Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Lord Vaux of Harrowden) (CB)
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.
Lifelong Learning (Fee Limits) Regulations 2026
(1 month, 1 week ago)
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Baroness Smith of Malvern
That the Grand Committee do consider the Lifelong Learning (Fee Limits) Regulations 2026.
Relevant document: 3rd Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Education and Department for Work and Pensions (Baroness Smith of Malvern) (Lab)
My Lords, I thank the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee for the scrutiny of this instrument they have provided. I believe that they were satisfied with it. The draft regulations were laid in Parliament on 18 May 2026. These regulations are the first of three pieces of secondary legislation needed to implement the lifelong learning entitlement—LLE. They establish a new system of tuition fee limits for higher education courses and modules that begin on or after 1 January 2027.
The LLE is one of the most significant reforms to student finance in a generation. For the first time, it creates a single flexible funding system for study at levels 4 to 6, spanning both further and higher education—one that supports people to learn, upskill and retrain across their working lives. The LLE was a central element within the Government’s Post-16 Education and Skills White Paper, supporting the growth and skills missions as well as the industrial strategy.
The case for the LLE is clear. Over a third of job vacancies are unfilled because of skills shortages and at least 80% of the workforce of 2030 are already in work today, yet our current system was designed largely with younger, full-time learners in mind. It does not offer the flexibility for someone who is older, who wants to study part-time, take a short course or module, or retrain mid-career. The principle of a single lifelong learning entitlement was a central recommendation of Sir Philip Augar’s 2019 review. Parliament then established the framework for this through the Skills and Post-16 Education Act 2022 and the Lifelong Learning (Higher Education Fee Limits) Act 2023. These regulations now continue the serious work of implementation.
The LLE will broaden access to high-quality, flexible education and training. It will support learner mobility and help our colleges, universities and other providers respond more effectively to the skills needs of learners, employers and the wider economy. In doing this, it will support the Prime Minister’s ambition for two-thirds of young people to access higher-level learning by the age of 25 and help to increase participation in high-quality technical education. This Government are committed to breaking down barriers to opportunity and driving economic growth, and the LLE is a central part of that mission. These regulations set out the details of the LLE tuition fee limit system. A tuition fee limit is the maximum amount that a provider in England can charge per year if they are subject to a fee cap. Currently this limit is up to £9,790 for a standard full-time course in 2026-27.
At present, fee limits are set as a fixed cash amount for each academic year, regardless of how much learning that year contains. That works for a traditional three-year degree but it cannot price a single module or a short course effectively. These regulations replace this with a credit-based approach. Credits are units widely used to signify the amount of learning a student would ordinarily be expected to undertake to complete a particular course or part of a course. Across the further and higher education sectors, definitions are consistent. One credit equals about 10 hours of student learning, so to give a straightforward example for a typical higher education course, the standard higher fee limit amount for the academic year 2026-27 is £9,790 and a standard full-time year contains 120 credits. The LLE per-credit fee limit as described by these regulations represents that £9,790 divided by 120. The result is therefore a tuition fee limit of close to £82 per credit, or £81.58 to be precise. These regulations mean that tuition fee limits can be apportioned in line with the credit size of any given course.
The new system established by these regulations does not change the overall tuition fee limit, as debated by the House earlier this year. The vast majority of students will see no change in the fees they are charged. What changes is the application of the tuition fee limits that have been set. For the first time, fee limits will apply fairly to short periods of study, as well as to traditional longer courses; that is because they will be based on the amount of learning in a course or module. Students will therefore know that their tuition fees reflect the volume of learning they are undertaking. The regulations provide protection for students and taxpayers. There are limits on the credits for which a provider can charge: 360 credits for a typical three-year degree and 180 credits within any one year.
Subject to Parliament’s approval of these regulations, it is my intention to make and lay two further instruments, which are necessary to establish the LLE. The two instruments, on student support and on repayments, have already been published in draft so that the House has full sight of the suite of legislation proposed and the sector can make appropriate preparations for the introduction of the LLE system. These two instruments will both be subject to the negative procedure. Given their dependency on the regulations before us today, they will be made only if both Houses approve these regulations.
These regulations represent a significant step in fulfilling this Government’s commitment to deliver the lifelong learning entitlement. They establish the fee limit system needed to support a more flexible approach to student finance—one that works better for young people and adults alike. By doing so, they will help learners study in a way that fits their lives, help providers respond to changing skills needs and support people across the country to access the education and training they need to succeed. I beg to move.
Lord Johnson of Marylebone (Con)
My Lords, I welcome these regulations and, obviously, support the objective of the lifelong learning entitlement. As the Minister said, it originated in the Augar review a few years ago, in which the noble Baroness, Lady Wolf, played an important part. I am glad that this Government are continuing the work initiated by previous Governments in this respect.
These regulations are really important because they put in place the funding architecture for the LLE, without which it cannot become a reality. However, the real test will be whether, in reality, the architecture translates into substantially greater participation in lifelong learning, which has always been one of the missing pieces of our educational landscape in England. That will become all the more important in the world we are moving into—that of artificial intelligence. As Ministers and others have noted, we will need to enable the retraining of people many times over the course of their working lives. So I would be interested to hear from the Minister how the LLE is intended to operate alongside employer-funded retraining through the growth and skills levy.
It is important that we have clarity on the boundaries between these two important funding schemes, and how they relate to one another, so that we eliminate any policy confusion that might inadvertently depress demand for lifelong learning, which, as I said, is already pretty low. If a worker needs to retrain because AI has transformed their role, how should they go about it? How will they know whether the expectation from government is that their employer will fund that training or whether they should fund it themselves through loans via the lifelong learning entitlement? I would really welcome some thoughts from the Minister on those questions.
I also have broader questions about the future of this policy. These regulations are a great start and it is better that we are starting down this journey towards more modular study where possible, but I think the Minister has admitted in the past that this is not the end point or final destination. I would like to probe a little further where she sees this policy area going. In particular, when will the LLE be extended to master’s level study—level 7—given the increasing demand for postgraduate-level reskilling in areas such as AI, digital technologies and advanced professional practice? Many adults who need to retrain in the coming decade will already hold a bachelor’s degree, given current levels of tertiary enrolment, and will need to acquire higher-level skills rather than simply further study at undergraduate level or sub-degree level, which is the current area of focus of the LLE.
Secondly, what is the Government’s thinking on eligibility for funding for courses not drawn from existing qualifications? The stipulations in the policy are very clear at the moment: funding will be made available only for modules that are drawn from existing qualifications. I have said on a few occasions that this risks us stifling innovation in what is on offer, meaning that we, in effect, provide access only to more of the same but in smaller pieces. I would be grateful for the Minister’s thoughts on how we can meet demand from employers for shorter, more agile programmes that respond to rapidly changing labour market needs but do not necessarily fit within traditional qualification structures. If lifelong learning is genuinely to become a normal feature of working life, it seems likely that the funding system will ultimately need to accommodate that greater flexibility.
In her remarks, the Minister referred to two further regulations that are going to be laid, one of which is on student support. As she thinks about the future direction of this policy area, could she say whether the Government might soften their stance on student support for online, distance-learning qualifications? It stands to reason—and this is the whole intent of the Government’s policy—that the smaller the unit of study, the more likely it is to be studied at distance and online, given that students will not want to incur the frictional costs of upping sticks and moving to study at another institution in person. None the less, they will still need to incur maintenance costs, which the current regulations do not provide for. As we move into a more modular landscape, it is likely that we will need to rethink that, so I would like to understand the Government’s intentions in that respect.
Finally, what does success look like in this policy area? How are we measuring it? What level of adult participation do the Government want this entitlement to achieve over the next three to five years in shifting the market share away from this category-killing three-year bachelor’s degree towards other more flexible forms of study? Where does the Minister want us to end up in changing the way higher education is consumed and delivered over a horizon of three to five years and by what measures will the Government judge whether further reform is needed? All those points are not to detract from the importance of these regulations: they are a really important beginning. I wish the Minister every success in getting them through Parliament.
Baroness Wolf of Dulwich (CB)
I also welcome these regulations. They seem to have taken a while, and it is really good to see them. As the noble Lord, Lord Johnson, pointed out, this policy was the number one recommendation of the Augar review, of which I was fortunate enough to be a member. The cross-party support for that has been really gratifying, because we all recognise the importance both of continuing education and training and of greater flexibility.
I thought it might be worth putting on the record some of the things that we were most concerned about, because they lead into the question of how we know whether it is working or whether anything else needs doing. First, we were not particularly looking forward to modular study as such; it was much more about creating a comprehensive change in the student funding system that would build in far greater flexibility.
The thing that we were most concerned about was the rigidity of the equivalent level qualification regulations, which had been brought in by previous Governments. The noble Lord, Lord Willetts, will probably be able to elaborate. The idea was that you should have people going up and up in levels all the time. We felt that that was deeply misconceived and that one of the things you had to do—for everybody, not just for a few additional people—was to make it clear that what was important was what you were learning, not the level at which that took place.
Lord Mohammed of Tinsley (LD)
My Lords, on these Benches we have also long supported the principle of lifelong learning. Because of the rapidly changing economy, where technology, artificial intelligence and the transition to a greener economy are reshaping jobs, people need the opportunity to retrain and upskill throughout their lives. Education should not be something that ends in your early 20s; it should be available for people whenever they need it. I say that as someone who went into higher education in their late 20s.
These regulations are important and part of implementing the lifelong learning entitlement by introducing a credit-based fee system for modular studies. Rather than relying solely on annual fee caps designed for traditional three-year degrees, providers will be able to charge fees proportionate to the number of credits studied. This is a sensible and necessary technical reform if modular learning is to work in practice.
However, as my Lib Dem colleague Ian Sollom argued in the House of Commons, changing the mechanism for charging fees is only one piece of the puzzle. If the Government genuinely want lifelong learning to succeed, they must also address the barriers that prevent adults from returning to education in the first place, because many adults are balancing work, caring responsibilities and the rising cost of living. Flexible courses alone will not encourage participation if learners cannot afford to take time away from work, arrange childcare and access maintenance support. The danger is that we create a system that is technically more flexible but remains financially out of reach for many of those who would benefit the most.
There are also legitimate concerns from universities and colleges about the implementation. Higher education institutions are already operating under severe financial pressure. They are being asked to redesign courses, develop modular provision and invest in new admin systems, while maintaining significant financial uncertainty. If the Government want us to embrace these reforms, they must ensure that the funding and regulatory framework give institutions the confidence to innovate rather than simply observe additional costs.
The Lib Dems believe that lifelong learning should also be driven by the needs of the learner and the employer together. Skills shortages continue across sectors, including engineering, construction, digital industries, health and education. The lifelong learning entitlement should help adults to access high-quality qualifications that respond to those workforce needs, while also giving individuals the freedom to pursue learning and personal development and career progression.
While we welcome the direction of travel represented by these regulations, they cannot be viewed in isolation. Success will depend on a wider package of student support, employer engagement, higher-quality careers advice and sustainable funding for universities and further education colleges. Therefore, I ask the Minister three simple questions. First, what assessment has been made of the likely impact of these regulations on participation by mature and disadvantaged learners? Secondly, what support will be available to help providers to implement modular delivery successfully? Finally, how will the Government ensure that the lifelong learning entitlement genuinely widens participation, rather than simply changing the way the fees are calculated?
As I said, the Lib Dems support the ambitions of making learning available throughout life, but ambitions must be matched by opportunity, affordability and proper investment. Only then will this important reform deliver what it promises.
The Earl of Effingham (Con)
My Lords, I thank the Minister for introducing these regulations. Lifelong access to high-quality education is a key component for a successful society. Access to resources that improve the skills and capabilities of the workforce goes hand in hand with a more dynamic economy and a more independent public. It provides individuals with the freedom to engage in subjects that are their passion and to strive for careers in the industries that they desire. This is largely the raison d’être of universities in our country. Undergraduate courses provide a leg-up into the workforce, while postgraduate and part-time courses allow for further specialisation and reorientation.
That is indeed a reasonable model, but while the structure of post-18 education is sound, His Majesty’s loyal Opposition believe that the incentives can be improved. Undergraduate course tuition fees are capped and thus allow for a broad uptake; conversely, modular and short courses are not. Therefore, there is a rational financial barrier to further higher education. Particularly in the current, fast-changing labour market, which will only accelerate, there is an eminently reasonable case for changing this current model. People will need to be able to retrain and reorient themselves, bolder and faster. Skilled education will become all the more important. That is why His Majesty’s loyal Opposition support these regulations.
The noble Baroness, Lady Wolf, played an integral part in the Augar review. The previous Conservative Government welcomed the recommendations of that independent review into post-18 education and funding and introduced the primary legislation that makes a lifelong learning entitlement possible. We are therefore grateful that the Government have now taken the steps to make this a reality.
Largely underpinning these regulations is the concept of proportionality. Using credits as the standard unit of learning time is the best way in which to achieve this uniformly. Limiting the number of credits that can be charged per course time and per activity is a start to ensuring that courses are rightly valued. But proportionality of credits does not necessarily equal proportionality of quality and we have many times highlighted the extent of less valuable courses currently within the market. This remains a concern.
It would be fair and reasonable to ask how the Government will ensure that the quality of education matches the cost of the degree past simply looking at credit numbers. This is of particular concern with part-time courses. Flexibility of education is of course a good thing, but it cannot be used to justify students enrolling in modular courses and not having face-to-face time with a teacher. How does the Minister propose to ensure that the highest possible in-person education is taking place face to face, involving engaging with each other and truly gaining from the experience?
In a similar line of thought to that of my noble friend Lord Johnson, we ask more generally what the feedback mechanisms are for this measure. How will its implementation and success be monitored both for providers and students, as referenced by the noble Lord, Lord Mohammed? It was surprising that the Minister in the other place did not answer this question. How will the providers who will naturally incur an administrative cost in implementing this new system be supported in the transition?
The Earl of Effingham (Con)
My Lords, in summary, these regulations should be viewed as positive and we hope that they are effective.
Baroness Smith of Malvern (Lab)
My Lords, I genuinely thank all noble Lords for their contributions to this debate. It is always refreshing to debate something with people who were there at the beginning and who were part of the very important Augar review that led to this work in the first place. I appreciate the points made in the debate and I will endeavour to respond to them as well as possible.
Before turning to the specific questions, I will restate why these regulations matter. They are a critical and indispensable step in delivering the lifelong learning entitlement. To respond to some of the points made, that reform is not just about how we deliver modular courses, important though those will be as an opportunity, but how we will, for example, bring further and higher education closer together, open up more flexible and modular study, and give people a real choice in how and when they learn and make it easy for them to return to learning throughout their lives.
As we have said, these regulations set the tuition fee limits that apply to higher education courses and modules that are funded by the lifelong learning entitlement and that begin on or after 1 January 2027. They are not designed to overhaul the entire student finance system, in terms of some of the controversies that we have seen recently. They address a central weakness in that the current system is too rigid and too focused on traditional full-time study and it does not work well enough for adults who want to retrain or upskill across their working lives.
The noble Lord, Lord Johnson, is right that the test for this policy is whether or not this translates into greater participation and whether or not the flexibility enables there to be more opportunities for a wider range of people to upskill and return to learning, at different stages in their working lives. The AI example that the noble Lord used is interesting, and he has previously, and quite rightly, challenged us about the relationship between the growth and skills levy reforms—the apprenticeship levy, in essence—their links to the lifelong learning entitlement and how we ensure that employers have a role in developing the flexible courses that the LLE enables. A key part of our reform and the direction of travel for higher education is to emphasise its role in growth and the relationships it needs to build with employers, which is why they are an integral part of the HE learning and skills partnerships now.
However, this does not necessarily mean that the only way to be upskilled in AI, for example, would be through the LLE. It depends on how you want to learn. As part of our reform of the growth and skills levy, we have introduced short courses that can be funded through the levy for those who are employed, and AI is one of the first areas in which we have developed those. So it may be appropriate for employers to enable those in employment to take one of those short courses using the growth and skills levy. If you want to do something more fundamental, which requires a course of at least 30 credits, the lifelong learning entitlement would be more appropriate to use, so that you can go back to a broader higher education course.
On the point about scale, we have been careful to introduce the LLE incrementally, in a way that recognises some of the risks that we have seen in the higher education system recently of uncontrolled expansion and a failure to focus on the quality of what is being offered. That is why we have taken a relatively tightly controlled approach to the first providers of modular courses from January 2027. They will not simply, as I think was suggested, be more of the same but chunked up a bit. For example, the opportunity for further education to provide these courses and for students to be funded through the LLE is quite a significant change and an important development. But we are being careful about the way that we introduce these courses. We will want to expand this in the future, although I am not in a position to say when, at this point. Nevertheless, this is the start of something that will be more radical.
The noble Lord also raised the levels at which the LLE will fund. It is right that the LLE is currently focused on modular and flexible learning at levels 4 to 6, where the greatest need for retraining and upskilling has been identified. The postgraduate master’s loan and postgraduate doctoral loan remain available to help with course fees and living costs, and they provide flexibility to the student.
Lord Johnson of Marylebone (Con)
I thank the Minister very much for her comments in response to my remarks. I make just two observations. In relation to the Minister’s point on the master’s loan, it is, I think, still the case that the master’s loan is not available in a modular, flexible form; it is still for a year’s worth of funding. So the flexible goals of the regulations will not apply at level 7, even through the master’s loan.
On the Minister’s point about maintenance funding, I think that it is probably a mistake to think that, just because someone is studying online or at distance, they do not need support. Even if they are not incurring the same living costs as someone who has physically moved to study a higher education course, they are none the less incurring the opportunity cost of not earning. That is the principal loss of income to them, which the maintenance loan is traditionally supposed to meet.
Baroness Smith of Malvern (Lab)
It is of course the case that, even for distance learning, if you had a disability, for example, you would have access to the disabled students’ allowance. However, with limited resource, we have to make decisions about where we want to focus maintenance support. I do not think that it is inappropriate to focus it on those who find it much more difficult to earn alongside their learning. I understand the point that the noble Lord is making—anybody who has done an OU course understands precisely how much time it takes to do that—but the Government have focused in the way that I have described.
The next set of issues, as raised by the noble Lord, Lord Johnson, and the noble Baroness, Lady Wolf, relate to what we see as success, where we see the future of this measure and how radical we think it should be. It is important to say that this is not a short-term fix; it is a bold long-term investment to support the creation of a student finance system that is fit for the challenges of the future. We have made a deliberate decision to phase in the delivery of the LLE, placing quality and learner outcomes ahead of an immediate large-scale rollout, but we want to see education providers using the LLE to innovate, driving deeper collaboration between further and higher education institutions and supporting smoother learner transitions across levels.
The student finance system must also meet labour market needs, which is why we are calling on employers to be active partners. We want employers to see the LLE as an essential part of their workforce strategies, helping them to attract new talent, develop skills and retain employees. We expect more FE and HE providers to work with employers and representative bodies to co-design flexible provision, helping create coherent learner pathways into the workforce.
I reiterate, as others in this Committee have, my thanks to and respect for the noble Baroness, Lady Wolf. She has a long record in this area and is, in fact, one of only two people in this Room who turned up to my briefing session on the LLE.
Lord Willetts (Con)
I am grateful to the Minister for giving way. I am clearly one of the guilty people who did not turn up to the briefing sessions, but I am sure my question will be answered. There is a view that success will look like more people moving in and out of higher education—doing a course for a time and, through the more modular structure, withdrawing and then doing some more. On the other hand, as she well knows, there are a lot of measures of quality by the OfS that focus on so-called drop-outs, non-completions and B3 requirements, which all assume that leaving a course is a bad thing. How will the modular agenda and this wider B3 agenda be reconciled?
Baroness Smith of Malvern (Lab)
The noble Lord makes an important point. I think the noble Lord, Lord Mohammed, asked how we change regulation to support what we want to see here. It is a fair point that the regulation at the moment is designed around that traditional three-year course. Part of how we expand the opportunities through the LLE will include looking with the OfS at that regulation, to make sure that it does not act against the more flexible way of learning that the LLE can support. Linked to that, to return to another point made by the noble Baroness, Lady Wolf, I reiterate that we believe that the way we are approaching this builds in flexibility. It is not simply an add-on of modular courses. The shift from only—
Baroness Wolf of Dulwich (CB)
Just to clarify, I know that that is the case, but there seem to be a lot of people out there who have not quite grasped that. That is the only point I was trying to make.
Baroness Smith of Malvern (Lab)
To be fair to them, that might be because I am frequently banging on about the opportunities of modularity and different ways of providers being able to offer courses. The noble Baroness also raised an important point about the proposed consultation on break points that we will bring forward. We have to develop a system where you can gain credit for learning short of having done a full three-year degree. The Prime Minister’s target for two-thirds of young people getting a level 4 or above qualification obviously puts an emphasis on qualifications at level 4 and level 5 in a way that the student finance system has perhaps not supported previously.
The noble Lord, Lord Mohammed, made a point about maintenance support. I note that the LLE provisions will expand maintenance support for those in part-time learning. Maintenance loans will become available for all courses and modules that require in-person attendance, including part-time and technical study below degree level that does not qualify today, on top of other actions that the Government are taking to upgrade maintenance loans and to introduce maintenance grants. This demonstrates our commitment to broadening access to and participation in higher education.
On implementation, several noble Lords asked what support will be given to providers to develop modules. There will be some upfront costs in setting up modular study, but these costs are voluntary: there will be no regulatory requirement to offer a greater provision of shorter programmes. However, I think that providers—with their business hat on, if you like, thinking about the strategic opportunities for their institutions of what the LLE will enable their students to do—will see the real potential profitability of these sorts of courses. I hope that will be a reason why they might want to shift some resource into and help develop those courses. This is happening at a time when we have committed—although it is not part of these regulations—to an index-linked increase in the tuition fee limits that will be funding the provision that is being made in higher education.
The noble Earl, Lord Effingham, made an important point about quality. I reiterate the announcements that we made relatively recently about the additional work that we will do to focus on quality in higher education. Of course, we have already said that we will link any increase in tuition fees to the developments in the teaching evaluation framework that the Office for Students is working on. We will look at ways in which to limit the growth of poor-quality courses and are taking action on the source of a lot of the concerns around quality: that is the big expansion in franchise provision, with the introduction of regulation of such provision with more than 300 students in it.
I hope that I have been able to respond to the key points that noble Lords have made. I accept the point—this is part of the excitement of the LLE—that not all the answers are currently available because this is the start of something that has real potential to open up and change the way in which higher education is offered and funded for students throughout their lives. This is an important start and a foundation on which we can build that much more flexible higher education system with greater work with further education, greater opportunities to learn throughout your life and greater capacity to respond to some of the skills needs that we have in the economy. I commend the instrument to the Committee.
Energy Prices Act 2022 (Extension of Time Limit) (No. 2) Regulations 2026
(1 month, 1 week ago)
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Lord Whitehead
That the Grand Committee do consider the Energy Prices Act 2022 (Extension of Time Limit) (No. 2) Regulations 2026.
Relevant document: 6th Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, these draft regulations were laid before the House on 8 June and, in case noble Lords think we are suffering from a small dose of déjà vu, similar regulations, which we debated at the time, were laid months ago for reasons that I will come to in a moment. Further regulations were laid concerning Northern Ireland a little while after that.
As the background to this SI, the Government acted in the Autumn Budget to reduce electricity costs to the benefit of all households with a domestic electricity meter by scrapping the energy company obligation— ECO—scheme and moving 75% of the domestic costs of the renewables obligation to the Exchequer. We have been able to provide immediate savings for households in kind. These actions also mean that the energy price cap grew by less than it would otherwise have done on 1 July this year.
On 27 May, Ofgem announced that the price cap level for the period from 1 July to 30 September would be set at £1,862—an increase of £221 from April. The changes that we made at the Autumn Budget are still factored into bills and, without that action, the price cap would be significantly higher.
This concerns the transfer of 75% of the levies on the renewables obligation scheme to the Exchequer. The renewables obligation scheme exists to incentivise UK renewable electricity generation through a system of tradeable certificates. Of course, it is not a current scheme—it closed to new applications in 2017—but existing sites will continue to receive support until the scheme ends in 2037. The scheme has been instrumental in taking a nascent renewable energy sector to where it is today, with the scheme supporting around 30% of total UK electricity generation.
The core of the renewables obligation scheme is a process in which electricity suppliers purchase certificates from renewables generators. This process continues unchanged. However, previously, suppliers ultimately recovered the costs of complying with their renewables obligations from consumers via electricity bills. Ofgem considered these costs when setting the quarterly price cap for domestic consumers in Great Britain.
From 1 April, the Government have instead been providing grant funding to electricity suppliers to cover 75% of the cost of these obligations attributable to domestic energy supply in GB. We have given a legal direction to electricity suppliers requiring them to pass these savings on to domestic consumers. Translated into the typical dual-fuel bill used by Ofgem, and accounting for other changes, our intervention delivered a reduction of £117 in the price cap on 1 April. Although the price cap on 1 July increased by £221 as a direct consequence of events in the Middle East, it would have been considerably higher still without the ongoing effect of moving the renewables obligation to the Exchequer, which continues to suppress bills.
I come to the vehicle through which those changes could be placed in legislation. The legislative basis for the grant funding that enables the energy bill reductions was originally due to expire in April; that is because the Energy Prices Act 2022 contained provisions that have been used, for the purpose of this legislation on these reductions, to sunset the possibility of those reductions being undertaken. As I mentioned, we debated the Energy Prices Act 2022 (Extension of Time Limit) Regulations 2026 in the Chamber this year. They came into force in April and extended the power so that it is now set to expire on 25 October. The regulations before us extend this time limit once more to ensure that the removal of costs from energy bills can continue.
I should say at this point by way of a confession that, when I was the shadow Energy Minister in opposition and took part in our consideration of the then Energy Prices Bill in 2022, I did state that I was rather concerned that some other Government might come along and use the provisions in that Bill for something else entirely. I was a little mollified by the fact that a sunset clause was placed in the Bill, but I consider that the changes that have been put into legislation here have a rather similar purpose to that of the Bill in 2022—at least as far as the clauses at that time are concerned; they aimed to provide additional assistance for people who had very high energy bills as a result of the Russian invasion of Ukraine and the volatility that resulted from that.
What we are looking at today is a further extension of those sunset clauses to cope with the next phase of that transfer of responsibility from energy bills to the Exchequer. The arrangements in the settlements were for three years to 2029 so, as things stand, these regulations will have to be extended repeatedly during the time that those savings on customers’ energy bills are in place.
This extension to the regulations is only until 25 April 2027. It says in my brief: “I therefore expect to return to the House by February to seek a further extension”, but that should read, “Whoever happens to be there at the time will come to the House to seek a further extension”. However, I can assure noble Lords that the department is working hard on some primary legislation, at the moment, which will provide a more permanent solution to be taken forward when parliamentary time allows. Your Lordships would therefore not be in a position of having to return every six months to take this matter forward.
I emphasise to noble Lords that the position is slightly different in Northern Ireland, as I think we know because we have debated it separately. Energy costs are a transferred matter for the Executive, and the Northern Ireland renewables obligation forms a smaller cost on electricity bills. The department has been supporting colleagues in Northern Ireland as they develop a comparable offer to the policy in Great Britain. Following a request from the Minister for the Economy in Northern Ireland, separate regulations were laid on 20 June, as I mentioned, to enable the Northern Ireland Department for the Economy to deliver a comparable offer. Those regulations have since been signed and have entered into force.
These regulations are a straightforward extension of an existing time-limited power, but they ensure that the Government can continue to deliver the bill reductions announced at the Budget while work progresses on a longer-term legislative solution. I beg to move.
Baroness McIntosh of Pickering (Con)
I thank the Minister for presenting the regulations before us. I express the hope that he stays in his position, as indeed does the Whip. We do not like changes in the House of Lords.
I will make a couple of comments. Eons ago, I served as the shadow Environment Minister on an energy Bill in 2006 or 2007, I think it was, so plus ça change, plus—or rather, the more things change, the more they stay the same. I do not know how Hansard will cope with a French quotation so I will not say it.
What the Minister has put before us just confirms that this is smoke and mirrors. We are all playing for what is, in effect, a subsidy, and this has been the case since the mid-2000s, when his Government introduced this type of policy. Instead of me, as a householder, paying my household electricity bill, I am now paying it as a taxpayer, through my general taxation. I just hope the Minister and the department will step back from saying that this is a reimbursement or a return to me of £117, because that is not the case.
Where the department and the Minister could make a difference is by reducing the standing charge, as Martin Lewis, the money-saving expert, has said on many occasions. I know it has been outside the remit and the purport of the statutory instrument, but I just make a plea to the Minister, who has now disappeared behind the Dispatch Box—I cannot see him any more. I think he is still there.
Lord Whitehead (Lab)
I think that, in fact, our government lectern is higher than the opposition lectern.
Baroness McIntosh of Pickering (Con)
As we are all about the same height at this end, we do not need it. We should not worry about that.
Can the noble Lord write to me—I have asked this on more than one occasion—to tell me whether he, the department and the Government are inclined to look into this? From the point of view of household energy bills, that would make a real difference. If we could move away from renewables so that the application for the BESS in Knaresborough and Scotton is not approved next week, that would make the world a safer place, because my niece has been told that she will have to evacuate in the event of a fire. Knowing how highly combustible and flammable these things are, the world would be a safer place. However, with those few remarks, obviously I approve the SI before us this afternoon.
Earl Russell (LD)
My Lords, I thank the Minister for the way in which he introduced these regulations. It is almost like double déjà vu because we have considered the Northern Ireland regulations and we considered these ones very recently. We had a good debate on them last time, so I will be incredibly brief on these. I sincerely hope that the Minister stays in post, because I enjoy working opposite him.
On the regulations, the Government need go on seeking these six-month extensions so that they can continue to deliver these savings, which are important at the moment. We have renewed hostility in the Middle East and increased pressures on the cost of energy, so we absolutely recognise the need for this to be done, and these regulations would extend those provisions from 25 October 2026 until 25 April 2027. I therefore recognise that, in the absence of other primary legislation, there is a need continuously to come back with the six-month extensions.
I welcome that the noble Lord said that his department was working on bringing forward a permanent legislative solution so that we do not need to continue doing this. Can we expect that in the energy independence Bill, or is the expectation that it would need to be a stand-alone piece of legislation?
I made all the broader points I need to make on this SI when we debated it previously, so I will not rehearse those again. The Minister knows where I stand on a need to reduce energy costs, and on some of the ideas that I believe in and which my party has put forward. I wanted to ask about the situation in Northern Ireland, on which the Minister kindly updated us. I welcome that his department has been working with the Northern Ireland Executive, and I hear what he says: that has been enabled and has entered into force. If there is anything else on the Northern Ireland situation that the Minister might choose to add, that would be welcome. Other than that, we support these regulations, we will not stand in their way, and I thank the noble Lord.
Lord Moynihan (Con)
My Lords, I declare my interest as chairman of both Amey and of Acteon subsea engineering company, which works on offshore wind and oil and gas around the world, and as chairman of Buckthorn Partners, all of which are involved with energy transition.
I am very grateful to the Minister for the introduction of what is, I hope, the last SI before the Recess. I echo the comments made by my colleagues about the way he always handles the Committee with respect and responds to as many questions as he can in the time available.
I hope that the Government will not continue to keep propping up the renewables obligation to the Exchequer with secondary legislation. The point has been made that it is also important that we have proper scrutiny of it through the introduction of primary legislation. I say to my good friend, the noble Earl, Lord Russell, who is the Liberal Democrat spokesman, that I have no doubt that there will be plenty of room to handle this matter in the so-called energy independence Bill. It is fast becoming a Christmas tree Bill. I would not want to be on that Bill Committee; it must be the worst job in DESNZ at the moment, because it is being written and rewritten. I hope that the clauses about banning licensing in the North Sea have now been removed, in advance of the new government leadership—we will see shortly—but this would be a good opportunity for this specific point to be remedied in primary legislation.
Lord Moynihan (Con)
My Lords, I apologise for the interruption due to the vote. I was simply going to give the Committee one example of the consequences of overreliance on renewables.
On 23 June this year, NESO, the National Energy System Operator, faced severe supply constraints caused by high electricity demand for cooling during an extreme heatwave, combined with—this is important—low wind generation at the time, unplanned gas plant outages and network constraints. These factors cause the grid frequency to fall below the normal operating limits. It should have been reported to Ofgem immediately. I ask the Minister: why was it not reported to Ofgem on the day or early the following morning?
Many other important aspects related to this matter are outside the scope of this SI, so I will either write to the Minister with specific questions or potentially table them in a Written Question. This was an exceptionally important moment for the grid, and it appears that there were many problems associated with it: control room engineers being forced to take emergency action without it being reported; allegations from whistleblowers that the grid came closer to blackouts than was reported; and senior corporate staff instructing control room engineers to avoid making or preserving permanent paper trails of their operational decisions. All of that would be wholly unacceptable; I know that the Minister will share in my condemnation of those working practices.
In closing, I revert to the point that I made at the outset. I sincerely thank the Minister for always being so gracious, receptive, polite and engaging. I wish him a good break. I hope that he will still be in his place when he comes back from the Recess, because I anticipate that the energy Bill will take up a good deal of our time in the next 12 months, and I hope that he will be a renewed voice of influence in the U-turns that Andy Burnham will be making to energy policy. I am very grateful to him for everything that he has done and the courtesy that he has shown me throughout. I attribute those comments also to the noble Earl, Lord Russell, because he has always been similarly engaging in these debates during the current Session. These have been an interesting and appreciated six months back in the job. I look forward to the following year and working with the Minister.
Lord Whitehead (Lab)
I thank noble Lords for their constructive contributions and hope they will forgive me if I do not tarry too long in my closing speech and try to give a detailed response to everything that has been put forward. They are all very valid points but, among other things, we have a vote in about 20 minutes. I will certainly write to noble Lords on those points.
In particular, I am happy to write to the noble Baroness, Lady McIntosh, on standing charges. I have thought about this a great deal, but the issue is fraught with practical difficulties in how you do it. As the noble Lord pointed out, everyone has to pay for something somewhere. The question is what sort of equity you put in place if you are removing standing charges. A standing charge that goes on people’s bills as a block might be more properly allocated in terms of who pays for what and where. It is not a question of just taking standing charges away but of making sure that people are properly remunerated for network costs, distributed costs and all those sorts of things in a different way. That will be part of the content of my letter.
The noble Baroness is also sort of right to say that this measure is having the effect of taking charges off bills and putting them on to the general taxpayer. I would not exactly call it smoke and mirrors, but a charge will continue to be levied. However, there is one important point in this change that I hope noble Lords will consider. This changeover has an effect on the energy price cap each time round; changing billing from the levy to the general taxpayer means that the energy price cap is lower than it would otherwise be, which really is a saving for energy customers. As we can see, that is what has transpired as a result of these changes.
The noble Earl, Lord Russell, asked about the situation in Northern Ireland. I am grateful to him for being brief, as I know he has concerns in a number of other areas. If he has any further concerns, I am sure we can take those up. As far as Northern Ireland is concerned, my understanding is that everything is now complete. We have had the legislation through to enable the Northern Ireland Executive to put their own scheme in place, which they are now doing. The net benefit is going to be less, about £30 per customer, because of the different circumstances in Northern Ireland, but there are now no impediments in the way of that scheme being fully funded by the Treasury and fully operational under the aegis of the Northern Ireland Executive. That process is completed.
I assure the noble Lord, Lord Moynihan, that the costs of operating this will be very small. It involves small administrative changes and no large costs will be outstanding from them. He mentioned NESO, the frequency response and the margin call that was made recently. I can assure him that, as far as the narrow version of events is concerned, there are active inquiries under way as to what happened on that occasion which NESO is undertaking as we speak.
Lord Moynihan (Con)
In the interests of transparency, will the Minister write to us with the outcome of that report, so that this Committee, and indeed the House, are fully apprised of what happened that day and the actions being taken?
Lord Whitehead (Lab)
Yes, I am very happy to do that, but I anticipate—I do not know whether the noble Lord has this actively in mind—that we may have an Urgent Question coming on this, so we may be able to start talking about it at that point.
On the wider question of frequency response, it is true that, as far as having a substantially renewables-based system is concerned, the possibility of wider perturbations in frequency is something that one has to consider. That is why, among other things, as he will know, there have been regular auction calls for frequency response mechanisms which can be brought to bear to make sure that those perturbations are very rapidly brought under control, because it is a question of more than 50 megahertz on either side of the 400 barrier. When it goes down too low, you have to intervene. Those frequency response mechanisms can do that very efficiently and have done it very efficiently. Therefore, there was no question that we were beyond the buffer as far as that margin call was concerned. That may be something that I add to my correspondence with the noble Lord.
Tackling affordability is the Government’s number one priority, and we acted at last year’s Budget by taking, on average, £150 of costs off energy bills, with those decisions now factored into bills for three years to come, as I have said. The recent price cap announced by Ofgem will be deeply concerning news for families. We understand that developments in the Middle East are concerning, and we will continue to monitor that situation ahead of winter and plan for contingencies. Should there be any further action relating to what is happening in the Middle East, it may well be that the Energy Prices Act 2022 comes to the rescue, as far as any of those measures are concerned. We will keep that under close review, and let us hope that things work out in a good way, but the Government will certainly keep a close eye on it should things not work out as well as we hope.