Great British Energy Bill

Lord Alton of Liverpool Excerpts

Committee stage
Monday 13th January 2025 Lords Chamber

[Lord Petitgas (Con)]

My Lords, I rise to discuss Amendment 80. It proposes that GBE be required to produce both quarterly unaudited and annual audited reports. These should disclose the rate of returns for each investment and the carbon emissions resulting from each investment. This amendment is a matter not only of transparency but of accountability. It will ensure that taxpayers are fully informed about how their money is being spent.

Let me address first the rationale behind requiring disclosure of carbon emissions. This is standard practice. Indeed, the Secretary of State has compared GBE to Ørsted in Denmark; Octopus in the UK is another possible comparison. Both companies measure scope 1, 2 and 3 emissions, following certain protocols. These align with the Task Force on Climate-Related Financial Disclosures and EU taxonomy. Will the Minister confirm whether GBE will follow the same practice and taxonomy?

The principle behind the amendment in my name on financial returns is abundantly clear: if the Government are going to use public funds to invest in energy projects, they must be duty-bound to report the results of those investments. This proposal is an essential part of providing insight and knowledge of the operation of GBE. It is a principle of good governance to avoid taxpayers writing blank checks; it aligns with the notion that taxpayers should know not only how their money is being spent but how it is being invested and managed to ensure it delivers adequate returns.

I remind the Committee that GBE will be not an operating company but an investing company owning minority stakes in a large number of projects of different sizes. This will be complex, and the only way to track and measure performance will be to look at individual investment returns. I also remind the Committee that there is no investment committee yet set up and no reference—it looks as if the Secretary of State, ultimately, is in charge of making decisions on these investments. I have never seen this in an investment company. No private equity firm would be run like this.

Operating companies produce classic annual reports and accounts, but GBE will be more akin to a permanent capital venture fund. Therefore, its annual report and accounts really should be supplemented by disclosure of the rates of return on its investments.

I will address a comment made by the Secretary of State during the Bill’s Second Reading in the other place. He made an interesting argument about the potential of state-owned companies. In his own words:

“State ownership is the right idea for creating wealth for Britain”,


as GBE’s investments

“will help generate return for the taxpayer”.—[Official Report, Commons, 5/9/24; col. 456.]

GBE, he argued, would not only contribute to energy security but create jobs and foster economic growth. While I am encouraged by the potential for GBE to generate wealth and drive the economic growth that we need badly, I will ask the Minister to clarify a few points in relation to this statement.

First, if GBE is indeed intended to generate returns for the taxpayer, can the Minister confirm the expected rate of return on investment for these projects? In particular, will these returns be sufficient to justify the use of £8.3 billion of taxpayers’ money? To be clear, the £8.3 billion of capital for GBE will be borrowed by the Government. I do not need to tell your Lordships this as it is everywhere, but the long-term gilt yield stands now sadly at 5.5%—up more than 50 bps in the last three weeks. Infrastructure returns typically are above 10% and venture capital is above 15%. Therefore, the benchmark that GBE should be aiming at must be in the range of 10% to 15%.

We all know that we get what we measure. I worried when I read the evidence given by GBE’s chairman-elect, Jürgen Maier, in the Public Bill Committee debate in the other House on 8 October, when he said that GBE’s success will ultimately be measured by the number of projects it is able to finance and the quantum of energy it is able to deliver to the grid. So are we measuring returns or the number of projects? Therefore, it is critical that we understand the financial viability of these investments and ensure that they will not end up being a burden on the public purse.

Secondly, there is significant concern about the risk of GBE becoming a dumping ground for less profitable or riskier energy projects, especially those that private sector companies are unwilling to back. I should add that there was no shortage of capital for net zero when I was in No. 10, so I have to assume that GBE will back transactions that are perhaps less profitable. This concern was raised in Committee and by my right honourable friend Claire Coutinho, who questioned whether the Government’s aim to derisk projects could result in throwing taxpayers’ money into unprofitable ventures.

Representatives of energy trade associations such as RenewableUK and Energy UK have also raised questions. In particular, Adam Berman from Energy UK identified what he described as two competing priorities for GBE: making profitable investment and addressing problems in the energy system arising from market failures. He said that the company might struggle to resolve this potential conflict if it was not addressed in the Bill. Can the Minister provide assurances that GBE will not be disproportionately directed towards these high-risk, low-return projects, which could undermine the Government’s goal of creating wealth for Britain?

The Secretary of State and the honourable Member for Rutherglen, Michael Shanks, have cited Ørsted as a model and precedent for GBE. Ørsted is not only an operating company—it is the main energy entity in Denmark—but is 49% owned by the stock market. Its equity is researched by 20 investment banks, creating public and financial scrutiny each quarter. That is certainly a very different picture from GBE. GBE will invest in illiquid, minority positions, yet will be a large operation, at £8.3 billion of capital. Incidentally, this is about half the market value of Ørsted. This compels us to scrutinise it seriously and to ensure disciplined governance and oversight.

In summary, it is crucial for the Minister to provide further clarification on the financial viability of the investments to be made by GBE, the risks involved, and how the Government will ensure that taxpayers’ money is used wisely. Transparency and accountability, as we have discussed through Amendment 80, will be key to answering these questions and demonstrating that GBE is indeed acting in the best interests of the British taxpayer.

[Lord Alton of Liverpool (CB)]

My Lords, I support the remarks made by the noble Lord, Lord Offord of Garvel, and the noble Baroness, Lady Bloomfield, and Amendments 60 and 61, which they spoke to, particularly what the noble Lord said about reducing our dependency on foreign states. I will not repeat the remarks I made on day one in Committee, or indeed during our debate on China on 20 December, but I will add two or three germane points to what has been said to the Committee this afternoon.

Since we had our debate in Committee, I have sent the Minister a report by Ignites Asia that identifies funds run by global managers who had at least £1.4 billion linked to 14 solar and EV companies using slave labour in Xinjiang—a point referred to by the noble Baroness, Lady Bloomfield. These amendments are primarily about accountability; Parliament has a right to understand on a regular annual basis, as the noble Lord said, precisely how what will become the Great British Energy Act is working out in practice. It has a right to know what we are doing about supply chains and around the objective to create, as Amendment 60 mentions, some 650,000 jobs. How are we getting on with those things and how are we doing on the other side of the coin?

Already we are seeing the loss of jobs—in companies such as Vauxhall, for instance—not because of fair competition or trade, which most of us in this House support, but because of unfair trade that is based on massive subsidies for companies operating in China that use slave labour. We will never be able to compete on fair terms with companies that do that, but we aid and abet those practices by simply turning a blind eye to what is happening. As well as looking at the jobs we might gain, let us look at the jobs we are likely to lose.

We should think seriously about the supply chain question. The amendment I tabled for day one did not come out of thin air. I am glad to say it had been promoted as an idea in earlier debates in another place by Sarah Champion, chair of the House of Commons International Development Select Committee. That shows that it is a bipartisan and bicameral concern. People from all parties and none have anxieties about the kind of things that can go on in our supply chains and the lack of resilience and increase in dependency implicit in this. I remind your Lordships of the excellent report produced in 2023 by the Joint Committee on Intelligence and Security, chaired by Sir Julian Lewis MP, which reminded us of the massive security dangers we have to address as a result of the threat that the People’s Republic of China undoubtedly poses to us.

We should learn the lessons of the pandemic. We bought billions of PPE items with millions and millions of pounds of public money—taxpayers’ money—when many of those products could have been made in this country by British workers. We have to be a lot more careful than we have been so far. The noble Lord, Lord Offord of Garvel, is right to point us in his amendment towards justifying the case made by the Government in favour of the Bill.

I tabled a Written Question to the Minister that I hope he will be able to answer, if not today during our oral exchanges then at least in writing before Report, about how many solar panels we intend to buy to fulfil the ambitions of the Bill: how many, and at what cost? What are the alternatives? Can they be made elsewhere? Only this morning I heard from a company that operates out of South Africa that says it can produce solar panels without any of the risks involved in using slave labour from Xinjiang. There must be others—we should be doing more to look for those alternatives.

We have to take the issue of genocide more seriously than we have, not least because of what we would be placing on the shoulders of those companies that will be encouraged through this legislation to buy these products. They can be prosecuted under the 2015 legislation that was promoted in an incredibly enlightened way by the then Home Secretary, the noble Baroness, Lady May, who we referred to in our Question Time exchanges earlier today. The Joint Committee on Human Rights is about to embark on a new inquiry looking at supply chain transparency and the effects on modern day slavery. I hope that the noble Baroness might be one of those who comes to give evidence.

We have to take this issue more seriously. There was a good example of pre-legislative scrutiny when both Houses looked at this, amendments were made and there was a coming together; that should happen again this time. The House of Commons declared that a genocide is under way in Xinjiang. This is the crime above all crimes. I do not need to convince the Minister of this—I know that—but it seems that I have to convince the Government. Whenever Mr Miliband is questioned on this, he simply says, “We care about human rights”. We all care about human rights, but this is the crime above all crimes. The 1948 convention on the crime of genocide requires us to prevent, to protect and to punish. We do not do any of those things very well.

--- Later in debate ---

[Lord Hunt of Kings Heath (Lab)]

My Lords, we rely on agreed definitions as to whether an energy is clean. The noble Lord mentioned biomass and Drax. He will know that the Government’s view, which his party also took when in government, is that the carbon absorbed by the forestry that replaces what has been transported to Drax more than covers the carbon expended in the process of bringing it to Drax, including the use of shipping. For 14 years, the party opposite accepted that this was an appropriate definition.

I turn to my noble friend Lord Berkeley’s amendment, on the risk to off-grid households and the value of renewable liquid fuels to these households. The noble Lord, Lord Bruce, also covered that point, and I listened with great care to what both had to say. Clearly, we want fuel-poor and off-gas-grid homes to benefit from the transition to net zero. The current energy company obligation includes incentives to deliver measures such as low-carbon heating to off-gas-grid rural homes in Scotland and Wales. Phase 2 of the home upgrade grant provides energy efficiency upgrades and low-carbon heating measures to low-income households living in the worst performing off-gas-grid homes in England in order to tackle fuel poverty.

We recognise that renewable liquid fuels could play a role in decarbonising heat off the gas grid. We therefore expect to prioritise the use of renewable liquid fuels for the small number of homes that are not readily suitable for electrification, as these have the fewest options to decarbonise through alternative low-carbon technologies. My noble friend Lord Berkeley suggested a meeting on this; I am very happy to engage with him and, indeed, with the noble Lord, Lord Bruce.

Amendment 76, tabled by the noble Lord, Lord Offord, and Amendment 77, tabled by the noble Baroness, Lady Bloomfield, relate to sourcing materials for GBE projects from the domestic supply chain. Adding the proposed detail to the Bill would too narrowly restrict the company in carrying out its activities, halting the potential feasibility of projects where UK sourcing is not currently possible.

On jobs, I take the point made by the noble Lord, Lord Bruce, concerning the importance of the UK continental shelf and the need for an orderly transition. My daughter supported her career as a wireline engineer in the oil and gas industry working out of Aberdeen, and I am well aware of the importance of the sector, what it has contributed to the UK economy and the skills and dedication of the people working there. As we have described, we want an orderly and just transition.

GB Energy will be committed to helping drive the growth of supply chains in the UK to accelerate the deployment of key UK energy projects. It is important, however, that we comply with the international trading rules that the UK is bound by, such as prohibitions on requiring local content contained under various agreements under the WTO.

Amendment 80, in the name of the noble Lord, Lord Petitgas, requires the Secretary

[Lord Alton of Liverpool (CB)]

I am sorry to interrupt the noble Lord, but I wonder if I can press him further on the issue of jobs and the impact on our own economy when countries run, in their own jurisdictions, the kind of slave labour arrangements that I and others referred to earlier. He will have seen the information about the loss of electric vehicle-related jobs because of the flooding of the market—we do not have any tariffs on those vehicles, whereas every other G7 country does. He will know that, in the last quarter, the trade deficit with China was some £32 billion but at no time since 1995 has there ever been surplus on our side of the equation. How can we justify, therefore, pouring more money into the economy of a country that relies on slave labour? It cannot just be left to companies, even Great British Energy, to identify whether a country is using slave labour or not; surely that is a matter for the Government, too.

[Lord Hunt of Kings Heath (Lab)]

The noble Lord raises matters of great geopolitical importance and importance to the UK’s economy. He will have seen that my right honourable friend the Chancellor has been in China in the last few days, seeking to engage that country in relation to economic co-operation and development, within appropriate security safeguards. We want to see jobs in the energy sector developed as much as possible in the United Kingdom, but equally, we are operating in a global economy. For very good reasons, we are concerned about the introduction of tariffs which may inhibit international trade, and we must also be mindful of the economic value-for-money issues that clearly have to come into play in this area.

Let me return to the Bill and what is appropriate for us to include in it. We believe that this issue is a matter for GBE, working within the constraints set through the statement of priorities and through Clause 3, and also in relation to the further work we are going to do. We have mentioned solar, and noble Lords are right that much of the raw material for solar panels comes from China, although it is British companies working in the United Kingdom that benefit more from the value of the work on solar installations.

Turning to the amendment of the noble Lord, Lord Petitgas, as a publicly owned company, GBE will be held accountable through regular reporting to my department. It will be subject to HM Treasury’s value-for-money guidelines, its investments will be subject to safeguards and risk assessments, and it will invest in the private sector to share risk and reward.

On green taxonomy, a decision about how a potential UK green taxonomy could be used or applied has not yet been finalised. The Government have launched a consultation to gather views on the value of the case for a UK green taxonomy, and it will close on 6 February.

We need to come back to what Clause 6 is for as a whole. It is a backstop which one hopes would never have to be used; it is not a way to encourage the Secretary of State to micromanage a company that we very much want to be operationally independent.