Brexit: Medical Research and Innovation

Baroness Neville-Rolfe Excerpts

Monday 21st November 2016 Lords Chamber

[Baroness Andrews]

To ask Her Majesty’s Government, in the light of the numbers of European Union scientists working on British research programmes, what assessment they have made of the impact of the United Kingdom’s exit from the European Union on medical research and innovation.

[The Minister of State, Department for Business, Energy and Industrial Strategy (Baroness Neville-Rolfe) (Con)]

The Government are looking at more than 50 sectors and at the cross-cutting regulatory issues to build a detailed understanding of how withdrawing from the European Union will impact on the UK, including in the important area of medical research and innovation. The recently formed UK EU Life Sciences Steering Group is engaging with a wide range of stakeholders to help us ensure a positive outcome for this sector and for UK science.

[Baroness Andrews (Lab)]

I am grateful to the noble Baroness for that Answer. Does she appreciate that what medical researchers in the UK really want to know is what is going to happen after Horizon 2020? Are the Government aware of the risk that there will be to the great progress now being made by UK researchers working with European teams, networks and funding in, for example, the treatment of cancer and rare diseases? If those researchers are excluded from the next research framework, Framework Programme 9, that progress will come to a halt. In short, can she say what specific plans the Government have to ensure that we are not excluded from framework 9?

[Baroness Neville-Rolfe]

My Lords, it is too early to speculate on our future relationship with Horizon 2020 and its successor programme, No. 9—I am assured that it is going to be given a better name. Whatever happens in the future, we are committed to ensuring that the UK continues to be a world leader in international research and innovation and that collaboration with Europe and others continues. Separately, and as part of our industrial strategy, the Prime Minister has today announced a substantial real-terms increase in government investment in R&D worth £2 billion per year by 2020 as well as a new industrial strategy challenge fund which will also help medical innovation. This is good news.

[Baroness Morgan of Drefelin (CB)]

My Lords, perhaps I may remind the House of my interest in this area. The Minister in the other place said in June that the life sciences industry was worth around £60 billion a year to the UK and supports some 220,000 jobs, We in this House know that the role of the industry in promoting better patient outcomes through clinical research is absolutely vital. Is the Minister able to give us some reassurance that regulation will be put on a more even footing in the future, and will the Government commit to signing up to the agreed 2014 clinical trials regulations when they come into effect in 2018?

[Baroness Neville-Rolfe]

I entirely agree with the noble Baroness about the importance of our unique life science industries. Regarding the clinical trials regulation, preparations are continuing to implement that regulation in 2018 because we remain in the EU while negotiations continue. Of course, a great repeal Bill will come before Parliament after the next Queen’s Speech. That will end the authority of EU law and return power to the UK, but we will transpose current EU law into domestic law while allowing for amendments to take account of the future negotiated UK-EU relationship in this and other areas.

[Lord Foster of Bath (LD)]

My Lords, does the Minister accept that if we are to succeed in medical science research and innovation we need more home-grown science and maths graduates? That requires more science and maths teachers in our schools. Is she aware that teacher training targets are being missed, that vacancies are rising, that retention rates are falling, and that now more than a quarter of maths and science teachers have no relevant post A-level qualifications? What action are the Government taking?

[Baroness Neville-Rolfe]

The situation on STEM teaching is incredibly important. Indeed, thinking about our skills and how they relate to our industrial base, and our research and innovation will be a key strand of our industrial strategy, on which we will issue a consultation paper this side of Christmas.

[Lord Anderson of Swansea (Lab)]

My Lords, is it not inevitable that we will lose the European Medicines Agency in Canary Wharf, with its consequent expertise and jobs?

[Baroness Neville-Rolfe]

All I can do is repeat that it is too early to speculate on detailed issues such as the future of the European Medicines Agency, but our approach remains to be fully open and supportive of scientists, researchers and our medical strength. This is particularly famous in the UK because of the National Health Service, which provides such a good base for our medical and pharmaceutical industries.

[Lord Naseby (Con)]

Is my noble friend aware that one has only to go up to Cambridge and look at the number of start-up companies that are there, then open up the file on the new companies dealing with medical discovery going on the AIM market, to have some considerable reassurance that the industry is confident of the future, recognises that there will be some transitional challenges but, as before we joined the EU, will continue to be a leader in medical research?

[Baroness Neville-Rolfe]

I entirely agree with my noble friend. The fund for backing priority technologies, which we have announced today, will further support the UK’s potential to turn strengths in research into a global, industrial and commercial lead.

[Lord Kakkar (CB)]

My Lords, I declare an interest as professor of surgery at University College London and business ambassador for healthcare and life sciences. The announcement of £2 billion a year of additional funding to support research and development is most welcome, but are Her Majesty’s Government able to confirm that that funding, in addition to driving an industrial strategy in this area, will be delivered through the activities of the research councils, secure excellence in terms of the purpose of research funding, and be used to ensure the ongoing participation of our great institutions in global collaborative networks, which are vital for the delivery of excellent science?

[Baroness Neville-Rolfe]

I entirely agree with the noble Lord on the excellence of our research and development base, and on the great work being done by the research councils. I look forward to debating the way forward when the Bill on education and research reaches this House in the coming weeks. New funding has been made available today. This vision and direction of travel is excellent news for our science and research base in every part of the country.

[Lord Hunt of Kings Heath]

My Lords, the Minister ducked the question on the European Medicines Agency. Will she answer a question about the MHRA, the UK medicines regulator, which is regarded as the finest regulator in Europe and is one factor behind the large investment in medical research in the UK? In the Brexit negotiations, will she ensure that there is mutual recognition, so that medicines licensed by the MHRA will continue to be recognised throughout Europe?

[Baroness Neville-Rolfe]

I will feed the noble Lord’s suggestion into the process that is going on to make sure that we get the best deal in the Brexit negotiations on all these issues. He will know that Jo Johnson has a set up a forum with senior representatives of UK Research and Innovation to look at such matters, and that work continues in the Department of Health. This is a very important area. A lot of the detail is complex, but we are aware of that and, as I said in my opening comment, a great deal of work is going on.

Intellectual Property (Unjustified Threats) Bill [HL]

Baroness Neville-Rolfe Excerpts

Wednesday 9th November 2016 Other Business

[Lord Stevenson of Balmacara]

My Lords, I support the amendments introduced so well by the noble Baroness, Lady Bowles of Berkhamsted. There is very little that I need to add in terms of the general case—she made it very well. In the context of the remarks that we have just heard, a broader concern about the role of SMEs should carry weight in these debates. The anomaly of the omission of those commissioned by others who perhaps should know better is a point strongly made—the Lego example is rather a good one, even though we perhaps should not put it around too much in case people get ideas. The fact that such provision already exists elsewhere in statute suggests that, if we are trying in this Bill to level things up, this amendment and those consequential on it are very important. The amendment in the name of my noble friend Lord Hanworth is also worthy of consideration, although we will need to hear him speak to the other amendments in later groups to get a full picture of where he is coming from.

[The Minister of State, Department for Business, Energy and Industrial Strategy (Baroness Neville-Rolfe) (Con)]

My Lords, on interests, I am the Intellectual Property Minister, and I have the pleasure today of speaking on behalf of the Government.

I am very grateful to the noble Baroness, Lady Bowles, for her comprehensive introduction to this large group of amendments. I am also grateful to my noble friend Lady Wilcox for her support for the Bill as whole and for the good work done by the Law Commission.

It is common ground, I think, that Section 70A and its equivalents set out the definition of an actionable threat. The sections replicate the existing exception whereby a threats action cannot be brought if the threat refers to a primary act of infringement. The existing statutory definitions of what is an infringing act lie at the heart of the threats provisions.

The amendments in this group would mean that threats to someone “commissioning” another person to carry out a specified primary act cannot trigger a threats action. Commissioning infringing goods is not an infringing act within the meaning of any of the existing statutory definitions. This is a key point. Treating commissioning as if it were infringement, for the purposes of the threats provisions, would be a highly significant change to the law. It would introduce a novel concept and create confusion in the law of threats and more generally.

Unjustified threats are those threats which are made in respect of invalid rights, or where there has been no infringement. Amendment 1 and its equivalents would remove any protection from unjustified threats for a particular class of people who are not actually infringers at all—that could easily include the SMEs we are concerned about, on which I will come back to my noble friend’s comments at the end—and, to me, that cannot be right.

The amendment would also have other unwelcome consequences. For example, there is the defence which is available to the threatener, if they can show that the infringement did in fact occur. That defence is made unworkable in these circumstances.

I am concerned that, as with Amendment 3, there is a risk that the amendment would have unintended consequences on the interpretation of IP provisions more widely—specifically, the provisions which define infringement. Furthermore, the meaning of what amounts to “commissioning” a primary act would only become clear after a substantial body of case law had been built up. I do not think that that would be acceptable or welcome to business.

I shall now move on to Amendment 20—with many thanks to the noble Viscount, Lord Hanworth, for his explanation—which relates to use of trade marks in an online environment. I do not agree that there is an inconsistency in the threats regime. The noble Baroness, Lady Bowles, suggested that infringement law could be aligned better for the rights, but that is a wider question, as we discussed, that relates not just to threats or this particular Bill. If the amendment is intended to ensure that “applying” a trade mark in an online environment is covered more explicitly as a primary act, then in my view this is unnecessary when the threats provisions are read in the wider context of the parent Act.

This Bill will insert the individual threats provisions into the existing framework for the relevant rights. While the provisions appear in isolation in this Bill, they must be read—as I have just said—in their wider context.

The relevant sections of the Trade Marks Act 1994 do not expressly require a sign to be in physical form. It is accepted that services may be offered online under a sign in electronic form, and this applies whether the sign is included in a listing or as an AdWord. Nor do they require that the sign must be physically applied to physical goods or their physical packaging. Where goods themselves are electronic, then it follows that the sign applied must also be electronic.

That is a long way of saying that changing the provisions in the Bill to set out expressly that the online application of a sign is covered is unnecessary and, as we discussed in some of the hearings, could cast doubt on an already settled view.

I turn finally to the position of small businesses, which was so well expounded by my noble friend Lady Wilcox. I do not think that a champion is a matter for this Law Commission Bill, although she and I had a good discussion about it. I believe, as I have said several times, that this will benefit smaller-sized businesses by helping them to gain access to justice at reasonable cost in order to enforce and make best use of their IP in the sort of circumstances that she was talking about.

I hope noble Lords will allow me to enlarge a little on the measures that government has taken to help SMEs, as I think that might help my noble friend. We heard in the evidence sessions from Mr Justice Birss about the benefits to SMEs of using the Intellectual Property Enterprise Court. Recent reforms made to the IPEC—in particular, the small claims track—help to level the IP playing field for SMEs that previously struggled with cost. The Government are fully supportive of the IP pro bono initiative, launched last month, which is designed to help small businesses and individuals who are involved in a dispute about IP. The IPO also undertakes a wide range of activities that are aimed at SMEs—partly as a legacy of the time when my noble friend was Minister—and geared to promote understanding, such as: the government-funded IP audit programme; the IP for business tools; and the IP finance toolkit. I make no apology for taking this opportunity to explain that.

Regarding the guidance on the Bill, the IPO has committed to publish business guidance 12 weeks before the new provisions come into effect. In addition, the IPO will implement a full communications plan, update the online tools, make presentations at outreach events—many of which are aimed at SMEs—update stakeholders who have signed up to receive updates and use social media channels to try and ensure that we take this opportunity to raise awareness of the changes. Actually, this is a good opportunity to expound the importance of IP. The IPO works tirelessly to increase awareness of IP and to provide guidance and education at every level. I am happy to commit the IPO to communicating to SMEs in a helpful way about the changes and benefits that will be brought by the Bill.

An important point is that we will ensure, as we did for the Consumer Rights Act, that the material is pitched at the right level. I have asked the IPO to road-test the guidance in draft with small business representatives. So we will have material suitably targeted for SMEs, but also communicate to the people who provide advice and support to these businesses, such as the patent library network, growth hubs and professional IP advisers. As IP Minister, I have tried to make sure that people understand IP a bit more and, with my noble friend’s assistance, I think that this Bill is an opportunity to do a bit more of that.

Coming back to the amendments, I believe that they would in fact complicate what is currently, as drafted, a clear and consistent definition, developed by the Law Commission, of what is and is not an infringing act. I therefore ask the noble Baroness to withdraw the amendment.

[Lord Lucas]

My Lords, I apologise for being backward when it comes to IP law, but I am surprised that the “commissioner” is not committing anything actionable. In this internet world, if I commission a product that infringes a patent, it is easy to get it made somewhere that is hard for the patent owner to get at and then arrange to sell it over the internet so that the importer is actually the final customer, rather than anyone who can be got at. That leaves the patent owner with no sensible place to go to enforce their patent. Is it really the case that “commissioning” a manufacturer to infringe a patent is not in itself actionable, or did I misunderstand the Minister?

[Baroness Neville-Rolfe]

These are quite fine points of law, but that is a fair question. Are there any other points, while we try to ensure that we answer your question accurately?

[Lord Lucas]

I thought that the Minister was saying to the noble Baroness, Lady Bowles, that she was seeking to introduce something new by saying that “commissioning” was not an infringement and, therefore, one could not make a justified threat to someone who was not doing anything that was actionable.

[Baroness Bowles of Berkhamsted]

If I may, I think that in the kind of scenario where there is a commissioning person and a manufacturer and you can find them both, you would take action and the commissioner could be brought into it as a joint tortfeasor. If the commissioner was the big guy and the manufacturer was the small guy and you could take action just against the commissioner, as you could with a trademark, you might leave the small guy out of it. They become the prime person in the action, with the other person potentially joined in, but the issue is that you cannot write to the source of the problem.

It is true, as the Minister said, that there is a missing link in “causing” in everything except trademarks. When the Law Commission started its review in preparation for this Bill, it asked whether the law was working properly in various places and was told that it was not working as well as it could, including in relation to the amendments that had been made to Section 70 of the Patents Act following the Cavity Trays case. That has been rolled out with no change, not taking account of suggestions of areas where there could be improvement. Given that such suggestions have been made, it is appropriate that policy discussions and decisions take place. I can accept that the Law Commission does not have that power, but the legislature does. Therefore, I lay those points before the legislature.

I must quibble slightly with the suggestion that the point about unjustified threats is about getting at people who try to threaten you under an invalid patent or where there is obviously no infringement. Those are actions that, by and large, cannot be caught with a threats action; that is what the more blanket tort is needed for, or you have to go to different things, such as declarations of non-infringement or declarations of invalidity, because the threats action is not there. The law says that if you are the manufacturer or the importer anyway, you can threaten to your heart’s content.

If I may paraphrase Judge Pumfrey, as he then was, in the Quads 4 Kids case, he said that unjustified threats actions are about a rights holder who tries to keep enforcing their rights with the threat of going to court but never intending to go to court. That is why you are not allowed to threaten the customers, because that would be a soft option for doing that. However, that does not mean that people who are selling things are not infringers; they are—you do infringe if you are selling, but one is supposed to go for the person at the core of it, the manufacturer.

What I am saying, and have been supported in, is that in this day and age the notion of causing is far more relevant. Historically, it was always relevant for trade marks, because you got somebody else to mark the carton—that is where it all started—but now that we are into remote access, commissioning in one country and selling over the internet, there is definitely a missing link that is being made use of, particularly in respect of designs as well as trade marks, and probably patents to some extent as well.

That is where I stand on this. I think that I would like to test the level of support in the Committee.

[Baroness Neville-Rolfe]

Before the noble Baroness sits down—I say that for the cameras—I should say to her that this is obviously a Law Commission Bill. The extent of that has been explained to us as a Committee from day one. We are getting here almost into a treatise on the general law of infringement. The threats Bill needs to match the existing law, which it does. I have explained why I think the amendments go beyond that and have potentially perverse consequences.

The noble Lord, Lord Lucas, was essentially right in what he said, so I thank him for that. I think that the right thing for us to do is to stick with this wording, which the Law Commission has spent a lot of time clarifying, rather than move into these new areas.

[Baroness Bowles of Berkhamsted]

I would still like to test the opinion of the Committee. We do not have to do it for all the amendments; we can test on Amendment 1.

--- Later in debate ---

[Lord Stevenson of Balmacara]

Luckily, I do not have to answer that, but we have expertise beyond parallel at the Minister’s end of the table.

I just want to support the points made by the noble Baroness, Lady Bowles of Berkhamsted. The question here is not so much whether this is an issue that we should take into account ab initio, which was slightly the case with the previous amendment, although I supported that as well; the support here comes because there was clear evidence from those whom we consulted that this issue needs further attention, and the noble Baroness has made that case very well. If we have gone to the trouble of taking evidence but then do not consider it and take it forward, that seems to be a slightly casual way of approaching things. I hope that we will take this point very seriously.

I also take the noble Baroness’s point that, if we were to amend the Act in the way that she suggests, this would reduce the impact on small and medium-sized enterprises and other organisations, because there were would be fewer court actions and more such matters would be dealt with in the right way, which is directly between the participants. So I support these amendments.

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Baroness, Lady Bowles, for her comments which, it is fair to say, were wide-ranging. I will explain how I see things and then address the various amendments, to use her words, on their merits—I should say her “family” of amendments, which is a good new collective term that she has invented today.

It is crucial that the threats provisions encourage rights holders to communicate with the trade source of an infringement—that is agreed—and provide much-needed protection for secondary actors, such as retailers and customers. To facilitate this, the Bill sets out a clear statement of primary acts. Threats in respect of these primary acts, namely the manufacture or import of a product, in the case of patents, will not give rise to a threats action. To answer the point made by my noble friend Lord Lucas, the manufacturer of the cornflakes—to use his example—is the primary actor. The point has been made by my advisers that this assumes that they are patented cornflakes; I am not sure how likely that is in reality, but it is a fair point. I think that there are people, as we discussed during the evidence session, who are in both the primary and secondary markets.

As we have discussed in this Committee, the provisions make a distinction between primary actor, such as the manufacturer, and secondary actor, such as the distributer and retailer, or the person with that hat. This provides protection for secondary actors from being exposed to threats. They are less likely to be able to make an informed decision on whether the threat is actually justified. Secondary actors are more vulnerable to threats because of the fear that they will become embroiled in an infringement action that they cannot afford. As a consequence, mere threats can—and do—persuade secondary actors to move their custom elsewhere.

This group of amendments would introduce circumstances where threats in relation to secondary acts would not give rise to a threats action. This clearly starts to undermine, to my mind, the protection for those who should rightly be protected by the provisions before us. The first set of amendments, concerning where a person presents themselves as doing a primary act when they are not, would mean that a threat sent to a person who claims to do a primary act could not be the subject of a threats action. The rationale for the proposed amendment is that the rights holder may not find out that the recipient is not a primary actor until after the letter has been sent, and then only if the recipient draws back from previous statements.

The amendment introduces an exception to secondary actor protection that is based on a new concept—as the noble Baroness explained—of “claiming” to be a primary infringer. This is an inherently vague concept not found elsewhere in the main Acts for the rights concerned. It would be complex and very difficult to bring evidence to prove in court. A significant body of case law would be required before businesses would have clarity about what amounts to “claiming” to be a primary actor. There may be different views to the one that I took on whether satellite litigation might result, but it certainly seems possible and unfairness could result in any case. Critically, the amendment would undermine protection for retailers who inadvertently use ambiguous language. If a secondary actor somehow implies, even accidentally, that their product was made by them, then under this amendment they lose all protection from unjustified threats, which also seems unfair. Under the current drafting, rights holders can make threats that refer only to primary acts. These are not actionable, so that is one solution. If a rights holder is uncertain about whether a retailer is also a primary actor, they can use a permitted communication to seek clarification of the identity of the primary infringer, without the risk of a committing an actionable threat.

I turn to the second group of amendments, which extend what is a primary act—for example, the manufacture of a hair dryer whose patent is owned by the threatener—to include any products or processes having the same features. To continue the example of a hair dryer, it would be one which is not the same but is similar in all material respects. Where threats are made to a primary actor in respect of one product, it is correct to approach them. They are potentially the greatest risk to trade and the source of the alleged infringing. But if threats are made in relation to equivalent or similar products, where the same business is only a secondary actor, it should be possible—in my view—to bring a threats action. To remove this option would chip away at the principle of protection for the secondary actor, which is at the very heart of the threats provisions. Mark Bridgeway noted in his evidence session that asking secondary actors for undertakings to cease doing something for commercial purposes is expressly excluded from being a permitted purpose. Yet the effect of the amendment would be to allow this to happen.

The amendment would also make the provisions more, not less, complex. It would blur what is intended to be a clear line between what is and what is not actionable. In addition, the concept of “the same features” is very vague and I can foresee great uncertainty for business. The noble Lord, Lord Stevenson, rightly mentioned SMEs. For the reasons that I have stated, I believe that including the amendments would reduce clarity and, therefore, make the provisions more complex and advice potentially more expensive for SMEs. In reducing the protection for secondary actors, I fear that the amendment could open up SMEs to unjustified threats. I know that it is a very complex area but, for these reasons, I ask the noble Baroness to consider not pressing her amendments.

--- Later in debate ---

[Lord Stevenson of Balmacara]

My Lords, I pay tribute to the noble Baroness, Lady Bowles of Berkhamsted, for her ability to expand such a wide range of interests within one group. The grouping has been necessary, but possibly not in the best interests of a focused series of discussions. It rebounds on the Minister to try to respond in like mind to whichever one of the very large number of points we could have picked up on. I am sure she is well prepared, but I will not trouble her too much because I will not range very widely on this. I do not need to repeat what has been said so eloquently.

I wanted to focus my remarks on Amendment 13, which, more by luck than good judgment, I managed to get my name down to. I support what was said here in the context of the evidence we had. If the Committee will recall, a lot of what we talked about with one or two colleagues who came and gave evidence was the question of whether the Bill could be seen as evolutionary in any sense, leading to a broader understanding of the nature of the regulatory structure within which business in the UK should be conducted. I do not wish to put words into the Minister’s mouth, but I think she is not unsympathetic to the idea that we should instil good ethics in the business community. I hope for her support later on, perhaps, on this point.

The narrow issue here is that the decision of the Law Commission after much discussion was to accept that, while there was a teleological approach to this area of law in the sense that, in time, a wider tort could be introduced because it would encompass this and other areas, and in the process allow us to engage more directly with the Paris convention—which is where we might have to seek a wider international relationship post Brexit—it was not the time to do that and it had not carried out the necessary consultations it would wish if that was indeed where Parliament wanted to go. If we are not going the whole way, was there a midpoint?

It was interesting to hear the evidence from Sir Robin Jacob in particular that new Section 70B(3), if he read and interpreted it correctly, provided a little bit of breadth of discretion to the courts when approaching the issues that the noble Baroness, Lady Bowles, mentioned. I am keen that that should be the case. I align myself entirely with the noble Baroness’s remarks on this. It would be unfortunate if the wording as it currently stands, with the word “necessary”, was seen by some as a barrier to the sort of thing we think is appropriate, which is that, on occasion, only in appropriate circumstances and only for good reason, the judges should have the right to take a wider view about some of the issues before them.

It would be helpful to get a sense from the Minister of whether she understands that. It may be that she cannot go as far as the proposal here, although the words “reasonable in all the circumstances” or “proportionate” that the noble Baroness would introduce, would be better than “necessary”. Perhaps the Minister could reflect a little on what she takes from the current wording. If, on reflection, we look at that in Hansard and think it probably takes us as far as we need to go, it may be sufficient to leave this. It is probably one of the key points in this Bill where we could be doing something rather wonderful in trying to move the whole way this is taken forward from a rather tight set of constraints to a much more open approach. That would be for the benefit of small businesses in particular, which cannot always necessarily see the narrow point and come forward with ideas that would make it easier for people to move forward with their business. I support the amendment.

[Baroness Neville-Rolfe]

My Lords, new Section 70B introduces a framework of “permitted communications”, which sets out clearly how a rights holder may communicate with a secondary actor without being at risk of a threats action. It is important to note that a request for this certainty came from businesses and legal professionals during the Law Commission’s work. I have listened to the points that have been made with great interest. I am rather a fan of Latin, which is a very politically incorrect thing to say. I did Latin A-level and was probably one of the last to do so—people do not study it much nowadays.

[Lord Stevenson of Balmacara]

They are not allowed to.

[Baroness Neville-Rolfe]

You learn a lot from the mistakes of the Romans in terms of public policy.

I shall start with Amendment 6 and its equivalents. One of the requirements for a permitted communication is that the specific part of the communication which relates to a threat is made for a “permitted purpose”. The phrase,

“so far as it contains information that relates to a threat”,

is there to limit properly the scope of the provision about permitted purposes. We believe that deleting the words “contains information that” would risk the test being read as meaning that the entire communication had to be made for a permitted purpose—even the parts which were not a threat. The current drafting was inserted precisely because stakeholders—the Law Society and CIPA—expressed concern about that result. The amendment would mean that the permitted communications provisions might not apply if a communication happened to contain harmless, extraneous material. The hurdle would be so onerous that the protection offered by the permitted communications provisions would not, or might not, be used. Those less experienced would also easily be caught out by adding additional material.

I move on to Amendment 7. For a communication to be permitted, the part of the communication which relates to a threat must be made solely for a permitted purpose. The term “solely” ensures that the part in question cannot also be made for a non-permitted purpose. We heard that the Law Society and others have been concerned that the word “solely” somehow imports a need to look at the motives of the sender, but I do not really see how that would come about. The motives of the sender are not a consideration under either the current law or the new provisions. I think that the noble Baroness disagreed but my view is that that is right. As Professor Sir Robin Jacob said when he gave evidence, litigating over what someone believed,

“just leads to applications for discovery and claims for privilege”.

That is a bit of a red light to me because it could mean more costly litigation.

The “permitted purposes” in the Bill are based closely on the current patent exceptions. The law in this regard is unchanged—it remains an objective test—and, in legal terminology, making a threat will remain a strict liability tort. The requirements clearly relate to assessing the purpose of the communication itself, based on its wording alone. The amendment therefore seeks to resolve an issue which simply does not exist.

Turning to Amendment 8, to my mind the non-exclusive list of examples of information which are necessary for a permitted purpose provides valuable clarity. It gives stakeholders the certainty they desire, making it possible for disputing parties to know how and what they may communicate effectively without risking litigation. The amendment seeks to undermine that certainty by adding a requirement that not only must the information be necessary but it must also be “proportionate”. The term casts doubt on whether a business can rely on the examples listed. This decreases the value of the guidance that paragraph (5) is meant to provide and which stakeholders asked to be spelt out.

Amendment 14 has a similar effect by saying that the examples given are only “prima facie” to be regarded as necessary information. In other words, these examples can be regarded as necessary information, which it is safe to convey, only until it is proven otherwise. Noble Lords can see that this will introduce considerable doubt for business about whether the examples can be relied on.

Both amendments raise many possibilities for how to assess whether a particular communication can safely be made. They risk both confusion and even satellite litigation, and the resulting uncertainty about what information can be communicated risks encouraging a return to the “sue first, talk later” approach, which we are trying to avoid. That goes against the direction of the Bill as a whole.

Finally, I will address Amendments 12 and 13. The noble Lord, Lord Stevenson, spoke to the latter. As I said, the Bill provides a list of permitted purposes in order to give the much-needed clarity and certainty that stakeholders have asked for. However, consultees also warned against being too prescriptive. For this reason, the courts have discretion to treat other purposes as permitted, but only if necessary in the interests of justice.

The requirement for something to be necessary in the interests of justice is in fact intentionally high, and it is expected that the discretion will be used sparingly. “In the interests of justice” is a familiar and steady concept to shape how the law develops. A new test of “reasonable in all the circumstances” could make it difficult to ensure that the law provides the required level of guidance and certainty. These amendments could provide the courts with a wider discretion to treat other purposes as permitted, and that could create uncertainty for users over what communications can safely be made. That is undesirable both for those wishing to enforce their rights and for secondary actors in receipt of a threat. It would make legal advice more complex and perhaps more costly and it could risk the erosion, over time, of the valuable protection for secondary actors which is at the heart of the threats provisions.

The noble Lord, Lord Stevenson, was making a wider point, but I do not think that we can tackle business ethics in this Bill. However, I agree that being responsible in business leads to better business, not only in the long term but in the shorter term.

I have listened to the debates about “solely” and “necessary”—we have now debated this over five sessions—and I can see that noble Lords share the same objective that we have, which is to ensure that this key area of the law operates in the best possible way and that these permitted communications work well. I cannot promise anything today but I, along with perhaps other noble Lords, will look at the Hansard report of the debate and I will consider carefully the various detailed points that have been made today. On that basis, I hope that the noble Baroness will feel able to withdraw the amendment.

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If something like this is not made into a permitted communication, it is not right that we should remove the mere notification right. That is something I would want to revisit by way of amendment at a later stage to reintroduce it. This is a serious point. Taking away a right and replacing it with a defence reduces the options of the rights holder.

[Baroness Neville-Rolfe]

I am grateful to the noble Viscount, Lord Hanworth, for his clear explanation of these amendments. I liked his example of the Doctor Who birthday cards, which I look forward to researching.

It is true that the internet is growing. It is increasingly international and it is very important, but I am not sure that that necessarily means that we should be changing the Bill. The amendments seek, in various ways, to include the sending of an online infringement notice in the list of permitted purposes, the result being that such notices can be used to communicate with an online secondary actor, without fear of a threats action being brought. Unfortunately, such amendments would completely undermine the protection for secondary actors provided by the Bill. Noble Lords will remember that Mr Justice Birss was clear in his oral evidence that these forms should not be made an automatic exception from the law of threats. He noted that he was aware of the notification process being used in exactly the way the threats provisions aim to prevent. Furthermore, the amendments would distort the policy behind permitted communications, which, of course, is to encourage a conversation to resolve a dispute. If an online form is used, rightly or wrongly, and the product listing is taken down, then the rights holder has prevented further trade in the item, so that closes the door to discussion.

Amendment 11 defines the new permitted purpose in relation to the e-commerce regulations 2002. These regulations do not specify how the notification must be made or what it should contain. There is no conflict, as we see it, between the Bill provisions as they stand and these regulations. It is possible to send a communication which fits within both the requirements of the regulation and the permitted purposes. Given the undefined nature of an e-commerce notice, the range of communications exempted by this amendment would potentially be large. That could create a gap in the protection for secondary actors.

Amendments 9 and 11 in particular would allow malicious and unjustified threats to be made to a secondary actor simply because a particular online form is used. The parties damaged by that threat would have no form of redress. That cannot to my mind be the right outcome. A rights holder facing a threats action as a result of using such a form can take advantage of the defences set out in the Bill. One defence available is that “all reasonable steps” have been taken to find the primary infringer. What is reasonable in the case of high-volume online infringement, to which the noble Viscount referred, is very likely to be a lower hurdle than in other situations. If a step is reasonable, then I see no problem in expecting a rights holder to take it. In light of this, the permitted purpose set out in Amendment 10, with its explicit reference to the impracticality of finding a primary actor, is not necessary. A suitable defence already exists.

The other defence for a rights holder facing a threats action is that the right has in fact been infringed. As the BBC noted in its evidence, it is very well aware, before it makes contact, of who is permitted to use its brand, and therefore whether others are infringing. The provisions as drafted in no way prevent rights holders from legitimately enforcing their rights. Sir Colin Birss says about not including standardised/online letters in his evidence:

“I would not include them in the exemption. That kind of thing can cause real damage. … I would be wary of a draft that went too far the other way and simply excluded that kind of thing altogether. That would be unfortunate. It is a place where SMEs can get damaged”.

Finally, I will try to pick up a couple of the points made by the noble Baroness, Lady Bowles. As I am sure she knows, the list of permitted purposes is based on the current threats provisions where it is permitted to notify a recipient of a right or, for patents only, to give factual information about the right or make inquiries to find out if a right is being infringed and by whom. That is not changing. Also, mere notification, to which she referred, is the first of the permitted purposes, and notification is not a threat to the platform.

These are complex matters. They have obviously been discussed at length with the Law Commission. I hope that, on reflection, the noble Viscount will feel able to withdraw his amendment.

[Viscount Hanworth]

I shall consider carefully what the Minister has said, as recorded in Hansard. Therefore, I beg leave to withdraw my amendment. I wish to give notice that I may bring it back on Report, in collaboration, I would expect, with the noble Baroness, Lady Bowles.

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[Baroness Neville-Rolfe]

New Section 70C and equivalents set out remedies in the case of a successful threats action and the defences available to those who have a threats action brought against them. Subsection (4) sets out a defence if it has not been possible for the threatener to identify the primary actor.

As has been said, the first amendment would amend the subsection to reflect a drafting preference by moving the location of the reference letter T. That may relate to the person who made the threat, which begins with T, but I will discuss the wording with parliamentary counsel in the light of the Digital Economy Bill to see whether we feel that it is right. I do not think that anybody thinks that it is a material point.

The second group of amendments under discussion relate to the defences available for someone who is faced with a threats action. The 2004 patents reform introduced a defence for a person making a threat to a retailer or the like. The defence applies if their efforts to find the trade source of the infringing patented goods were unsuccessful. The Bill extends this limited but useful defence to trade marks and designs. The provisions clarify that the person making the threat must have used “all reasonable steps” to find the importer or manufacturer of the product in question before they are safe to approach the retailer.

The phrase “all reasonable steps” was carefully chosen in response to stakeholder feedback, discussions with the Law Society and the Law Commission’s working group. Stakeholders thought that the previous phrasing used in the patents defence, “best endeavours”, carried too much legal baggage, as it has a special meaning in commercial contract law. In addition, it was felt that this could require disproportionate efforts by a rights holder attempting to identify a primary infringer. “All reasonable steps” therefore strikes the right level. It requires the person making the threat not just to do something which is reasonable but to do everything which is reasonable. The wording is fair; it does not require the person making the threat to go beyond what is reasonable.

Amendments 18 and 19 and equivalents seek to deal with pending rights. It is well established that threats to sue for infringement of an IP right, when an application for that right is still pending, are nevertheless subject to the threats provisions. New Section 70E for patents, and equivalents for other rights, ensure that there is no change to this principle—the threat will be interpreted as a threat to bring infringement proceedings once the right has been granted.

The effect of the amendment is to state explicitly that the issue of whether there has been an infringement will be determined on the basis of the granted right. It would add words in respect of the justification defence at new Section 70C(3) to state that a reference to the word “patent” means, in the case of an application, “patent as granted”. It would also make similar changes in relation to the other rights. The amendment is unnecessary. The threatener has a defence that the acts were in fact infringing ones. It is already the case in law that he must be able to show that the acts are infringing at the point of trial. If, at that time, there is not yet a granted IP right, there is no valid right to infringe and so the defence is not available to the threatener. That is the right outcome.

It is only where an IP right has been granted by the time of the trial that the defence is available. The new threats provisions do not change this legal principle. They fit into the relevant Acts, which themselves make clear at what point and in what way infringement of an IP right can occur. Let us take patents as an example: to understand references to infringement of a pending patent, it is necessary to refer to Section 69 of the Patents Act 1977. This makes it clear that you will not infringe a patent until it is granted and explains how infringement works for pending patents.

I have tried to explain why the provisions are drafted in this way. I will look again at our friend T. I ask the noble Viscount to withdraw the amendment.

[Lord Lucas]

My Lords, I would be grateful if, between now and Report, the Minister could write to me with some examples of cases decided on the basis of “all reasonable efforts”, so that I can get a real grip on what that means. It is a very uncertain phrase in English. If I wrote to Tesco asking, “Who made the cornflakes?”, and it said, “It’s not our policy to divulge that information”, would that be “all reasonable efforts”, or should I ask five or six times? If I cannot find a way on the website to communicate with somebody who appears to be selling products off a platform, are no efforts “reasonable efforts”? Particularly in the context of being asked to give way on Amendment 11 or whatever comes back on Report, knowing that, for example, the things that we are asking the BBC to do in defence of “Doctor Who” are actually reasonable and are not a ridiculous burden in defence of a 20p commission on a Doctor Who birthday card is something that we as a House should do. I would be grateful for an opportunity to see the sort of evidence that a court will see, against which it will judge whether a particular course of action involves all reasonable actions rather than just reasonable actions.

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[Baroness Bowles of Berkhamsted]

This is the last group to move, and I can be relatively brief. The amendment speaks for itself. I have harvested suggestions from the chartered institute and the Law Society with the intention of making this wording a bit less clunky but also international. During hearings we looked at what duties regulators had when people were behaving badly. I have not gone so far as to name just the club of advisers envisaged in the CIPA amendment, but I thought it would be good to say that they should be regulatory bodies that were authorised by statute. I did not mention a statute because even one statute did not fit the whole of the United Kingdom. “Statute” is well understood in other jurisdictions. I thought the words “entitled to legal professional privilege” that the Law Society suggested was useful. I have done it in one line instead of three, so at least it is brief. I beg to move.

[Baroness Neville-Rolfe]

I am grateful to the noble Baroness, Lady Bowles, for her very brief introduction. We have debated this issue through the oral evidence. Not least for the benefit of people who feel strongly about this, I will set out why we are not inclined to accept these amendments.

The tactic of suing a professional adviser for making a threat has been used to disrupt negotiations and hamper the legitimate client-adviser relationship. We heard that convincingly from several people who gave evidence. Exempting professional advisers from the threats provisions has long been called for, because it stops game-playing.

The Bill delivers an exemption in a carefully limited way. The amendment seeks to restrict the protection available for professional advisers to just those who are regulated by statutory regulatory bodies or entitled to legal professional privilege. It is right that a professional adviser should not become personally embroiled in a threats action, when they were acting only on behalf of their client. I do not agree that this principle should apply to only a limited category of particular professional advisers. Neither should the law on threats be the place to define which regulatory bodies are considered appropriate to oversee exempted advisers. As we were discussing, it is an increasingly global market. The definition must capture the different types of foreign and domestic IP legal practitioner, who may risk facing a threats action under UK law. The current draft does that.

The first limb of the amendment would seek to restrict protection to those whose services are regulated by a “statutory” regulatory body. The term is unclear, leading to uncertainty about the exact scope. In addition, the requirement of statutory regulation would exclude international lawyers with a system of professional self-regulation, such as the American Bar.

The second limb provides that, as an alternative to being regulated by a statutory regulator, professional advisers might fall within the exemption only if they are entitled to legal professional privilege. We all know that the law on privilege is complicated and inconsistent in different jurisdictions. An adviser may not be able to be sure whether they can rely on legal professional privilege in particular circumstances. Again, that could restrict options available to business and advisers might therefore—this is always the problem—continue to seek the indemnities we heard about in our evidence sessions.

We have delivered a careful, limited exception that requires the legal adviser to be regulated but is not overly prescriptive or complicated. I therefore ask the noble Baroness and the noble Lord not to press their amendments, as I think we have found a way forward.

[Baroness Bowles of Berkhamsted]

I beg leave to withdraw the amendment.

Green Investment Bank

Baroness Neville-Rolfe Excerpts

Tuesday 1st November 2016 Lords Chamber

[Lord Teverson]

To ask Her Majesty’s Government what progress they have made in their sale of the Green Investment Bank.

[The Minister of State, Department for Business, Energy and Industrial Strategy (Baroness Neville-Rolfe) (Con)]

My Lords, on 3 March this year the Government launched the Green Investment Bank sale process and it is currently ongoing. I can inform the House that good progress is being made. In particular, yesterday the GIB announced the names of the special share trustees appointed to be the custodians of its green purposes, and I congratulate the noble Lord on his selection as a trustee. The Government will provide a full report to Parliament once the sale is completed.

[Lord Teverson (LD)]

I thank the Minister for her reply and for the good work she has done in this area. Will the Government put additional conditions into the contract for sale to ensure not just that the green purposes are kept for the bank, but that it does not become a shell company with those investments placed elsewhere to avoid such constraints, and that the bank will continue to invest in the UK green economy so that it can continue to thrive?

[Baroness Neville-Rolfe]

In addition to the special share, which will protect GIB’s green mission, the Government have asked potential investors to confirm their commitment to the GIB’s green values and its investment principles, and explain how they propose to protect them. Green investment is, of course, what the GIB does—it is in its DNA. Investors will buy into its reputation, its green business plan and forward pipeline of projects, all of which are focused on the UK, although there could be international potential as well.

[Lord Mendelsohn (Lab)]

My Lords, we welcome the appointment of the trustees to ensure the Green Investment Bank will retain its green mission under new ownership, and we warmly applaud the appointment of the noble Lord, Lord Teverson. The crucial ability of the trustees to exercise this vital role now depends on the contracts and corporate arrangements between the buyer and seller. Will the Minister confirm that the trustees will have access to the transaction, contract and documents, and some funds for expert legal advice, to ensure that they can do the job this House voted for?

[Baroness Neville-Rolfe]

The trustees will have all they need to do their job, but the noble Lord will of course recall from our lengthy and useful discussions during the passage of the Bill that their role relates to the articles of association, ensuring that the green purposes of the bank are maintained. That is where they come in: they are not envisaged as a management board for the GIB, whether in its current state or whatever. They have an important role to play.

[Viscount Ridley (Con)]

My Lords, are green investments judged by their results or their intentions?

[Baroness Neville-Rolfe]

The GIB is a commercial operation. It has its purposes, and it judges where it should make investments. What we have in the GIB—a world first—is a dedicated green investment bank, which we should celebrate and which a number of bidders have showed an interest in acquiring so it can move forwards and expand.

[Baroness Featherstone (LD)]

My Lords, I was very pleased to hear the Minister say that a number of bidders are interested, because my understanding was that there is only one serious bidder. Am I right? If so and there is only one, would it not be better to wait for a better purchase price?

[Baroness Neville-Rolfe]

Given the commercial sensitivity of the sale process, I am sure the noble Baroness will understand that I cannot comment on the identity of any bidders. They have been required to sign confidentiality agreements, as is appropriate. As I have said, there will be an announcement once a deal is signed, and the Government will provide a full report to Parliament on the sale, proceeds and so on when the sale is completed.

[Lord Geddes (Con)]

Will my noble friend allow me to congratulate the noble Lord, Lord Teverson, who, unlike the vast majority of his colleagues, asked his supplementary without a note in his hand?

[Baroness Neville-Rolfe]

I agree with my noble friend that this is an excellent example of good practice.

Nissan: Sunderland

Baroness Neville-Rolfe Excerpts

Monday 31st October 2016 Lords Chamber

[The Minister of State, Department for Business, Energy and Industrial Strategy (Baroness Neville-Rolfe) (Con)]

With your Lordships’ permission, I will now repeat a Statement made in the other place by my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy.

“Last Thursday, 27 October, the Nissan Motor Company Ltd announced that, following a meeting of its executive committee, both the next Qashqai and the next X-Trail models would be produced at its Sunderland plant. The plant will be expanded through new investment to be a super-plant manufacturing over 600,000 cars a year.

Eighty per cent of the plant’s output is exported to over 130 international markets. The decision is a massive win for the 7,000 direct employees and 35,000 total British employees in the plant and in the supply chain. It is a stunning tribute to the local workforce which has made the Sunderland plant, in the words of the chief executive of Nissan, ‘a globally competitive powerhouse’. We are immensely proud of it and proud of them.

Of course, the decision is great news for the people of the north-east more widely, our world-class automotive sector and the whole of the British economy. This is but the latest in a series of exciting investments in a United Kingdom that is proving to the world that it is open for business. Indeed, it is hard to think of more unambiguously good news.

I and my colleagues in government have been vigorous in ensuring that the Nissan board had no doubts about the importance of this plant and this industry to the British people. Through many conversations I and my colleagues had here and in Japan, it became clear that four reassurances were important to securing the investment for Britain. Three were about the automotive sector generally and one was about Brexit.

They were, first, that we would continue our successful and long-standing programme of support for the competitiveness of the automotive sector, including Nissan. This support is available for skills and training of the local workforce, research and development, and innovation in line with EU and UK government rules. Since 2010 the Government have invested £400 million into the UK automotive sector in this way, and we will continue to invest hundreds of millions more over the coming years. All proposals, from any company, must be underpinned by strong business cases and tested against published eligibility criteria. All proposals are subject to rigorous external scrutiny by the independent Industrial Development Advisory Board and are reported on to Parliament.

Secondly, we would continue our work with the automotive sector, including Nissan at Sunderland, to ensure that more of the supply chain can locate in the UK and in close proximity to the major manufacturing sites. Working with local enterprise partnerships, city and local growth deals have provided a way in which local councils, businesses and the Government can upgrade the sites and infrastructure for small and medium-sized suppliers. This programme will continue with vigour.

Thirdly, we would maintain a strong commitment to the research and development and take-up of ultra-low-emission vehicles. The opportunities presented by bringing the energy and climate change department together with the business department make us ideally placed to build on Britain’s strengths in low-carbon energy, the automotive sector and science and research.

Fourthly, in our negotiations to leave the EU we will emphasise the strong common ground that there is between ourselves and other EU member states in ensuring that trade between us can be free and unencumbered by impediments. A good deal for the UK can also be a good deal for other member states, and that will be how we approach the negotiations. Whatever the outcome, we are determined to ensure that the UK continues to be one of the most competitive locations in the world for automotive and other advanced manufacturing.

Last Thursday was a great day for Sunderland and for Britain, but the best is to come. Over 30 years Nissan has invested more than £3.7 billion in our country and created excellent jobs for a whole generation of world-beating British workers. Last week’s announcement means that a new generation of apprentices, technicians, engineers, managers and many other working men and women can look forward to a career filled with opportunity and success. This Government will always back them to the hilt, and I commend this Statement, and Nissan’s welcome decision, to the House”.

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[Lord Foster of Bath]

My Lords, I too thank the Minister for repeating the Statement. On these Benches, we are of course pleased that 35,000—some people argue 42,000—direct and indirect jobs have been saved because of the Nissan decision. We too join the tributes that have been made to the workforce and to Nissan for its commitment to the United Kingdom. But we remain unclear about cost, unclear about whether or not the deal extends beyond the Nissan Motor Company, unclear about the implications for sectors other than automotive and, frankly, completely in the dark about where the Government are seeking to take us. Like the noble Lord, Lord Mendelsohn, we wonder whether we have heard all there is to be told about the Nissan deal.

The Business Secretary says his negotiating demeanour—to use his word—will be to try to ensure continued access to the markets in Europe without tariffs and without bureaucratic impediments. What is the fallback position if he fails? WTO rules do not allow compensation to be paid to Nissan for imposed tariffs, so what will happen then? Alternatively, are the Government seeking partial membership—for some sectors and not others—of the single market and customs union? After all, the Prime Minister has said that membership of the customs union is not a binary affair. Does the Minister agree with the Prime Minister? Is she aware that experts simply cannot see a system where there is, for example, free movement for cars but not for bicycles? Does the Prime Minister know something that the rest of us do not?

If the Business Secretary succeeds in a tariff and bureaucracy-free solution for cars, who will then have responsibility for the manufacturing regulations? Will the UK have a say on them? That will be so important, not least for the specialist car sector and for our work, as the Minister said, on electric and driverless cars. What guarantee can the Government give Nissan in the long term if we do not have a voice in any regulatory framework? What of those other sectors, including aerospace, pharmaceuticals, the service sector and many others including the millions of small businesses? The Business Secretary has made clear that the Nissan deal is not a general deal. So is it the case simply that those who shout loudest get the best deal from the Government? If the Government cannot have a sector-specific customs union, will they stay in the customs union entirely? If so, why do we have a Secretary of State for International Trade trotting around the world proposing deals which would of course be illegal?

The Nissan saga shows all too clearly that the Government do not have a clear plan and that their idea of not having a running commentary on Brexit is, frankly, laughable. When Cabinet discussions are leaked, and when some companies and not others are given specific assurances, it causes confusion and rumour that impact on the economy and the confidence of millions of business owners, savers and investors across the country. Does the Minister agree that it would be better if the Government came to Parliament with a clear statement of their intentions for negotiations and then let Parliament have a vote on that negotiating strategy? We would like to hear the answer.

[Baroness Neville-Rolfe]

My Lords, I start by thanking the noble Lords, Lord Mendelsohn and Lord Foster of Bath, for their support for this important investment by Nissan. We are right to welcome it so widely. It seems to me a very long-term decision—a new plant and a new supply chain—and I congratulate everyone involved. It is in everyone’s interest and shows the strength of our economy. It builds on three decades of success, supported by all parties, in Sunderland and for Nissan.

What is the best way to start on the nature of the assurances? I emphasise that this is not a compensation package. That is important in relation to all the points that have been made. This was about convincing Nissan of the UK’s continuing competitiveness. Governments regularly invest in UK competitiveness by supporting businesses making major investment decisions. This investment has been secured thanks to the highly skilled workforce, the strong partnership between government and industry that we now have, and long-term investment in new technology and innovation. Those same strengths are what matters to the other sectors and other companies that noble Lords have touched on. There is real progress with the announcement that these two important, new, potentially world-leading models will be made in the UK.

I set out in my Statement the importance of electric cars. I do not apologise for the fact that putting the two departments together helps with the electrification of vehicles and encourages those sectors of industry in the UK to tool up to be world-competitive. That is also helped by the departments coming together in BEIS, the curiously pronounced new department.

On Brexit, as the Prime Minister has said, the Government want British companies to have maximum freedom to trade with and operate in the single market and to let European businesses do the same here. People do not emphasise often enough the huge mutuality of interest. That has to be taken into account in the Brexit negotiations that are being developed.

I do not want to stray into a running commentary, which would go beyond my brief, but we have been showing Nissan and others that we are committed to getting the best possible deal from the future relationship that we will be negotiating with the European Union. We wish to ensure and assure the competitiveness of the British economy, which is what they have been so pleased about. We understand the concerns of industry, and it will be a priority of our negotiation to support UK car manufacturers.

We are working across government in a joined-up way, coming to the correct, mature decisions, and we have an ambition to do the very best for our industries. That includes the other industries mentioned. We have been working across the divide as part of the Brexit process. We have 50 streams of work looking at the different sectors, including aerospace, pharma and steel, where there has been some good progress since we last debated it in the Chamber, with the reopening of the plate mills in Scotland and progress in Scunthorpe and, I would say, Port Talbot.

Finally, I should mention the industrial strategy. We are determined to ensure that the UK is a competitive place to manufacture and to have financial services and all the other things that have been mentioned. As we develop the industrial strategy, we want to work with companies such as Nissan across the economy to ensure that we get the very best results for Britain.

I shall close at that point. I have tried to answer the questions. I will need to come back to the noble Lord on the training numbers.

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[Baroness Neville-Rolfe]

In the discussions with Nissan, we emphasised the strong common ground that there is between us and EU member states, our intentions and ambition to get a really good deal and the mutuality of interest in the automotive industry. I am confident that the UK can get a good deal from other member states. That is the view that Nissan has come to, which is why it is making the investment it is.

[Baroness Armstrong of Hill Top (Lab)]

My Lords, does the Minister acknowledge the centrality of manufacturing to the north-east of England? Nissan is very important. I am probably the only person in this House who was born and brought up in Sunderland, and I well remember the challenge when Nissan was eventually persuaded to invest. It is a loyal company. I have just seen the Japanese ambassador, and that is precisely what he emphasised: the loyalty inherent in Japanese companies.

However, the supply chain is critical. The north-east manufactures more per head than any other region. It is more dependent on manufacturing than any other region in the country. The supply chain is critical, as are other industries, as the noble Baroness says. What discussions is she or are the Government having with Hitachi, which is critical to train development in Newton Aycliffe? It has made new investment there and is very worried because it now does not think, because of EU rules, that it will be easily able to make trains in this country for other European countries.

[Baroness Neville-Rolfe]

The noble Baroness is completely right about the north-east: I always love the opportunity to visit, and have been to Newton Aycliffe in the not too distant past. We have a catapult not far away researching world-leading innovation. We are in constant discussion with Hitachi on its investment plans, which are indeed very important. This is the sort of foreign investment that we need to continue to welcome to the UK and the north-east.

[Baroness Ludford (LD)]

My Lords, I would not wish to look a gift horse in the mouth, and it looks as if the Government intend to seek membership of the single market and the customs union. My noble friend Lord Foster’s question on that was not answered. On behalf of the Government, will the noble Baroness come clean about that objective, instead of all this secrecy, confusion and incoherence, as a Member of the other place, Andrew Tyrie, the Conservative chairman of the Treasury Committee, is urging? He is also saying that the secrecy has nothing to do with the conduct of negotiations but everything to do with the confusion and incoherence in government. Please can we have a clear answer about the single market and the customs union?

[Baroness Neville-Rolfe]

We have already said that it is a priority for our negotiations to support UK manufacturing and ensure that the ability to export to and from the EU is not adversely affected. We need to remain competitive. Our ambition is high. In relation to the customs union, we made it clear that we are seeking the best possible deal with the widest possible access and that we do not expect exports to the EU to be adversely affected.

Clearly, work on this continues, but your Lordships can be clear that our ambition cannot be denied. We are not giving a running commentary because, as the noble Baroness will know, in negotiations, you cannot reveal every detail as you go along. Talking about confidentiality, we have not published the correspondence with Nissan, which she was perhaps hinting at, for the very good reason that investors in the UK—I used to be in business—must be able to have confidential discussions with the Government on their plans and be sure that those will not be revealed to their competitors. That is the way you have to work in the modern competitive world.

[Lord Liddle (Lab)]

My Lords, perhaps I may press the Minister on the deliverability of what she is saying. If she had said, “Yes, we recognise that we’ve got to be fully in the single market”, or, “We’ve got to be in the customs union”, perhaps she would be able to say to us that she could deliver. Her refusal to say that effectively means that the Government are trying to negotiate a series of sectoral agreements without the wider obligations of single market membership. Does not she agree that this is an extremely hazardous process for the United Kingdom and that there is very little prospect of it being completed within the two years of the Brexit timetable? What will be the position in 2019 in those sectors if negotiations have not been completed? I strongly support Nissan, but does she agree that it will be much easier to get a sectoral deal in goods—where, overall, Britain has a trade deficit—than in services, where we have a huge surplus? If we are looking at our interests overall, how does what the Government are saying add up to an adequate pursuit of the national interest?

[Baroness Neville-Rolfe]

The noble Lord is right to express his concerns with passion. You can see that we have already made some important totemic advances. The Nissan statement is one and the other is the Chancellor’s statement about financing the Horizon 2020 investments, which we will ensure are guaranteed. We are working hard in a complex negotiation, moving forward with ambition and a determination to ensure that exports continue both ways. I perhaps have a more optimistic view of matters than the noble Lord does.

[Lord Wrigglesworth (LD)]

My Lords, I have had a long association with Nissan. I was chairman of the Port of Tyne until fairly recently, from which virtually all Nissan’s cars were exported to Europe and the rest of the United Kingdom. I was also a director of the Northern Development Company, which did such sterling work in bringing it to the United Kingdom 30 years ago. I have followed its prospects and ups and downs over the years. This is not the end of the matter for Nissan. It is very good news in the short term, but we have had this before in the north-east: will the model come or not? The great advantage with the Qashqai is that it has been the most successful model that Nissan has ever made there. It has been made there for the last few years, so it was obvious to carry on making it there and a much easier decision for Nissan to take than if it were bringing a completely new model to the plant. Therefore, the Government have to face up to the fact that, unless this is a complete blank cheque, the future of the plant is still going to be in question when a new model has to be built there. Has a blank cheque been given to Nissan? Is it going to be compensated for any tariffs that are put on goods coming out of the factory in the future? As other Members have said, what about Komatsu and Hitachi and all the pharmaceutical industries in the north-east and other parts of the country that are also going to be affected if we are not in the single market?

[Baroness Neville-Rolfe]

I have already made it clear that there is no compensation package. Indeed, Nissan has itself said that there is no special deal and nothing for it that the rest of the industry would not be able to have access to. I commend the noble Lord for the work that he has done in the north-east. It is very important that we continue to invest in these areas with things like the Sunderland and South Tyneside City Deal for new advanced manufacturing. The noble Lord asked about other companies: it is important to bear in mind that the nature of the deal is available to other companies as well, because we are investing in competitiveness right across the board. I already said in my opening remarks that we have invested £400 million since 2010. Companies can apply for support but, rightly, those applications have to underpinned by strong business cases. They have to be approved by the independent industrial advisory body. While we are in the EU, they have to respect state aid rules and even if we ended up in a WTO situation—which I am not forecasting—they would have to respect the rules there. All that is very important.

[Lord Inglewood (Con)]

My Lords, I declare an interest as chairman of a training company elsewhere in the north of England. Can the Minister confirm that Nissan will be treated like all other businesses in respect of the proposed apprenticeship levy and is not going to have some sort of exceptional status?

[Baroness Neville-Rolfe]

I am certainly not aware of any special arrangements for the apprenticeship levy. As I made clear, the sort of arrangements which I outlined in relation to training, skills and innovation are an across-the-board approach which Nissan is obviously welcoming. I know my noble friend’s interest in the north-west and how important it is to him that we ensure investment in Cumbria, not only in nuclear but in manufacturing and other areas.

[Lord Lea of Crondall (Lab)]

My Lords, is it not abundantly clear that what was worrying Nissan was the repeated statement that “Brexit means Brexit”? Is it not equally clear, from today’s Statement, that Brexit does not mean Brexit and that the absence of access to the internal market and the customs union was starting to worry the management of Nissan? If these guarantees are now being given—and we hope that people on the continent will accept them, which is another question which I have not heard much about—can this be replicated in other sectors? At the end of all this, I hope the agreement with the European Union will include a lot of industrial policy and, as my noble friend Lord Liddle said, that things will be much nearer to acceptance of the internal market and customs union.

--- Later in debate ---

[Baroness Neville-Rolfe]

I do not have a lot to add, except to repeat the point about the mutuality of interest between Britain and our European neighbours and our determination to approach the matter in a constructive fashion. The Secretary of State for Exiting the EU outlined to Parliament our ambition to get the best possible access to the European market that we can negotiate. I think he said that we want business to operate in the EU tariff-free area for the future. We must not forget that leaving the EU also offers us potential opportunities to forge some new relationships around the world and to stand up for free trade, which I believe strongly helps the world economy, the people of Britain and the people of Europe.

[Lord Ashdown of Norton-sub-Hamdon (LD)]

My Lords, the Government’s welcome clarity, albeit given in secret to Nissan, has assured the continuation of car jobs in Sunderland and the north. Does the Minister realise that their lack of commitment and uncertainty has contributed to costing some 290 high-tech aircraft engineering jobs in Yeovil? I will see if I can explain. The Government put an order for Apache to Boeing without any kind of competitive tender whatever. In consequence, the confidence has been eroded in the Government’s wish to see a continuation of the helicopter design and manufacturing industry in Yeovil—the only one in Britain. That has contributed to the loss of 290 jobs just recently, with Leonardo probably going to Italy. Does the Minister agree that any attempt to produce any kind of industrial policy that did not say clearly that it wished to see Britain’s aerospace industry maintained, and our standalone capacity to make helicopters sustained, would not be worth the paper it was written on?

[Baroness Neville-Rolfe]

I certainly agree with the noble Lord that the aerospace and aviation industries are incredibly important to Britain. I have already asked on a previous occasion to have a conversation with him about Yeovil in particular, so that I can report to my noble friend and other Ministers who deal with these issues. Especially at this time of uncertainty with Brexit, we need to engage more with business across the UK and discuss difficult issues that arise.

[Viscount Ridley (Con)]

My Lords, will the Minister confirm that Nissan’s practice, when choosing at which plant to build a new model, is to organise competitive tendering among its plants all around the world, that the best one wins and that that is why this decision has come? As recently as August, the BBC was reporting that Nissan in Sunderland would not even be able to bid for these new models, let alone win those competitions—a speculation in the long tradition of pessimism about the Nissan plant, going back to how it would be lost if we did not join the Euro et cetera. This is a tribute to the fact that, whatever the conditions, this plant is highly competitive thanks to the brilliant work done in the north-east of England.

[Baroness Neville-Rolfe]

My noble friend is entirely right. It is great news and a tribute to Sunderland and the people of Sunderland. I am delighted to know that Nissan in the UK scores so very well in the international league tables.

[Lord Hain (Lab)]

My Lords, since the great bulk of Nissan Sunderland’s production is exported to the European market and the typical life cycle of a new model is five to 10 years, can we assume that Nissan has been promised either tariff-free access to the single market or a transitional access of that kind over a 10-year period?

[Baroness Neville-Rolfe]

I have made it quite clear that there is no special sweetheart deal. I outlined in the Statement the broad ingredients of what we have agreed with Nissan, and it has endorsed this with a clear statement to that effect. Of course, we need to look ahead over 10 years. We need to tool our industry and ensure that it is skilled and that we have the right sort of investment and innovation. That can include things Nissan is expert in such as electric cars and, no doubt in due course, the move to autonomous vehicles. We can do all that together. Nissan is a very competitive company that likes Britain. There is plenty of opportunity. We do not need to be so pessimistic about the future.

[Lord Campbell of Pittenweem (LD)]

My Lords, are we to accept that Nissan was persuaded by the answers to the first three proposals, which are about continuing and maintaining, and the fourth, which is about doing the best deal we can for the United Kingdom? If I was making an objective judgment of Nissan’s capacity for negotiation, I do not think I would give it many marks out of 10 if this is all it amounts to. Why cannot we have sight of the correspondence exchanged between the Secretary of State with the relevant responsibility and Nissan? Surely this is not the normal run-of-the mill argument about confidentiality; this issue goes right to the very heart of the Government’s case and their chances of success in negotiation. Is not that exactly the kind of accountability which this House and, indeed, the other place are more than entitled to ask for?

[Baroness Neville-Rolfe]

I feel sorry for Nissan. Over 30 years, it has invested more than £3.7 billion here. We have had important exchanges and correspondence with it of a confidential nature. We have summarised the key ingredients of that in good faith. I do not think there is anything I need to add to give a truer picture. I look forward to Nissan continuing to invest in the UK over many years.

[Lord Trefgarne (Con)]

My Lords, I warmly commend what the Statement said about support for training. I speak as the former chairman of the Engineering Training Authority. I have visited Nissan on many occasions. Its training facilities are outstanding.

[Baroness Neville-Rolfe]

I very much agree with my noble friend. Part of our industrial strategy—to give a preview—will be that skills and training will be vital. As the world is changing, especially as it becomes more digital, they are becoming even more important, and we have to invest in skills and training to a much greater degree, as we have heard from the Prime Minister and the Secretary of State. I look forward to seeing a changing Britain with our new approaches and investments. We should learn from Nissan because it has obviously been so successful.

Solar Panels: Business Rate Exemption

Baroness Neville-Rolfe Excerpts

Thursday 27th October 2016 Lords Chamber

[Baroness Featherstone]

To ask Her Majesty’s Government whether they will reverse their decision to end the business rate exemption for small solar panels from April 2017.

[The Minister of State, Department for Business, Energy and Industrial Strategy (Baroness Neville-Rolfe) (Con)]

The Government are aware of the solar industry’s concerns regarding the application of business rates on microgeneration and changes that may affect businesses with solar more widely. We continue to engage with the affected parties. Following the business rates revaluation and this year’s Budget, nearly three-quarters of businesses will see no change or a fall in their bills next year, with 600,000 businesses set to pay no business rates at all.

[Baroness Featherstone (LD)]

I thank the Minister, but I have to say that if one parish council in Wokingham can find that its business rates are going from £7,000 to £14,000, this will be the death of non-domestic solar roof panels. I urge the Government to look at the impact on schools and parish councils, which will be devastating. Will she also address the unfair and unjust anomaly whereby schools with charitable status will be exempt from the new increased business rates, thus creating a two-tier system that penalises local authority schools?

[Baroness Neville-Rolfe]

The noble Baroness is right that there is in this area a curiosity, as I think I would describe it, which is that private schools and academies, being charities, as she said, get an 80% reduction, which is good. We have a system where the impact depends on the ownership, as she will know, of the affected solar project, so we have a situation in which there is a fall on new projects where the electricity generated is sold and an increase where the electricity is used directly by the owner—she mentioned the example of schools. It is not possible to estimate the impact of those changes because it depends on ownership but, as I said in my reply, we are considering the impact and any proposed changes will be made in due course.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, last year I visited a school in Croydon, which has had to cancel an expansion of its solar installation because of the Government’s cuts to the feed-in tariff. I invite the Minister, when she is sure about the impact of this particular measure, to go with me to that school in Croydon and explain why its solar installation is now going to be taxed and how much it will be taxed by.

[Baroness Neville-Rolfe]

As I have said, we are looking at the rate issue. There is also an issue relating to VAT, where HMRC issued a consultation—at the moment, domestic VAT continues to be 5%. The feed-in tariff deployment actually continues. Obviously, the subsidies of solar have come down because the costs have come down to such an extent. Solar has been a big success in this country and it is obviously right that the subsidy levels reflect that innovation and productivity.

[Lord Campbell-Savours (Lab)]

Why are there business rates on solar panels?

[Baroness Neville-Rolfe]

I do not think that there are business rates on domestic solar panels—that falls under my right honourable friend Sajid Javid’s department. Businesses have been caught because the rateable values reflect the value of the business property, and there have been changes to the regime that have led to the situation that I have described to the noble Baroness. We are looking at that, but rates reflect, in the long term, the value of property. However, I can see that there is an issue in relation to solar panels.

[The Lord Bishop of Portsmouth]

My Lords, may I press the Minister a little further on the impact—perhaps, I am hoping, the unintended impact—of this decision on some small schools? Is it really intended that small schools should pay business rates, often after significant community fundraising to install solar panels to increase awareness among children and young people of climate-change issues?

[Baroness Neville-Rolfe]

We are looking at this, and, in particular, this change to microgeneration, which has had these anomalous effects. In the past, schools have been totally exempt; now, as I have said, the rate system is coming in and biting in a way that perhaps was not intended in the first place. We are looking seriously at the impacts against this background of some doing better out of the system than others. We look forward to making some progress in this area.

[Baroness Young of Old Scone (Lab)]

Can the noble Baroness tell the House how many more changes of policy impacting on renewable energy and carbon reduction will come from the Government? We seem to have had quite a string of them, all of them rather unexpected. Perhaps they are in response to the cheaper generation issue that the noble Baroness raised, but they have certainly reduced confidence both among domestic and commercial investors and in the renewables industry. Are there many more changes to come?

[Baroness Neville-Rolfe]

I think the noble Baroness should take comfort from the signing of the agreement in Paris, the statements we have made and the comments I have made about the carbon budgets that will be put forward in due course. This Government and the last one have made enormous investments in renewables, but nobody could fault us now for looking properly at affordability and at where things can be affordable. Innovation—for instance, on solar—is making things less expensive, and then the subsidy regimes should change. However, of course we understand the need for investor confidence.

[Lord Grantchester (Lab)]

My Lords, solar PV has taken the brunt of corrective measures taken by the Government, as in their analysis it is the key reason for the overspend on renewables. In fact, the National Audit Office report shows that solar accounted for only 6% of this overspend. The technology is so popular and affordable. What steps will the Minister and her department take to review this overcorrection, encourage further solar deployment and restore confidence to the sector?

[Baroness Neville-Rolfe]

The noble Lord is right that solar has been a success. We have over 11 gigawatts now installed, with 49% of EU investment in solar, so we have strength. We have had to bring down the subsidies for that, although feed-in tariffs and so on continue. My own view is that solar is an important part of the mix, particularly internationally, because there is more sun and less intermittency, which helps us with our climate change targets. However, the noble Lord can be reassured that we are looking carefully at solar, and a lot of our innovation budget is going toward solar and storage to see whether, going forward, we can take those two together and make the technology even more cost effective.

Fuel Poverty

Baroness Neville-Rolfe Excerpts

Tuesday 25th October 2016 Lords Chamber

[Baroness Donaghy]

To ask Her Majesty’s Government what is their estimate of the number of households currently in fuel poverty; and what action they intend to take to reduce that number.

[The Minister of State, Department for Business, Energy and Industrial Strategy (Baroness Neville-Rolfe) (Con)]

My Lords, the latest official statistics show that there are 2.38 million households living in fuel poverty in England. We are reforming the energy company obligation to improve the energy efficiency of the households that most need support. Combined with the support from the warm home discount, almost £1 billion a year will be spent on tackling fuel poverty from 2018. We also propose to raise the standards of energy efficiency in the private rented sector.

[Baroness Donaghy (Lab)]

I thank the Minister for her reply. She will know that the Prime Minister said:

“It’s just not right that two-thirds of energy customers are stuck on the most expensive tariffs”.

The Minister will also know that the figures she gave the House are a conservative estimate, because they do not include those who are in need of extra warmth because of old age or ill health. Could she elaborate on the Government’s intentions to achieve this improvement?

[Baroness Neville-Rolfe]

As the noble Baroness said, the Government are very focused on this issue. We are trying to improve the various schemes to focus them more on low-income and vulnerable people. We have a report from the Competition and Markets Authority looking at price, and at the key issue of pre-payment meters, which are extremely important for the poor and vulnerable—and which Lord Ezra, who used to ask questions on this subject, did so much to bring to everyone’s attention.

[Baroness Gardner of Parkes (Con)]

Does the Minister agree that it is not only the price of fuel and heating that are important, but how you use them? In my days as a member of the London Electricity Board, we encouraged a programme to be sent, particularly to elderly and vulnerable people, telling them how they could intensify the use of one particular room at times when they would be at serious risk of ill health if they did more. At least we sent out information that could be useful to people to protect them. Are the authorities that produce fuel still doing that? If not, can it be sent out by a health department or someone of that type?

[Baroness Neville-Rolfe]

The noble Baroness makes an important point about the need to get the information to the consumer, which I very much agree with. Public Health England recently estimated that cold homes cost the NHS £850 million a year—so we need to get the regimes right, and we also need to communicate that well, both through the energy providers and more generally.

[Lord Palmer (CB)]

My Lords, in this day and age, is it not an absolute disgrace that any household should live in fuel poverty?

[Baroness Neville-Rolfe]

It is certainly a problem, and it has been a problem for successive Administrations. We are trying to move forward: as has been said, the Prime Minister has commented on this area. We need to reach right across the piece: recently I met Christians Against Poverty and discussed its work to help the most vulnerable in society. As with so many issues, this is quite complex. We need to move forward in the competition area, and with meters, and we need to make sure that the schemes for improving energy efficiency—a long-term way of reducing energy bills—are focused on those who really need them.

[Lord Wallace of Tankerness (LD)]

My Lords, the most recent increase in inflation was attributed in part to increased fuel prices. What assessment have the Government made of the additional number of households which will have dropped into fuel poverty because of even further increases as a result of the Brexit-induced decline in sterling? In these circumstances, will the Government consider unfreezing the freeze they put on working-age benefits and tax credits so that the first consequences of Brexit do not fall disproportionately on the poorest and most vulnerable households?

[Baroness Neville-Rolfe]

The noble and learned Lord makes some interesting comments. It will be difficult for me to say yes today. However, I can say that we are continuing the winter fuel payments, which are very important to the 12 million pensioners who benefited from them last winter. We are also taking steps to make sure that this market works well so that affordable fuel is available. We are seeking an energy policy which is secure, clean and affordable for people.

[The Lord Bishop of St Albans]

My Lords, there is a particular problem with fuel poverty in rural areas, particularly remote rural areas. What steps are Her Majesty’s Government taking to promote the use of renewable forms of heating, especially in off-grid areas in the countryside?

[Baroness Neville-Rolfe]

The right reverend Prelate is entirely right to say that there are special problems in rural areas. There has been a succession of schemes promoting renewables, some of which are particularly important in rural areas. I would like to talk to him further about the issues that he has encountered in this area so that we can make sure that, going forward, we focus on those as well.

[Lord Grantchester (Lab)]

My Lords, the UK energy system needs to digitise, just like TV and mobile phones. The building blocks for this revolution are smart meters, which create better opportunities for demand-side response measures to have a significant impact on fuel poverty. Will the Minister update the House on the introduction of the better markets Bill that could provide an effective start, such as a protective tariff for pre-payment customers? Are these measures a priority for the Government?

--- Later in debate ---

[Baroness Neville-Rolfe]

The rollout of smart meters and their proper use is very much a priority for us. Indeed, some of the changes that we will need for digitisation are already contained in the Digital Economy Bill, which is in the other place and will come here in due course.

Contracts for Difference (Allocation) (Amendment) Regulations 2016

Baroness Neville-Rolfe Excerpts

Tuesday 25th October 2016 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

That the draft Regulations laid before the House on 6 September be approved.

[The Minister of State, Department for Business, Energy and Industrial Strategy (Baroness Neville-Rolfe) (Con)]

My Lords, the proposed regulations amend a statutory instrument made under the Energy Act 2013. The instrument being debated today makes a simple amendment to the current regulations in order extend the contracts for difference scheme. Under the current regulations, the Government have the power to run an allocation round and allocate budget for renewables projects commissioning up to 2020. The proposed amendment extends the date for projects commissioning to 2026.

As noble Lords will see, the regulations are short but sweet. They are uncontroversial and are not of themselves trail-blazing. They passed through the Joint Committee on Statutory Instruments and Secondary Legislation Scrutiny Committee without note, and were welcomed yesterday in the other place. Members of the House with a keen eye for matters such as a common commencement date will note that the regulations do not come into force on one of the set dates for common commencement. That is because they fall outside that scheme, as the impact of these specific regulations on business, charities and voluntary bodies is negligible. However, it is right that attention is drawn to the costs to consumers and businesses of the broader operation of the contracts for difference scheme, which is why the draft Explanatory Memorandum includes the impact assessment for the scheme as a whole.

It is timely that we are debating this today, given that the National Audit Office published its report on its inquiry into the levy control framework last week. Clearly, a lot of that report focuses on the past. One of the things that it recognises is that we now have a much more robust process in place. In fact, the NAO says that it is a model we should apply more widely, and we will look into doing so. However, there is always room for further improvement and we are considering the NAO’s recommendations carefully. The Public Accounts Committee will discuss the report with officials from my department at the end of November.

There are two points that I would like to touch on. On the first, investor confidence, Bloomberg New Energy Finance rated the UK fourth globally for new investment in renewables for 2015, and there is a healthy pipeline of projects, suggesting that investors see the UK as a good place to invest. At Budget 2016 we gave investors the longer-term certainty they need by announcing £290 million of annual support for the next contract for difference allocation round for projects commissioning from 2021-22 onwards. The instrument being debated today enables us to deliver on that and enables future allocation rounds to take place. This demonstrates our continued commitment to contracts for difference and the renewables sector.

On value for money, the early investment contracts examined in previous NAO reports proved to be more expensive than the projects which came along later as part of a competitive process. Here we are focusing on contracts for difference for renewables which drive competitive tension, resulting in a reduced price and better value for money for household bill payers. They also give eligible generators increased price certainty through a long-term contract. Investment should therefore come forward at a lower cost of capital and at a lower cost to consumers.

The contracts for difference scheme is designed to incentivise the significant investment required in our electricity infrastructure in order to keep our energy supply secure, keep costs affordable for consumers and help meet our climate change targets, playing our part in working towards the 2050 targets on climate change agreed in Paris and reinforced at the G20.

We plan to run the next allocation round soon. As noble Lords will be aware, the first CfD allocation round was held in October 2014, leading to contracts being signed with 25 large-scale renewable generation projects, at significantly lower cost than those projects would have cost under the renewables obligation scheme—a total of £105 million less.

I am glad to say that, in June 2016, Charity Farm solar park in Shropshire was connected to the grid, becoming the first project under contracts for difference to begin generating power. The 12 megawatt project will provide enough power for more than 4,000 homes, and a further 360 megawatts of capacity is on track to commission by spring 2017 from three other projects.

I commend these important draft regulations to the House.

--- Later in debate ---

This order should begin to lay out the Government’s intentions towards incentivising projects that are vital to deliver a low-carbon future. Investors need the certainty of stability in government policies for long periods ahead to plan and deliver that. I support approval of the order tonight in the expectation that the noble Baroness and her department will be able to—and indeed must—provide the clarity needed for a successful energy transition.

[Baroness Neville-Rolfe]

I thank the noble Lord for his helpful remarks and for the welcome he has given the order this evening. As I said earlier, the regulations that the Government seek to amend through this instrument affect the contracts for difference scheme designed to incentivise the significant investment required in our electricity infrastructure to keep our energy supply secure and the costs affordable for consumers, and to help meet our climate change targets. The instrument being debated today enables us to continue to deliver on that by allowing future allocation rounds in order to deliver new renewable generation capacity into the 2020s and to give confidence to investors for the future, which the noble Lord rightly emphasised.

The noble Lord was kind enough to mention his concerns about the dates in the Explanatory Memorandum. In particular, he asked why there is an apparent gap—from 2020 to 2021—in paragraph 7.2. The levy control framework presently runs until 2021. He is right to note that there are different periods, and that is in fact intentional. The regulations relate to the legal power to open up delivery years. We have already ensured investor confidence by announcing at Budget 2016 £730 million of support for projects commissioning —that is, delivering—between 2021 and 2026. We have made a conscious decision not to have a CfD round for less-established technology projects that start to generate electricity before 31 March 2021 because of the potential overspend in the current LCF period, which runs until March 2021. We are of course committed to delivering our decarbonisation objectives but not at any cost. Therefore, we are not planning to offer more CfDs for deployment within the current LCF period.

Paragraph 10.2 of the Explanatory Memorandum covers the administrative costs of running the scheme, not the subsidy being provided to developers through CfD auctions.

Turning to the levy control framework, we are within the headroom permitted under the LCF and, as the noble Lord knows, we have already taken action to reduce spend by around £520 million up to 2020. The levy control framework covers the renewables obligation and the feed-in tariff, as well as CfDs. Our focus on supporting new renewables is through the contracts for difference scheme using competitive tendering, as I said in my introduction, to drive down prices and therefore the costs to consumers. The Treasury announcement focused on that CfD scheme, which is giving investors the confidence they need going forward. It did not mention clawback. We have not taken a decision on the future of the levy control framework beyond 2021. The National Audit Office has recommended the extension of that framework beyond 2020. In response to the noble Lord’s question, we are considering that and the NAO’s other recommendations, and we will respond in due course.

Finally, the noble Lord mentioned the requirement to report after five years. There is a duty to report after five years on a wide range of matters, including CfDs, and I will certainly make sure that I personally look at that in the light of the points that he has raised this evening.

This is a non-controversial and important proposal. The time is late and I commend the regulations to the House.

Motion agreed.

Sharing Economy

Baroness Neville-Rolfe Excerpts

Monday 17th October 2016 Lords Chamber

[Lord Holmes of Richmond]

To ask Her Majesty’s Government what action they are taking to ensure that the United Kingdom becomes a global centre for innovation and growth in the sharing economy.

[The Minister of State, Department for Business, Energy and Industrial Strategy (Baroness Neville-Rolfe) (Con)]

The Government commissioned an independent review on how to unblock the value of the sharing economy. Debbie Wosskow reported in 2014 and we have implemented many of her recommendations. The Government will consider whether further steps can be taken to support innovation in this area in their industrial strategy.

[Lord Holmes of Richmond (Con)]

My Lords, growth in key areas of the sharing economy, not least transport and housing, is to rise from 5% in 2014 to over 50% in 2025. Could my noble friend write to all relevant departments to ask what plans they have to make sure that we capture all the benefits of the sharing economy? In addition, how are things going with the two proposed hubs in this area which were announced in the 2015 Budget?

[Baroness Neville-Rolfe]

Part of the process of developing the industrial strategy is of course to bring in information from other departments on how major changes in the economy are affecting them. One of the things that we ensure when consulting business is that we always include the sharing economy element in those discussions. I will write to my noble friend about the hubs.

[Lord Clark of Windermere (Lab)]

My Lords, it is 60 years ago today that Britain became a world pioneer when Her Majesty the Queen opened the nuclear power station at Calder Hall. Nuclear power has plugged our energy gap for the past 60 years. When will the Government try to have some extra innovation and look at wave power so that we can plug the gap in the energy demands of the future?

[Baroness Neville-Rolfe]

As the new Energy Minister, I have been struck by the range of opportunities in energy. On nuclear, we have made the decision to go ahead with Hinkley and a potential whole new generation of nuclear power stations. We are looking at all these other areas and we have innovation expenditure. We will be sharing our thoughts further in due course—for example, in the context of the contract for difference decisions that are due in the coming weeks.

[Baroness Burt of Solihull (LD)]

In her Answer, the Minister claimed that the Government are protecting our global position as a world leader in innovation and growth. Could she then explain why, in the race for Brexit, they are shutting the door on the very global talent that we need—particularly for tech start-ups—to come to this country from Europe and the rest of the world?

[Baroness Neville-Rolfe]

The noble Baroness is right that skills—especially digital skills—are important to our economy. We are extremely aware of that, including in the context of the Brexit discussions. I am sure she knows about all that we have done to ensure that we can get diverse digital skills from abroad, where that is appropriate, and to develop digital skills here in the UK, both through lifelong learning education and, more importantly, in schools, with computing now being part of the curriculum from five to 16.

[Lord Stevenson of Balmacara (Lab)]

My Lords, in the last Administration the noble Baroness was a Minister not just in BIS but in DCMS—a post that she has now had to give up, although I in no sense cast any aspersions on her very successful successor. Since that Administration, the creative economy has been moved back to DCMS and higher education has been carved out and sent back to DfE. Given that she talked about the industrial strategy that is coming, and that we are all looking forward to, what arrangements are going to be made to ensure that the work on that will not be restricted to BIS?

[Baroness Neville-Rolfe]

I can give the noble Lord that assurance. Obviously an industrial strategy has to be wide-ranging and, as I have said, key things such as the development of the digital economy and skills have to be at the heart of that. There is a Cabinet committee under the Prime Minister looking at the development of the industrial strategy, and that is bringing together the strands of work across Whitehall. There have been departmental changes; we have gathered energy—a major and important area—and I am trying to get to grips with its important challenges.

[Lord Ashdown of Norton-sub-Hamdon (LD)]

My Lords, on the subject of the industrial strategy, I draw noble Lords’ attention to the situation in Yeovil, which is the last integrated site capable of designing, manufacturing and assembling helicopters. As a result of the Government’s short-sighted decision to grant the order for the Apache to the United States without any tendering whatever, the Italian owner, Leonardo, has now concluded that we do not seem interested in producing helicopters on a stand-alone site and is now shipping all the work on assembly back to Italy. What is needed now is the Government’s clear statement that they wish to see helicopters made in Britain, of British manufacture, for our Armed Forces, as they have been for nearly 50 years now. Does the Minister realise what will happen if that should vanish or be in doubt as the Government’s intention?

[Baroness Neville-Rolfe]

Helicopters are some way from the sharing economy, which is the subject of this Question. We are looking at the procurement rules on the sharing economy and in other areas to make sure that we get the best deal for Britain. We will be looking at all the issues regarding the industrial strategy. Coming from the West Country, I look forward to talking to the noble Lord further on the subject of Yeovil.

[Lord Geddes (Con)]

My Lords, reverting to the subject of wave power, I opened my account in your Lordships’ House 40 years ago on the subject of marine power. Will my noble friend concentrate rather more on tidal power than wave power, because I do not think any manufacturer has yet produced a machine that could withstand the forces of waves—but tidal power is another story altogether?

[Baroness Neville-Rolfe]

My noble friend is right: some innovative demonstration work is going on in Scotland and we are awaiting a report from Mr Hendry on a possible tidal lagoon in Swansea—and elsewhere.

[Lord Haskel (Lab)]

As the Minister knows, much of the investment and work in the sharing economy is intangible. What progress are the Government making on measuring that work, as recommended in the Bean report?

--- Later in debate ---

[Baroness Neville-Rolfe]

I think that the noble Lord is talking about the work by the ONS on a subject we have talked about before: how you measure the sharing economy. He will be glad to know that on 12 October the ONS produced a progress report on how we advance measurement, how we sample and how we collect data. It is difficult because a lot of sharing economy transactions are non-financial and do not always involve business. The answer is that the good questions that he has previously asked have now been reflected in the work of the ONS. I look forward to seeing the results—I hope in higher growth figures for the UK economy.

Hinkley Point C

Baroness Neville-Rolfe Excerpts

Thursday 15th September 2016 Lords Chamber

[The Minister of State, Department for Business, Energy and Industrial Strategy (Baroness Neville-Rolfe) (Con)]

My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy. The Statement is as follows:

“As the House knows, on 28 July, following a decision by the board of EDF to approve the final investment decision of the £18 billion project to build a new nuclear power plant in Somerset, I announced that the Government would carefully consider all elements of the project before announcing whether the Government would enter into a contract with EDF, and that we would make a decision by the early autumn. I can announce today that the Government have decided to proceed with the first new nuclear power station for a generation. However, this decision is made with two important changes.

On the Hinkley project itself, the Government will now be able to prevent the sale of EDF’s controlling stake prior to the completion of construction. This agreement will be confirmed in an exchange of letters between the Government and EDF. Existing legal powers, and the new legal framework, will mean that the Government are able to intervene in the sale of EDF’s stake once Hinkley is operational. Furthermore, and even more importantly, we will reform the wider legal framework for future foreign investment in British critical infrastructure.

These reforms will have three elements. First, after Hinkley, the British Government will take a special share in all future nuclear new-build projects. This will ensure that significant stakes cannot be sold without the Government’s knowledge or consent. Secondly, the Office for Nuclear Regulation will be directed to require notice from developers or operators of nuclear sites of any change of ownership or part-ownership. This will allow the Government to advise or direct the ONR to take action to protect national security as a result of a change in ownership. Thirdly, the Government will significantly reform their approach to the ownership and control of critical infrastructure to ensure that the full implications of foreign ownership are scrutinised for the purposes of national security. This will include a review of the public interest regime in the Enterprise Act 2002 and the introduction of a cross-cutting national security requirement for continuing government approval of the ownership and control of critical infrastructure.

These changes will bring Britain’s policy framework for the ownership and control of critical infrastructure into line with other major economies. This will allow the UK Government to take a fair and consistent approach to the national security implications of all significant investments in critical infrastructure, including nuclear energy, in the future. The changes mean that, while the UK will remain one of the most open economies in the world, the public can be confident that foreign direct investment works in the country’s best interests.

The £18 billion investment in Britain provides an upgrade in our supply of clean energy. When it begins producing electricity in the middle of the next decade, it will provide 7% of the UK’s electricity needs, giving secure energy to 6 million homes for 60 years. Furthermore, it must be stressed that the contract negotiated places all the construction risk on the investors alone. Consumers will not pay a penny unless and until the plant generates electricity.

The proposed strike price of £92.50, reducing to £89.50 if Sizewell C is built, contains important elements of insurance against any cost overrun in construction and future high gas prices, which have historically been volatile. It compares broadly with the costs of other clean energy, whether offshore wind with additional costs of intermittency, or gas with carbon capture and storage.

Hinkley unleashes a long-overdue new wave of investment in nuclear engineering in the UK, creating 26,000 jobs and apprenticeships and providing a huge boost to the economy, not only in the south-west but in every part of the country through the supply chain of firms, big and small, that will benefit from the investment. EDF has also confirmed that UK businesses are set to secure 64% of the value of the £18 billion investment being made—the biggest single capital project in the UK today. But as it is the first of a wave of new nuclear plants, we expect the experience of rebooting the nuclear industry to mean that the cost should reduce for future new nuclear power stations, of which another five are proposed.

In any consideration of nuclear power, safety will always be the number one consideration. The construction of Hinkley Point C will be under the close scrutiny of the Office for Nuclear Regulation, which is independent of the industry and of Ministers. The Office for Nuclear Regulation has the power necessary to halt construction or require amendments to any part of the plant if at any point it is not completely satisfied with the safety of any part of the reactor and its associated construction. Unlike in the past, the long-term decommissioning costs for the plant will be provided for explicitly as part of the funded decommissioning programme, at a level that has been assessed independently as prudent and conservative.

Any investment that provides significant electricity supplies for the next two generations of British people and businesses requires serious consideration. It was right that the new Government should have taken the time to consider all components of the project. Having reviewed the project, the Government are satisfied that the improved deal and the other changes announced today will, for the first time, remedy the weaknesses of the regime for foreign ownership of critical infrastructure.

It is important to get the right balance between welcoming foreign investment and ensuring that it serves the national interest. That is exactly what these changes will achieve. The investment will secure 7% of the UK’s electricity needs for 60 years, helping replace existing nuclear capacity, which is due to be decommissioned in the decade ahead. The electricity generated will be reliable and low carbon, and so completely compatible with our climate change obligations.

Hinkley Point C will inaugurate a new era of UK nuclear power, with UK-based businesses benefiting from almost two-thirds of the £18 billion value of the project, and 26,000 jobs and apprenticeships will be created. All of these developments are good for Britain. It is now right that we support this major upgrade, the first of many, to the infrastructure on which our future depends”.

--- Later in debate ---

[Lord Teverson (LD)]

My Lords, I, too, thank the Minister, but I have a different take on the pricing side. Some time ago, we had the resignation of the finance director of EDF. I have looked at the share price since the announcement was made, and it is going down. Does the Minister expect EDF to be solvent by the time this project is due to be delivered? That is a real risk, given the other problems at Flamanville and—I am not brave enough to pronounce the town in Finland—the Finnish nuclear station. Will EDF survive this? What are the contingency plans?

This decision was originally made some three years ago, and we have had this soap opera ever since, but time and technology have moved on. Given the assessments on smart grids, energy storage and the Government’s brave and correct interconnector plan, is this nuclear power station—and fleet of nuclear power stations—necessary? I for one am not against nuclear technology as such, but is this the right technology to go forward? The previous Minister in the House of Commons, the Secretary of State for DECC, Amber Rudd, was very keen on small nuclear reactors. I would be interested to know whether the Minister is still pursuing that area.

I accept and welcome the various measures put in place to protect taxpayers and the public sector against the future costs of decommissioning, but I am concerned about the nuclear waste issue. I cannot see that there has been any movement by the Government in terms of their nuclear waste strategy or where we are going to put even old nuclear waste, let alone new nuclear waste. How can we be sure that the funding that will be put in place for decommissioning will reflect such an undefined nuclear waste strategy for the future?

Now that we have got through this period of constipation on energy decision-making, when can we expect a decision on the Swansea tidal lagoon?

I want to take up another major element in the Statement that is really interesting and that I have debated with the Minister on previous occasions. The Government are saying that they will take a golden share in future nuclear and other critical energy projects. The Minister will not be surprised if I ask her whether the Government have consulted with the Office for National Statistics about this strategy. She is quite right to be sensitive about the issue and wanting to make sure that, in having even slight government control over a company or a project, it does not become part of the public sector and go on to the public sector balance sheet. However, this seems quite incautious in comparison with previous government policy, and it is quite likely that at some point this project, which is worth £18 billion, will be put on to the public balance sheet. If that is the case, surely we should have put our own public money into it, at a more or less zero long-term interest rate, rather than bother with Chinese and French investment because it is going to be on the public sector balance sheet anyway.

I shall leave my questions at that. Again, I thank the Minister for repeating the Statement.

[Baroness Neville-Rolfe]

I thank the noble Lord, Lord Grantchester, for his support. I agree that we do not want any further delays, although I take comfort from the fact that the costs are borne by the developer. Under the contract for difference, if the plant is not generating by 2029, the period in which the developer has increased price security will decrease and the Government have an option to cancel if it is not generating in good time.

I shall try to answer some of the noble Lord’s testing questions on the legalities. He asked about the legal basis of letters. Clearly, letters are not legally binding in the same way as the contract for difference, but they provide a clear political reassurance that we trust EDF will stick to. We have a mutual interest in this important project.

Perhaps I might go through the protections and thus respond both to the questions of the noble Lord, Lord Grantchester, and to those of the noble Lord, Lord Teverson. We will have a special share which would allow the special shareholder to intervene in any transaction where there were national grounds for doing so. That will not apply to Hinkley, which is being dealt with by an exchange of letters, but it will apply to future reactors. We have the Office for Nuclear Regulation which is a world-class, independent regulator that has a range of existing powers to intervene in developments. Under our proposals, we will require notice from developers or operators of any change of ownership or part-ownership. Most significantly, we will make proposals to establish a legal regime that allows us to consider the national security implications of all significant investment into our critical infrastructure, including nuclear. That will be the subject of widespread consultation on the details and will require legislation, so there will be opportunities to consider the proposals as we go forward.

For the Hinkley arrangement, we have tried to reach an agreement with EDF which—subject to its agreement to the project going forward—puts us in an improved position compared with where we were in July. That is what the Government have now decided, in part also because of the benefits in terms of security and reliability of supply. With a nuclear baseload—this will provide 7% of the UK’s energy needs—the advantage is that the energy continues to be produced whether the sun is shining or the wind is blowing.

As has been said, 26,000 jobs is a lot. The £30 billion figure that was mentioned is an NAO construction which used a different discount rate of 0.7%, which is much lower than our own 3.5% and is equivalent to the top end of our projections, which of course I covered in the Statement.

The noble Lord, Lord Grantchester, compared this proposal to the French situation. Perhaps he would like to know that the French figure is a regulated price for electricity generated by all the power stations; there is a mix of both new and old in the French nuclear fleet, so it is not just Flamanville. The British price is a CFD for a specific new-build project, and furthermore it reflects the fact that the construction risks in Hinkley are borne by the developer alone and not the British consumer. I very much agree that the ONR is well respected and we are lucky to have that body.

The noble Lord also asked why the Statement is being made today. I thought that noble Lords would welcome the fact that, having said that we would make an announcement in the early autumn and then that we would do so in September, we have been able to get to the line today, so that it is possible for us to have a short debate on this ahead of the Conference Recess.

The noble Lord, Lord Teverson, in his inimitable way, made a lot of interesting points. I can confirm that we are looking at the small nuclear reactors he mentioned. He will recall that we are looking at an innovation competition in that area, with funding having been earmarked.

The noble Lord was right to say that the decommissioning of nuclear waste is an important issue, but he is wrong in that we do have a good system in this country. One of my earliest visits was to Sellafield, and I was impressed by the progress that is being made there. We are making a large public commitment—£2 billion at Sellafield alone—and of course we have built decommissioning into Hinkley, and we will do the same with the new nuclear fleet so that we do not get landed with a large legacy of decommissioning for which the public sector has to pick up the tab. However, a lot of good work is going on at Sellafield on nuclear waste from 30, 40 and 50 years ago, including defence waste as well as civil waste.

[Lord Lawson of Blaby (Con)]

My Lords, my noble friend—for whom I have the highest regard, as she knows—will also know that I am in no way anti-nuclear. The Statement refers to the fact that this is the first new nuclear power station for a generation. The last one was Sizewell B, for which I authorised the public inquiry when I was the Secretary of State for Energy in 1982. Is she not also aware that every single independent energy expert of whatever stripe has said that this is a thoroughly lousy deal, for reasons which will not be affected in the slightest by the changes she announced in the Statement?

It is charming, in this post-Brexit era, to throw out a lifeline to EDF, which as the noble Lord, Lord Teverson, pointed out, is on the verge of bankruptcy and has never built a power station of this kind. As he rightly pointed out, the company has two power stations under construction—one in France and the other in Finland—and both of them are hopelessly behind schedule and in deep, deep trouble. Can my noble friend give an assurance that, if this power station appears to be getting behind schedule and suffering the same sort of problems that are affecting Flamanville and the project in Finland, the Government will have no hesitation in ending this contract, whatever penalties there may be? I ask that because it is a lousy contract, and the sooner it is ended, the better.

[Baroness Neville-Rolfe]

While I agree with my noble friend about Sizewell B, which I had the pleasure of visiting during its construction phase all those years ago, I cannot agree with him on the general approach. For reasons that I have already explained, nuclear is a central part of our future and I have explained what would happen if the Hinkley power station is badly delayed. I do not believe it will be. We have learned from Flamanville and from the troubles in Finland. Our own chief scientist has given us reassurance on that. I have visited CGN myself. It is producing a nuclear power station in Taishan on similar technology, which is nearly ready for operation. We cannot afford to wait, because the existing fleet is coming offline. By 2030, except for Sizewell B—my noble friend’s legacy—we will not have any nuclear power stations, unless we invest now in a new nuclear fleet. This proposal is on the table and we have decided, having looked at all aspects, that it is right to proceed.

[Lord Berkeley (Lab)]

My Lords, I am not against nuclear at all, but the Minister has tried to say that this technology is proven and works, yet nothing I have heard in the Statement or in other noble Lords’ comments this afternoon indicates that that is the case. The Finland scheme is years out of date and is not finished. The last thing I read about the one at Cape Flamanville was that the French nuclear regulator had said it could not generate more than 60% of its planned output because the basic design of the welding inside the core, surrounded by concrete, was faulty. It looks as if that means the whole thing has to be broken apart and started again, if that is possible.

It is fine saying that we have learned from their mistakes, but how many more mistakes have yet to be uncovered? It seems to me pretty irresponsible for the Government to commit maybe in the end £16 billion of taxpayers’ money to a technology that is not proven when there are so many other technologies for generating electricity that are. I cannot think of any precedent—maybe the Minister can give me an example—of such profligacy with government funding apart from, of course, in the MoD. I leave them to one side.

[Baroness Neville-Rolfe]

I cannot agree with the noble Lord. In business you learn from mistakes and—I remember this well—from other people’s mistakes. As I have explained, EDF has learned from Flamanville and Finland, and CGN is already producing a reactor of this kind. The consortium is taking the construction risk. That is one reason why we believe this is a good approach.

[Lord Hennessy of Nympsfield (CB)]

My Lords, there is a curse on our country when we talk about civil nuclear power. I am old enough to have read the Eagle comic in 1954 and cut out a picture of Calder Hall, which was to provide the first civil electricity in the world. Indeed it did: we had a world lead. The story is tragic ever since. I hope we will not make a mistake of that magnitude this time.

I congratulate the Government on boosting the national security element in future civil nuclear procurement but, alluding to the contribution of the noble Lord, Lord Teverson, I ask the Minister that the submissions her department receives on the small modular reactors be placed in the Library for the illumination of your Lordships. Before we go in for these huge concrete and steel water reactors, maybe the future lies in smaller, safer and cheaper.

[Baroness Neville-Rolfe]

I will certainly look at what we can do about transparency relating to small nuclear reactors. It is something that, as a new energy team, we are in the process of looking at, as I have already said. The noble Lord, as always, makes a good point about the need for testing this idea.

I did not answer the point from the noble Lord, Lord Teverson, on tidal lagoons. We will take a decision on the future role of tidal lagoons in the UK’s energy mix following the conclusions of an independent review being undertaken by Mr Hendry, the former MP.

[Lord Howell of Guildford (Con)]

Would my noble friend accept that this was an incredibly difficult decision and that there were huge risks whichever way the decision might have gone? Would she agree that the main risks of going ahead—although, as I said, there were huge risks in not going ahead—are not so much the Chinese security issue, which has received a lot of press, as the rocky financial state of EDF, which the noble Lord, Lord Teverson, rightly raised, and of its supplier, Areva; the untried design, which still has not been proven and still is not working; the possibility of further cost inflation in the construction; and the enormous delay? Having visited Flamanville, I have seen how extensive that is: it is six years behind time and three times over budget.

Of course, as the noble Lord, Lord Teverson, again said, there are the new technology possibilities coming along by the time this produces electric current, as well as the possibility of falling renewable costs and the present possibility of very low oil and gas prices for years ahead. When I launched a programme in 1979 of nine new reactors—only one, Sizewell B, was ever built —it was the weak oil price that completely undermined the economics of the situation. That is the problem we face again today. Would my noble friend accept that it might have been wiser, faced with this Hobson’s choice, to at least have gone at it more sequentially and built just one reactor the same size as Flamanville to start with, and then see how matters developed from there, working with the Chinese and the French, not involving huge compensation and delay? One at a time might just have been a wiser course.

Finally, can we have a careful examination of how this decision ever came about and how my noble friends in the Government were confronted with it, so we are not caught out a second time?

[Baroness Neville-Rolfe]

I very much agree with my noble friend that we should learn from our experiences. That is something I always try to ensure we do in any area I am involved with. That obviously includes this. The honest truth is that this has been a difficult decision. That is one of the reasons why it was delayed, although we ended up with a decision in September, which was the most recent scheduled date.

My noble friend asks why there will be two reactors instead of one. There are two answers there. There are economies of scale. We have the skills and capability. The second point is that the consortium, led by EDF, came forward with a proposal for two reactors allowing for all of that and bringing many benefits that were weighed against the difficulties. We have made some changes, particularly relating to security protections, but we believe this project represents value for money for 7% of supplies of electricity over 60 years, of a sort that is a secure and reliable baseload, as they call it in the industry.

[Lord King of Bridgwater (Con)]

My Lords, can I cheer up my noble friend by welcoming this Statement on behalf of the people of Bridgwater, who have helped to ensure that Hinkley A and B have both provided loyal and continuous service over very many years to the nation? If there was to be a new nuclear power station, Hinkley is precisely the right place to put it. It is also a bit of a relief to everybody. My noble friend may know, and other noble Lords who have seen the pictures on television will know, that half the groundworks have already been done in anticipation of what they thought would be a favourable decision. It is a great relief that this has been decided.

I take seriously the points made by the two former Secretaries of State for Energy and by others. There are concerns about the experiences of the two power stations under construction. I hope that the advantage of coming third is that those lessons have all been learned. I hope the Government are fully satisfied in that respect. I do not think it is sufficient to say, “Well, it won’t be our cost if they’re not”, because the problems that would flow from it would be very substantial.

Something that is also very important indeed and is quite different from Hinkley A and B is that we never had cyberwarfare in the times of Hinkley A and B. That will become an ever-growing threat to critical national infrastructure. The need to ensure we protect the critical national infrastructure is enormously important.

As it is, I say to my noble friend that what is now happening is the relaunch of British involvement in the nuclear industry. I welcome the fact there is to be a nuclear college in Bridgwater for the training of nuclear engineers and apprenticeships. Now at last we will see a real chance to rebuild the position we used to have in the nuclear world and which, sadly, we have seriously lost.

I have only one other criticism. When we go back into the nuclear business, one comment in the Statement was that it will put out electricity for 60 years. That will certainly be a great improvement on the length of time that Hinkley Point A and Hinkley Point B managed. Is that a realistic assessment?

[Baroness Neville-Rolfe]

I am grateful to my noble friend for his support. I completely agree: this is a good deal for Britain and especially for our nuclear industry, which used to be world-leading and could be again. It is also excellent news for the south-west. I talked this morning to the local MPs and the local council. They are very pleased. They had the sword of Damocles of a loss of a very important project to that area hanging over them and are delighted by the news today.

I agree with my noble friend about the college. It is extremely good that, with the help of EDF, we were able to set up a facility for training in the nuclear industry. That can be of merit right across the UK.

Cyberwarfare is a new reality. It was obviously one thing we took into account in looking at all the different components of this deal. We strengthened the security protections and of course we have a civil nuclear police, who I am looking forward to meeting and talking to shortly in my capacity as the new Energy Minister.

[Lord Crickhowell (Con)]

My Lords, I am strongly in favour of the development of nuclear power but the Statement says that the changes made will allow the UK Government to take a fair and consistent approach to the national security implications of all significant investments in critical infrastructure, including nuclear energy, in the future. How far have the critical issues been addressed as far as this project is concerned? My noble friend gave assurances about the future; we are interested about whether the Government are absolutely satisfied about the security implications here.

On the point raised by so many about the construction risks, it may be true that consumers will not pay a penny unless and until the plant generates electricity but, if the plant is not constructed, the losses incurred because we do not have a working nuclear plant will be just as important as the financial ones.

[Baroness Neville-Rolfe]

As I explained in the Statement, on the Hinkley project we will, following the changes to the deal, have a veto over change of ownership. The project will also be subject to what everybody agrees is the world-class oversight of the Office for Nuclear Regulation, which can intervene in development, construction and operations, and amend site licences, among other things. That is a very important control. Then we will consult on proposals to establish a legal regime that allows us to consider national security implications in all significant investments in critical infrastructure. Once that becomes law it will apply to major infrastructure in the UK.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend not think that there is a certain irony that after the nation voted to take more control of its own affairs we are asking two foreign Governments to take control of 7% of our future energy requirements? In particular, what actual transfer of risk is happening here, which presumably justifies the very high price that consumers will have to pay for this energy? Is there really a transfer of risk given that this technology is untried? No one has been able to make it work. What is plan B if it turns out that this thing does not work, to maintain energy security for our country? Finally, I very much welcome the emphasis placed on the importance of security and so on, but does the Statement not rather reek of closing the stable door after the horse has bolted?

[Baroness Neville-Rolfe]

As I explained, the risk of construction falls on the consortium. We have a deal at a pre-agreed strike price which will produce a supply of electricity over an estimated 60 years. Everyone in this House this afternoon seems to take too gloomy a view of the prospects of building this facility. We looked at this very carefully over a number of months. Our Chief Scientific Adviser gave us reassurances that learnings have been taken from other nuclear facilities. However, the consumer does not pay a penny until Hinkley generates electricity. The risks are borne by the developer.

National Minimum Wage (Amendment) (No. 2) Regulations 2016

Baroness Neville-Rolfe Excerpts

Thursday 8th September 2016 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

That the draft Regulations laid before the House on 4 July be approved.

[The Minister of State, Department for Business, Energy and Industrial Strategy (Baroness Neville-Rolfe) (Con)]

My Lords, the purpose of these regulations is to increase the hourly rate of the national minimum wage and increase the maximum amount for living accommodation that counts towards minimum wage pay to ensure the provision of higher-quality accommodation by employers, in line with the recommendations from the Low Pay Commission.

The national minimum wage is designed to protect low-income workers and provides an incentive to work by ensuring that all workers receive at least the hourly minimum rates set. It helps to deter unscrupulous employers from competing on very low pay.

Following advice from the Low Pay Commission, the Government are uprating the minimum wage from 1 October, so that the main rate for 21 to 24 year-olds will be £6.95 per hour. This represents an increase of 3.7%, despite CPI inflation currently being 0.6%.

Younger people aged between 18 and 20 years-old will be entitled to a minimum of £5.55, a 4.7% increase on the rate currently in force, and those between 16 and 17 years old will have a minimum wage rate of £4 an hour. For apprentices aged under 19, or those aged 19 and over in the first year of their apprenticeship, we are increasing the minimum wage by 3% to £3.40. This follows the 57% increase to the apprenticeship minimum wage last year, the largest increase to date.

For 21 to 24 year-olds, this is the largest increase in the main rate of the national minimum wage since 2008. It will mean that someone working full time on the national minimum wage will see their earnings increase by around £450 per year. The new main rate of the national minimum wage is expected to be at its highest level ever when accounting for the general increases in prices, surpassing its pre-recession peak. In all, we estimate that around 500,000 workers are expected to benefit from the national minimum wage increases being debated today.

The accommodation offset was introduced in 1999. It limits the amount that employers can recoup through accommodation charges. This year we followed advice from the Low Pay Commission and increased it significantly by 12% to £6 a day from October 2016. This is intended to ensure the provision of higher-quality accommodation by employers.

Since its introduction in 1999, the national minimum wage has been a success in supporting the lowest-paid UK workers. Over that period it has increased faster than average wages and inflation without an adverse effect on employment. It has continued to rise each year during the worst recession in living memory and the new main rate is expected to be at its highest-ever real value.

These increases to minimum wage rates are of course in addition to the national living wage for those aged 25 and over, which we implemented in April. It is the Government’s ambition for the national living wage to reach 60% of median earnings by 2020. In addition, the national minimum wage cycle will be aligned with the national living wage cycle from April 2017. This will reduce the burden on businesses that have to update their workforce’s pay more than once a year and will mean that the statutory pay floor for all ages is uprated simultaneously.

I note the findings of the recent research conducted by the Federation of Small Businesses and understand that some concerns have been raised about the impact on businesses’ profitability. Let me address this point specifically. The Government are committed to ensuring that the new rates work for businesses of all sizes and we continue to work closely with the LPC to consider the wider economic and business impact when recommending and setting national minimum wage rates. We have already introduced measures to mitigate the cost to business of our ambition to move to a higher-wage economy, including increasing the employment allowance from £2,000 to £3,000 this year. This measure will benefit up to 500,000 employers and take 90,000 employers out of NIC payments altogether.

For smaller businesses we have extended the doubling of the small business rate relief for a further year until April 2017. Around 600,000 small businesses benefit from the small business rate relief and about 405,000 businesses will pay no rates at all as a result of the extension.

The most recent employment statistics show that the employment rate is at a record high, with almost 32 million people in work and the unemployment rate at its lowest level in more than 10 years, with fewer than 1.7 million people unemployed and wages up 2.4% on a year earlier, while inflation has, of course, remained low. While the referendum result may have introduced uncertainty over forecasts and assessments made before June, we should remember that the UK labour market was remarkably resilient during the worst recession in living memory.

The new rates are recommended by the independent Low Pay Commission, which consulted extensively with stakeholders representing both business and workers, as well as conducting comprehensive research and analysis. Crucially, the Low Pay Commission has proven that a rising minimum wage can go hand in hand with rising employment. The carefully considered independent advice from the Low Pay Commission is central to maintaining this balance. In particular, its remit is clear that, when considering the pace of increased minimum wage rates, the state of the economy should be taken into account. The LPC has stated that the labour market has continued to perform well, with robust employment growth in low-paying sectors.

[Lord Fox (LD)]

My Lords, the Minister is right to suggest that we have high or record high employment levels. We are also at record levels of zero-hour contracts. The minimum wage is not actually a wage; it is a minimum hourly rate and people fight to get sufficient hours to get that minimum wage. Can the Minister comment on the way in which the Government will approach the zero-hour part, which is diminishing the minimum wage for many people across the country?

[Baroness Neville-Rolfe]

We have debated zero-hours contracts in this House a number of times. I continue to believe that they have a part to play in the modern flexible market. There were some abuses to those contracts, which we discussed last year, and we have banned the use of exclusivity clauses so that people have the freedom to look for and take other work opportunities and have more control over their work hours and income. However, I believe that a strong minimum wage framework with good enforcement, which I am going to talk about, is the right way forward. The effectiveness of this system—I think that this is true in every regulatory area that I deal with—relies on proper enforcement.

We are clear that anyone entitled to be paid the national minimum wage or the national living wage should receive it, whether they are on a zero-hours contract or not. The enforcement of a minimum wage is therefore essential to its success and we are committed to cracking down on employers who break the minimum wage law. That is across all sectors of the economy. That is why we have increased the enforcement budget for HMRC, which enforces the minimum wage on behalf of our department. That is £20 million in 2016-17, up from £13 million last year. That bolsters its resources and ensures that it can respond to every worker complaint. We will continue to take a tough approach to employers who break minimum wage law. As of April this year, the Government have also doubled the national minimum wage penalty paid by employers, so it is up from 100% to 200% of the arrears owed to the worker, up to a maximum of £20,000 per worker—penalties that really hit those who do not comply with the law. Finally, HMRC will continue to refer the most serious cases of wilful non-compliance for criminal investigation.

The Government believe that the rates set out in the regulations before the House today will increase the wages of the lowest paid while being affordable for business. I commend the regulations to the House.

[Lord Stevenson of Balmacara (Lab)]

My Lords, first, I express my apologies to the House for not being present at the start of the discussions. I looked at the Annunciator and thought that I had about 10 minutes to spare, because the last speaker in the debate had only just started, but apparently he cut his speech very short. I was entranced by a debate going on in the Moses Room on access arrangements for going into secondary education, which was so good that I have completely lost my place. I am sorry that I was late.

However, I have heard the Minister speak on many of these issues before. Indeed, we debated them as recently as the end of last term. I am fairly aware of the issues and I will certainly read what she said carefully, in case I have missed anything. I have no objections at all in principle to the proposal that is being brought forward. For all the arguments made by the Minister, this process is now well-entrenched. The increases are very modest, but they are done in accordance with the procedure set out. I have absolutely no doubt that it is appropriate and good that wages will be lifted, which will benefit a large number of people on lower pay. Women in particular will see these benefits in their pay packets.

I have four small points that I want to raise and to which I would be happy to hear the Minister respond, but if there are complications I am happy to receive a letter in due course. The first is a technical one, which was that the paper supplied by the Printed Paper Office includes an impact assessment. It is extremely well-written and I compliment officials on that. I enjoyed reading it and I felt that it dealt with all the issues well. However, it said that the RPC opinion was awaiting scrutiny and I have not been sent that. I would be grateful if it could be provided. I am sure that there is no difficulty around it, but it would be nice to have a complete set of papers when we are considering these issues. On technical issues, I again congratulate the Minister on living the life that she promised, which was to bring these things in on the common commencement date of 1 October. She will have expected me to say that.

Secondly, the evidence base for many issues, but particularly for non-compliance and to some extent apprenticeships, depends on a rather oddly named survey called ASHE—a survey of employees completed by employers, which can be used to identify jobs paid below the national minimum wage. Clearly non-compliance is important here. Two points arise from it: is that the best we can do, and does the department have any plans to improve it? A survey of employees completed by employers aimed at establishing whether the national minimum wage is being paid at the correct rate may not be the most appropriate and independent way of checking whether it is happening in practice. Having said that, we note that some 209,000 employees’ jobs were paid less than the national minimum wage in April 2015. That is a significant number and ought to be of some concern, even though the individual amounts are small. It is the methodology that I pick up on. I would be interested to know whether the Minister has plans to improve it, because, as she said, it is important to ensure that the national minimum wage and, as we get to it, the national living wage are paid. If we do not have an adequate means of checking, I do not see how we will do so.

My third small point raises a similar issue. Quite an important part of some people’s pay packets is the accommodation offset rate. Accommodation is the only benefit in kind that can be offset against minimum wage pay. It is only up to the limit. I suspect that it is therefore quite an important element for quite a large number of the people involved, but the trouble is that we do not know how many that is, since apparently no statistics are available that give any details around it. The increase this year is 12%. It is a substantial amount of additional money, which goes up to £6 per week, but because of the uncertainty in knowing how many employees in scope of the national minimum wage offset rate receive it, it is not counted in analysing what the benefits, costs and disbenefits would be of any increase. I do not wish to delay consideration but, in the need to improve the quality of the public administration, surely we could do a bit more to survey and get accurate information. If it does not lie in BEIS, perhaps it lies in DWP—I am sure that the noble Lord, Lord Freud, is taking note of the points that I make, because I am sure it is relevant to what he will say.

Finally, in a week where we have been given a lot of information about the activities of a particular sportswear manufacturing and delivering firm, it seemed a little ironic to read about the enforcement regime and the relatively small number of firms that have been reported on and investigated. Sports Direct—it may as well be named—clearly has a large problem on its plate in what it has been paying, or not paying, its employees. The situation with Sports Direct arose from a private investigation by a newspaper, not from the additional money available to HMRC. Has that taught the department any lessons about how this is to be taken forward? Might it wish to investigate other firms as a result? Its approach seems to be one of responding to complaints. That might miss some of the most obvious cases where not enough action is taking place.

What sort of approach would be better? Is there not a suggestion to be made of a tougher approach to large employers employing large numbers of people on zero-hours contracts, where it is clear that the combination of that arrangement, particularly in companies controlled perhaps by an original owner, might suggest that there will be some difficulty in ensuring that these things happen? Will the Minister confirm that in the case of Sports Direct, since it is fairly clear that there has been failure to comply with the arrangements, the doubled penalties to which we agreed in the then Enterprise Bill and the additional more difficult approach—not in numbers of employees, but in the amount per employee—will be applied in full in this case?

[Baroness Neville-Rolfe]

I am most grateful to the noble Lord for his courteous comments about his lateness—I am sorry to have dragged him away from such an important debate—and for his support for the regulations. The minimum wage came in under the Labour Government and we have had a lot of cross-party support for the system that they set up, including the Low Pay Commission. We agree on that. I am also grateful for his comment about common commencement dates, because we have a joint campaign to ensure that they are respected. It is not always possible, but when they are we should celebrate it. The points that he raised are technical and testing. I will start with the impact assessment. I think that the noble Lord was saying that he had not seen a copy.

[Lord Stevenson of Balmacara]

I am sorry to interrupt. On the front page of the impact assessment, which is attached to the explanatory memorandum—it is what I was given when I asked in the Printed Paper Office—there is usually a note in the top right-hand corner on what the RPC opinion is. That is obviously useful, because it is a traffic-light system as to whether it thinks that the assessment has been properly done. I fully expect it to have been properly done, but its opinion is not recorded there.

[Baroness Neville-Rolfe]

Perhaps the noble Lord remembers that the RPC had an issue with our impact assessment on the October 2015 uprating of the apprentice national minimum wage. It has, however, indicated that it is content with our new approach with respect to the assessment of the impacts of the 2016 upratings. Indeed, the assessment now looks at costs over two years, rather than one year, in response to RPC feedback. I hope that that clarifies the RPC position.

On the non-compliance estimates, we are working to improve them. I note what the noble Lord says about enforcement—he was saying, in a way, that we should look at higher-risk employers, and was talking about size and zero-hours contracts. I will take a look at the noble Lord’s comments and write to him about that whole area. I think that my spirit is the same as his.

With regard to Sports Direct, that is clearly a concerning matter. I have to be careful about commenting on specific employers, as noble Lords know. The double penalties have come in and, in relation to offences since the adoption of the regulation, they would of course apply. We are very much committed to ensuring that workers receive the money that they are owed and that unscrupulous employers face tough penalties. I like the combination of civil penalties, which have led to quite large amounts of income being recovered for people, and the occasional criminal penalty, where there is an egregious case and we can take totemic action. That is the way that we try to do things.

Motion agreed.