Employment: Remuneration

Baroness Neville-Rolfe Excerpts

Thursday 8th September 2016 Lords Chamber

[The Lord Bishop of St Albans]

To ask Her Majesty’s Government how they intend to address the gap between the remuneration of senior executives and their employees.

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

We intend to publish a consultation document later this year which will set out a range of options for improving corporate governance, including measures to strengthen the way executive pay is set and reported. This follows on, and is in line with, the Prime Minister’s statements on this important subject.

[The Lord Bishop of St Albans]

I thank the Minister for her reply. I wonder whether she has read the report published last week by the High Pay Centre written by Chris Philp, the Conservative Member for Croydon South, which makes a number of recommendations, including requiring firms to create a shareholder committee with the power to ratify pay packages comprised of shareholders with longer-term holdings in the company. Will these proposals be part of the consultation that will be published?

[Baroness Neville-Rolfe]

I have not yet read the report, although I know that it was discussed in the House and I think it makes a very useful contribution. As I see it, that idea is in the mix of what we will consult on. The underlying objective is to make shareholders exercise much better oversight over company decision-making. The changes that we will be looking at, and indeed prior reforms, have been directed at this objective—some with more success than others.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend know that many of the big institutions contract out their voting to other organisations at company AGMs? Is not the key to ensuring that remuneration is brought under proper control that those institutional shareholders exercise their rights and that the Government change the rules so that votes on executive pay at shareholder meetings are binding on boards?

[Baroness Neville-Rolfe]

My noble friend makes a very good point about voting. I am glad to say that one of the options we will be looking at is binding votes, for the reasons that he says.

[Baroness Burt of Solihull (LD)]

My Lords, it seems to me that the problem is that companies benchmark their executive pay against other companies in the marketplace. Does the Minister agree that a more diverse range of company models in the marketplace, such as mutuals where workers are also shareholders, would bring a greater sense of proportion to executive pay and have a stabilising effect on pay in the marketplace generally?

[Baroness Neville-Rolfe]

The noble Baroness is right that there is a place for comparisons, although, as somebody who sat on a number of boards, I actually think that one needs to look at the overall position and in relation to the wider workforce. That is something that we will certainly look at as part of the consultation that we will publish, because some of this stuff is complicated and we need to make sure that we talk to people on the detail.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, my noble friend referred to the importance of increasing shareholder power. Is she aware that individual shareholders in particular are increasingly under pressure to hold their shares through nominees? The nominee holder is not required to send on information to the individual shareholder about the company in which he or she has a holding. They are therefore disenfranchised. Would it not be a good idea to make a simple legal change which would require nominee companies to enfranchise and inform the people who actually hold the shares?

[Baroness Neville-Rolfe]

My noble friend, as always, brings unusual insights to the debate. It sounds as though this is a point that he and I should discuss further, because clearly we want to make sure that shareholders are exercising the oversight that we all want.

[Lord Stevenson of Balmacara (Lab)]

My Lords, there is an irony in this Question being answered today, in that later today we will consider a statutory instrument which makes a welcome increase to the national minimum wage by the order of 25p per hour. An earlier report by the High Pay Centre, which is a cross-party initiative, reported that FTSE 100 CEOs had just enjoyed a 10% pay increase to over £5.1 million per annum on average in the last year. Can I press the Minister a little further on what will be in the consultation? She mentioned a number of things, but the Prime Minister’s comments, to which I think the noble Baroness referred, are that she would like to see not just consumers represented on company boards but employees as well, and she wants to see more transparency on pay, including making shareholder votes on corporate pay not just advisory but binding. Will the noble Baroness confirm that?

[Baroness Neville-Rolfe]

We are looking at the precise wording of the consultation document, but the idea is to explore the various ideas that the Prime Minister set out so eloquently in this area. That would include binding votes, employee representation, which I am aware of because I used to sit on a German board—it has pluses and minuses—and, of course, full disclosure of bonus arrangements.

[Lord Tebbit (Con)]

Does my noble friend agree that it might help to bring a different dimension to these discussions if, occasionally, we referred not to the “shareholders” but to the “owners” of businesses and not to the “executives” but to the “hirelings” who operate on behalf of the owners?

[Baroness Neville-Rolfe]

I thank my noble friend for his interesting and provocative remark.

[The Earl of Erroll (CB)]

Is there not also a deeper problem, which is that many of these remuneration packages of senior executives are geared towards profit targets in various ways? The quickest and easiest way of doing this is to axe the visionary research and development programmes in order to increase the bottom line temporarily to get their rewards. As a result, some of our larger companies are suffering from, I would say, a lack of vision, expansion and innovation.

--- Later in debate ---

[Baroness Neville-Rolfe]

The noble Earl knows that I share his passion for innovation and R&D. I believe we need a governance framework that ensures a good sense of strategy and long-term planning, and that helps to encourage innovation and R&D.

[Lord Haskel (Lab)]

Some companies publish a ratio between the top salaries and the bottom salaries. As part of the Government’s consultation, are they going to seek some kind of standard—some kind of ideal ratio—for this sort of thing?

[Baroness Neville-Rolfe]

As the noble Lord will know, the devil is in the detail in these matters. Certainly however, requiring the publication of the ratio between the CEO’s pay and the relevant average is something we will be looking at. That is coming in in the United States in 2017, as he will know. We need to learn from that experience and, as I have said, try through our consultation to come to the right changes in this important area.

Climate Change: Fracking

Baroness Neville-Rolfe Excerpts

Tuesday 6th September 2016 Lords Chamber

[Baroness McIntosh of Pickering]

To ask Her Majesty’s Government whether they plan to ensure that the three tests set out by the Committee on Climate Change with regard to shale gas exploitation by fracking are met before any fracking work proceeds, and if so, how.

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

My Lords, shale could promote the opportunity of a new, domestic source of gas which adds to our energy security. Since 2000, UK gas production has decreased and import dependency has increased. This Government have been clear that shale development must be safe and environmentally sound. As our response to the Committee on Climate Change report states, we believe that each of the three tests for shale gas development will be met.

[Baroness McIntosh of Pickering (Con)]

I am most grateful to the Minister for that Answer. Will she explain to the House how the Government intend to meet those tests and, in particular, satisfy the Committee on Climate Change regarding greenhouse gas emissions, which would increase in intensity with the extraction of such a fossil fuel on a large, significant scale? Also, how do we intend to meet our carbon reporting targets in those circumstances?

[Baroness Neville-Rolfe]

We have made it clear that we will take steps to meet our carbon targets, particularly by 2050, and we agreed on the fifth carbon budget before the Summer Recess. In relation to the tests, the first test is met by our regulatory system; tests 2 and 3 will be met by the commitments we will be making in the carbon budgets.

[Lord Wigley (PC)]

My Lords, does the Minister accept that one of the main considerations with regard to fracking is the geological stability of the land, particularly in those areas where there has been coal mining and the seepage of water can go many miles? Does she accept that, in these circumstances, any decision on fracking should be taken as locally as possible so that local opinions are taken into account?

[Baroness Neville-Rolfe]

I agree with the noble Lord that we need to be careful. I also agree that the permission should be dealt with by the relevant local planning authority. However, we are fortunate in having strong regulators. The Environment Agency focuses particularly on water and, of course, the Oil and Gas Authority has operated for many years and has very strong regulations in relation to seismic activity.

[Baroness Featherstone (LD)]

My Lords, gas is a fossil fuel wherever it comes from. Given that the Government are going to miss our legally binding targets on reductions in carbon emissions, would it not be better altogether if the Government simply banned fracking and got on with delivering reductions in emissions rather than increases?

[Baroness Neville-Rolfe]

I cannot agree with the noble Baroness. I believe that shale has the potential to make a strong contribution to the transition from a heavily coal-fired carbon-inducing energy mix to the vision that I think we all share for 2050.

[Baroness Royall of Blaisdon (Lab)]

My Lords, in the Forest of Dean, to my sorrow, licences have been granted despite the opposition of all members of the community. There is great concern that the complex hydrology, local subsidence and faulting issues, as well as the shallowness of the carboniferous shales and coal-bed which the licence holder intends to explore, will be particularly prone to ground-water contamination through fugitive methane emissions and the chemicals used in the fracking and drilling process. Given that methane is 80 times more significant as a greenhouse gas than carbon dioxide, what level of fugitive emissions —that is to say, leakage—would the Government define as an acceptable level?

[Baroness Neville-Rolfe]

The noble Baroness is right to draw attention to methane. That is, of course, one of the key focuses of the Environment Agency, which has control over the permitting process and environmental emissions.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, in fact there is mounting evidence that the methane leaks associated with fracking are far dirtier than those associated with energy derived from coal. Therefore, I do not see how it is possible for us to have clean energy and fulfil all our commitments if we carry on fracking. Is it not time that we followed the devolved countries of Scotland and Wales and abandoned fracking in England?

[Baroness Neville-Rolfe]

I think the key thing is to have a proper regulatory system of controls. We have learned from US experience in setting up our system. We are also focused on all the Kyoto basket of gases, which includes methane. I assure the noble Baroness that that is an important part of our thinking. But I return to my first point, which is that we need a mix of energy in the transition to 2050.

[Lord Foulkes of Cumnock (Lab)]

My Lords, will the noble Baroness try again to answer the question of my noble friend Lady Royall: what amount of leakage is acceptable?

[Baroness Neville-Rolfe]

I think this is a matter for the experts concerned in the particular circumstances. Our regulatory system is site specific. You go to the particular site and work it out. Clearly, you want to minimise the emissions of all six of the Kyoto basket of gases. I think that would be an agreed objective.

[Lord Harris of Haringey (Lab)]

My Lords, is that why the Government do not have a view on what is an acceptable degree of leakage, or are they perhaps consulting the experts? If so, will the Minister share with us what advice has been received on what would be an acceptable level of leakage?

[Baroness Neville-Rolfe]

I can certainly write to noble Lords about what advice we have received, if that would be helpful. I return to my point that we have a strong regulatory system right across the board in this area and we should look to this as an opportunity.

[Baroness Farrington of Ribbleton (Lab)]

My Lords, I declare an interest as a Lancashire resident. Would the Minister be prepared to inform the House, in writing if necessary, how many of the controls, considerations, regulations and judgments will be made by those external to the industry concerned and how many will be made by those involved in gaining profit, however low they choose to set the safety targets? My recollection is that the Government did not want all the regulation to be external, and that they wanted the industry itself to tackle this. Some of us are concerned about that.

[Baroness Neville-Rolfe]

I am the new Energy Minister, but I have been struck by the variety of independent outside agencies that are involved in this site-specific process. There can also be benefit to the community, both through the community benefit package, which involves an industry contribution, as the noble Baroness is suggesting, and from the shale wealth fund, on which we are consulting, which will allow some of the tax revenues to be shared with individual members of the community.

Warm Home Discount (Miscellaneous Amendments) Regulations 2016

Baroness Neville-Rolfe Excerpts

Thursday 21st July 2016 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

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

Relevant document: 6th Report from the Secondary Legislation Scrutiny Committee

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

My Lords, I am pleased to open the debate on the regulations, in my first week in this post. In her first speech, the new Prime Minister recognised the hardships faced by poor households in Britain, families who,

“can just about manage but worry about the costs of living”.

As part of that, this Government are committed to tackling the problem of fuel poverty, and that is why I am moving this Motion today.

Before going into the detail of the changes proposed in the regulations, I shall respond to the amendment tabled yesterday by the noble Baroness, Lady Jones of Whitchurch. This has been a highly unusual period for both Government and Parliament and, yes, it means that getting these regulations before the House has taken longer than we would have liked. However, if we approve the regulations today then we expect payments to the core group of recipients to begin in mid-October, with 1.2 million rebates reaching customers this winter before the end of January, during the coldest period. This represents over half the intended recipients. We expect the remaining 800,000 recipients to receive their rebates by the end of February, although some may receive them as early as the autumn. I recognise that this is a little later than in previous years but, if we do not pass the regulations today and instead wait until after the Recess, we estimate that payments will begin in mid-December and not finish until March.

I turn to the regulations. I shall give some background on fuel poverty and the warm home discount scheme to put them in context. The warm home discount is one of a range of policies to address the factors contributing to fuel poverty. It is a bill rebate, or discount, of £140 from energy suppliers directly to customers. Other policies, such as the energy company obligation, are focused instead on providing energy efficiency measures. However, this rebate reaches over 2 million households each year, giving them immediate support to heat their homes when they need it most.

The warm home discount scheme is currently made up of three parts. First, there are eligible pensioners, described in the regulations as the “core group customers”, who automatically receive a bill rebate of £140 from their supplier. Secondly, there are other low-income and vulnerable customers, such as low-income families and those with long-term disabilities, who are described as “broader group customers”. These customers can apply for rebates through their supplier. The amount is the same, £140. Thirdly, there is the industry initiatives element of the scheme, whereby suppliers provide a range of support measures that include debt assistance, benefit entitlement checks and energy advice to domestic customers in or at risk of fuel poverty.

Over the next five years, we want to simplify the way the scheme is delivered, targeting it more accurately at those households which need it most. To enable this we are reliant on new primary legislation. Data-sharing powers in the Digital Economy Bill, if implemented, could see more of the warm home discount provided automatically. This will reduce the administrative costs for suppliers to participate in the scheme and, importantly, will allow us to provide more accurate targeting. Because we are reliant on this new primary legislation, to implement these changes we propose that these regulations cover two winters—until 2017-18. If we secure the powers, we will consult on our proposals, giving noble Lords another opportunity to comment.

For these amending regulations, the Government consulted on their proposed extension of the scheme in April, proposing some relatively small changes to improve effectiveness and make the regulations simpler and more accessible. Respondents to the consultation were supportive of extending the scheme, and the government response was published at the end of June.

There are four main changes to the warm home discount scheme. The first is that local authorities or charities will be able to submit proposals under the industry initiatives element of the scheme; for example, schemes that offer support to people with specific health conditions linked to living in a cold home. The second proposed change is to place a limit on the total amount that suppliers are able to spend on debt write-off. While we understand the help that debt write-off can provide—suppliers would still be able to use half of this allocation for write-off—we would like to encourage greater diversity of approaches. Thirdly, we are providing the option to pay the rebate on the gas bill rather than the electricity bill, if requested by the customer, and finally, we will require energy suppliers to report exactly how many pre-payment meter vouchers have been redeemed, encouraging them to maximise take-up among the poorest customers. I commend the regulations to the House.

Amendment to the Motion

Moved by

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, I thank the noble Baroness, Lady Jones of Whitchurch. As she says, there is some agreement across the House on the importance of tackling fuel poverty. Like her, I look forward to further debates on this issue in the months, and even years, ahead.

As I have stated, these regulations were prepared in difficult circumstances. I very much regret that they have come before this House so late. Although some households will receive their rebates later than in previous years, the majority will reach customers during the coldest months of the year. As I stated in my opening remarks, payments will start in mid-October and not in December, as I think the noble Baroness, Lady Jones, feared.

To respond to another of her points, we are in touch with suppliers and have put in place steps to ensure that they can begin to credit customers’ accounts by mid-October, helping those customers to keep warmer. We will also closely monitor delivery during the scheme, especially given the delay. However, I say to the noble Lord, Lord Berkeley, that I cannot perform a miracle. I can reassure him that I have tried to be completely transparent about what the new timetable is as a result of the delay, which I think we all regret.

I hope that the unusual circumstances of this year will not be repeated next time round. As the new Minister, I take note of what has been said about the importance of avoiding delays in the future and the wish of noble Lords to be able to engage.

As it happens, the Digital Economy Bill, which has been introduced in the other place, will provide the powers to be able to combine data on benefits and the housing stock, helping us to identify more households in fuel poverty. The Government accept that the targeting of this scheme could be improved and, therefore, we are seeking to take steps to improve it. The new powers will provide the Government with the opportunity they need, and also opportunity for debate. We will, of course, be consulting, as we try to do on these sorts of schemes, on the way that we will go about using the new information-sharing powers that we hope to obtain.

The noble Baroness, Lady Miller of Chilthorne Domer, rightly pointed out, and I can confirm, that we have committed to extending the warm home discount to 2020-21. That discount continues to help a large number of poorer households with their energy costs, right across the country, at a time when they are most in need. We will work with stakeholders to deliver these changes efficiently and will continue to provide help where and when it is needed in the most effective way. This obviously complements other proposals that either exist or are being consulted on, such as the energy company obligation and improvements to homes in the private rented sector, which have some of the worst energy efficiency ratings.

The noble Baroness also mentioned measures stemming from the CMA report, which is one thing that I plan to read this weekend. If I have anything further to say, I will certainly come back to her. I look forward to learning from her in this new brief.

I hope that noble Lords will agree that these regulations are important and forgive us for the delay. I hope that the noble Baroness will feel able to withdraw her amendment.

[Baroness Jones of Whitchurch]

My Lords, I am grateful to the Minister for the regret that she expressed about the timetable and the late registration of the regulations before the House. Obviously, that goes some way to addressing our concerns.

We could argue about the five months. I do not think that the unusual circumstances—or however we want to describe them—go back to November of last year. Still at the heart of this issue is a fundamental problem about cross-departmental working and cross-departmental policy discussion, which seemingly remains unresolved. We were looking for the opportunity to hear from the noble Baroness that the Government understand that, are taking it seriously and are addressing it.

[Baroness Neville-Rolfe]

I did say that I take the point about interdepartmental co-operation. It was quite an unusual period in the run-up to the referendum lasting several months: it felt like that to me. However, I am a newcomer to this subject and all I can do is to learn going forward. Cross-departmental agreement in these sorts of areas, particularly between DWP, the Treasury and others is obviously extremely important.

[Baroness Jones of Whitchurch]

I thank the Minister for that intervention. I have one other point. The timetable that is set out assumes that the data matching will go to plan—the timetable with the DWP is 10 weeks. A lot of those IT projects tend to have optimistic timetables in my experience, so we are relying on that data-matching being done within 10 weeks. Otherwise, there will be a further delay which everyone would find very regrettable. There is clearly more work to be done on targeting and how we can get the rebates and the payments to those in greatest need. I understand that this cannot necessarily be resolved within this particular set of regulations, but there is more room for dialogue on that issue in the months to come.

Having heard what the Minister has to say, I will not detain the House any longer. I do not intend at this stage to press this amendment to a vote. It is the Lord Speaker’s last day in post barring disasters over the summer, so it is only fair to give her a gentle ending to her distinguished service. On that basis, I beg leave to withdraw the amendment.

Amendment withdrawn.

Motion agreed.

Pubs Code etc. Regulations 2016

Baroness Neville-Rolfe Excerpts

Tuesday 19th July 2016 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

That the draft Regulations laid before the House on 13 June be approved.

Relevant document: 4th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 12 July

Motion agreed.

Pubs Code (Fees, Costs and Financial Penalties) Regulations 2016

Baroness Neville-Rolfe Excerpts

Tuesday 19th July 2016 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

That the draft Regulations laid before the House on 13 June be approved. Considered in Grand Committee on 13 July.

Motion agreed.

Carbon Budget Order 2016

Baroness Neville-Rolfe Excerpts

Tuesday 19th July 2016 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

That the draft Order laid before the House on 30 June be approved.

Relevant document: 5th Report from the Secondary Legislation Scrutiny Committee

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

My Lords, I am very pleased to address the House as the new Minister for Energy and to open the debate on the Carbon Budget Order 2016. This order fulfils the requirement under the Climate Change Act 2008 for the Government to set five-year carbon budgets on the path to our 2050 target of an 80% reduction in emissions. It sets the level for the fifth carbon budget, covering the period 2028 to 2032. The order is now overdue, after being held up by the extraordinary events of the last few weeks, and I hope noble Lords will be happy to approve it.

As noble Lords know, I am brand new to this area and have not had a chance to look at, let alone review, the policy. However, it is well established and very important, and passed with considerable cross-party support—although that is not of course a reason not to reflect in a practical way on how we can do better, looking at the underlying facts, the economics, issues of security and resilience, and our international commitments on climate change. There is also an interaction between security of supply, price and industrial competitiveness—a key objective of our new Department for Business, Energy and Industrial Strategy.

Before discussing the order, I will reflect briefly on the UK’s Climate Change Act and what it means at the current time. Leaving the EU will bring challenges and opportunities to the UK. However, it does not change the fact that climate change remains one of the most serious long-term risks to our stability. The main direct threat to the UK relates to an increased risk of flooding, and the floods we saw in parts of the north of England last year, which were tragic for those affected, could become more common.

The Act was passed with near-unanimous cross-party support, and this legal framework has inspired countries across the world, including Denmark, Finland and France. At its heart is a system of five-year cycles, mirrored in the historic Paris climate agreement, which the UK helped to achieve. The certainty given by the Act underpins the investment we have seen in the low-carbon economy since 2010. This is an industry of course with extraordinarily long timeframes. The Government remain committed to the Climate Change Act and to meeting its targets for an 80% reduction in greenhouse gas emissions from 1990 levels, and to meeting the subsequent five-year carbon budgets that have been set under the Act.

We are equally clear about the need to keep our energy supply secure and bills as low as possible. The capacity market helps to ensure that we have secure electricity supplies, by bringing forward new investments, including in gas generation. We are laying the ground for new nuclear to play an important role in ensuring our future electricity supplies. The Government have also taken difficult decisions to ensure that costs remain under control and on policies that were not fit for purpose.

I turn to the Carbon Budget Order 2016, which will set the level for the fifth carbon budget at an equivalent 57% emission reduction on 1990 levels. This budget level is in line with the recommendations of our independent advisers, the Committee on Climate Change, and reflects the views of the devolved Administrations. The Government have considered a wide range of factors in proposing this level. We are proposing a carbon budget which balances how to keep on track towards our 2050 goal while cutting emissions at the lowest possible cost. Both the Committee on Climate Change and the Government have agreed that this budget level will put us on a path to our legally binding 2050 target.

The Confederation of British Industry, the Engineering Employers Federation and the Aldersgate Group have all welcomed the certainty that this budget level gives as we move to a lower-carbon economy. Noble Lords opposite will be pleased that the shadow Secretary of State for Energy and Climate Change, Mr Barry Gardiner, the cross-party Energy and Climate Change Committee and the Scottish Nationalist Party have shown their support.

The Paris agreement sent a strong signal to business and investors that the world is committed to long-term decarbonisation. The carbon budget for 2028-32 will ensure that the UK economy is best placed to realise the opportunities that this transition presents. What is important is not just the target but an acceptance that we mean to meet it. Our emission reductions to date give us confidence. The UK met the first carbon budget and is on track to meet the second and third. Provisional figures show that UK emissions in 2015 could be 38% lower than in 1990 and more than 3% below those in 2014. The past two years have seen the greatest annual emission reductions against a backdrop of a growing economy.

The Government have already begun to engage proactively with businesses, consumers and civil society on the development of our policies and proposals, and will continue to do so in the coming months. As noble Lords may know, the Climate Change Act requires the Government to set out our policies and proposals as soon as reasonably practicable after setting a budget level. It is too early to give specifics. However, our new emissions reduction plan will map the transition over the period of the fourth and fifth carbon budgets—from 2022 to 2032.

I move on to the second order, which concerns the third carbon budget credit limit. Although we believe that the Government’s current policies ensure that we are on track for the third carbon budget, it is prudent to allow ourselves flexibility to manage the uncertainty in our emissions projections. This is why the order sets the credit limit for the third carbon budget at 55 million tonnes of carbon dioxide equivalent. That is about 2% of the third carbon budget. It is the same amount of flexibility as was agreed for the second carbon budget credit limit.

I know that we are not in quite the same place as the Committee on Climate Change—it is good to see my noble friend Lord Deben, who chairs the committee, in his seat. It recommended a zero credit limit. However, the Government have concluded that it is best to maintain a small amount of flexibility over the third carbon budget period—of course, we may not need it.

In conclusion, the proposed fifth carbon budget is in line with our independent advice, it demonstrates the UK’s leadership on climate change and it has support across the political spectrum and the business community. It will provide the certainty needed for future investment in a stronger, lower-carbon economy as part of our industrial strategy. The proposed credit limit in the second order ensures a pragmatic level of flexibility should it be required, given the inherent uncertainty in our emissions projections. I beg to move.

[Baroness Featherstone (LD)]

My Lords, first, I take this opportunity to welcome the noble Baroness to her new role. It is a big portfolio to learn in a couple of days.

I am pleased and relieved that Her Majesty’s Government have accepted the recommendation of the Committee on Climate Change for the 57% reduction in greenhouse gases by 2030 for the fifth carbon budget, relative to 1990 levels. Since I arrived in your Lordships’ House only at the end of last November, more often than not I have had to criticise and berate the Government for their lack of commitment to tackling climate change and their relentless litany of anti-green actions, from sudden removal of subsidy to renewables industries to the privatisation of the Green Bank, and much between. Therefore, I am encouraged that this commitment will send a message out loud and clear to the world that we remain a country committed to tackling climate change and determined to reduce our emissions right across our energy industry, from power, from buildings, from transport and of course by reducing demand.

It is especially important because, at this moment of uncertainty for the future of the UK in its journey out of the European Union, despite the reassurances we have received from the Dispatch Box both here and in another place that we will both stick to our legally binding EU targets and ratify our signature to the Paris agreement, more is needed. It was a dreadful blow to hear that the Department for Energy and Climate Change is to be no longer. It has gone—collapsed into the Department for Business, Energy and Industrial Strategy. Climate change is no longer named. I fear that that sends out the exact opposite signal: that tackling climate change has been demoted and de-prioritised.

No doubt the noble Baroness will say that that is not at all the case, but I may not believe her. Actions always speak louder than words, and the actions of the Government today and since the end of the coalition have all been in the wrong direction. So I look to the noble Baroness to assure me that climate change will get the attention it needs, particularly given that the National Grid has said that the UK is almost certain to miss our EU 2020 targets for renewables. Will she commit to ratifying the Paris agreement immediately, to send a clear message that climate change will be given priority?

It would also be extremely helpful if the noble Baroness could persuade our new Secretary of State, Greg Clark, urgently to set down in writing his commitment to the future of this planet. With this loud and proud announcement of the fifth carbon budget, we could be in a position to zoom ahead, become world leaders in decarbonisation and tackling climate change and nurture a green economic boom with the innovation we are seeing in low-carbon technologies. I would love to think that that will be the case, but I fear not.

Even on the fifth carbon budget itself and the other order there is a “but”. We on this side of the House are very concerned that Her Majesty’s Government have extended the third carbon budget by 10% when the net account was already 10% below where it needed to be to meet the third carbon budget in 2014. The offset provision should be used only in an emergency and as a last resort against highly unusual and unforeseen circumstances.

To meet the reductions set out in the fifth carbon budget, we urge the Government to prioritise domestic action. Our menu for the Government would be to: support and encourage the renewables industry; quicken and intensify energy efficiency measures; introduce urgently a zero-carbon homes standard—something which we Liberal Democrats championed while in coalition and during the passage of the Housing and Planning Bill, which the new Secretary of State for Energy sadly did not support in his previous role in the Department for Communities and Local Government—support technological innovation; get on with tidal lagoons and give the go-ahead to Swansea Bay. Proof and pudding need to be the order of the day, so I look forward to seeing the plan that the UK Government have committed to set out on how it will meet the fourth and fifth carbon budgets by the end of 2016.

--- Later in debate ---

The noble Lord, Lord Deben, did so well to remind us about climate change and to challenge the Government to implement effectively UK emissions policies. The noble Lord, Lord Howell, also wants us to be serious on the international context of emissions. In agreeing to the order today, I ask the Minister to pick up on these issues in her reply.

[Baroness Neville-Rolfe]

I thank noble Lords for their contributions to this my first debate on what is indeed a very complicated subject. Perhaps we could have done with more time to address some of the issues, but I shall try to answer where I can on this my first day.

I start by thanking the noble Baroness, Lady Featherstone, my noble friend Lord Ridley, the noble Lord, Lord Teverson, my noble friend Lord Lawson, my neighbour the right reverend Prelate the Bishop of Salisbury, the noble Baroness, Lady Worthington, my noble friend Lord Howell of Guildford and the noble Lord, Lord Grantchester, because they were united in their kindness to me, even though there is clearly a lively difference on this important area of policy, which I look forward to discussing on a number of occasions. This is actually my first day because, some noble Lords may be glad to know, I was in Slovakia at the Competitiveness Council until last night, engaging, as we should, with the EU while we remain.

Climate change has not been downgraded as a threat; it remains one of the most serious long-term risks. The title of a department matters far less than its DNA and what it does, as I explained this afternoon to the assembled former DECC staff in the building in Whitehall Place—where I originally started my Civil Service career. Energy and climate change will be at the heart of the new department. For example, I can confirm that this Government remain committed to ratifying the Paris agreement, which was agreed last year by 195 countries, as soon as possible. Our policy will also look at affordable and reliable energy, and generally join things up in the way that I described in my opening remarks.

At the heart of our commitment is the Climate Change Act. While the vote to leave the European Union is hugely significant, the Government will continue to play their part in tackling the energy and environmental challenges our country faces. My noble friend Lord Ridley—well-known for his views in this area and, as always, the source of some very telling questions—suggested that the referendum result might invalidate the budget, as there was no mention of Brexit. I remind my noble friend that carbon budgets are UK-specific targets, based on UK legislation. The referendum result does not change the validity of the budgets or, by extension, the impact assessment.

I hear what has been said about the impact assessments, which, as some noble Lords will know, is an area I always take a great interest in in any of my policy areas. I look forward to discussing them with our economists—including the points about price assumptions and the points made by my noble friend Lord Howell of Guildford—to learn from this exchange.

In other areas, we will also engage in the opportunities and challenges of the seismic change that Brexit represents. I am always keen to emphasise the opportunities, being a glass-half-full person.

The noble Lord, Lord Grantchester, asked about the delay in the laying of this order. I am sorry we missed the due date. There were some rather disruptive events in the last few weeks, but I understand there is no question of the legality of the order being put into doubt by the process.

The proposed fifth carbon budget is in line with the advice of the independent Committee on Climate Change and has been widely welcomed by the business community. I am from business, as the right reverend Prelate the Bishop of Salisbury reminded us. Indeed, I used to run a carbon reduction programme across the world when I was at the Tesco supermarket chain. It actually saved us money. I also know from being in business that we need a certain amount of consistency and ambition on climate change if we are to support investment. The carbon budgets provide this.

My noble friend Lord Ridley said that UK action went further and was faster than in the EU. The UK’s domestic target is to reduce emissions by 80% on the 1990 level by 2050. The EU has a comparable target of 80% to 95% by 2050. As I understand it, other countries are taking comparable action.

Businesses have of course been calling for consistent ambition on climate change, which is what the proposed fifth carbon budget, far ahead though it is, now achieves. The Government have listened to the concerns of energy-intensive industries, such as steel, and are providing relief to mitigate policy costs on their electricity bills.

The noble Lord, Lord Teverson, said that carbon budgets account for only 50% of emissions. He is right that the budgets do not bite on the power sector, but the EU ETS does. So does the overall 2050 target. There are, of course, pros and cons to different accounting methods. We will keep this under review—a point raised by others. Our commitment to decarbonisation is clear. We have also set out funding to be provided through future auctions in this Parliament to support up to 4 gigawatts of new offshore wind and other renewable technologies.

The right reverend Prelate asked about shipping and aviation. There is currently no internationally agreed solution to allocating emissions to specific countries in shipping. How do you deal with a British ship going from Rio to Naples? We are working, through the International Maritime Organization, to provide a way forward. We believe that unilateral action could undermine our ability to get the right agreement. The Committee on Climate Change did not recommend that we include aviation emissions in our budget at this stage, but that is not to say that we will not do so in due course when the International Civil Aviation Organization has agreed how they should be accounted for. So I can see some very interesting accounting issues in my new job.

What else are we doing to head off an energy gap and decarbonise? First, we are making real progress to deliver new nuclear power in the UK for the first time in two decades. As the noble Baroness, Lady Worthington, mentioned, with her great knowledge of the area, we have announced record investments in new heat networks in our towns and cities to enable lower-carbon ways of heating our homes and businesses while keeping energy bills low, and we have committed over £600 million up to 2020 to support early market uptake of ultra-low and zero-emission vehicles in the UK.

Electric cars are, in my view, a vital aspect of our future industrial strategy, drawing on our strength in the British car industry and on digital, which is a well-known passion of mine.

I was interested in the various ideas set out by the noble Baroness, Lady Featherstone, and others, which are all food for thought. I particularly appreciate the point made by my noble friend Lord Howell of Guildford about the impact of engaging with major emitters overseas. I very much agree with that. I have spent a lot of time thinking about international matters, and I think this is very important.

Emissions are coming down. Provisional statistics indicate that UK emissions in 2015 were 38% lower than in 1990 and more than 3% below those in 2014. This was one of the greatest annual emissions reductions against a backdrop of a growing economy.

To respond to the noble Baroness, Lady Worthington, we continue to make good progress, but we recognise that the 2020 target is challenging. However, the Government have achieved the interim renewable energy target for the last two years. Our new plan will be informed by analysis and economics to ensure that we are on our way to meeting our 2050 target while keeping costs low for consumers and businesses, a point of concern also to my noble friend Lord Ridley.

We have been working with other government departments to identify potential policy proposals from across homes, businesses, transport, land use, waste, agriculture and industry, all mentioned by the right reverend Prelate the Bishop of Salisbury. As I have already said, the machinery of government changes give us a new opportunity to be joined up. To respond to the noble Lord, Lord Grantchester, Defra is, indeed, an important participant on climate change and industrial policy, and I will certainly be engaging with it.

With regard to the third carbon budget, the Government’s projections suggest that we are on track to meet our target. It is prudent to retain the flexibility of a 2% credit limit to account for uncertainty. I am glad that the noble Lord, Lord Teverson, does not feel that that is a fundamental point.

In conclusion, these orders have been welcomed on both sides of the House. There are always differences but I believe that they provide the right level of certainty for the future while allowing the flexibility to manage any uncertainties that we may face.

Motion agreed.

Climate Change Act 2008 (Credit Limit) Order 2016

Baroness Neville-Rolfe Excerpts

Tuesday 19th July 2016 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

That the draft Order laid before the House on 30 June be approved.

Relevant document: 5th Report from the Secondary Legislation Scrutiny Committee

Motion agreed.