply chain commitments can quietly evaporate because of unforeseen circumstances.
The extension of the scheme’s life plan to the end of 2028 feels pragmatic, but it is also modest given that 2028 is not that far away. What are the Government doing to look beyond that 2028 framework, which is only three years away? Also, are they considering putting the clean industry bonus on a statutory footing and extending that timeline?
We welcome these commitments. Although we have a couple of questions, we very much welcome the direction of travel set out in this SI.
Lord Moynihan (Con)
My Lords, I declare my interest as the chairman of Acteon, a global specialist subsea services company that operates worldwide in offshore wind and oil and gas.
It is good that the Government are investing in UK supply chains. However, whether it is cables, batteries, inverters or critical minerals, the Government’s rush to meet their unrealistic clean power targets will make the UK more dependent on imports, particularly Chinese ones. With all the energy security risks that brings us, the world becomes more dangerous; I will concentrate on that in a moment.
The clean industry bonus provides additional CfD financial reward for offshore wind developers, provided they prioritise investment in regions that are most in demand or in cleaner supply chains—for example, traditional oil and gas. I assume that this also includes ex-industrial areas, ports and coastal towns. Ana Musat, the executive director of policy at RenewableUK, stated:
“The Clean Industry Bonus is a good starting point as part of a wider industrial strategy which the Government is due to unveil in full this summer, and which we hope will be complemented by new policies to support the expansion of UK ports. With larger ports, we could secure even more investment in offshore wind manufacturing and turbine assembly”.
We have already debated ports, particularly in the context of Northern Ireland, over three and a half hours in the Chamber. The reality is that most developments in ports are not going to take place for many years: in Belfast, electrification—the ability to charge—will not happen until 2035, and there is little sign of investment in ports across the United Kingdom. Can the Minister give the Committee greater clarity on exactly what he sees on the time of the rollout to support ports, modernisation and the level of investment?
On my reading, although it is good that the Government are investing in UK supply chains, the current timeline is too onerous on UK supplies; it is that timeline on which we really need to concentrate in the Minister’s response. Take NESO, which has observed that Clean Power 2030 will require more than £60 billion of private investment. It says that
“meeting the target would require the deployment of more supply-side technologies, such as onshore and offshore wind, solar energy and battery storage, on average each year to 2030 than there ever has been in a single year before”,
with
“nearly 1,000 km of onshore”
electricity network infrastructure
“and over 4,500 km of offshore network”.
It goes on to say:
“That is more than double over five years what has been built in total in the last ten”.
This is an issue: the question of timing and the headlong rush towards the target of 2030 are of major concern to my colleagues.
Two other aspects that cause concern have been raised; I hope the Minister will respond to them. The first is the supply chain and the offshore wind fair work charter, which has slipped in via the back door somewhat. In another place, the Minister stated that
“clean industry bonus applicants will need to sign up to the offshore wind fair work charter … The charter builds on forthcoming commitments in the Employment Rights Act 2025, in particular by asking that the offshore wind sector proactively implement voluntary access agreements for trade unions”.—[Official Report, Commons, Fourth Delegated Legislation Committee, 17/3/26; col. 4.]
We cannot see the final fair work charter that is intended. The draft charter and the draft code of practice for trade union access are still subject to government consultation so, as I understand it, are not final yet. I have certainly not seen the final drafts. It seems the wrong process to have this very important commitment at the centre of the SI without the opportunity for parliamentarians to review what is intended in detail.
We know that the draft code leans towards giving unions practical workplace facilities. It says that, “where practicable”, the employer should “provide a notice board” in a “prominent location”, allowing union material to be displayed without employer veto. Even if the employer or the employees do not want it, that is what is required. When needed, the employer should allow a union official on to the site to display it. It also points to meetings, surgeries and the use of workplace facilities. It even suggests joint meetings and joint notice boards as ways to deliver information.
It limits the employer’s ability to manage around union meetings. The employer should
“avoid the scheduling of other conflicting … events which would draw workers away from the union’s meeting. Unless reasonable in the circumstances, the employer should not offer inducements to workers not to attend”.
The example given is that employers should not tell workers that they can go home early instead of attending the union meeting.
The employer is expected to respond incredibly fast during that negotiation. If it rejects the union proposals, the code says that
“it should offer alternative arrangements … at the earliest opportunity, preferably within three working days of receiving the union’s initial proposals”.
This is probably the closest thing in the draft to the burden of very short notice that people are talking about. Many other aspects of this code are really concerning.
The central point I am making to the Minister is that it is vital to have sight of the final code and for us to be able to debate it. If that code is too onerous on the supply chain, we risk losing good-quality companies in the United Kingdom that could add value to the supply chain and to what the Government are seeking to achieve. We live in a highly competitive global market and, unless there is a reasonable approach towards what employers should and can do, we risk losing investment.
I emphasise to the Minister that the draft code of practice for trade union access is insufficient and, because it is still subject to government consultation, is not in final form yet. It really should have been presented to the House before these regulations were agreed.
My second point is about the security of our energy supplies and suppliers. Recent reports suggest that the Treasury may allow Ming Yang Smart Energy to supply turbines for the Green Volt North Sea wind farm. As I understand it—I look forward to the Minister’s confirmation—Ming Yang is planning £1.5 billion of investment to build the largest offshore wind turbine manufacturing facility, at Ardersier near Inverness. That this is a Chinese firm has led to considerable questioning from UK government officials who, I understand, are currently evaluating the proposal amid warnings from experts of potential security vulnerabilities—such as Chinese-manufactured sensors and potential kill switches in critical energy infrastructure. This comes on top of a series of initiatives that the Government have taken to engage with the Chinese, not least in our civil nuclear programme.
It concerns me that in wind and solar we now have the potential for our supply chain to be significantly impacted by Chinese manufacturers. We know that close to 90% of our solar panels come from China; all include polycrystalline. Of these imports, 45% are understood to come from the Xinjiang Uyghur Autonomous Region, where slave labour is known to have been used in the manufacture of solar panels. Despite the requirements introduced by the Secretary of State in the Great British Energy Act to take full responsibility for the ethical sourcing of solar panels, the Minister’s department has consistently been unable to assure parents, teachers and children alike that their newly installed solar panels have not been made by slave labour.
As I say, the secrecy surrounding the UK-China MoU aroused yet further suspicion on this, since co-operation with China has now been extended to the supply chains to include civil nuclear; charging infrastructure; battery storage; offshore wind; carbon capture, usage and storage; and renewable hydrogen. They are all identified in that MoU. Where are the resilience and security in our own energy sector to be found if we are opening wide the door to the Chinese, who are now setting up a wind turbine business in Ardersier?
I hope the Minister can respond to both those points. The fair work charter is a significant concern, as is the growing prominence of Chinese suppliers to meet the clean energy objectives that the Minister and the Government have set out.
Lord Whitehead (Lab)
I thank noble Lords for their important contributions to this debate. I did not hear any particular dissent from the idea that this is a good thing that will help British supply chains in offshore wind and, we hope, onshore wind, to develop significantly in the future. That will be done through a process whereby, in future rounds, those bidding for services will put in, as a pre-bid to the AR7, AR8 or AR9 bid itself, a notice of intent about what they will do as far as British supply chains are concerned and how they will source from them. When they get the additional CfD arrangement for doing that, the money will be released only when those commitments have been met. It is not a “money for pie in the sky” arrangement; it is very much a “money for pie firmly affixed to the ground” arrangement for the future.
Of course, one can never be sure exactly what commitments will be made by people putting forward their proposals to get into a particular realm but, certainly in AR7, they have covered all sorts of aspects of the supply chain, including port infrastructure, et cetera. The noble Earl raised the question of port development. A lot of investment is going into ports in general at the moment, and into the ability of ports to provide the sites for fabrication, et cetera, for offshore wind, as well as making sure that the ports are as well equipped as possible for Sea Jack-type erection vessels and so on. The idea is to thoroughly uprate investment in ports to support the offshore wind energy industry of the future.
The noble Lord, Lord Moynihan, was concerned about the fair work charter. I just looked it up: it appears on the government website and seems, pretty substantially, to be a final document. I am sorry not to have got my speech finished before the Division.
Lord Whitehead (Lab)
My Lords, votes in this House are tremendously helpful for securing clarity where maybe there was not clarity before in certain aspects. They are particularly helpful half way through a speech, enabling that speech to end on a clearer note than might otherwise have been the case.
I mentioned the offshore wind fair work charter to noble Lords just before we departed to vote this afternoon. It is true that the final offshore wind Fair Work Charter is now complete and live on GOV.UK, which I showed to noble Lords on my phone. However, it is also true to say that the Department for Business and Trade is pursuing a consultation on make work pay, which has many elements of the offshore wind fair work charter in it. That is what is not complete and is being consulted on at the moment. As far as the offshore wind industry is concerned, the charter that I have mentioned is complete and was, as far as I understand, extant before this SI.
Lord Moynihan (Con)
I am grateful to the Minister. Let me put to him my understanding of where we are at the moment, because this is a really important point. I majored on this so I have looked into it. We have the Fair Work Agency, of course, and we have the overview of what the offshore wind fair work charter will look like. A cornerstone of that charter for the offshore wind sector is the issue of trade union access. That was what I was concentrating on; I gave some examples on the record of the issues that trade union access would raise with companies. It is still a draft code of practice for trade union access. It is not finalised. It is still subject to consultation and, I assume, to an SI that will be brought before Parliament.
My position was therefore that while we were debating the importance of an offshore wind fair work charter, we were unable to be specific about what it would include, particularly on the cornerstone point of access for trade unions to companies in this sector. That is the important point. It has yet to be finalised, and I understand that there will be an SI in due course. My point was that it would have been better for us to look at that in the context of a complete offshore wind fair work charter, so that employers could understand the issues about trade union access, and a final code of practice for that access.
Lord Whitehead (Lab)
I thank the noble Lord for that clarifying intervention. Essentially—forgive me for putting it quite like this—both of us are more or less right: the charter is there and has been there for a little while. But obviously, once a charter is up on the noticeboard, as it were, there are details of its implementation still before us. One of them is that question of the detail—not the principle—of trade union involvement in the offshore wind industry as a whole, and the requirement that from AR8, the companies involved in bidding sign up to that fair work charter overall.
One important thing to say is that the whole process of the fair work charter has been tripartite throughout, with government, industry and unions all involved in setting up the charter itself and its consequences. It is not that anyone is going to impose anything on anybody; it will be a question of continuing tripartite involvement and interest in the detail of the fair work charter, as well as the charter itself. While I take the noble Lord’s point that in an absolutely ideal world it would have been a good idea if the sub-details of the fair work charter itself had all been worked through, in the real world it is very seldom possible to do that when something comes into place. I think he will appreciate that trying to get this in place so that it runs for AR8 and onwards, for example, is an important process of pace. Therefore, having the principle in place, with everyone clear what they are supposed to sign up to for AR8, is an important move in its own right.
Lord Moynihan (Con)
Indeed, the Minister is right as well. The key point, however, is one of emphasis. To me and to my colleagues, and to companies that may access government funding through this scheme, not to know the detail of what is proposed through the draft code of practice for trade union access negates, to a great extent, the initial tripartite agreement, because that agreement can hold only when all three parties to it know the details.
I am not disagreeing with the Minister’s overview about the Fair Work Agency being in place and the fair work charter being drafted. But I am genuinely concerned that if government money is to be made available to companies in this sector—and we are really looking to encourage UK companies and international companies to come and play an important role in the supply chain—we need to have those details before we trumpet an offshore wind fair work charter without actually seeing them. I do not think that is an unreasonable point to make.
Lord Whitehead (Lab)
I thank the noble Lord for that point, which confirms that we are both substantially rightish. In some subtexts of the overall charter, there are still some things to be sorted out, but not the charter itself. It should be pretty clear to companies what they are signing up for and what they will be required to undertake once they have signed up for it. The question of how that then works out in detail over the period is a live issue, but it is not an issue that overthrows the charter and its clarity. I am not sure we can take that any further today, but I am happy to engage with the noble Lord offline if he needs clarification on any further points.
The noble Lord also mentioned something we have discussed on several occasions: work practices in the supply of some components for low-carbon industry. He mentioned solar panels, obviously, but that issue potentially applies to other things as well. I can only repeat the points about the Government’s efforts to ensure that slave labour is not used in components that are coming to the UK, but I add a further qualification in that the money for which companies bid as they go into allocation rounds allows, among other things, for those companies to use not necessarily the cheapest tender but the tender that is most suitable for the development of both the UK supply chain and good, ethical working practices in the industry, which are part of the fair work charter. So one would expect those companies to be actively engaged in ensuring that what they are committing themselves to, as far as UK supply chains are concerned, includes the sorts of consideration that the noble Lord mentioned. Indeed, supply chains that one can absolutely say are not engaged in slave labour, because they are based in the UK, will be a substantial underpinning of this whole process.
We have exhausted pretty much all the available avenues on this SI, but I will briefly address the questions asked by the noble Earl, Lord Russell. He was very supportive of this measure but was particularly concerned about whether it should be a permanent part of the process. He questioned why there is a sunset clause in the Bill for 2028. Of course, that sunset clause encompasses three allocation rounds, and I hope an awful lot of investment will have been secured in those three rounds, but the Government wanted to make sure that, for the long term, that remains the right thing to do. There may well be, in future allocation rounds—if they have been a great success in the earlier rounds—better uses for those particular commitments than are in this SI today.
It is important that we learn from what happened in AR7. We will see what happens in AR8. That, hopefully, will culminate in AR9, at which point we can review and decide the long-term future of this mechanism and, indeed, whether it can be used for different and wider purposes in the future, as mentioned by some noble Lords today.
The overall welcome by noble Lords for this measure is certainly very welcome. On that basis, I hope the SI will secure unanimous support.
Train Driving Licences and Certificates (Amendment) Regulations 2026
(1 day, 8 hours ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Hendy of Richmond Hill
That the Grand Committee do consider the Train Driving Licences and Certificates (Amendment) Regulations 2026.
Relevant document: 52nd Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)
The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)
My Lords, these regulations will lower the minimum age at which the Office of Rail and Road, ORR, can issue a train driving licence to a person to drive trains on the mainline railway in Great Britain from 20 to 18. Under the regime, applicants will continue to be required to satisfy the same conditions for driving trains contained in the Train Driving Licences and Certificates Regulations 2010, hereafter called the 2010 regulations. These licence conditions will remain unchanged. They include completion of at least nine years of primary and secondary education or vocational training equivalent to level 3 qualifications, and proof of passing medical, psychological fitness and general professional competence examinations.
By lowering the minimum age from 20 to 18, these regulations will bring Britain into line with several other countries including Germany, the Netherlands and Australia. They will also be consistent with the London Underground, where professional operating roles can begin at 18. These regulations will not change the minimum age to be a train driver in the Channel Tunnel, which will remain at 20, consistent with our international obligations.
I will begin by providing background information on the regulatory framework and the case for lowering the minimum age to be a train driver. The railway network currently depends on approximately 19,000 train drivers. These drivers operate passenger and freight services across the country. The 2010 regulations established the legal conditions required to drive trains on the mainline railway and cover both licences and certificates.
A train driving licence confirms that a driver has been medically and psychologically assessed as fit and has passed a general competence examination in train driving. As long as the driver continues to meet these conditions, the licence remains valid for 10 years. Drivers must also hold an employer-issued certificate showing that they are trained and authorised to drive specific trains on specific routes. A driver must hold both documents.
The 2010 regulations implemented the EU train driving directive, which sets a default minimum licensing age of 20 across the EU. The directive also allowed member states to adopt a lower age of 18 for domestic services, but the United Kingdom did not choose to do this in 2009. Since then, as I have mentioned, several countries have successfully implemented a lower age limit and others are actively considering it, including Japan.
In 2019 the Rail Safety and Standards Board, RSSB, undertook research to look at the case for lowering the minimum age in Britain. It published its findings in February 2024. The RSSB found that 18 and 19 year-olds can drive trains safely and professionally when held to the same training, assessment and supervision standards as older recruits. At the same time, lowering the age limit widens the talent pool, increasing driver numbers and improving representation.
The research found that experience, not age, is the determining factor in whether a new entrant to the profession will enjoy a successful career. This experience is gained through practice and exposure to train driving. Experience is a central feature of train driver training and can be gained through a structured training programme. Training and assessment typically take between 12 and 18 months and involve several months of classroom and simulator learning, alongside 225-plus hours of practical train driving. This is followed by mandatory examinations and post-qualification monitoring and assessments.
Support for the policy was reaffirmed in a May 2023 post-implementation review, prompting the previous Conservative Government to consult on the proposal. The consultation, published in May 2025, showed broad support from major industry bodies, including ASLEF—the train drivers’ union—and train operators, although some stakeholders sought assurances about transition arrangements.
For this reason, on 7 May 2025 my department confirmed that we would move forward with lowering the minimum train driver age, subject to receiving an industry implementation plan that would then determine the timetable for changing the law. The Rail Delivery Group, working through the Train Drivers Academy, co-ordinated the industry’s response, gathering industry specialists to review existing arrangements and identify opportunities to optimise the system. The industry confirmed that existing safeguards, testing and supervision remain appropriate for younger entrants, but recommended that operators update their procedures and ensure staff understand how best to support new trainees. Overall, the implementation plan demonstrated that a lower minimum age for train driving can be introduced safely and without requiring major changes to core safety or competence management systems.
The department and the ORR approved the implementation plan in December and published it on GOV.UK on 19 March. The plan proposed several practical improvements that industry will now implement to strengthen recruitment, assessment and training for all new drivers, not just younger applicants. These include fairer and more transparent recruitment processes, clearer information about the role, better support for managers working with younger colleagues, more consistent industry-wide communication, and development of a simple and accessible recruitment portal. To help monitor arrangements, a study is proposed to monitor the progress of younger drivers over time, which will use a small group of pathfinder operators to test, refine and share effective approaches.
Taken together, the industry has produced a clear and evidence-based strategy that will help bring younger entrants into the profession safely and confidently. We are confident that these arrangements will be in place by June this year, which is why we have scheduled the legislative change to take effect on 30 June. From that date, young people will be eligible for train driving positions.
I turn to the reasons why the Government are bringing forward these regulations and their intended objectives. The rail industry is facing significant skills shortages across several key areas, particularly train driving. Around 25% of the current workforce is expected to reach retirement age by 2030. We project that there will be a deficit of 2,500 train drivers by the end of the decade unless action is taken.
In some parts of the country, such as Wales, that figure is closer to 38%. Even in London, where the proportion is lowest, nearly a quarter of drivers will retire within the same period. Without a concerted effort, this presents a retirement cliff edge that risks the industry’s ability to maintain current service levels. Operators are already experiencing difficulties in recruiting new drivers and are too frequently reliant on overtime to sustain timetables.
At the same time, there is clear evidence that the rail industry is not yet drawing on the full breadth of talent available. The workforce remains relatively homogenous: the average train driver is 47 years old, fewer than 11% of them are women and fewer than 13% come from minority-ethnic backgrounds. This points to significant untapped potential across the country.
Lowering the minimum age of train drivers will not on its own solve driver shortages, and it is still the responsibility of operators to take steps to secure the workforce they need. This change is, however, an important first step and will help the industry to build a more resilient pipeline of drivers by creating a clearer route for school leavers to enter the profession. This is because the current minimum age of 20 has for many years acted as an arbitrary barrier to entry. By that age, many young people have already committed to other employment, vocations or further study. Lowering the minimum age to 18 will allow operators to engage school leavers and offer a clear, structured route into a highly skilled and respected profession. In doing so, it will help the industry respond to the demographic and operational pressures it will face in the coming years.
Baroness Pidgeon (LD)
My Lords, I thank the Minister for introducing these regulations so thoroughly. We on these Benches welcome the statutory instrument, which presents a pragmatic, evidence-based approach to modernising our railway workforce and opening up highly skilled and well-paid careers to the next generation.
For too long, the arbitrary age limit of 20 has meant that the rail industry has lost out on bright, capable school leavers who, when they finish their education at 18, have been forced to seek opportunities in other sectors. As we have heard, we are facing a demographic cliff edge in the railway in terms of age, while trying to make sure we have a workforce that represents the whole of our communities. That is really important. The statutory instrument allows for earlier training and that new talent pipeline. It is good to see that we are aligning ourselves with our European neighbours.
We need to take into account, though, the perspectives of those who operate our trains every day. Looking at the consultation, there were quite high numbers of respondents concerned about this, particularly current train drivers. I would therefore like to ask the Minister a few questions.
First, how is this going to be publicised? The Train Drivers Academy is going to have this comprehensive communications campaign, online guidance and so on, but how are the Government going to support the industry in co-ordinating this new outreach to attract new applicants? Secondly, can the Minister explain how the Government will work closely with the industry to reassure the existing workforce, who have expressed some concerns, and ensure that any issues are addressed? In achieving the policy objectives outlined in the post-implementation review, can the Minister outline additional measures the Government are actively considering, apart from this regulation, to promote rail careers and ensure that broader, diverse pipeline of workers in the sector? As long as this does not compromise rigorous recruitment and assessment processes, as the Minister has set out, and has high medical standards and so on, we gladly support this measure to empower our young people and secure the future of our rail workforce.
Lord Moylan (Con)
My Lords, I thank the Minister for setting out so clearly his succinct response to the issues raised by the Secondary Legislation Scrutiny Committee. It is good to have those comments on the record. It also saves me the trouble of asking all the questions that it asked and pressing him to give answers in his wrap-up. That has considerably shortened the remarks I entered the Room with.
On my part and on behalf of the Conservative Party, we wholly welcome this statutory instrument and the development it contains. It was, in fact, a Conservative initiative, as the Minister mentioned in his opening remarks. It is always good to have new measures that help youth employment at a time when youth unemployment is rising so dramatically under the current Government.
However, while I welcome the regulations wholeheartedly and without reservation, and while I think they are a very good thing in principle, I have slight doubts about whether they are going to make an enormous difference in practice. First, as the Government say, there is already a strong demand for train driver roles. Lots of people want to be train drivers, yet the fact is that the workforce is very restrictive. The Minister mentioned the retirement profile that is approaching, and I do not need to repeat that, but as far as I am aware, the average age is 47. Less than 3% are under 30, and women make up less than 11%. I wonder what has brought that about. It is not the restriction from the age of 20 that is causing that, and moving it to 18 is unlikely to change it, especially given that these are well-paid roles for which there is a great deal of demand.
What is in the process of happening as a result of the Government’s policies is that the Government are becoming the employer. The Government might say that Great British Rail is becoming the employer, but that does not exist and will not exists for several years at the rate things are going. The Government themselves—the Department for Transport, through its subsidiary companies—are the employer. So trying to understand, trying to tackle the root explanations for this strange profile in the workforce with a view to opening up the demographic of our train drivers, is a responsibility that falls squarely on the Government. I have not heard the Minister say what, as an employer, the Government are going to do about that.
I welcome that he has explained, I think quite convincingly, what he is going to do to make it easier for 16 to 18 year-olds to get on track in this direction, but what are they going to do about the existing profile of the workforce? How are they going to get people of other ages, who might be in their mid-20s or who might have done some other role, to enter the workforce at that stage—urgently—and get involved, given the cliff edge that we are promoting?
There are serious issues. We know that the workforce has tended to be restrictive about how one can enter it, and that its general profile is not reflective of the population at large. While I am not encouraging diversity for the sake of diversity, some of the problems we have are because the pool has been very narrow and widening it from 20 to 18 is not the key issue that will resolve it.
The Government’s impact assessment states that they have looked at other countries, including France, Germany and the Netherlands. If the Government are looking to other countries, they might also look to other working practices that need changing. One example is Sunday working, which in many countries is built into the contracts of train drivers. That is not so here, and we are dependent on voluntary overtime for Sunday running of the trains. It would be useful to know what the Government are thinking of doing about this as part of their general workforce programme, now that they are the employer.
On the question of age, I come back to the issue of Transport for London. The Government said that the age limit of 18 already applied at Transport for London, which is true, yet, as far as I can see, there are very few young drivers at Transport for London. We have the problem that, according to a freedom of information request, Transport for London does not currently employ a single train operator under the age of 23, and that person is a bit of an outlier anyway. Similar problems exist at Transport for London regarding retirement cliff edges, even though they operate this lower age limit for entry.
The general verdict is that we are in favour of the lower age limit and we recognise the problem, but we do not think this is enough. The Government will have to go a great deal further to solve the problems that the Minister set out in his opening remarks.
Lord Hendy of Richmond Hill (Lab)
My Lords, I thank noble Lords for their attention and for their comments about this instrument.
In response to the noble Baroness’s questions, I reassure her that I and my officials are working closely with all the people involved to ensure that we can capture the interests of young people and promote awareness of the opportunities. I think it will be easier with 18 year-olds than it is with 20 year-olds because of the measures that I talked about, including apprenticeships and the prior preparation for these jobs. We know that it will be easier, and we intend to do a great deal to make sure that, across the industry, we engage young people and showcase what a career in train driving can offer.
The industry is more co-ordinated than it was. For example, I draw noble Lords’ attention to the train circulating to celebrate the 200th anniversary of the national railway system. It has a carriage devoted to interesting young people in railway careers, which has been enthusiastically welcomed wherever it has been. On a more long-term basis, operators will work closely with schools and colleges to deliver talks by other young train drivers, share experience and support activities that will inspire young people to consider this as a career. We know that we need to do more across communities, and the opportunity of engaging younger people will be a stimulus to achieve that.
The noble Baroness referred to the consultation in which there were objections from existing drivers to this proposal, but we do not believe it is correct to say that the majority of drivers opposed it. I have met a number who are very keen on it, including some people of a relatively venerable age. We think that the objections are individual and not representative of the wider industry view. Certainly ASLEF, the largest train-driving union, which represents 95% of drivers on the network, strongly supports the measure. For any who have expressed concerns, I believe they are mostly about somehow compromising the rigorous high standards that existing drivers must meet. I hope I have reassured the Committee that that will not be the case, that standards will continue to be as high as they are now and the full competitive selection process will still be followed. In any event, we will monitor how the new arrangements are working in practice as part of the longitudinal study.
Finally, the noble Baroness asked what additional measures the Government are actively considering. Aside from what I have already said about updating and widening access to existing rail apprenticeships, the Government recently invested £1 billion into the national youth employment initiative, which will help to create 200,000 new jobs and apprenticeships. Those measures will strengthen generally high quality apprenticeships, while the rail industry having the new apprenticeships that I talked about will encourage young people into this industry.
There are already key initiatives across the railway industry, including women in rail, the National Skills Academy for Rail’s routes into rail campaign, Network Rail’s inspire and STEM programmes and the young rail professionals network. We will make sure that they all embrace 18 year-olds in the future so that we get a more diverse pipeline of talent into the sector. My department will also look at potential reforms to the legislative framework for train driving to ensure that it remains fit for purpose and continues to equip train drivers with the training they need in this evolving industry. Of course, Great British Railways will make it easier to work with the industry to develop proposals for consultation over the next years.
I am grateful to the noble Lord, Lord Moylan, for his general support for this measure and concur with him that it was initiated by the previous Government. He asks what else we will do. One of the answers is that there is a much more vigorous recruitment programme than under the previous Government. Severe shortages have developed since Covid. The Government are working extremely hard to make up the deficiency in vacancies and work out properly what the establishment of the railway is. Several operators clearly lost sight of that in the previous regime. We will raise the railway’s profile with schools and use the precedent of the bus industry, which similarly reduced the age some time ago and has found a good source of younger people.
The noble Lord referred to Sundays not being part of the working week. That is a real problem, and the industry has not been consistent on it. Some employers have Sundays within the working week. The Secretary of State in the other place has said a number of times that it is time that the railway employed people for seven days a week, since that is how it works. That will encourage employment characteristics that are more like the rest of the railway and, we hope, encourage people into the industry as well.
Lastly, the noble Lord raised the Underground’s lower limit and its apparent absence of young people as a consequence. My own surmise is that—I will write to him if this differs—recruitment to fill the night Tube, which he will recall, has distorted the age profile simply because there was a large recruitment of drivers for it. Subsequently, employment conditions changed again, and those people are now part of the normal workforce, so that distorted the age profile.
I hope that I have satisfactorily answered all the questions from noble Lords who have spoken in the debate. All that remains for me is to beg the Committee to consider the statutory instrument.
Sussex and Brighton Combined County Authority Regulations 2026
(1 day, 8 hours ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Taylor of Stevenage
That the Grand Committee do consider the Sussex and Brighton Combined County Authority Regulations 2026.
Relevant document: 52nd Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, these regulations were laid on 11 February 2026. Before I proceed, I draw the Committee’s attention to a correction slip that has been issued for these regulations. It corrects the name of the appropriate administering authority for pension purposes from East Sussex to West Sussex. This change was requested by, and agreed with, the constituent councils. When referring to the Sussex and Brighton Combined County Authority, I will use the term “strategic authority” hereafter unless there is a reason to be specific.
Devolution is a critical lever for delivering growth and prosperity, with mayors and local leaders being best placed to take the decisions that benefit local communities. This Government were elected on a manifesto commitment to widen and deepen devolution across England. The English Devolution White Paper set out our plans to achieve that. Much of that White Paper is now being taken through Parliament via the English Devolution and Community Empowerment Bill.
The White Paper also launched the devolution priority programme to provide a fast track to establish a new wave of mayoral strategic authorities. Following an expressions of interest process, in February 2025 we announced six places on the programme, including Sussex and Brighton. This statutory instrument will establish their strategic authority and provide for mayoral elections. In doing so, it represents substantial progress towards fulfilling our commitment to move power out of Whitehall and back to those who know their areas best.
The Government have worked closely with the constituent councils in Sussex and Brighton on the instrument. The constituent councils are West Sussex County Council, East Sussex County Council and Brighton and Hove City Council. All the constituent councils have consented to the making of this instrument, and I thank local leaders and their councils for their support in getting us to this point.
The instrument will, if Parliament approves, be made under the enabling provisions in the Levelling-up and Regeneration Act 2023. The strategic authority will be established on the day after the day on which the instrument is made. The inaugural mayoral election is due to take place on 4 May 2028, and the elected mayor will take office on 8 May 2028 for a four-year term.
The instrument makes provision for the governance arrangements of the strategic authority. Each constituent council will appoint two of its elected members to be a member of the strategic authority, with the mayor also a member once in office. The strategic authority can also appoint non-constituent and associate members to support its work. Each voting member is to have one vote, and the vast majority of decisions are to be determined by a simple majority of the members present and voting. Once the mayor takes office, that majority must include the mayor, or the deputy mayor when acting in place of the mayor.
The instrument provides some functions in relation to transport and economic development, but there is a strong link here with the English Devolution and Community Empowerment Bill. Subject to Royal Assent, the Sussex and Brighton strategic authority will be classed as a mayoral strategic authority and the functions reserved for that tier will automatically be conferred. Even before the mayor is in office, the strategic authority will be able to exercise mayoral strategic authority functions, with the exception of those that are specifically reserved for the mayor. That is why this instrument confers fewer functions than previous instruments establishing strategic authorities. The functions that it confers, focused around local transport and economic development, are designed to support the work of the strategic authority before the Bill is in force and enable it to deliver the benefits of devolution from day one.
MHCLG consulted on a proposal to establish the strategic authority between 17 February and 13 April 2025. The purpose of the consultation was to gather evidence and information on the effects of establishing the strategic authority. The consultation was promoted using social media, a communications campaign, a dedicated website, online and in-person events and distribution of consultation materials. Responses could be made online, by email or by post. They were received from a wide range of stakeholder groups, including members of the public, businesses, councils, universities, the third sector and other bodies. A summary has been published on GOV.UK. The Government carefully considered the responses and on 17 July confirmed to Parliament that the statutory tests to establish a strategic authority had been met.
Subject to the making of this instrument, the strategic authority will receive devolved funding. This will include devolved funding for transport and adult skills, capacity funding and a 30-year mayoral investment fund to support key local priorities.
To conclude, this instrument represents clear progress in our mission to widen and deepen devolution in England and will make this a reality in Sussex and Brighton. It will empower local leaders to deliver for their communities, improving the lives and opportunities of their residents. I hope noble Lords will join me in supporting the draft regulations, which I commend to the Committee. I beg to move.
Baroness Pinnock (LD)
My Lords, I thank the Minister for her introduction to this statutory instrument, one in a series of statutory instruments creating county combined authorities that we have discussed over several months.
I start with what the Minister said about the purpose of this statutory instrument: that the Government wish to “widen and deepen devolution”. We Liberal Democrats support devolution and have long advocated for it. However, the Secondary Legislation Scrutiny Committee noted in its report on this SI that of the more than 6,000 responses received from the public,
“71% disagreed that it would support … local communities”.
The SLSC asked, given that local opposition—the overwhelming majority of those 6,000 responses not in favour—how the Government will ensure that the mayor has a “firm democratic mandate” and that local residents are able to “engage” with the system. That seems to be fundamental for any devolution proposal—that it takes people with them. Clearly, from the response to the consultation, that is not the case. I hope that the Minister has some responses to that committee’s report.
The Government have given a formal response to the committee’s report, which included a commitment to future strengthening of scrutiny. As the Minister will know, every time we discuss this, I criticise the scrutiny arrangements in mayoral authorities as being totally inadequate for the range and depth of functions that the mayor will have. One of the easy ways to improve scrutiny would be by ensuring that pre-decision scrutiny is the norm. I wonder whether the Minister can give us any hope that this will be the case.
I have a couple of other points to make. The financing of the mayoral model—if I have read it right—is to be from the constituent councils until the mayoral elections. If that is the case, can the Minister quantify the financial call on the constituent local councils until that time?
The main concern I have is that the Government are proceeding with mayoral devolution alongside very significant local government reorganisation. Two major reorganisations in local government are taking place in that area, which will inevitably cause increased expenditure in the first instance. Establishing the different and new authorities will inevitably be a call on the constituent authorities’ finances. It will not all be funded by grants—it never is—and that will inevitably mean a call on financing of basic public services. Does the Minister agree with that?
Finally, the Government and the previous Government are very keen on the mayoral model, but at no point have we had an assessment or a review of its achievements and its failures. Looking across the metro mayors that have been established, there have been some notable successes. The bus transport system in Greater Manchester has been a success, but there are other parts of the country—looking towards the north-east of the country—where it has not been such an overwhelming success and great question marks have been raised about the way that the mayor and the authority have fulfilled their statutory requirements. It is important that the Government do a review and an assessment of the various mayoral models that have been instituted across the country.
Lord Porter of Spalding (Con)
I commend the Government on getting on with doing something on this agenda. I am a massive fan of mayoral authorities. If that is the price to pay to take power away from Whitehall and Westminster, it is a price worth paying. It could have been a bit cheaper, but nothing is cheap when you get it off the Government if the Treasury is involved with it.
I will ask a couple of questions. It will not start until 2028. That is unfortunate because 2027 is closer, so it would have been better if the department got its act together quicker, got the necessary work done and concentrated on those areas where it was doable. Sussex and Brighton are in a DPP area and are expecting an announcement on Wednesday this week about which of the six are likely to go ahead. There is money being laid now that it might be that five or fewer get announced. Do we know whether this is one area that will be announced? If it is going to be announced, do we know whether the constituent members are going to go from three to five? Does that mean that the council holding the ring on the pension pot will still be in existence after that process? If the constituent council is broken into more than one piece, where will the pension pot then sit?
Lord Jamieson (Con)
My Lords, I also thank the Minister for her introduction to these regulations. We on these Benches support the principle of devolution. As the Minister outlined, these regulations will establish a new combined county authority for Brighton, Hove, East Sussex and West Sussex under the framework set up in the previous Conservative Government’s Levelling-up and Regeneration Act 2023. However, there are some issues that merit closer scrutiny.
The noble Baroness, Lady Pinnock, has already raised the Secondary Legislation Scrutiny Committee’s comment on the consultation underpinning these proposals, which revealed significant public concern, particularly around the implementation of a mayoral model. A clear majority of respondents did not believe that such a structure would reflect local identities or deliver meaningful benefits. That raises an important question about how devolution is being delivered. If it is to succeed, it must carry public confidence. Does the Minister agree?
Secondly—I would welcome further clarification from the Minister here—there are questions about timing, funding and democratic accountability. The Government have been clear that they intend to establish mayoral strategic authorities in devolution priority programme areas as quickly as possible. Indeed, we are told that the legislation for Sussex and Brighton is already being progressed and that institutions will be set up with the consent of constituent councils. However, as my noble friend Lord Porter pointed out, at the same time the Government have confirmed that the inaugural mayoral elections in these areas have been delayed until May 2028. That is much later than originally planned and is accompanied with a delay to the full powers, such as strategic planning, CPO and, importantly, full mayoral funding, which will be only 40% of that originally promised in the interim. Parties had already selected their candidates and were preparing for an election, so why is the mayoral election being delayed? Why can the full funding not be implemented now? It was on that basis that the councils involved embarked on the devolution programme, but the Government are not fulfilling their end of the programme.
The justification offered for this delay is that it allows time for local government reorganisation and the establishment of robust institutions. That is a weak excuse. Having experienced devolution first hand, I know that previous programmes have been delivered to a tighter, clearer timetable without the need for constant postponement of elections or, more recently, their reinstatement. It creates an unusual and uncomfortable position. We are being asked to approve the creation of a new strategic authority, the transfer of powers to it and the establishment of an institutional framework without a directly elected mayor in place for another two years. In effect, structures of devolution are being put in place while the democratic leadership is deferred until later. Can the Minister clarify the interim governance arrangements and, in particular, who is ultimately accountable to the public during this interim period for the exercise of these new powers? We appreciate that this instrument does not in itself determine the timing of elections, but it is inseparable from that broader context, and it is entirely reasonable for this Committee to probe how these arrangements will operate in practice.
To be clear, we are supportive of the creation of the Sussex and Brighton combined county authority in principle, but we are aware that devolution must be locally supported and democratically grounded from the outset. Also, the terms of the deal with the residents of Sussex should not be changed half way through the process. On that basis, I hope that the Minister can provide some reassurance on how accountability will be maintained in the period before May 2028 and whether any consideration has been given to shortening that timetable. I also commend my noble friend Lord Porter on his important question regarding pensions and look forward to the Minister’s response on that.
Baroness Taylor of Stevenage (Lab)
My Lords, I thank noble Lords for their contributions and their broad support for the Sussex and Brighton authority, which I think is broadly welcomed in the local area.
The noble Baroness, Lady Pinnock, asked me about the 6,000 responses. The purpose of the consultation was to gather evidence and information on the effect of establishing a mayoral combined authority over that proposed geography. Unsurprisingly, respondents provided a range of views, including evidence setting out the potential benefits, as well as some concerns. The Government carefully considered the responses received. The results of the consultation formed part of the assessment made by the Secretary of State on the relevant statutory tests, as set out in Section 46 of the Levelling-up and Regeneration Act 2023. The Secretary of State’s decision was that those tests were met. It is not surprising that knowing how exactly this will work might have been a concern for some people, but I have looked at the evidence that came back and there was a pretty equal balance between the concerns and the things that people thought were a plus.
The noble Baroness mentioned scrutiny arrangements. I am not sure whether she was here the other day when we debated this on the English devolution Bill. The Government are bringing forward arrangements in that Bill to introduce local scrutiny committees with powers to scrutinise what the mayor is doing. Her noble friend Lord Shipley has raised this with me on a number of occasions, as he was concerned that those bodies should have powers to undertake pre-scrutiny. They will have those powers. This will be a powerful body to make sure that the mayor’s work gets scrutinised properly.
The noble Baroness and the noble Lord, Lord Jamieson, raised LGR and asked why the mayoral arrangements are not being put in place until the foundation strategic authorities have been set up. The Government’s carefully considered decision is that we need resilient and sustainable authorities in place, and then the mayors will be elected. That is how we are taking that forward.
On the noble Baroness’s point about the review of mayoral arrangements, there are a huge number of advantages to them. Mayors can use their mandate for change to take the difficult decisions needed to drive economic growth. They have standing and soft power to convene local partners to tackle shared problems, directly exercise devolved powers and attract inward investment. They also have a platform for tackling the obstacles to growth that need a regional approach. Mayors are accountable directly to their citizens and have the profile to stand up for them on the national stage. They are able to both partner with and challenge central government where needed. That partnering on the national stage is critical. We now have the mayoral council to enable the regions represented by mayors to sit around the table and represent them to national government, which is really powerful. We are seeing that voice being amplified for local people in many areas that already have mayors, including Manchester, which the noble Baroness mentioned, London and the West Midlands, as well as other areas that are still developing but nevertheless are exercising their mayoral role powerfully.
The noble Baroness also asked whether councils and taxpayers will fund the CCA. The Government will support with the costs associated with the new authority through capacity funding, and the authority will also receive its investment fund as well as devolved funding for specific functions such as transport and adult skills. Beyond the support provided by the Government, the budgets of strategic authorities and how any costs are funded will be a local decision. The extent to which the constituent councils need to contribute at all to the running of the authority will therefore be decided locally.
I thank the noble Lord, Lord Porter, for his comment about this being a price worth paying to get power out of Westminster. That has long been my view, and we have had many discussions about it over the years. First, on the pensions pot, we are still making decisions on how the LGR will be taken forward, but that has not yet been announced. The Government are considering those questions and will respond in due course, so the foundation strategic authorities will hold the ring on pension provision for now, until the mayors come into post.
The noble Lord, Lord Jamieson, asked why we cannot have mayoral authorities now. I think I have explained that we want to make sure that these foundation strategic authorities are on a firm footing before we bring in the mayoral arrangement. He spoke about democratic arrangements. Once they come into post, the mayors will be directly elected across the whole area. Nevertheless, representatives on the foundation strategic authorities have their own democratic mandate, because they will be nominated from the councils concerned.
On the funding that the strategic authorities will receive, we will support with the costs associated with the new authorities. Sussex and Brighton have received £1.5 million this year in capacity funding to help towards establishment, and will receive a further £7.5 million over the next three years to help with core running costs. They will also receive the 30-year mayoral investment fund once the mayor is in post, as I have said. That will be £38 million a year, £1.14 billion over the 30 years. They will receive a portion of this in the two years prior to the mayor being elected to support the early delivery of growth priorities, and will also receive other devolved funding such as for transport and adult skills.
It is essential that the benefits of devolution are not delayed, and that is why, in the interim period between the establishment of the mayoral strategic authority and the inaugural mayoral elections, we will provide the authorities with a proportion of their investment funds, so that they can start delivering on key local priorities and deliver some benefits ahead of the mayor taking office. The strategic authority will have a number of functions available in the interim period to enable and encourage investment in the area, subject to Royal Assent to the Bill. These include: the general power of competence, with the duty to develop a local growth plan and the power to borrow to an agreed cap; a health improvement and health inequalities duty; functions to acquire land, provide housing and build infrastructure, enabling it to make strategic interventions and support local growth ambitions; and responsibility for public transport and local transport planning, joining up the transport network across the region and helping people get to work, education and leisure activities.
In conclusion, this instrument delivers the commitment made with Sussex and Brighton to establish a combined county authority. I hope the Committee will welcome the regulations.
Lord Jamieson (Con)
When we have requested a timetable for devolution elsewhere, the Minister has said that elections in May 2028 would be held not only in the six priority areas but in a number of other authorities, as part of this devolution. I am slightly confused as, if there is a need for the six priority areas to have this period of time, having already started the process towards May 2028, how will those that have not even started the process be able to do it by then? By inference, if the others can do it more quickly, why can these not do it more quickly, so that we could have those elections earlier? My noble friend Lord Porter suggested possibly May 2027.
Baroness Taylor of Stevenage (Lab)
The time periods are quite compressed, as the next tranche of 14 areas will be decided before the Summer Recess. The decision-making is quite close together and it is up to us to make sure that we get these SIs through, so that the foundation strategic authorities are in place before the mayoral elections all take place in 2028.
Non-Domestic Rating (Rates Retention and Levy and Safety Net: Miscellaneous Amendments) Regulations 2026
(1 day, 8 hours ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Taylor of Stevenage
That the Grand Committee do consider the Non-Domestic Rating (Rates Retention and Levy and Safety Net: Miscellaneous Amendments) Regulations 2026.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
The most exciting ones always come at the end.
As many noble Lords will know, the Government are embarking on a much-needed funding reform for English councils to ensure that resources are aligned with need across the sector, with the first multi-year settlement in a decade delivering that reform. The business rates retention system is a major part of the overall local government finance system under which English councils retain a share of the business rates they collect, as well as a portion of any growth in that income. Resetting the system is a key element of the wider reforms, ensuring that funding is better aligned with need while preserving the incentive for authorities to continue to drive local growth.
In parallel with these reforms, the Government are also implementing substantial changes to business rates tax policy, which I am sure noble Lords will agree is also an essential task. As a result, the Government must make technical updates to the business rates retention system to ensure that, as far as is practicable, local government funding is not impacted by these changes, which are outside the control of local councils.
The instrument before the Committee today will update the business rates retention system to factor in local government finance reform and to accommodate changes to the tax. It amends two key sets of regulations on which the rates retention system is run. The levy and safety net regulations establish the safety net through which authorities are protected from large drops in business rates income; they fund that protection by applying a levy to business rates growth. The rates retention regulations set out the fundamentals of how the system operates, including how business rates income is calculated and shared between central government, billing authorities and major precepting authorities. The amendments are technical but clear in purpose; I will explain them now.
The safety net and levy determine the balance of risk and reward in the business rates retention system. To ensure that this balance is appropriate through the multi-year settlement, the Government announced changes at the settlement; this instrument puts them in place. First, the level of safety net protection is being increased to 100% of baseline funding level or need, provided through rates income for 2026-27. This is something that local government has welcomed and which noble Lords will, I am sure, agree is sensible. Secondly, the levy on business rates growth will now operate on a marginal basis, with different rates applying as growth increases up to a maximum of 45%. This balances the reward of business rates growth with the need to fund safety net protections.
Moving on, in response to the reset and wider tax policy changes, we are making changes to ensure that grant compensation paid to councils in lieu of business rates is treated in the same way as the rates themselves, streamlining local government accounting.
Next, the instrument updates key formulae and figures that are used to run the rates retention system in order to reflect changes and updated values from the funding reforms delivered through this year’s settlement. This includes figures used to calculate different measures of local authority income for the year.
Finally, we are making a series of minor amendments that are aimed at reducing complexity across the system wherever possible, which noble Lords will, I am sure, value. These include disapplying provisions that are no longer required, future-proofing routine calculations and streamlining a number of small funding mechanisms.
These amending regulations make technical changes to the business rates retention system, putting into effect what is required due to funding reform and changes to business rates tax policy. If approved, they will ensure that councils receive the business rates income the system is designed to deliver. I beg to move.
Baroness Pinnock (LD)
My Lords, I draw the Grand Committee’s attention to my interest as a councillor on Kirklees Council.
This is a very technical measure and a bit of a mixed bag. The reset of the business rates retention system is long overdue and welcome. For too long, the distribution of resources has been based on figures from when the system was introduced in 2013, so recalculating each authority’s assessed need and business rate tax base to redistribute funding on a needs basis is welcome. Given that aim, it is surprising that the Government have not produced an impact assessment. The Explanatory Memorandum says within it that most authorities will find that the system works for them, but some will not, so an impact assessment would be very welcome to understand the winners and losers, and to what extent they are winning or losing. Can the Minister provide some basic impact assessment, not for all authorities but for those that will benefit most and least so that we can see how this will work in practice?
The safety net established in this SI is to be supported because, while any fundamental changes in the business rates system take place, it will enable local authorities to have stability in their known income. That is positive, but as far as I could see it is not explained how authorities already in a pooled system will be impacted, such as those in West Yorkshire. All the data provided is based not on a pool of authorities but on individual ones, so it would be helpful to understand how that works. The proposal for Section 31 grants is welcome, because it will also help remove the impact of volatility in the system.
The downside is, I guess, the move away from the whole purpose of the business rates retention system, when introduced 10 or 12 years ago, as an incentive for growth. The introduction of marginal tax rates—which is what they are—on growth that exceeds the limits could be viewed as a tax on success. That is somewhat at odds with the Government’s fundamental position that growth is everything. It does not seem to apply in this case. How far do they think that these marginal tax rates of 30% and 45% will encourage or discourage investment and growth in particular areas?
This is a mixed bag. The reset is necessary for fairness and a safety net is good for stability, but having worked figures would have been really helpful so that we could understand the consequences.
Lord Fuller (Con)
If I may speak before my Front Bench, of course we welcome the introduction of multi-year settlements. Local authorities have been crying out for that for many years, and I can see that this is part of the path that we are going down.
The noble Baroness, Lady Pinnock, identified the importance of incentives—incentives for councils to do the right thing and go the extra mile. Sometimes those incentives help the council, as a promoter or joint enterprise with those people who wish to invest in an area, to make the case to local residents who may not necessarily welcome development. In my nearly 20 years as a council leader, I used the new homes bonus, as well as business rates retention, as powerful examples to otherwise semi-hostile or reluctant residents for us to make those investments.
Back in those days—the noble Baroness, Lady Pinnock, talked about 10 years ago and it must have been all of that—there were really powerful and compelling reasons for our authority, which was a high-growth authority, to pal up with all our neighbours, not all of which were quite so pro-growth as we were. By giving away some of our growth, the pot over the entirety of Norfolk was greater; there was that compelling case for co-operation. But I can tell the Committee that, over subsequent years, particularly more recently—I should stress that I am no longer the council leader doing these negotiations, but they are fresh in my mind—
Lord Fuller (Con)
I was mid-flow. I was making the case that, in the early days of business rates retention and pooling, there was an exceptionally compelling case to co-operate. Even if we gave away a little of our own growth as a local authority—I was the leader—the pot was large enough that we did not lose out. However, ever since, the incentive to grow through business rates retention and, in particular, pooling has become weaker and less compelling. It has been harder to demonstrate the benefits of growth to a sceptical population.
The trouble is that, through this instrument, it is not just that the train tracks have narrowed and the bid offer spread has become more constrained; a series of disincentives have made it significantly less attractive. I understand why there has to be a reset, but the cliff edge of the reset means that those councils that have worked hard to do the right thing are seeing that growth be snatched away. That is a pretty powerful disincentive to do the right thing.
Increasing redistribution means that, however well you do above the baseline, more and more gets taken away. That is a further disincentive. Now, there is an additional factor that weighs against the co-operation that makes everybody better off: the tweaks. It is more than a tweak, in fact; it is a tilting of the playing field against those who are growing hard and in favour of the indices of multiple deprivation.
I do not deny that some areas are poorer than others but, when you take into account each of these detractors from the incentive to grow, you find out that there are rewards for sitting back and not pushing the envelope. Those councils that can just sit back and wait for the others to do well are the undeserved beneficiaries. This is not to say that there should not be any redistribution—I am not making that case at all—but through this instrument and, in fairness, others over the past three or four years, we are getting to a situation where, if nobody is really incentivised to do the right thing, why should anybody do the right thing? Why should any council leader go out on a limb, as I did, to sell the benefits of growth and explain to residents and businesses, “If you come with me on this one, you’ll pay less council tax, the economy will be stronger, there’ll be more jobs”, and so on?
There is no taste in nothing. Diluting the incentives to do the right thing even more, as this instrument does, means that we will all end up in a rather tasteless situation that achieves neither what the Government crave nor what this nation deserves.
Lord Jamieson (Con)
My Lords, first, I draw the Committee’s attention to my interest as a councillor in central Bedfordshire. I thank the Minister for introducing these regulations. I agree with the two previous speakers that it is positive that there is a three-year settlement.
This instrument forms part of a wider set of reforms to the business rates retention system ahead of the 2026 reset. It makes a number of technical changes to how the system operates in practice, particularly in relation to the levy on growth, the safety net and the treatment of compensation for reliefs and multiplier changes. However, as the noble Baroness, Lady Pinnock, and my noble friend Lord Fuller have said, these regulations will have an impact on growth and incentives.
We recognise the Government’s stated intentions both to realign local government funding with need and to ensure that the system continues to function smoothly as wider reforms are introduced, but those objectives cannot come at the expense of undermining incentives for local economic growth and for high-performing councils. It is the Government’s stated intention to promote growth; I query how this instrument fits with that intention.
These regulations replace the existing levy cap with a system of marginal rates on growth. In many cases, the effect will be that local authorities retain less of the proceeds of the very development they are being asked to support. That raises a fundamental question: if councils see a diminishing or even negative financial return from growth, why would they take on the costs and complexities that often come with approving new development? As my noble friend Lord Fuller said, new development is not free; you may need to invest in infrastructure or provide incentives for someone to come to your area. There are also social costs in the wider sense, such as busier roads, the loss of green fields, busier doctors, a lack of GP surgeries and so on. What is the incentive for local councils and councillors to promote growth if there is no financial recompense that they can use to invest in their communities?
Local authorities are not passive actors in this system. They make those difficult decisions concerning planning, infrastructure and local services. If the link between growth and local benefit is weakened, the Government risk tilting the system away from enterprise and towards dependency on redistribution. I ask the Minister directly: what assessment has been made of the impact of these changes on councils’ willingness to bring forward new development? Can the Minister set out more clearly which types of authorities stand to lose out under these changes? What assessment has been made of the impact on local financial planning and rates collection as a result? This largely mirrors what the noble Baroness, Lady Pinnock, raised around the idea of an impact assessment.
Baroness Taylor of Stevenage (Lab)
My Lords, I am grateful for all those comments. It is absolutely important to get the balance right between incentivising growth and ensuring that areas needing it benefit.
Like the noble Lord, Lord Fuller, I took the decision to go into a pooling arrangement. I will cite my area as an example of the difficulty. These are figures from a few years back, because I am not involved with it now, clearly. Our collection of business rates was around £44 million, and we got about £2 million back. We need to make sure that we continue to incentivise the growth we want to see. I will cover in a bit more detail some of the points that noble Lords raised.
On the impact assessment that the noble Baroness, Lady Pinnock, raised, the changes made by the instrument will put in place reforms delivered via the local government finance settlement. More information on the impacts of the charges is included as part of that settlement. The instrument will put in place the technical figures and formulas relating to that. I add that because these are technical regulation amendments, policy officials in the department have undertaken extensive engagement to prepare for their implementation, including consultations and targeted technical engagement with sector representatives and specialists, to make sure the proposed amendments achieve the correct policy intent. I hope that answers the noble Baroness’s points on impact assessment.
I am grateful to the noble Lord, Lord Fuller, for his welcome for multi-year settlements. He and I both argued long and hard for that over the years, and I am very pleased that we have been able to deliver that.
The noble Baroness, Lady Pinnock, asked about local authorities being affected by the Government changing how they are compensated for business rates relief. Now that we are compensating for reliefs via Section 31 grants, based on data collected from the authorities themselves, they will receive pound-for-pound reimbursement. They will be compensated by the usual annual data collection process, based on their returns, and this mirrors the way compensation for reliefs via Section 31 grants currently operates. Previously, authorities were funded for most reliefs through a reduction to their tariff or an increase in their top-up. Given that these amounts remained fixed in real terms over time, they were expected to absorb some of the costs associated with certain reliefs. We think that this will actually be of benefit to local authorities.
Both the noble Baroness, Lady Pinnock, and the noble Lord, Lord Fuller, raised questions about the pooling method used. Transitional arrangements are in place to take local authorities, including those in pools, from current arrangements to their new arrangements, and this includes a measurement of the income they started from, including any income from pooling. Following consultation, we are making a change to better reflect income from business rates pooling, which is included in local authority transitional funding baselines.
The Government’s objective across this process has always been to make the best possible estimate of current local authority income. The revised method will still ensure that pooling gains are allocated across the locally pooled area. Within each pool, 50% of levy savings will be allocated between tariff authorities and 50% will be allocated between top-up authorities. The complexity and variety of pooling arrangements, which the Government are not directly involved in, mean that a central assumption is used to estimate pooling gains for this specific purpose. To help councils adjust for the change, the Government will provide a one-off adjustment support grant in 2026-27 to authorities that would otherwise see their core spending power reduce in 2026-27. The pooling assumptions for 2027-28 and 2028-29 will be subject to consultation at the next settlement. I have already started talking to local authorities about this.
I think all Peers who have spoken referred to the potential for growth disincentive. The business rates retention system was designed to be reset periodically to update the way it redistributes locally retained business rates between local authorities, which is a core aspect of the system. The reset will move business rates income, which is retained locally by local authorities, to where it is needed most, based on an updated assessment of need. Recalculating available business rates alongside a new assessment of funding need will ensure that business rates income is reallocated to meet changes in relative need, restoring the business rates retention system to its intended purpose of providing a responsive funding stream for local government while also rewarding authorities for business rates growth. Business rates growth can be realised. A proportionate levy will be applied to growth to ensure that income protections can be offered to local authorities. Of course, business rates growth generated within designated areas such as freeports, enterprise zones and investment zones will be exempt, in line with the current policy.
In setting levy rates, the Government are balancing the reward of business rates growth with the need to fund safety net protections. This will always be a balance. I think all noble Lords agreed that the reset was necessary. The approach we are taking will better support growth across the sector, with a lower percentage levy charge for early business rates growth in comparison with the current scheme, and the highest margin at a lower rate than the current 50% levy that many authorities are currently subject to.
To conclude, the technical amendments made by this instrument are necessary to ensure that the business rates retention system operates as intended for the coming year. I hope that the Committee will join me in supporting it.