Storm Arwen

Lord Callanan Excerpts

Thursday 2nd December 2021 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, I associate myself and these Benches with the points made so eloquently by the noble Baroness, Lady Hayman of Ullock, both now and at Questions earlier. Her frustration is representative of the many people who must declare an interest in this issue. When I came down from the Borders last Monday, I had no power in my house; when I arrived back there on Friday there were eight outages that evening and no power overnight on Saturday. However, I was one of the lucky ones because I had some power on Sunday.

I hope that the disproportionate effect on rural areas will be the key lesson in the post-incident review to which the Government have committed. For those living in Kincardine who still lack reliable power, there should be an equivalent test: how would this place treat it if it were Knightsbridge? We are asking people to do the same: to work from home, provide services and care for people. There should be no difference between a resident in Knightsbridge and a resident in Kincardine in the 21st century, especially during a pandemic when people want to be carers or to work from home.

I noticed in the Statement that the Minister had been in Berwick, so I declare my second interest. It is my hometown and where my mum and dad still live. I know that the Minister knows the north-east extremely well as he is a northerner; actually, he is a north-easterner. It is unsettling when you speak to elderly relatives who are genuinely scared about what is happening and are vulnerable due to what happens afterwards. The lack of support for vulnerable communities in rural areas has been shocking in this regard.

The question will be: who has the primary responsibility? I know that many local authorities and their staff have worked extremely hard over this time; I saw it for myself with the local authority for the Borders, and the farmers and others who cleared roads and supported people. Many people in these communities are also first responders and, during this situation, have been checking on vulnerable residents in local authorities. However, certainly in the Borders, local authorities have been extremely frustrated with the electricity companies due to their lack of communication with customers; this was outlined eloquently before.

I will say one thing to the Minister with regard to the Statement. Some people in the north-east of Scotland have had not only their power supply but their mobile phone masts go down. Many communities have now been passed over to voice through broadband phones, as in my house, but there has been no communication at all. Therefore, the Statement giving an indication that people should dial 105 from their landline or mobile when they have no mobile phone coverage is—how should I say this?—insensitive, to say the least. I do not know how the Minister will do it but one lesson that we must learn is how to have civil contingencies when so much now relies on mobile and electricity networks.

My other question relates to power lines. In a former life, before I was elected in the Borders, I worked for David Steel when he was an MP. I strongly remember the awful length of the power cuts then. I know about the modernisation of the network in the north of England and Scotland.

Do we stress test the local networks? We stress test banks and other institutions, but is there a lack of legislative power for the Government to insist that companies stress test their networks so we know that, when it comes to what could well be more frequent events, the networks have been graded on a stress-test basis? This has given a lot of people a lack of confidence in the network and many of the companies.

The final thing I would say is that we have seen through bitter experience—certainly in the Borders and other areas, and in the north-west of England—that there have been improvements in flood warning systems and the way communities are able to operate. These systems have been put in place so that, when flood alerts are indicated, the public bodies and the private sector are prepared. But it seems as though we are not learning from those experiences with floods when it comes to electricity outages. I would be grateful to know what the post-incident review scope is and, in particular, how customers, consumers and communities themselves can feed into it when they are back to having reliable energy supplies.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I thank both noble Lords for their contributions. Let me state that I totally share their frustration and annoyance. Storm Arwen has brought severe weather to many parts of the north of our country, and those in the north of England and Scotland have suffered the most. Many have been without power for several days, and we totally understand their frustration, annoyance and indeed fury. I am not immune to that, as someone who comes from that part of the world as well. Let me reiterate that we are all working incredibly hard to ensure we can return to normality as soon as is humanly possible.

Yesterday, my Secretary of State stated in the Commons that restoring power across the entire country is a “grave concern” of ours, and a top priority and focus for the Government. Officials are in constant contact with the distribution network operators to understand their response, and operators have a mature and successful programme of sharing and deploying qualified resources to those areas most in need. My Secretary of State is having daily calls with local resilience forums, including the various chairmen in the north of England, to discuss the ongoing response. The Government continue to reinforce that, if additional support is needed by the industry, it needs only to escalate it to senior officials. Let me say to the noble Baroness, Lady Hayman, that the Government remain in constant regular communication with the distribution network operators, to ensure that communication—which, frankly, has been lamentable in many cases—is up to speed.

In the case of Northern Powergrid, I understand its phone lines are now operating properly; obviously there were problems with calls initially. Waits are now down from several hours to a few minutes, so people can now contact it.

The scale of the restoration effort that engineers are facing is enormous. The storm brought down trees and debris on to power lines, and wind speeds were exceptional. Since the storm hit, on Friday 26 November, over 4,000 engineers have been working round the clock to repair damage in very difficult conditions. Nearly 800 generators have been deployed to provide people with emergency power, and I am pleased to report to the House that, so far, over 98% of those affected by the storm—more than 964,000 customers—have had their power supply restored so far. I totally accept that that will be no compensation whatever to the few thousand who are still without power. As of 4 pm today, that was about 15,000 households, and that includes about 9,000 in the north-east, focused around the Wear Valley, Eastgate and north Northumberland; about 3,000 in the north-west, especially in the north Peak District and the south lakes areas; and a little under 3,000 across north Scotland, mostly in Aberdeenshire and Perthshire.

To confirm, all customers who have faced electricity distribution issues caused by Storm Arwen will have their power restored before Christmas—there was no truth in the rumours Members were referring to this morning. We expect to have the vast majority of those customers connected within one week. We know people are desperate to return to normality, and my department has been reassured that power will be restored, as I said, to the majority of customers by the end of this week, at the latest.

On the lessons learned, I thank the people who have borne with us during these difficult times and give a final reassurance that everyone involved is straining every sinew to ensure that they are reconnected as quickly as possible. We will ensure that all the appropriate lessons have been learned and, if such a storm happens again, that we are as resilient as we possibly can be.

The noble Baroness, Lady Hayman, asked about compensation. Ofgem, the independent regulator, sets service levels that companies must meet, with rules on how quickly network operators must restore power. It also sets compensation payments for consumers if those standards are not met, as they clearly have not been in these circumstances. I will ensure that Ofgem puts maximum pressure on the companies for those compensation payments to be made as swiftly and speedily as possible.

Regarding vulnerable consumers, those who have reached state pension age can register as priority service customers with their network operator, and will then be prioritised in terms of support, including to rural communities. We are working with the network operators to reduce vulnerabilities in future and to ensure that the network is as resilient as possible to these disruptive events. We intend urgently to review the exercise with the network operators to stress test the appropriate systems and will be able to share the terms of reference for review once the incident is over. We can then finalise the appropriate scope. Ofgem will also consider whether there is need for any further regulatory investigation.

The noble Lord, Lord Purvis, made a very good point about people not being able to get in touch when mobiles are down. The priority service register means that when outages occur, operators will already be able to locate the most vulnerable affected people and help them. They set up strategic hubs in the disrupted areas to aid communication with other customers, but I totally accept that these are often sparsely populated areas, and often rural areas with poor transport and communication links. Many network operators did their best in difficult circumstances.

[Lord Kirkhope of Harrogate (Con)]

My Lords, I fully agree with what has been said by other noble Lords so far. I have a house on the Northumberland coast, near Alnwick, which, as my noble friend will be aware, received the highest wind rating—98 mph—during this terrible storm, a storm which is very difficult to be ready for or predict.

My question is a little broader. My house sustained some damage, but that can be put right. Luckily, I did not lose any power there. What sort of audit will be carried out following the storm, not necessarily to learn lessons but to put things right? Thousands of trees in Kielder Forest, which my noble friend and I know well, have been destroyed. They will have to be replanted. All along the Northumberland coast, facilities of all kinds have been destroyed, such as golf courses on the links. These may not be a priority to some people right now, but nevertheless, they are important to some small business, such as cafés and restaurants. Agricultural equipment and facilities to store it have been destroyed. The insurance companies will no doubt be involved, and I hope that my noble friend will be asking them to be as speedy and sympathetic as possible in putting things right, but what audit will be carried out to look at the effects of this storm and how, perhaps, more aid can be given in a directed manner, to put things right as soon as possible for the communities that have suffered so much?

[Lord Callanan (Con)]

My noble friend makes some good points, and I am obviously pleased to hear that his property was not too badly affected. As he knows, I know the area well and I am pleased that his power managed to be left in place. He makes some very good points about the totality of the damage, not just to public infrastructure and essential services, but to local authorities’ premises and the property of private businesses; it will be immense. Our priority at the moment is to get everybody restored and back on to the network, but we will need to learn the lessons and look at what we can do to help the affected communities in future.

[Lord Inglewood (Non-Afl)]

My Lords, I declare an interest as chairman of the Cumbria Local Enterprise Partnership and a landowner in Cumbria who was not directly affected by the power cuts. Can the Minister confirm that the capacity of the infrastructure to respond to events like this is equivalent in the various parts of England, in particular between the north and south?

--- Later in debate ---

[Lord Callanan (Con)]

Yes, I believe that it is. The network operators are as resilient and able in the north of England as they are in the south. But a fact of the geography and communication of this country is that many more people live in the south. Those of us in the north always complain that when there are severe snowstorms and snow events, in the north nobody notices, but if a little bit of snow falls in London it is a catastrophe and all over the national news—which is probably characteristic of how many of our national broadcasters and reporters are based in and around the capital. It is up to us from the north to make sure that this does not happen in future and that cataclysmic events such as this get the appropriate coverage and respect.

House adjourned at 6.16 pm.

Power Outages: North of England

Lord Callanan Excerpts

Thursday 2nd December 2021 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

In the face of damage to infrastructure unprecedented in recent years, network engineering staff have been working tirelessly in challenging conditions to make repairs and restore power as quickly as possible. As of this morning, fewer than 20,000 people remain without power, and more than 950,000 have had their electricity restored. The Secretary of State has commissioned his officials to conduct a post-incident review to learn lessons and improve system resilience and customer support.

[Baroness McIntosh of Pickering (Con)]

I am grateful to my noble friend for his Answer. He will be aware that there was simply no way to report a power cut or to receive information as to how the planned power cut might be expected to be terminated. There was no mobile signal and, obviously, there was no access because there was no power to the internet, which are the two main means by which customers are asked to report a power outage. Will my noble friend ensure that the military engineers are sent in to support Northern Powergrid and others responsible for the remaining thousands of customers who are without power, and ensure that a rumour going around that some will be without power until the new year is absolutely untrue? In the long term, will my noble friend ensure that we reduce reliance on overhead power lines and the overhead transmission of power, and seek to put these giant electricity wires underground, as is the case in other parts of the country?

[Lord Callanan (Con)]

Of course, there are many lessons to be learned from the past week. It has been extremely challenging in the north of the country. I am from there myself and well aware of the issues: many people have contacted me about it. I just say to the noble Baroness that more than 4,000 engineers have been working to repair the damage, 750 generators have been deployed to provide emergency power and vulnerable customers have been prioritised for support. There are clearly issues about being able to contact Northern Powergrid, in particular; it was overwhelmed by the volume of calls. These were exceptionally strong winds of more than 100 miles per hour, and it is the most damage that has been done to the system for 15 years.

[Lord Fox (LD)]

My Lords, obviously, the capacity to respond is in question, and I am pleased to hear the Minister say that there will be a review ongoing, but the review is no good to the people who have lost power today. As the noble Baroness, Lady McIntosh, said, there are rumours—indeed, statements—that this could go on for some people right up to Christmas and the new year. Speaking in the House, the Secretary of State was unable to say whether that was true. He said

“I will do everything in my power to ensure that this does not happen.”—[Official Report, Commons, 1/12/21; col. 924.]

Given the structure of the industry, perhaps the Minister can say what is in the power of the Secretary of State and what practical help he has given to the people who still do not have power.

[Lord Callanan (Con)]

My colleague, Minister Hands, went up to visit the area yesterday, spoke to many people who had been affected and met many of the engineers who have been working around the clock over the past week to restore power. As the noble Lord said, there are a number of lessons that we need to learn from this. It was fairly unprecedented, but of course that is no compensation to the people affected, concentrated in the north of England and Scotland, who have been suffering greatly—I have heard many of their stories myself. We must give any resources or support that we can to the companies concerned. Restoring power is a complicated, technical exercise. We need to ensure that the people doing it, who are very skilled personnel, are working safely and we will want to support them in every possible way.

[Lord Berkeley (Lab)]

My Lords, this was a very bad series of storms in the north-east. I do not think it is unprecedented, because I recall a similar one in the south-east of England in 1987—some older noble Lords will remember that. It sometimes took weeks for the power to be reconnected. The noble Baroness, Lady McIntosh, said that the answer is to put more power lines underground. Is there not a conflict between the enormous cost of putting power underground and the fact that we do not like cutting trees down? Trees tend to fall on wires, railway lines and other such things. Is there a solution to this, or have we just got to accept that we love our trees, they will knock the wires down occasionally and we just have to accept that there will be delays and congratulate all the people trying to put it right?

[Lord Callanan (Con)]

I hope we will not just accept it. Balancing the different factors that the noble Lord mentioned, we need to put as many cables underground as possible, but he is right that that is much more expensive than running overhead lines. We need to do what we can to improve the resilience of the system, but I am sure we would meet many objections if the solution was to cut down more trees near power lines.

[Baroness Altmann (Con)]

My Lords, can my noble friend tell the House how many people are still without power—the figure of 50,000 has been mentioned; whether the Army has been asked to go in to support those people who are cut off in this awful winter weather; and what plans the Government have, given the prospect of climate change, with such storms likely to be increasingly prevalent, to forestall or deal with situations of this nature that arise in future?

[Lord Callanan (Con)]

My understanding is that there are currently about 20,000 people who are still without power. As I said, 950,000 have had their power restored. I understand the calls for the Army to be deployed, and its abilities are legendary, but it is important to recognise that in work such as this, safety priorities mean that only suitably qualified engineers can work on electricity network infrastructure. The military resource cannot support the restoration of electricity supplies, and network distribution operators have confirmed that military assistance is not necessary in this case.

[Lord Adonis (Lab)]

My Lords, can the Minister give us some idea of how much it would cost to put all these power lines underground?

--- Later in debate ---

[Lord Callanan (Con)]

I do not have that figure to hand. The noble Lord, with his work on infrastructure, will know that the cost of putting power lines underground is much greater than that of overhead lines, and these are difficult balances that have to be struck in any particular circumstance, particularly in rural communities or if the lines are going long-distance across the countryside. To put them all underground would be immensely expensive. If my officials have access to any figures, I will certainly let him have them.

[Baroness Bennett of Manor Castle (GP)]

My Lords, in responding to the noble Lord, Lord Berkeley, the Minister said that “we” need to ensure more resilience, but of course we are talking here about private companies, whose entire focus is on private profits. Will the Government ensure that regulators force those companies to build more resilience into the system?

[Lord Callanan (Con)]

They are indeed private companies, but resilience is in their interests as well as ours, and they are very tightly regulated through Ofgem. They will be seeking to learn all the lessons they can so that the system is suitably resilient in future.

[Baroness Hayman of Ullock (Lab)]

I feel increasingly frustrated by the lack of appreciation of the fact that many residents in the rural north have felt utterly abandoned by the Government. What have the Government done practically to support people who have had no heating, no water and no hot food? It is not good enough—I am really sorry to say this. The Government knew the extent of the crisis in advance. The noble Baroness, Lady Altmann, asked about the Army and the Minister talked about the fact its personnel were not qualified electricians. Surely, however, the Army could have gone to rural areas and brought in gas heaters, hot food, generators—anything to mitigate the impact. It has been appalling for many people.

[Lord Callanan (Con)]

I know that it has been appalling for many people; I come from the area myself and have spoken to many MPs in those areas. I have been contacted by many residents. There are Members of this House who also live in the north and have suffered. With regard to the noble Baroness’s questions, we are giving all the support we can to the companies responsible for delivering this, with the appropriately trained engineers. In answer to her question about generators, more than 750 have been deployed since the incident began. Almost 1 million customers experienced disruption, but 950,000 have had their power restored. As I said, 20,000 people are still, unfortunately, cut off from electricity supply, but I know that engineers are working at this moment to try to get them restored.

Homes: Environmental Standards

Lord Callanan Excerpts

Thursday 2nd December 2021 Lords Chamber

[Lord Dubs]

To ask Her Majesty’s Government what steps they are taking to provide guidance to homeowners and landlords to ensure that homes are improved to the highest possible environmental standards.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

The Government’s ambition is for as many homes as possible to reach EPC band C by 2035. Our Simple Energy Advice service provides tailored advice and guidance for home owners and landlords on how to improve the energy performance of their homes and has received over 1.7 million users to date. We are also looking to improve the tailoring of recommendations on energy performance certificates to individual properties.

[Lord Dubs (Lab)]

My Lords, it is a mammoth task to bring the many millions of homes in this country up to the standard suggested by the Minister. What are the Government going to do to ensure that we have enough trained workers, apprentices and others to do the work? Surely we need a massive training programme for the skilled workforce that is required to bring our homes up to standard.

[Lord Callanan (Con)]

I agree with the noble Lord: we need exactly that. We are working both through the Department for Education, with some of its training investments, and with many of the private sector providers which are also introducing new schemes, apprenticeships and training even as we speak. I went up to visit some of them only a few weeks ago, and the way industry is coming to the fore with these advancements is very impressive.

[The Lord Bishop of St Albans]

My Lords, we are going to need a massive step change if we are to achieve reductions in emissions. An important element of that will be providing financial incentives for people to adopt the new technologies and get their houses sorted out, such as the money people can make from selling surplus energy from their solar panels. What is Her Majesty’s Government’s assessment of other small, domestic, green energy production methods which might help us offset emissions from the built environment?

[Lord Callanan (Con)]

The right reverend Prelate is right to draw attention to some of the export guarantee schemes that we already have. I also draw his attention to the boiler upgrade scheme, which we will be introducing from April next year. That is £450 million of straight, upfront grants for people to install heat pumps.

[Baroness McIntosh of Pickering (Con)]

I remind my noble friend that I am president of National Energy Action. Does he agree that much can be achieved through building regulations to make houses more energy efficient and more resilient to flooding? Does he share my disappointment that the review for sustainable drainage systems will not be concluded till autumn next year? Will he use his good offices to ensure that the regulations are brought forward by the middle of next year at the very latest?

[Lord Callanan (Con)]

I thank my noble friend for her question. She is right that building regulations have an important role to play. From 2025, the future homes standard will ensure that new homes produce at least 75% lower CO₂ emissions compared to those built to current standards.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, will the Minister indicate when the Government will publish a long-term strategy for the sector, so that home owners and landlords seeking to meet new energy-efficient standards do not find in the years to come that they have to undertake further work to meet changed standards?

[Lord Callanan (Con)]

With regard to landlords, we consulted in the summer on raising energy performance standards of rented property to EPC C by 2028. I am happy to tell the noble Baroness that we will publish our response to that consultation shortly.

[Baroness Thornhill (LD)]

Does the Minister agree that, given the house price variability in the UK, landlords who operate in the lower-income market see this as an investment that will not be returned, as it is usually the tenant who pays the fuel bill? Does he agree that more incentives might be needed to meet targets in these areas? Can he reassure us that the—dare I say it—failed one-size-fits-all funding systems we have had previously will not be repeated and that local authorities will have more genuine autonomy to meet local needs and overcome their particular local barriers?

[Lord Callanan (Con)]

The noble Baroness makes a very good point. Local authorities are of course one of our key delivery partners through many of the schemes that we currently subsidise. We are spending billions of pounds on home upgrade grants, the local authority delivery scheme, the social housing decarbonisation fund and so on, and local authorities are our key partner in those projects.

[Baroness Blake of Leeds (Lab)]

Housing retrofitting is arguably one of the toughest infrastructure challenges the UK has ever seen. Concerted public sector intervention will be required to have any chance of achieving the legally binding and local net-zero targets. I was pleased to hear that the Minister visited Leeds last week to see schemes that are developing on the ground. However, we had to wait months for the Government’s heat and buildings strategy, and it was a massive letdown when it was published in October. Unfortunately, there was no replacement for the ill-fated Green Homes Grant for home owners. Can the Minister simply explain where the long-term retrofit plan is?

[Lord Callanan (Con)]

The heat and buildings strategy is our long-term retrofit plan. Within that, we announced a number of forthcoming consultations; previous questions have referred to the consultation on the private rented sector. The noble Baroness referenced the visit I made to Leeds last week to look at the local authority installed measures that are going so well. We continue to invest large sums of money in these projects.

[Lord Jones of Cheltenham (LD) [V]]

The Government propose that private landlords will be required to pay up to £10,000 to ensure that the properties they rent out have an energy performance rating of C or better. Given that NRLA data suggests that the net annual rental income for landlords is under £4,400 a year, what financial support will be available for private landlords to make the energy improvements required of them?

[Lord Callanan (Con)]

There are a number of financial packages that private landlords letting to low-income tenants can take advantage of; I referred to some of the schemes earlier. Private sector landlords are entitled to take advantage of them, but the noble Lord is right and points to one of the dilemmas in the private rented sector, which is that the investment is made by landlords but the benefit is gained by tenants through lower fuel bills.

[Baroness Jones of Moulsecoomb (GP)]

I hear the optimism and the claims, but, sadly, these are not carried through into government action and the Government know that full well. The Public Accounts Committee reported yesterday that the Government’s

“Green Homes Grant … Scheme … underperformed badly … and risks damaging … future efforts”

to deliver net zero. It also said that it is “not convinced” that BEIS has

“fully acknowledged the scale of its failures with this scheme.”

If you do not understand how or how badly you have failed, how will you ever deliver this green stuff that you clearly do not understand?

[Lord Callanan (Con)]

I am sorry the noble Baroness thinks we do not understand this “green stuff”—we have her advice to rely on, constantly, and she tells us all about it. To be serious, she is of course right that the National Audit Office acknowledged that the Green Homes Grant scheme did not deliver at the pace we would have expected. Nevertheless, we did deliver some 80,000 vouchers and spent some £300 million on precisely the kind of measures that I know the noble Baroness would support. We have certainly learned lessons from the Green Homes Grant and are taking those forward in future grant schemes, such as the boiler upgrade scheme to install more heat pumps, which I am sure the noble Baroness will also welcome.

Oil and Gas Authority: Remit

Lord Callanan Excerpts

Thursday 2nd December 2021 Lords Chamber

[Baroness Sheehan]

To ask Her Majesty’s Government what plans they have to align the remit of the Oil and Gas Authority from seeking the “maximum economic recovery” of North Sea oil and gas, to meeting the United Kingdom’s net-zero emissions commitments.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, even though renewable electricity capacity has grown five-fold since 2010, oil and gas are still essential for our energy needs and are vital to the production of many everyday essentials such as medicines, plastics, cosmetics and household appliances. They will remain so in declining amounts, even in a net-zero world. It is therefore essential that we have a managed transition away from fossil fuels, as set out in our landmark North Sea Transition Deal.

[Baroness Sheehan (LD)]

My Lords, the concentration of carbon dioxide in the global atmosphere stands at an unprecedented 417 parts per million. At the very least, we have to stop exploration for new fields. The truth is that the UK is the most profitable country in the world for large offshore oil and gas projects thanks to our MER policy. Companies can offset all spending on exploration against tax, as well as receiving millions of pounds in direct grants. What plans do the Government have to phase out such inefficient subsidies, as required by the Glasgow climate pact?

[Lord Callanan (Con)]

As the noble Baroness knows, we have some of the most ambitious climate targets of any major economy in the western world and we are committed to net zero; indeed, it is a legal obligation. However, we will still need declining amounts of oil and gas, and the choice we face is whether we wish to use that produced domestically or to import it. In every scenario set out by the reductions, we will still have a requirement for petroleum products.

[Baroness Altmann (Con)]

I congratulate the Government on their ambitious climate targets, but can my noble friend tell the House what proportion of the oil that will be extracted from the Cambo development is likely to be exported under current scenarios, as there seems to be little domestic demand for the heavy crude oil that Cambo and other future oilfields will produce? This seems more about exporting than about domestic energy security, and, in that context, some extra taxation on production would anticipate some of the future taxpayer costs that might arise if these oilfields end up being unable to export in a future scenario of other countries having to reduce their oil imports.

[Lord Callanan (Con)]

No decision has yet been made regarding the proposed Cambo field. The export market for oil and gas produced from Cambo is purely a commercial matter dictated by the market, the quality of oil and the different refinery capabilities. But, as I said, even with continued development, we expect the UK to remain a net importer of both oil and gas throughout the transition period when following the Climate Change Committee’s balanced net-zero pathway.

[Baroness Boycott (CB)]

My Lords, HMRC estimates that decommissioning will cost the taxpayer £18.3 billion over the next few decades. Oil and gas companies can claim tax back on all decommissioning as well as R&D, as the noble Baroness, Lady Sheehan, pointed out. We also have one of the lowest tax burdens for oil and gas in the world. Shell paid $1.8 billion in tax to Norway last year, but the UK gave it $99.1 million towards decommissioning costs. What has happened to the polluter pays principle? After all, the oil companies have made a lot of money and trashed our planet, and now we are going to help them continue to make money in order to transition to a better future.

[Lord Callanan (Con)]

It remains the case that the petroleum sector is a net payer of taxes to the UK Exchequer. I frankly do not understand the argument that we should stop all production in the North Sea and instead import those materials that we will continue to need in every scenario. We would be declining to give ourselves the revenue and spending extra to import those same products.

[Baroness Blackstone (Ind Lab)]

My Lords, a global poll of energy workers showed that more than half want to leave the fossil fuel industry. What are the Government doing to support these workers in the UK to ensure that there is a fair and just transition both for them and for their communities?

[Lord Callanan (Con)]

That is a very good question, and this is why we have our world-leading oil and gas sector transition deal, the North Sea Transition Deal. We are committed to it, with the support of all the oil and gas companies, to precisely bring about that happy state of affairs so that workers can transition to working in the clean economy.

[Lord Fox (LD)]

My Lords, speaking last month, Tim Eggar, the chairman of the Oil and Gas Authority, was bullish when referencing future offshore licensing rounds in the UK. He said:

“Let’s be clear, there is no current ban on exploration and licensing”—


and, of course, he is right. On the other hand, the International Energy Agency—the global expert on energy stats—is equally unequivocal that the development of any new gas or oil field is incompatible with net zero by 2050. Perhaps the Minister could help us here and confirm what his department’s objectives will be with regard to future licensing. Will it adhere to IEA advice, aim for net zero and end future exploration, or will it go along with the oil industry and keep on drilling?

[Lord Callanan (Con)]

We will go along with our net-zero commitment. I do not know how many times I have to repeat this for the benefit of the Liberal Democrats, but under all of the climate change scenarios, including that towards net zero, we will remain a net importer of oil and gas during that period. The choice that faces us is whether we wish to import them or produce them domestically and gain the tax revenues from that. I really cannot see why this is such a difficult concept for the Liberal Democrats to grasp.

[Lord Berkeley (Lab)]

My Lords, the Minister surely must know that the target of net zero means reduced consumption; whether it is produced in this country or imported, it is still our consumption. How is that compatible with the Oil and Gas Authority’s target of “maximum economic recovery” of oil from the North Sea? Bearing in mind that it takes so long to commission and decommission North Sea oil and gas plants, is it not about time that the Oil and Gas Authority changed its target now to give it time to achieve net-zero carbon when it is due?

[Lord Callanan (Con)]

I actually agree with the first part of the noble Lord’s question that production from the North Sea is on a declining pathway. Our usage is, of course, on a declining pathway as we transition to net zero.

[Lord Howell of Guildford (Con)]

My Lords, I declare an interest as set out in the register. Would it not be helpful to explain even more clearly to the public that none of the needed energy decarbonisation or transition is going to happen smoothly without a proper back-up of swing suppliers and fuel sources? Unless there is a prudent level of continued investment in fossil fuel sources, we will see many more of the violent fuel and energy price spikes we have now, which cause considerable stress and hardship for millions of households experiencing this every day and threaten our national security.

[Lord Callanan (Con)]

I know my noble friend speaks with great authority on this as a former Energy Minister himself, and I agree with him. Of course, the ultimate solution to the problem of high gas prices is to use less of it. Indeed, we are doing that, and we are continuing to develop our renewable sources. We have one of the largest productions of renewable sources in the western world. However, fossil fuel generation, such as unabated gas-fired generation, currently plays an important role in keeping Britain’s electricity system secure and stable. The development of clean energy technologies means that it will be used less frequently in future, but it will still be required.

[Lord Oates (LD)]

My Lords, I declare my interests as set out in the register. I think it is the Minister, rather than the Liberal Democrats, who may be failing to grasp the implications of the Government’s own policy. But is the Minister aware that if warming is kept to well below 2 degrees in line with the Paris Agreement, new oilfields such as Cambo will become stranded assets? In the light of that, will the Government ensure that the risks that such stranded assets pose to financial stability are properly reflected in increased capital adequacy requirements for those institutions that continue to finance them?

[Lord Callanan (Con)]

We have a role in the licensing of future developments, but whether to proceed with them is, of course, a commercial decision for the operators concerned. I am sure they will bear the noble Lord’s comments in mind. I am sure many of the big companies would not wish to end up with stranded assets either.

[Baroness Blake of Leeds (Lab)]

I am sure the Minister will say that it is right that we await the Oil and Gas Authority’s scrutiny report looking into the proposed Cambo oil and gas field. But surely it never made sense for the Government to consider progressing with the plans, especially in the run-up to COP 26 and now post COP. I reiterate: will the Government listen to the science and, starting with Cambo, help workers and industry wind down production of oil and gas in the North Sea?

[Lord Callanan (Con)]

The noble Baroness answers her own question—indeed, I would say, “Let’s wait for the decision of OPRED before we make any final observations about this.” But, as I mentioned to her colleague earlier, at the same time we are proceeding with our ground-breaking North Sea Transition Deal to ensure exactly what she asks: to help workers to transition away from these industries in the future.

[The Lord Speaker (Lord McFall of Alcluith)]

My Lords, the time allowed for this Question has elapsed.

Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021

Lord Callanan Excerpts

Tuesday 30th November 2021 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021.

Relevant document: 19th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I beg to move that these draft regulations, which were laid before the House on 28 October 2021, be approved. These regulations will amend the Companies Act 2006 to require certain publicly quoted and large private companies to include disclosures in their annual reports of climate change-related risks and opportunities material to them, aligned with the international framework of the Task Force on Climate-related Financial Disclosures; I shall refer to it as the TCFD in future.

This TCFD SI will help to deliver on the Government’s commitment to make climate-related financial disclosures mandatory across the economy by 2025, with a significant portion of those mandatory requirements in place by 2023. This commitment was set out in the Government’s paper, A Roadmap towards Mandatory Climate-Related Disclosures, published in November last year. The Government have made it clear that we view action to address climate change as a priority. Internationally, we are taking a leading role to promote action through our presidency of the Conference of the Parties to the UN Framework Convention on Climate Change— or COP.

Domestically, we are working to ensure that the UK achieves net-zero greenhouse gas emissions by 2050. The Government have published our net-zero strategy, setting out the measures to transition to a green and sustainable future. Transparency from businesses about climate risks and opportunities is key to delivering our net-zero ambition. Without an accurate assessment of climate risk by companies, it will be impossible for them to assess what action is needed to address this. That is why this instrument will require the UK’s largest companies to assess, disclose and take actions to manage climate-related risks and opportunities. This information should be a key part of all investment decisions and be taken into account in the strategy of every business.

Some large UK companies are, of course, already reporting on climate risks. However, to date, these disclosures have been variable in quality and quantity. This inconsistency makes it incredibly difficult for investors to compare investment opportunities and risks across companies, let alone across different markets. Many organisations are also not making the fuller disclosures needed to inform business risk and investment decisions.

The Government have already introduced regulations to require climate disclosures from occupational pension schemes through the Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021, which were approved by both Houses and entered into force on 1 October this year. The Financial Conduct Authority has introduced TCFD-aligned disclosures for premium listed companies and recently conducted a consultation on extending this to standard listed companies.

Let me take a moment to talk through what these regulations actually do. The instrument will require companies in scope to assess and make specific climate-related disclosures in respect of governance, strategy, risk management, and metrics and targets. These headings broadly reflect the TCFD’s four-pillar approach to reporting. These requirements will apply to all PIEs—public interest entities—and companies traded on the Alternative Investment Market of the London Stock Exchange with over 500 employees. They will also apply to private companies with over 500 employees and over £500 million of turnover. The disclosure requirements will commence for accounting periods starting on or after 6 April 2022. My department will prepare non-binding guidance to help companies that fall into scope. This will provide additional information to help companies understand the requirements and improve disclosures.

The Government consulted on the policy in these regulations between March and May this year. The consultation generated 137 responses from a range of companies, financial institutions, civil society organisations, trade associations and accountancy firms. Officials also participated in three online events to try to engage wider audiences. Overall, the policy proposals received wide support.

The consultation led to two policy changes in response to the feedback that was received. First, to simplify reporting for those companies that are also subject to FCA rules, the regulations’ wording is now more closely aligned to that of the climate-related financial disclosures within the TCFD’s framework. Secondly, respondents to the consultation called for companies to be required to analyse their risks against specific climate-change scenarios. As such, these regulations include the requirement for companies to assess their climate risks against different scenarios and report this on a qualitative basis.

The draft regulations will require climate disclosures in the annual reports from just over 1,300 of the largest companies in the United Kingdom. Companies are of course at different stages of their journey towards net zero and producing robust climate-related disclosures. Our guidance will help companies in that journey and signpost some further sources of information, which can be drawn on according to their particular needs. In parallel, we also encourage the market-led evolution of good practices on disclosures.

The Government want to ensure that companies and investors can make the most of the opportunities created as we transition the economy to net zero and sustainability. To do this, we need companies to understand the risks and opportunities and to report transparently on them. I therefore commend these regulations to the House.

--- Later in debate ---

[Lord Lennie (Lab)]

We shall see, my Lords. We debate these regulations on the back of the most important summit the UK has ever held—a summit which future generations will look back on as when we either met the moment or missed the opportunity. It is increasingly clear that progress at COP 26 was modest and, too often, action will come too late. The Climate Action Tracker has stated that Glasgow commitments mean that, rather than limiting warming to the target 1.5 degrees, we are on track for a devastating 2.4-degree rise.

This is the backdrop to which we debate these regulations, which I hope have not come too late, as they will play an essential part in reaching net zero by 2050, as well as ensuring businesses both mitigate the risks of climate change and seize opportunities.

Today’s instrument introduces new reporting obligations for certain UK registered companies, as the Minister explained, including certain listed companies and companies with more than 500 employees and a turnover of more than £500 million, which require them to report climate-related financial information as part of their strategic report. This is in line with the recommendations of the task force on climate-related financial disclosures—a framework which includes 11 recommendations forming, as we have heard, four pillars: governance, strategy, risk management, and metrics and targets.

Support has been coalescing around these recommendations. The TCFD’s latest annual status report states that the number of organisations endorsing the task force’s recommendations has increased to more than 2,600—an annual increase of 70%.

We should remember that, regardless of the serious impact on migration, security and hunger, climate chaos is also costly. The Intergovernmental Panel on Climate Change estimates $69 trillion in global financial losses by 2100 from a 2-degree warming scenario.

Getting to this point has taken a while, and climate delay has been a repeated issue with this Government. The task force on climate-related financial disclosures published its recommendations back in 2017. Then the UK Government’s green finance strategy set out an expectation that all listed companies and large asset owners should disclose in line with the TCFD’s recommendations back in 2019, but did not hold a consultation on the proposals until earlier this year. As we have heard, these new requirements are to come into force next April, 2022—five years after the task force on climate-related financial disclosures published its recommendations.

According to BEIS, regulatory action is necessary because the current voluntary approach

“is unlikely to be effective … current levels of disclosure across the economy are low and reporting quality varies significantly.”

If we look in detail at the impact assessment, this is clear. Looking at the central scenario for additional groups having to comply with reporting requirements, it reveals that only 34% of the 1,350 companies in scope have already aligned with governance, 24% with risk management and only 14% with scenario analysis. The impact assessment estimates that 1,350 companies are in scope of the regulations. Can the Minister tell us what percentage of the UK economy this covers?

The impact assessment states that

“When a UK group is in scope, all the subsidiaries (UK and overseas) belonging to the same UK group, would be expected to hold some degree of reporting burden.”


What does “some degree” mean? These regulations also focus on companies producing mandatory qualitative scenario analysis. The impact assessment states that the Government

“understand that while some companies might decide to go beyond these requirements … there will be some companies that lack the expertise, resources and capabilities to undertake quantitative scenario analysis by the time these regulations come into force.”

How many companies are predicted to produce quantitative analysis as well? What will be done to encourage both qualitative and quantitative analysis to be produced? When does the Minister expect quantification to be phased in?

It is regrettable that, first, we are unable to study the non-binding guidance alongside these regulations and, secondly, that the LLPs regulations have not been laid at the same time as this SI, due to their interlinking nature. The Secondary Legislation Scrutiny Committee flagged this SI as an instrument of interest:

“We note that the Department will produce guidance on the new reporting requirements which, according to the Impact Assessment, will be around 125 pages long. This suggests a considerable degree of complexity. In the absence of the actual guidance, it is difficult to form a view of the nature and extent of the new reporting requirements, and how robust the Department’s assessment of the impact on businesses is.”


Does the Minister agree that there will be a “considerable degree of complexity”? Why is the guidance not ready for today’s debate? In the consultation stage impact assessment, the Government had assumed that guidance would be about 75 pages long. Why has this increased by 50 pages according to the Secondary Legislation Scrutiny Committee’s report?

The Government state that the combined impact on business of these regulations and those which apply to LLPs is £145.3 million. The impact assessment states that costs result from companies needing

“to get familiar with BEIS Guidance, TCFD Guidance and other companies’ disclosures before producing their own report”,

as well as ongoing costs which include collecting and processing information, strategy and risk management. How are the Government communicating to and supporting businesses with this additional cost?

I would like some clarification from the Minister on enforcement. The impact assessment states that:

“We also expect there to be an additional ongoing cost of monitoring, supervision and enforcement to the Financial Reporting Council (FRC) as the appropriate regulating body for disclosures”,


but is the FRC properly resourced to take on this additional burden? Can the Minister explain how the Government will work closely with the Financial Conduct Authority and the Financial Reporting Council to ensure monitoring and enforcement frameworks operate in a coherent and complementary way? What happens if these companies fail to follow these obligations or publish substandard information? Will there be fines? The impact assessment states that “reporting quality varies significantly”, as the Minister said, so can these regulations ensure that this does not continue to be the case? A review before 6 April 2027 is welcome, but the impact assessment states that there will be “a light touch review” in 2023. What will this consist of?

I end by speaking about small and medium-sized enterprises. As the impact assessment states,

“Climate change poses significant risks to businesses,”

and we have to include SMEs within that statement. The cost implication of these risks means that SMEs can be even more exposed to the risks and to being squeezed out of the opportunities of climate change. Does the Minister see these obligations being extended to SMEs soon? The impact assessment states,

“disclosure can have cascade effects through the supply chain”.

Can the Minister confirm they are not just relying on trickle-down climate economics to see a change in reporting behaviour for SMEs? The cost implications for SMEs make it essential that the Government have a strategy to support them.

To conclude, these regulations are welcome, but they represent only a small part of the picture of how the Government need to help businesses respond to the risks and opportunities of climate change.

[Lord Callanan (Con)]

I thank both noble Lords. I know that they had some questions, which I will come on to shortly, but both their contributions emphasised how much support there is for these regulations. Although people have concerns about the detail, I think that we are at one in terms of general principles. That reflects the fairly broad support we have for introducing them.

The Government appreciate that these regulations will entail some additional costs to the UK’s largest companies, but we think that the legal targets we have make it essential for us to act if we are to achieve net-zero greenhouse gas emissions by 2050. The process of preparing the disclosures required by these regulations will help businesses to understand their climate-related risks and opportunities, and will bring a greater focus on how to manage them. The increased transparency will enable investors to make better-informed decisions about where to allocate capital in a consistent and climate-positive manner.

The proposals take account of business capabilities and business readiness. For instance, the introduction of qualitative scenario analysis allows companies to use this important tool to manage climate risks in a way that encourages capabilities to grow over time.

The noble Lord, Lord Vaux, raised the concern that annual reports and accounts are becoming more and more full of ESG information, such that it is sometimes hard to see the wood from the trees. He asked whether my department could commit to keeping the regulations under review in the interim. I can tell him that the Government will indeed review the effectiveness of these provisions. If we see that they are not working, we will certainly look at taking further measures. We will conduct a statutory review of the regulations after five years, as is normal.

In response to the noble Lord, Lord Lennie, I can tell him that we are publishing non-binding Q&A style guidance targeted to help companies making the disclosures. It provides clarification on the disclosures against each of these specific requirements. There is, in fact, already significant background material on how to disclose according to TCFD, which itself has recommendations and guidance available online. There is also, by way of background material, the existing guidance from the Financial Conduct Authority on the climate-disclosure provisions in the UK listing rules, and indeed from the Department for Work and Pensions on the disclosure requirements that exist for pension funds.

The department assumed to model costs that companies might read 125 pages for familiarisation before making the appropriate climate disclosures. We hope and anticipate that BEIS’s Q&A guidance on the regulations, which explains their legal requirements and desirable outcomes, will be well short of that page total. However, companies might want to consult wider background material and information to familiarise themselves with the disclosures. Accordingly, we made that assumption in our cost modelling to ensure that our impact assessment did not underestimate the true cost of these regulations to business. As I said, we appreciate that there will be a cost to implementing them.

On the point the noble Lord raised about monitoring and enforcement, the FRC will take on the monitoring of the climate-related disclosures alongside the other contents of the strategic report. The Government consulted earlier this year on reforms to the FRC. We will publish a response to that White Paper and our plans to create ARGA very shortly.

The responses to the consultation showed that many respondents considered that scenario analysis is important for meaningful climate disclosures. However, they also recognised that it is one of the most challenging and costly aspects of the TCFD to implement. We believe that requiring qualitative disclosures strikes an appropriate balance between, on the one hand, requiring companies to consider this important element in business planning, and, on the other, recognising that this is an emerging area of competence and one that will be new to many businesses and companies. So, although some companies are already doing quantitative scenario analysis to produce excellent disclosures, we did not believe that all companies within scope would be able to produce such analysis at this time; therefore, the regulations take a proportionate approach to enable businesses to grow their capabilities.

Regulatory Enforcement and Sanctions Act 2008 (Amendment to Schedule 3) (England) Order 2021

Lord Callanan Excerpts

Tuesday 30th November 2021 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Regulatory Enforcement and Sanctions Act 2008 (Amendment to Schedule 3) (England) Order 2021.

Relevant document: 19th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I beg to move that the draft Regulatory Enforcement and Sanctions Act 2008 (Amendment to Schedule 3) (England) Order 2021, which was laid before the House on 1 November 2021, be approved.

This instrument will add Part 2A of the of the Public Health (Control of Disease) Act 1984, as it applies to England, to Schedule 3 to the Regulatory Enforcement and Sanctions Act 2008. The reason for adding Part 2A to Schedule 3 to RESA is that it brings Part 2A and regulations made under it within the scope of the primary authority scheme as it applies in England. From now on, I will refer to Part 2A of the Public Health (Control of Disease) Act 1984 simply as “Part 2A”. I will also refer to the Regulatory Enforcement and Sanctions Act 2008 as “RESA”, and to the primary authority scheme as “the scheme”.

As I am sure noble Lords will recognise, businesses operating in the UK need to comply with a wide range of legislation, much of which is enforced by local authorities. The scheme has been developed to assist businesses and allow them to receive tailored support in relation to one or more specific areas of law. With a dedicated team, a primary authority partnership makes it easier for businesses to comply with the law, reducing the costs of compliance without reducing regulatory protections. Businesses can invest in products, practices and procedures, knowing that the resources they devote to compliance are recognisable throughout the country across local authority boundaries, resulting in a consistent approach.

Advice provided by the primary authority carries legal weight and provides assurance for the business when dealing with other local authorities that regulate it. The area of law that we are concerned with today is public health regulation. Bringing Part 2A within the scheme will ensure that businesses in England can received assured advice, referred to as “primary authority advice”, on complying with public health regulations made under Part 2A, including in the context of a future pandemic.

Let me now address each of these areas in more detail. I will start with an explanation of Part 2A and its addition to Schedule 3 of RESA, before providing more detail about the scheme. I will also briefly outline the support that the order has already received.

First, Part 2A enables action to be taken to deal with cases of infection or contamination presenting significant harm to human health, if and when they arise. Under Part 2A, a local authority can, where necessary, apply to a magistrate for a range of orders to reduce or remove risks arising from persons, things or premises that are or may be infectious or contaminated and which could present significant harm to health and a risk that others might be infected or contaminated. This is known as a Part 2A order. It is intended to be used as a last resort when other interventions by the local authority have either failed or are not suitable. A magistrate may grant a Part 2A order to a local authority if they are satisfied that the criteria set out in the Health Protection Regulations 2010 are met. Part 2A also provides powers for regulations to be made in an emergency to address a serious and imminent threat to public health.

Secondly, I will explain why Part 2A, as it applies in England, needs to be added to Schedule 3 to RESA. As noble Lords have heard, the order effects the inclusion of Part 2A in the primary authority scheme. To be within scope of the scheme, legislation must be listed in Schedule 3 to RESA, or be made under legislation listed in Schedule 3, or under Section 2(2) of the European Communities Act 1972. It must relate to certain specified matters and be enforced by local authorities. RESA requires any amendments to Schedule 3 to be made using the draft affirmative procedure for statutory instruments.

If Part 2A is not added to Schedule 3 of RESA, it would be necessary to amend Schedule 3 on an individual basis to bring each regulation made under Part 2A within scope of the scheme. This would delay the provision of primary authority advice at the time of a public health emergency. In contrast, by bringing Part 2A and regulations made under it within the scope of the scheme, businesses in England will be able to obtain primary authority advice on compliance with public health regulations from the outset of a public health emergency.

Thirdly, I will briefly describe the primary authority scheme. This was established under RESA and has been in operation since 2009. It was created in response to the Hampton report of 2005, which noted widespread inconsistencies of regulatory interpretation between different local authorities. RESA establishes a statutory framework for a business to form a partnership with a local authority—which becomes the primary authority—for it to receive support from that primary authority in respect of complying with regulations introduced under a relevant enactment. Once a partnership has been nominated by the Secretary of State, the primary authority can issue tailored advice to the business on compliance with legislation in scope of the scheme. The receipt of primary authority advice enables businesses to avoid the cost and regulatory burden associated with inconsistent interpretation and application of the law by different local authorities in respect of the same regulatory requirements.

Where a local authority is proposing to take enforcement action against a business, the primary authority will review the proposed action and consider whether it is consistent with previous primary authority advice. In the event of any disagreement between the primary authority and a local authority over whether the proposed enforcement action is consistent with the original primary authority advice, the Secretary of State is empowered to make a determination.

There are many benefits to the scheme. Primary authority partnerships facilitate a more productive and proactive regulatory relationship between businesses and local authorities. The public also benefit when businesses properly comply with regulations. There are benefits for local authorities as well. If one local authority—the primary authority—provides a business with robust, reliable and consistent advice, it will allow other local authorities to target their resources more effectively, thereby avoiding duplication. Transparency is maintained via a central register through which local authorities can search for primary authority advice. Finally, the scheme gives regulators greater clarity as to where responsibility lies. It improves the consistency of local regulation and supports local economic growth through stronger business relationships.

Finally, let me highlight that there has been strong support among business stakeholders, local authorities and trade associations for the addition of Part 2A to Schedule 3 to RESA. The challenges that local authorities recently experienced in interpreting, at pace, regulations made under Part 2A to reduce the impact of the Covid-19 pandemic, and the associated burdens experienced by businesses in trying to comply with these differing interpretations, led to calls for Part 2A to be brought within scope of the scheme. For example, in November 2020 the British Retail Consortium, which represents over 170 major retailers, wrote to the then Business Secretary, Alok Sharma, requesting that Part 2A be brought within scope. This was in the context that in 2020 approximately 46,000 businesses with an existing primary authority partnership received informal advice on coronavirus regulations made under Part 2A.

In conclusion, we are introducing this order to bring Part 2A, as it applies in England, within scope of the scheme. As I have said, the aim is to ensure that businesses in England will be able to obtain primary authority advice on compliance with regulations made under Part 2A from the outset of any future public health emergency. Due to the Covid-19 pandemic, which is unfortunately unlikely to be the last public health emergency this country will face, there is strong recognition among business stakeholders, local authorities and trade associations of the benefit of bringing Part 2A within scope of the scheme. I therefore commend this order to the Committee.

[Lord Lennie (Lab)]

My Lords, as we have heard, these regulations extend the scope of the primary authority scheme, as provided under the Regulatory Enforcement and Sanctions Act 2008, to include regulations made under the Public Health (Control of Disease) Act 1984 that deal with public health protection. The Government have said that this will have the effect of enabling businesses to form primary authority partnerships with local authorities in England in relation to public health protection, including in the context of a future pandemic.

The Explanatory Memorandum reveals quite a startling statistic: there is a 5% likelihood, in any given year, of a pandemic. It also states that it is estimated that a severe pandemic, of high mortality, will occur at a 2% rate per year and a less severe pandemic, of low mortality, will occur at a 3% rate per year. Can the Minister explain whether this likelihood has increased due to the Covid pandemic we are experiencing? With the knowledge of the 5% figure, can he also explain why the Government are dragging their feet over launching the public inquiry into Covid-19?

We must surely learn the lessons of this pandemic as soon as possible, given the scenario predicting a 5% likelihood of pandemics in any future year. This change is clearly taking place in response to the role that business and the private sector have played during the Covid pandemic. What the Government have asked from business and the wider private sector during it is unprecedented in peacetime. We must thank businesses for stepping up when we needed them to do so most.

The Explanatory Memorandum reveals that in 2020, approximately 46,000 businesses with an existing partnership under the primary authority scheme were receiving informal advice on regulations made under the Public Health (Control of Disease) Act 1984. The Government have stated that this change will enable these businesses to access consistent and reliable advice on compliance and that business stakeholders, local authorities and trade associations in England have requested this change. Can the Minister repeat how many there were—I am not sure that he told us—and did they include organisations representing small and medium-sized enterprises? Can he also confirm that businesses have struggled to get any reliable advice during the pandemic, and whether there have been any serious consequences from not being able to do so?

The Welsh Government have apparently decided not to apply this statutory instrument to Wales. The First Minister of Wales declined to consent to the amendment in July 2021. Can the Minister explain why, and what type of engagement took place with the Welsh Minister?

The Explanatory Memorandum revealed this:

“The impact on business, charities or voluntary bodies is an expected net benefit to business in England of approximately £20.9 m over 2021 to 2030.”


Can the Minister provide some clarity on how that benefit is expected to be shared between large businesses, SMEs and charities? I look forward to his reply.

[Lord Callanan (Con)]

I thank the noble Lord, Lord Lennie, for his contribution. As I said initially, the order will ensure that businesses can receive consistent and reliable advice in respect of regulations brought in to deal with the public health emergency, thereby reducing the burdens on businesses and providing benefits more widely to local authorities and the public. It does that by adding Part 2A to Schedule 3 to RESA, thereby bringing Part 2A and any regulations made under it within the scope of the scheme as it applies in England.

Our experience of the coronavirus pandemic has shown how important it is for businesses to receive clear regulatory guidance. With another pandemic likely to happen—possibly—in our lifetime, it is important to be well prepared. So, in response to the questions asked by the noble Lord, Lord Lennie, the 5% that he mentioned includes the current pandemic and is based on the outbreak of pandemics over the past 100 years. However, as I am sure he appreciates, the provision of the new Covid regulations and any inquiry into the Government’s response to the Covid-19 pandemic are outside the scope of this statutory instrument debate. As soon as I have more information on those points, I will be sure to share it with the noble Lord.

The noble Lord also asked how many businesses are in the scheme. The de minimis self-certification assessment noted that, in December 2020, there were around 106,000 businesses in the primary authority scheme. Based on an estimated annual flat and natural growth rate of 2,500, this means that, between 2021 and 2030, approximately 109,000 to 131,000 businesses will be in the primary authority scheme.

The noble Lord made an important point about why Welsh Ministers did not consent to the order applying in Wales. The UK Government believe that there are benefits to businesses in England from receiving consistent public authority advice on legislation brought in during a public health emergency, and that the order should be brought in so that those benefits are realised. My understanding is that the position of the Welsh First Minister, Mark Drakeford, is that the context is different in Wales. His view is that local authorities already can and do capitalise on close working relationships to reach a common approach to guidance and enforcement of health protection regulations, and therefore do not need to provide for this formally. It is of course within his lawful discretion to decline consent to this order as this is a devolved matter; as always, we will continue to engage with Welsh Ministers on devolved matters within the scope of the primary authority regime.

The noble Lord asked for clarity on the benefit between large and small businesses. All businesses receive consistent, assured advice, and SMEs do not have to pay for costly legal interpretations. Small businesses may also join a co-ordinated partnership and receive the benefits of primary authority advice in that way. The primary authority scheme is voluntary; obviously, businesses will participate only if they consider that doing so will benefit them.

In supporting this order, we support businesses being in a better position to understand and comply with regulations enacted during a public health emergency. With thanks to the noble Lord, Lord Lennie, for the sole contribution, I commend this order to the Committee.

Motion agreed.

Advanced Research and Invention Agency Bill

Lord Callanan Excerpts

Committee stage
Monday 22nd November 2021 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I thank the noble Viscount, Lord Stansgate, for tabling these amendments and for the discussions so far. I will not comment at length, given the discussions that we had last week about ARIA’s research focus and relationship with other research organisations, but I will respond to noble Lords who have spoken today.

To take up the point of my noble friend Lord Willetts, ARIA needs to be as complementary as possible in its functions to other research and innovation organisations. This of course includes UKRI, which retains its system-wide responsibilities and also funds high-risk research. However, ARIA’s fit within this system goes beyond just having regard to the work of other players; it is about actively engaging and making the most of the system. We are currently looking to recruit a brilliant CEO who will form a collaborative and open network of partners right across the UK’s R&D landscape as part of embedding ARIA as a high-functioning organisation for years to come.

Amendment 49 is on a new subject, ARIA’s title. I agree that the focus should be on what the agency does, but let me say a few words about why we decided to call it the Advanced Research and Invention Agency. The noble Viscount, Lord Stansgate, will be aware that ARPA was the title of the US agency originally established in 1958; ARPA subsequently evolved into DARPA and the model was then developed, as my noble friend Lord Vaizey reminded us, in forming ARPA-E, IARPA and ARPA-H—somebody has been having great fun with the acronyms. It is also the inspiration for the agency that we are discussing today.

However, I stress that ARPA is only the inspiration. ARIA will learn many lessons from the original ARPA, but it is not a carbon copy. It takes into account what we think to be the distinct UK R&D landscape. As we have discussed, given the levers that the Government already have to gear R&D funding to national and strategic priorities, one key departure is that we are not mandating a specific area, such as defence, that ARIA must focus on. There may be other areas and ways in which ARIA’s incoming leadership wish to adapt the original ARPA model, given what we think is a fairly unique context. Calling this new agency ARPA could give a somewhat confusing message about its functions and easily result in it being mistaken for a purely defence-focused research funding agency. I strongly believe that ARIA must have its own brand and identity; that will be integral and crucial to its success.

I also believe that “invention” is a useful element of the agency’s title, which has been well received during the passage of the Bill in the other place and, so far, in our House, as well as by many in the research community. Together, “advanced”, “research” and “invention” signify that ARIA will be focused on high-risk research and clear, soluble challenges in the development and deployment of what we hope will be breakthrough technology. I completely recognise that the agency could be called many things—we could probably get 20 or 30 different examples in this Room alone—but I assure noble Lords that we have thought carefully about all the many options and come to the position, across government and with contributions from all departments, that the Advanced Research and Invention Agency is a clear, bold title, which clearly signifies what we want the agency to do and how we want its functions to evolve. With that explanation, I hope that the noble Viscount, Lord Stansgate, will not feel the need to press his amendments.

[Baroness Chapman of Darlington (Lab)]

I beg leave to withdraw the amendment.

--- Later in debate ---

The noble Baroness, Lady Chapman, interestingly enough, did not speak to her Amendment 42, but it is all of a piece. I do not think that I need to say much, except to ask why we should not treat ARIA in line with other public bodies. The Government have had to perform contortions of statutory drafting to exclude ARIA. We have all sorts of weird and wonderful amendments coming later, which seems extraordinary. Why on earth should not ARIA be subject to exactly the same procurement regime as other public bodies? The principle that we have talked about on the FoIA is exactly the same as it is in regard to procurement.

[Lord Callanan (Con)]

I start with Amendment 24 from the noble Baroness, Lady Chapman, Amendment 32A from the noble Viscount, Lord Stansgate, and Amendment 39 from the noble Lord, Lord Clement-Jones, which all deal with the Freedom of Information Act. As I said at Second Reading, our decision not to subject ARIA to FoI was made after much consideration. As on so many of these things, I find myself in full agreement with my noble friend Lady Noakes and I thank my noble friend Lord Patten for his support during the Second Reading debate.

I was hoping that some of my noble friends who have been in government would comment on how they found the Freedom of Information Act in government. From my point of view, it is a truly malign piece of legislation. At the risk of trashing his reputation even further in the Labour Party, I agree with Tony Blair on this matter. I agree with the noble Lord, Lord Fox, that all information on government contracts et cetera should be published, even if it is embarrassing for the Government. However, I think he will find that all the contracts to which he refers were not released under freedom of information but under normal government contract transparency.

In my experience, not much is ever released under freedom of information that causes any problems for government; it is normally stuff that is released in the normal transparency of contract negotiations and government transparency returns. I am fully in favour of decisions, and information about them, being released, but I fail to see how the processology of government benefits at all from FoI disclosures. I find that people just modify their behaviour and communication to take account of the fact that private conversations may be released in the future. I genuinely do not think that it achieves anything at all, but that is my personal perspective and not necessarily a matter for this debate. It was also new to me to discover at Second Reading that the US charges a fee for freedom of information disclosures. I think that is an excellent idea, even if it is only a nominal amount to get rid of some of the somewhat spurious fishing expeditions that many go people in for. Anyway, that is a separate matter for different discussions.

In contrast to UKRI, which comprises the seven research councils, ARIA is a new, unique organisation that we anticipate will attract a disproportionate number of FoI requests for its size. On the point made by the noble Lord, Lord Browne, I would reiterate, as I did at Second Reading, that comparisons between ARIA and DARPA do not hold, precisely because, as I said, DARPA adds a standard fee to the requester, which is not comparable to the situation in the UK, although we should certainly consider it.

[Lord Clement-Jones (LD)]

My Lords, if I may have the privilege of intervening—a wonderful feeling, having been under different rules for a period of time—does the Minister not accept what the noble Lord, Lord Browne, said: that the individual research councils receive no more than the number of requests that DARPA receive, something of the order of 47? It is quite coincidental that the average is 47. Why does the Minister think that ARIA will be inundated with freedom of information requests?

[Lord Callanan (Con)]

Because it is a fairly new and exciting agency doing new things. I suppose we will have to disagree on that. There is no point and nothing to be gained by doing otherwise. In designing ARIA, we are envisaging a lean agency that will employ people in the tens. I do not know how many people across government are currently employed to respond to the hundreds if not thousands of FoI requests that we get, but given the bundles of documentation that sometimes pass my desk, there must be many hundreds of civil servants engaged in doing nothing other than responding to these fishing expeditions. As I said, ARIA will be an agency employing people in the tens, with around 1% of the R&D budget.

[Lord Browne of Ladyton (Lab)]

My Lords, I am grateful to the Minister for giving way. I invite him to reread what he said at Second Reading. He virtually invited people who are being refused the opportunity to ask ARIA questions to ask them of his department. Then it will be a true comparison. I invited him to compare an organisation of the nature of a research council with one such as DARPA, not to compare DARPA with a government department. At Second Reading, he himself listed a whole number of organisations, including government departments, that are subject to FoI. It is an invitation to people who are refused the discipline of talking to a smaller organisation in a proportionate way to flood a department with requests and take up even more time. With respect to the Minister, I think this is verging on an irresponsible attitude towards this argument, even in his own interests.

[Lord Callanan (Con)]

I can assure the noble Lord that people need no invitation from me to table FoI requests to my department. They are well capable of doing it. I think some people already have forms set up on their word processors to submit some of these things with gay abandon.

Anyway, in designing ARIA we are envisaging an agency that will be lean and streamlined. It will employ people in the tens, and we strongly believe that it needs to be agile and efficient. “Lean”, “streamlined” and “efficient” are not always words that are used to describe nominal usual public bodies. However, as my noble friend Lady Noakes has attested to, this context has always been at the forefront of our minds in bringing forward this Bill.

We have carefully considered which procedures are conducive to ARIA’s success. I recognise here that part of ARIA’s success depends on it gaining public trust and being transparent and accountable for its activities, as the noble Lord, Lord Fox, called for. I believe that we have found the right balance in freeing this small agency to fund high-risk, critical research but to do it differently, with appropriate visibility to Parliament and taxpayers.

The noble Lord, Lord Broers, raised some concerns about the protection of technological gains in sensitive projects. I note at this point that there are, of course, existing commercial confidentiality exemptions to the FoI Act, as referenced by the noble Lord, Lord Clement-Jones. All requests still require processing and we are conscious of this in making the decisions to exclude ARIA.

Much has also been said on transparency today in the contributions from the noble Baroness, Lady Chapman, and the noble Viscount, Lord Stansgate. I maintain that the right provisions to hold ARIA to account are the ones that I outlined at Second Reading. They are the publishing of an annual report and statement of accounts, which will be laid before Parliament, as set out in the Bill; being subject to annual audits by the National Audit Office; and being accountable to Parliament through the CEO, who will be the agency’s accounting officer.

In addition, as the noble Lord, Lord Browne, has pointed out, ARIA will remain a BEIS arm’s-length body, and my department will work with ARIA’s leadership to agree the appropriate arrangements for its scrutiny and oversight in the interests of good governance.

We expect ARIA, as far as possible, to have a culture of transparency, and we hope that will be championed by its incoming leadership. Working across the R&D community, and indeed with Parliament and the public, to communicate ARIA’s activities will be critical to ARIA’s commercial and research success. Given that, I hope the Committee will understand that I cannot accept or agree with this amendment. I am sure the noble Lord, Lord Clement-Jones, has a different opinion.

I turn now to the exemption the Bill affords ARIA from the Public Contracts Regulations 2015, and to Amendments 24 and 42 in the name of the noble Baroness, Lady Chapman. I think she omitted to speak in favour of her amendment, but I will respond to it anyway.

Our decision to exempt ARIA from the contracting authority obligations in the Public Contracts Regulations hinges on two critical expectations: first, that ARIA will be commissioning and contracting others to do research for it; and, secondly, that ARIA’s programme managers should be acting and investing with agility and speed. When ARIA is commissioning and contracting others to do research for it, it will be operating in a fundamentally different way from traditional R&D grant-making where procurement rules do not apply.

In my view, it is therefore appropriate for ARIA to be given freedom from procurement rules to ensure that the agency has greater flexibility in its contractual arrangements. However, to counterbalance that and to provide the assurance that this freedom will be used properly, we have provided a non-legislative commitment for an independent auditor to report annually on ARIA’s procurement activity. This measure, alongside ARIA’s robust conflict of interest procedures, the wider accountability I just talked about, and governance provisions, are an appropriate set of arrangements. I hope that reassures the Committee that we have taken all these matters into consideration and that this exemption is both essential to ARIA’s effective function and proportionate to the tasks it faces. Therefore, I invite noble Lords not to press their amendments.

--- Later in debate ---

[Lord Callanan (Con)]

Well, it may surprise the noble Baroness, Lady Chapman, to know that I largely agree with what she had to say on this. I agree with the sentiments that Select Committees should continue to scrutinise the work of arm’s-length bodies. However, as the noble Lord, Lord Fox, said, interactions with Select Committees are governed by a different set of rules. They are governed by a long-standing convention set out in the Osmotherly rules, which indicate that members of arm’s-length bodies

“should be as helpful as possible in providing accurate, truthful and full information when giving evidence”

to Select Committees. Furthermore, under the House’s Standing Orders, Select Committees have the power to

“send for persons, papers and records”

relevant to their terms of reference, and for anyone to refuse such a request would be considered contempt of the House.

Finally, as I have said separately, ARIA’s CEO will be personally responsible to the Public Accounts Committee, as the accounting officer. So I do really believe that Select Committees do not need our help in legislation, and probably would not want it, to be able to do their job properly and efficiently. Such guidance is sufficient for ensuring a co-operative relationship between other public bodies and the relevant committees across both Houses. We have not set these things out in legislation before, and I do not believe it should be any different for ARIA.

I hope, therefore, that, with the assurances I have been able to set out—that ARIA will work with Select Committees in the normal way, as other arm’s-length bodies do—it will not be necessary to include any specific provisions in the Bill to enable it to happen.

--- Later in debate ---

Moved by

[Lord Callanan]

35: Clause 8, page 3, line 35, leave out from “any” to end of line 36
Member’s explanatory statement
This amendment removes the power to treat legislative references to the Advanced Research and Invention Agency as references to another body which will be unnecessary as a result of the power to modify, amend, repeal or revoke those references under the power introduced by the Minister’s amendment at page 4, line 4.

[Lord Callanan (Con)]

My Lords, the Government have brought forward Amendments 35, 36, 44, 45, 46 and 48 in response to your Lordships’ Delegated Powers and Regulatory Reform Committee’s report on the Bill. I take this opportunity to thank the committee very much for its careful consideration of the Bill and the important scrutiny it has provided. One of its recommendations was that the power to make consequential provision currently contained in Clause 10 is too broad and should be omitted. I have reflected on the committee’s position and consequently given notice of my intention to oppose the Question that Clause 10 stand part of the Bill. Amendment 36 would introduce a much narrower and more specific power to make consequential amendments into Clause 8—the only remaining place it would be required.

So I will start by saying that the power to dissolve ARIA through draft affirmative regulations made under Clause 8 is, I believe, an important part of the Bill. Although the DPRRC also raised concerns about this power, there is a strong policy rationale and a clear precedent for this particular delegation of power. As the power can be exercised only 10 years after the Bill receives Royal Assent, I hope that that will give your Lordships sufficient indication of our long-term commitment to ARIA. We have clearly heard that patience will be essential if ARIA is to successfully pursue its most ambitious research and innovation. It must therefore have the opportunity to prove itself before it is judged. I therefore welcome the Commons Science and Technology Committee’s recognition in its report into ARIA that

“these projects will take a long time, potentially 10-15 years, to ‘bear fruit’”.

In terms of precedent, under powers set out in the Public Bodies Act 2011, several bodies established by primary legislation have been dissolved using secondary legislation. The Administrative Justice and Tribunals Council, for example, was created by the Tribunals, Courts and Enforcement Act 2007 and abolished using powers in the Public Bodies Act in 2013. I of course recognise that the super-affirmative procedure was applied in such instances, but in that particular case this was appropriate in the context of much broader powers. The Public Bodies Act gave Ministers delegated powers not just to abolish bodies but to merge them or change their governance structure and functions. This was also in the context of widespread public body reform, and it was therefore appropriate that the use of the powers was subject to a higher level of scrutiny.

In contrast, the power in Clause 8 is narrow, such that ARIA can only be dissolved. It cannot be merged or have its functions or governance changed in any way, as set out in my response to the DPRRC last week. I hope I have therefore provided sufficient reassurances that this power is justified.

I turn to the revised power to make consequential provision that Amendment 36 introduces. The first thing to say is that consequential provision could now be made in consequence of regulations made only under Clause 8, rather than any provision of the Bill, which represents a substantial narrowing of the previous power contained in Clause 10, which I will oppose.

The second point to emphasise is that, as a result, the power could be exercised only on one occasion, obviously. ARIA can be dissolved only once, and there would be a single opportunity to make consequential amendments in this way. However, ARIA could not be dissolved for at least 10 years, so at least 10 years’ worth of legislation will be passed or made before the power to make consequential amendments could be exercised. It is likely that there will be references to ARIA in those 10 years of future legislation. This amendment extends the power to make consequential amendments to legislation whenever passed or made, so references to ARIA that might appear in future can be removed, leaving a tidy and orderly statute book. I hope that all noble Lords agree that this is a sensible approach.

The final point to make here is that, as a result of this change to the power to make consequential provision, minor and technical changes to other parts of the Bill are required. Amendments 35, 44, 45, 46 and 48 to Clauses 8(4)(e), 11, 12 and 14 fall into that category. These correct the Clause 8 provisions and those on regulations, interpretation and commencement to reflect the replacement of Clause 10. They are consequential on that substantive change and are therefore necessary.

I hope that noble Lords will take a similar view and recognise that, in bringing forward these amendments, we are both taking the right approach and demonstrating the Government’s commitment to engage with and act on the DPRRC’s recommendations. I therefore beg to move.

[The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)]

I draw your Lordships’ attention to the fact that, in this group, government Amendments 44, 45, 46 and 48 do not appear as government amendments on the printed list.

[Baroness Chapman of Darlington (Lab)]

It is a pleasure to follow the noble Lord, Lord Fox. I have a lot of sympathy with what he has to say. We welcome the government amendments, which act on the concerns of the Delegated Powers and Regulatory Reform Committee and remove Clause 10 from the Bill. We can only hope that this is something of a sign of good habits to come and that the Government will prove attentive to the committee’s concerns about other legislation.

On Clause 8, where the Government have chosen not to act on the committee’s objection, rather than repeat everything that the noble Lord, Lord Fox, just said, I look forward to the Minister’s reply. I think the best way to sum up the DPRRC’s concern over the clause is that the Government were designing the law for convenience rather than necessity. It also made the point that, after 10 years or longer of ARIA’s operation, the agency would be well established and dissolving it might be a bit more complicated than Clause 8 suggests. Let us hope that ARIA makes it to 10 years.

We are content with the changes made by this group, but it would be helpful to the Committee for the Minister to respond in a bit more detail to some of the concerns. Can he outline how the Government envisage the winding down of ARIA would be managed? In particular, how would parliamentarians be kept informed and, aside from ARIA, who does he think it might be a good idea to consult before bringing forward regulations under Clause 8?

[Lord Callanan (Con)]

I can be very brief, because I do not have a lot to add to what I said earlier, beyond acknowledging to the noble Lord, Lord Fox, that it might have been helpful for me to write a “Dear colleagues” letter informing him and other Members that we had tabled these amendments. They did have the information in advance, but it may have been more helpful specifically to draw noble Lords’ attention to it.

In response to the noble Baroness, Lady Chapman, I have set out why we think the power is justified. In terms of asking us to set out further thoughts on how we might wind it down, we have not even established it yet. Beyond taking the power potentially to do this in 10 years’ time, on the specific circumstances in which this might arise and what might happen in consequence, Parliament will clearly be kept informed through the normal statutory instrument process—

[Baroness Chapman of Darlington (Lab)]

I have to respond because of the mocking tone of the Minister. He said I should not be asking how he would be winding this up—but it was he who put in the clause about winding up the agency that he is trying to create, so I do not think it is unreasonable to press him on exactly how that might be implemented.

[Lord Callanan (Con)]

Certainly I apologise to the noble Baroness if she interpreted my remarks as mocking: I was not at all implying that. I was just pointing out that we are still in the process of setting up the agency and recruiting the senior leadership team. I am justifying why the power is in the Bill. The noble Baroness asked me to set out further thoughts on how we might write down something that might happen in 10 years’ time. I will write to her if there is any further information, but I think I am correct in saying that not a great deal of thought has been given to how we might abolish something that we have not yet set up. I did not intend a mocking tone: it was just a point of fact.

I do not have anything to add to what I said earlier. We think the power is justified and there is a precedent for this—but I totally accept that this might be a point of difference between us.

Amendment 35 agreed.

--- Later in debate ---

[Lord Fox (LD)]

My Lords, I took the time to discuss this amendment with the noble Baroness, Lady Neville-Rolfe, and I congratulate the noble Baroness, Lady Noakes, on completely representing her views on it—but, strangely, we approach this from opposite directions and land in the same place, similarly to the noble Baroness, Lady Chapman. There is a false dichotomy here. Just because an organisation has a purpose does not mean to say that it cannot be independent. On that basis, it is important for it to be independent, and it is equally important for it to have a purpose—and that purpose should be climate change.

[Lord Callanan (Con)]

I thank the noble Baroness, Lady Noakes, for her comments and for stepping so ably into the breach to represent my noble friend Lady Neville-Rolfe in her amendment. It is perfectly right that we have returned once again to the central issue of ARIA’s independence, because it is a core part of equipping it for its unique funding approach and for the distinct contribution that we expect it to make to the UK’s R&D landscape.

I support the ambition for the Secretary of State to be mindful of protecting ARIA’s independence in all its interactions with the organisations, where such interactions are required by the Secretary of State’s very limited functions. However, I differ with my noble friend on how we protect its independence in a practical way. I submit that it would be the accumulation of many small things—perhaps creeping influence over strategy, new mechanisms of oversight, or ever-increasing reporting demands on issues of political priority—that would be the arena in which ARIA’s independence would be compromised or lost.

My noble friend Lord Willetts, who is not in his place, spoke eloquently on Wednesday about the challenges he has experienced in trying to carve out space for new approaches in the current R&D system. At that stage, we also had a fairly extensive debate on the accumulated obligations placed on ARIA. We considered how those obligations might be balanced with this vital principle of independence, in the context of amendments which, I believe, would have diminished ARIA’s autonomy in a way that would have been entirely counterproductive. If we truly wish to safeguard ARIA’s independence, it is on those issues that we must look to do it, and there is no easy alternative.

I do not suggest that this is a moment to reopen that debate, but I submit that we cannot have this conversation on independence in an abstract way, divorced from consideration of the practical and operational ways in which it will or will not be given to ARIA. I am sure that there will be plentiful opportunities to discuss this important issue in future. I hope, on the basis of the reassurances I have been able to provide, that my noble friend will, on behalf of my noble friend Lady Neville-Rolfe, feel able to withdraw the amendment today.

[Baroness Noakes (Con)]

My Lords, let me thank all noble Lords who have spoken. I agree with the noble Baroness, Lady Chapman, that independence is not incompatible with the Freedom of Information Act and other aspects that are included in the proposition for ARIA in this Bill. However, I do not think that independence is compatible with prescribing that it should focus only on climate change. We will have to agree to differ on that point.

The point of this amendment was that the Secretary of State had to respect the independence of ARIA, not that everybody else had to respect that independence, and I am not sure that I got the ringing endorsement of the Secretary of State not interfering in ARIA. However, we have had a good debate, and I am sure that my noble friend Lady Neville-Rolfe will enjoy reading it in Hansard. With that, I beg leave to withdraw the amendment.

--- Later in debate ---

Moved by

[Lord Callanan]

37: Schedule 3, page 13, leave out lines 1 to 14
Member’s explanatory statement
This amendment removes the amendments that would have treated the Advanced Research and Invention Agency as a reserved matter in relation to Scotland and Northern Ireland and funding provided to it through the Science and Technology Act 1965 as a reserved matter in Scotland.

[Lord Callanan (Con)]

My Lords, the Bill as introduced to the House added ARIA to the lists of reserved bodies within the three devolution Acts. That approach would have conferred on ARIA the same constitutional status as UKRI, which is the UK’s primary public R&D funder. More importantly, it would also have ensured ARIA’s independence by placing it outside the competence of the devolved legislatures.

Since then, my ministerial colleagues and officials have been in close discussions with all three devolved Administrations throughout the passage of the Bill, on the need for legislative consent Motions to be passed in the Scottish Parliament, the Senedd and the Northern Ireland Assembly. During those discussions, principled objections were raised to the creation of ARIA as a reserved body. As a result, we have worked—as I am sure the Committee would expect us to do—to develop an alternative way of guaranteeing ARIA’s independence, through something called the “agreement on the independence of ARIA”, which all four Administrations of the UK have said that they will abide by, and which will sit beneath the overarching memorandum of understanding on devolution.

I am delighted that the text of this document has now been agreed by all four Administrations of the UK and that we have been able to share it with noble Lords in advance of this discussion. I apologise for the fact that we were not able to provide the opportunity for noble Lords to consider this document at greater length before the Committee. However, I wanted to share it as soon as possible, albeit fairly shortly in advance, rather than not sharing it at all. I am confident that this agreement will allow ARIA’s important characteristics to be protected. On that basis, I am content to remove, through Amendments 37 and 40, the reservations that we originally placed in the Bill.

ARIA will remain a single UK-wide organisation able to find and fund the most exciting projects in all regions and nations of the UK. Through the agreement, all four Administrations of the UK have committed to upholding the important principles of ARIA’s strategic autonomy, operational autonomy and minimal bureaucracy.

[Lord Lansley (Con)]

My noble friend referred to the agreement having been shared with us, but I am not aware of having seen it or where it was shared with me.

[Baroness Noakes (Con)]

My noble friend also sent a letter to me following last week’s Committee; that was shared only with the noble Lord, Lord Browne of Ladyton. My noble friend’s department has form on not sharing widely with those in Committee when things are circulated. Can he go back to his department to ensure that all active members of the Committee get access to all the information circulated in response to its deliberations?

[Lord Callanan (Con)]

My apologies—we shared it with those who had contributed to the debate on the subject previously. In retrospect, we should perhaps have shared it more widely; we will now do so.

As my noble friend Lady Bloomfield set out last week, all four Administrations are equally committed to facilitating ARIA’s seamless operation throughout the UK. I hope that this will provide some comfort, in particular to the noble Baroness, Lady Randerson, who raised some important points on this issue at the time. My department will remain as ARIA’s sponsoring department to reflect the power of the UK Secretary of State, who alone has the power to fund ARIA through Clause 4 of the Bill. In our view, the accountability for that use of public money must therefore flow through the UK Government.

In addition to these protections for ARIA’s autonomy, the agreement provides an input mechanism from a new forum of science advisers to the four Administrations of the UK, directly to ARIA’s executive leadership. While there will be no obligation for ARIA specifically to respond to this input, the scientific challenges relevant to the policy priorities of all four Governments will be jointly communicated.

I appreciate that noble Lords have raised questions on how this will work in detail. At the moment this is necessarily a high-level document and clearly there is more work to do, at a working level, to flesh out this agreement between the UK Government and the devolved Administrations. This work is ongoing and will be the subject of further work in the months to come. However, as a result of it, Ministers in Scotland, Wales and Northern Ireland have all now given in-principle consent for the Bill on the basis of this approach. On that basis, I hope that noble Lords will similarly be able to support it. I beg to move.

--- Later in debate ---

[Lord Fox (LD)]

My Lords, this has obviously been an unsatisfactory semi-debate. That dissatisfaction has rung out in various corners of the Room. The advice of the noble Lord, Lord Browne, seems good; if we continue on our current trajectory, Wednesday afternoon will have some time in it. I will not repeat the questions which have been raised, but I add another which we would like to address on Wednesday afternoon when the Minister calls us together to explain. Is this outwith the framework agreement process? Is there a separate process going on? I add that to the list of unanswered questions.

[Lord Callanan (Con)]

I thank noble Lords for their comments. First, on the agreement, the text has been agreed by Ministers in Scotland, Wales and Northern Ireland. I thought it best to share it as soon as possible; I wanted to share it in advance—it was not far in advance but it was slightly in advance—rather than not share it at all. We originally committed to sharing it ahead of Report; I will ensure that all noble Lords have the opportunity properly to scrutinise it ahead of that and we can return to the issue then. Once noble Lords have had an opportunity to discuss it, I would be very happy to arrange a further briefing with officials for anyone interested in this subject.

--- Later in debate ---

Moved by

[Lord Callanan]

38: Schedule 3, page 13, line 14, at end insert—
“Income Tax (Earnings and Pensions) Act 2003
6A_ In section 61L(1) of the Income Tax (Earnings and Pensions) Act 2003 (meaning of “public authority”), after paragraph (b) insert—“(ba) the Advanced Research and Invention Agency,”.”Member’s explanatory statement
This amendment provides for the Advanced Research and Invention Agency to be a public authority for the purposes of Chapter 10 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 (workers’ services provided through intermediaries to public authorities or medium or large clients).

[Lord Callanan (Con)]

Amendments 38, 41 and 43 are consequential on the omission of Clause 10 from the Bill and the narrowing of the power we talked about earlier to make consequential amendments through regulations. The Delegated Powers and Regulatory Reform Committee suggested that any necessary consequential amendments should be added to Schedule 3, so we are responding to that recommendation here. The amendments apply to ARIA a set of relevant obligations that would usually apply to “public authorities”, which are sometimes defined in reference to Schedule 1 to the Freedom of Information Act 2000, which, of course, ARIA is not listed in. Bespoke provisions therefore are required.

I will briefly summarise the obligations that will apply to ARIA as a result of these amendments. The first relate to the Income Tax (Earnings and Pensions) Act 2003 and the Social Security Contributions (Intermediaries) Regulations 2000, with which I am sure all noble Lords are intimately familiar. This legislation includes the off-payroll working rules, which are designed to ensure that individuals working like employees but through their own company—usually a personal service company—pay broadly the same income tax and national insurance contributions as those who are directly employed. These rules have been reformed over the past five years to improve compliance by moving the responsibility for determining whether the off-payroll working rules apply from the individual’s personal service company to the client engaging them. That reform came into effect in the public sector in April 2017, and in the private and voluntary sectors on 6 April this year. I do not believe that there is a justification for ARIA to be treated differently from any other public bodies here.

The second element is the Data Protection Act 2018, which gives the GDPR effect in UK law. Through the Bill as it was introduced, ARIA would already be subject to the normal requirements of the GDPR, but the obligations on public authorities are different, in terms of the bases for data processing and governance and oversight arrangements. Similarly, in this case, I do not believe that there is a justification for ARIA to be treated differently from other comparable bodies in this important area.

Finally, the amendments to the Enterprise Act 2016 and Small Business, Enterprise and Employment Act 2015 allow us to avoid a situation where ARIA is considered part of the private sector for the purposes of business impact assessments of regulatory activities. Again, I do not believe that it is appropriate for impacts to ARIA, as a public sector body, to be included in any such considerations. I also do not believe that it would be appropriate for ARIA to avail itself of the support available through the office of the Small Business Commissioner, which is intended for private sector entities. So, while public authority obligations in other legislation have been considered, they were not assessed to be sufficiently relevant to ARIA to make further amendments here. I beg to move.

[Lord Clement-Jones (LD)]

My Lords, there is a splendid irony in what the Minister has just said as he trotted through the contortions of these amendments. I think he had a former life as a contortionist: it was quite extraordinary, really.

I do not think that these amendments are consequential; I think they are “Oops, we forgot something, actually”, as far as the Bill is concerned. Because of the way they treated the FoIA, suddenly everybody woke up to the fact that, for the purposes of that, ARIA was not a public body, because the Government had been so keen not to define it as a public body and therefore it had to be defined as a public body for the purposes of other legislation in a rather different way. So I do not think that this is consequential—except that it is something that probably should have been thought about when the original FoIA omission decision was made. No doubt everything will be clear after Report: the Minister will have his definition of a public body, everything will be logical and clear, and we will not have to have contortions such as this.

--- Later in debate ---

Moved by

[Lord Callanan]

40: Schedule 3, page 13, leave out lines 15 to 30
Member’s explanatory statement
This amendment removes the amendments that would have treated the Advanced Research and Invention Agency as a reserved matter in relation to Wales and funding provided to it through the Science and Technology Act 1965 as outside the functions of the Welsh Ministers.

--- Later in debate ---

Moved by

[Lord Callanan]

43: Schedule 3, page 14, line 3, at end insert—
“UK GDPR
12_(1) In Article 2 of the UK GDPR (material scope), in paragraph (5)(d), for “and (7)” substitute “to (8)”.(2) In sub-paragraph (1), “UK GDPR” has the same meaning as in the Data Protection Act 2018 (see sections 3(10) and 205(4) of that Act).”Member’s explanatory statement
This amendment is consequential on the Minister’s amendment at page 13, line 35, so far as it inserts section 21(8) of the Data Protection Act 2018.

--- Later in debate ---

Moved by

[Lord Callanan]

44: Clause 11, page 4, line 29, leave out “any of the following” and insert “regulations under section 8”
Member’s explanatory statement
This amendment is consequential on leaving out Clause 10.

--- Later in debate ---

Moved by

[Lord Callanan]

46: Clause 12, page 5, leave out lines 4 to 8
Member’s explanatory statement
This amendment is consequential on the Minister’s amendment at Clause 8, page 4, line 4.

--- Later in debate ---

[Lord Browne of Ladyton (Lab)]

I remind the Minister that, not so long ago, he secured Amendments 37 and 40 on the basis of the sight, by a limited number of us, of a draft agreement. It is not unreasonable to ask him to at least consider reciprocating.

[Lord Callanan (Con)]

I thank Members who have contributed to this brief debate. I am disappointed that the noble Lord, Lord Browne, did not exercise us again with his Daily Telegraph subscription, which I was very impressed by. I congratulate the noble Lord, Lord Fox, on saving the best to last with his bravura amendment. He has obviously been searching his thesaurus over the weekend for appropriate analogies. It was well moved and I do understand the seriousness of the issue and the noble Lord’s intention, which relates to the desire, as we have heard, to understand more details of how ARIA will work in practice.

As I mentioned at Second Reading, ARIA’s framework document is a governance document. It is a standard requirement for public bodies—which, of course, ARIA will be. As suggested in the noble Lord’s amendment, it will set the parameters for ARIA’s relationship with BEIS, as its sponsoring department. That is indeed its very purpose.

The noble Lord, Lord Clement-Jones, referred to the guidance published by Her Majesty’s Treasury, and I reassure him that, by drawing on the Treasury’s guidance, ARIA’s framework document will ensure that the agency and BEIS work effectively together. It will outline ARIA’s accountability, its decision-making and its financial management structures, along with some broader reporting requirements. However, it is not the appropriate place to codify ARIA’s relationship with other government departments. Other departments have no accountability relationship with ARIA, so its terms of engagement with them are a question of strategy rather than governance. The framework document will not contain any information relating to ARIA’s strategy in terms of collaboration, its project portfolio or indeed, its areas of research interest, all of which, I know, are of great interest to noble Lords.

On the sequencing of publication and commencement, given that both ARIA and the department need to be in agreement on the framework document, I reiterate, as I said at Second Reading, that it is therefore not possible to finalise it before ARIA’s senior leadership is in place, as my noble friend Lady Noakes, pointed out. It is not possible for the framework document to be published in advance of ARIA coming into legal existence. Similarly, the framework document for UKRI, for example, was finalised and published after that body came into legal existence.

Finally, it is worth noting that framework documents are live publications and are amended regularly to reflect any changes in the sponsor department or indeed the arm’s-length body itself, and they are all thoroughly reviewed every three years.

On the point raised by the noble Viscount, Lord Stansgate, on whether the framework document will outline the role of the Government’s Chief Scientific Adviser on ARIA, it is likely to. I will be happy to write to the noble Viscount with any more detail that I can on that.

I hope therefore that noble Lords understand that, in our view, there is a logical process to follow in the establishment of a public body and therefore that they will accept my assurance that we will publish the finalised framework document as soon as practicably possible.

[Lord Fox (LD)]

I have a couple of questions before the Minister sits down—or rather, I will now respond. The Minister seeks to downplay why we should be interested in the framework agreement, but the noble Lord, Lord Willetts, when he was in his seat, specifically asked about the relationship between UKRI and ARIA. That is just one question; there is a lot of interest in this and a lot of need to know. So the Minister should acknowledge that this is important to people and to organisations that are, in turn, important to this country.

I have a second point on which I would like an answer. I assume from what the Minister said that the sequence is: first, appoint a chief executive and then appoint the person to whom the chief executive reports. I still find that an interesting sequence, but certainly both those people will be asking what our relationship is with, for example, UKRI—or with others, as set out by the noble Viscount, Lord Stansgate.

It seems to me that either the Government will have an answer to that question during the recruitment process, or they will say, “Well, please yourself”. I suspect they have an answer and, just as the noble Lord, Lord Browne, said, trusting us with the draft of how that question will be answered would be completely reasonable and something that we would appreciate. With that said, I beg leave to withdraw the amendment.

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Moved by

[Lord Callanan]

48: Clause 14, page 5, line 28, leave out “10” and insert “11”
Member’s explanatory statement
This amendment is consequential on the Minister’s amendment to leave out Clause 10.

Onshore Wind Bill [HL]

Lord Callanan Excerpts

2nd reading
Friday 19th November 2021 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, like everyone else, I congratulate the noble Baroness, Lady Hayman, very much indeed, on securing a Second Reading for her Private Member’s Bill. She has spoken passionately, as she often does, about the importance of onshore wind in meeting our net-zero and carbon budget ambitions, and advocating the need for reform.

Deploying renewable electricity is intrinsic to the decarbonisation of the power sector and the UK’s efforts to reduce greenhouse gas emissions. A low-cost net-zero consistent system of the future is likely to be comprised predominantly of wind and solar. There should be no doubt of the value that this Government place on a strong renewable power sector. Over recent years, the Government have committed to delivering a deep decarbonisation of the grid, implementing new legislation, stimulating growth with ambitious policy pledges, and marrying this with the provision of appropriate financial support.

Let me begin by quickly recapping the role of onshore wind, before setting out how the Government intend to deliver a planning system that will give local planning authorities the capacity to make decisions that are consistent with our carbon budget and net-zero ambitions.

Onshore wind is an important part of the renewable electricity mix. As the noble Lord, Lord Grantchester, said, we currently have 14 gigawatts of onshore wind installed in the UK, the most of any renewable technology. Last year, onshore wind generated a record 11% of our electricity. In response to the noble Baroness, Lady Sheehan, I confirm that onshore wind is now among the cheapest forms of electricity generation. The most recent Electricity Generation Costs report, published by my department, estimated that onshore wind projects have a levelised cost of electricity of £46 per megawatt hour, making it the second-cheapest form of electricity generation, behind utility-scale solar.

We will need more. In response to the noble Baroness, Lady Hayman, and the noble Lord, Lord Oates, the Government acknowledge that targets can be useful in giving certainty to sectors with long investment horizons. However, the Government do not believe in the need to prescribe a specific proportion of generation that will come from all technologies in 2050 or, indeed, in 2030. There is no single optimal mix of technologies to decarbonise electricity generation. However, as set out in the recent energy White Paper and in our Net Zero Strategy, the Government are clear that carbon budget 6 requires a sustained increase of onshore wind over the next decade.

As the noble Baroness, Lady Hayman, acknowledged, the Government have also announced that onshore wind can compete in the next contracts for difference allocation round, which is scheduled for next month. The contracts for difference scheme is the Government’s main mechanism for incentivising large-scale renewable electricity generation. The next CfD allocation round will be the biggest yet. It includes up to 5 gigawatts of capacity from established renewable technologies such as onshore wind, with a £10 million budget. I can confirm to the noble Baroness, Lady Blackstone, that the Government will seek to accelerate deployment of low-cost renewable generation, such as onshore wind, by undertaking a review of the frequency of the contracts for difference auctions. These announcements reflect the Government’s commitment to a sustainable, diverse and resilient energy system.

As I have mentioned before, the Government have committed to more than just financial support. In response to the noble Lord, Lord Kerr, the Government also recognise the importance of planning in delivering our net-zero and carbon budget requirements, and are clear that the planning system should support the transition to a low-carbon future in changing climate. The energy White Paper and the Net Zero Strategy have committed to reviewing the planning system to ensure that it supports efforts to combat climate change and helps to bring greenhouse gas emissions down to net zero by 2050. That remains the Government’s position.

Noble Lords will doubtless be aware that the Department for Levelling Up, Housing and Communities is considering the best way forward to reform the planning system. This will include a review of planning guidance following the passage of the Planning Bill. The review will consider ways in which local planning authorities will be able to make decisions on energy infrastructure in keeping with our carbon budget requirements, while ensuring that the environmental impacts and, of course, the interests of local communities continue to be taken into account.

I turn to the Bill. It seeks to ensure that planning guidance enables local planning authorities to grant onshore wind applications for the purposes of meeting our carbon budget targets. First, the Bill requires that within six months of the Act coming into force the Secretary of State must revise national planning guidance on onshore wind. My concern is that this duplicates proposals to review the existing suite of planning guidance documents.

The review is being proposed as part of the broader reform to planning, managed by the Department for Levelling Up, Housing and Communities. It will consider ways in which local planning authorities will be able to make decisions on energy infrastructure, including onshore wind, that are in keeping with our carbon budget requirements. The review of planning guidance is being carried out in the context of the reforms being brought forward in the Planning Bill, and in my view it would therefore not be right to impose a timeframe on that process because we all know legislative procedure to be a complex and, at times, indeterminable process.

Secondly, the Bill requires that the National Policy Statement for Renewable Energy Infrastructure is also revised. However, it should be noted that the national policy statements are designated under the Planning Act 2008. Their purpose is to provide guidance to the Secretary of State when determining development consent for major infrastructure through the Nationally Significant Infrastructure Projects regime. Onshore wind was removed from that regime in 2016 through amendments to the Planning Act 2008. This means that all planning applications for onshore wind turbines in England are now made to the local planning authority.

The Government are currently carrying out a review of the existing national policy statements to ensure that they reflect current energy policy. However, the national policy statements are statutory guidance. As onshore wind is now not included in the 2008 Act, it is no longer appropriate for the national policy statements to provide specific technical policy guidance in relation to it. However, the draft national policy statements, currently open to consultation and parliamentary scrutiny, make clear that sustained increases in onshore wind will be needed alongside other low-carbon technologies to meet our net-zero targets.

Thirdly, the Bill requires that planning guidance provides for the construction of onshore wind on sites not previously used for wind energy, as well as enabling the repowering of existing sites. Current planning guidance already allows for that. Onshore wind can be constructed on sites not previously used for wind energy so long as the local planning authority has designated the area as suitable for wind energy and the proposal has local support.

In response to the noble Baroness, Lady Worthington, while the Government have not undertaken a complete appraisal of how many local planning authorities have designated areas as suitable for wind energy, the Government are aware that some have done so or are intending to do so, and that those authorities correlate, broadly, with the areas of best wind resource.

The noble Lord, Lord Grantchester, inquired whether requirements to address concerns mean unanimity. Whether a proposal has the backing of the affected local community is of course a planning judgment for the local planning authority. Important local factors such as wind speed, proximity to grid connections or indeed landscape or visual impact will determine suitability. In my view, it is right that local planning authorities continue to have jurisdiction over spatial planning and that communities can have a say on developments that take place in their area. The move to net zero will require buy-in from all parts of society as the energy infrastructure landscape changes and we increase the deployment of low-carbon technologies, including onshore wind.

The noble Baronesses, Lady Hayman and Lady Bennett, rightly highlighted the role that repowering can play in helping to reach the national carbon budget targets. The national policy framework supports the repowering of onshore wind, and the repowering of existing wind turbines is exempted from some of the requirements that typically apply to new onshore wind sites. The National Planning Policy Framework states that in instances of repowering, local planning authorities

“should … approve the application if its impacts are (or can be made) acceptable.”

In conclusion, I thank the noble Baroness for bringing this Bill to the House and enabling what has been a very useful debate. I am sympathetic towards her aims but, as I have underlined, the Government are already taking forward sufficient actions to enable local planning authorities to grant onshore wind applications so as to meet our carbon budget requirements. I am therefore not convinced that the Bill is necessary.

Advanced Research and Invention Agency Bill

Lord Callanan Excerpts

Committee stage
Wednesday 17th November 2021 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

I thank the noble Viscount, Lord Stansgate, for his intervention. When he was unable to complete his remarks at Second Reading, he said that he would come back in Committee and add to what he had said—which makes a change from what normally happens, with people coming back to repeat their Second Reading speeches. It is good to hear from the noble Viscount.

I am also delighted to hear the unequivocal support from the Opposition Benches for that great neo-conservative, Donald Rumsfeld—quoted by both Cross-Benchers and the Liberal Democrats. A great man indeed.

Amendments 1, 21, 25 and 26 create requirements that seek to narrow, or to have the Government direct, ARIA’s funding. Amendment 1 would require ARIA to pursue projects that contribute to a sustainable and resilient society, planet and economy. Amendment 25 seeks to specify a relationship with UKRI. Amendments 21 and 26 would set ARIA’s core mission as to support achieving the target established in Section 1 of the Climate Change Act. Once achieved, ARIA’s mission would then be set every five years by government by an affirmative SI. Of course, I thank noble Lords for tabling these timely and topical amendments, particularly given the partial success at COP 26 last week.

Starting with Amendment 1 from the noble Lord, Lord Ravensdale, let me point him to Clause 2(6), where, in exercising its functions, ARIA must have regard to contributing to economic growth, promoting scientific innovation and invention, or improving the quality of life. These considerations ensure that ARIA’s activities are geared towards beneficial outcomes, which will of course include sustainability and resilience. Of course, this broad characterisation of the benefits of ARIA’s activities does not represent the limits of ambition for individual ARIA programmes, or substitute for ARIA’s unique tolerance to failure as set out in Clause 3.

That brings me on to Amendment 27 from my noble friend Lord Lansley. I have heard consistently from the scientific community that ARIA must have high risk tolerance to succeed, and indeed that gets to the heart of what ARIA is all about. It is therefore important, in my view, that we express that idea precisely. My noble friend’s alternative articulation of risk tolerance, for which I thank him, does not specify the particular weight that ARIA may give to this type of activity, and I think that is crucial, particularly for the NAO’s assessment of whether ARIA’s activities are in line with its stated functions.

--- Later in debate ---

[Lord Callanan (Con)]

This group of amendments relates to the balance that we need to strike between ARIA’s independence from and accountability to government, which is a difficult balance to draw. I shall begin with the amendments relating to the composition of ARIA’s board.

Amendment 2 from my noble friend Lady Noakes would limit the executives on ARIA’s board to just the CEO and the CFO. I appreciate the spirit of her amendments, trying to ensure that ARIA is an agile body with a streamlined board, but we have decided that the number of executives should be at least four. We have said that in the interests of representing the different executive functions within the organisations. Similarly, we have imposed a maximum number to try to keep it as efficient as possible.

As the majority of the board members need to be non-executives, in our view, that means that the minimum total number of board members will be nine, to ensure a majority of non-executives, and our expected maximum is 15. We believe that this is very much in line with standard practice. It is not usual for legislation to specify quoracy arrangements, and the Bill’s current provisions mirror some of the procedural arrangements that are in the Higher Education and Research Act. I am also happy to confirm that it is not our intention to offer non-executive members pensions or gratuities—I do not want to get into a definition of gratuities—but it is commonplace to ensure that the provision is available.

The drafting that we have used is also found in the Higher Education and Research Act 2017 for UKRI non-executives under paragraph 7(2) of Schedule 9, and indeed in the Energy Act 2013 for the Office for Nuclear Regulation’s non-executives under paragraph 11(3) of Schedule 7. I therefore do not see that Amendment 8 in the name of my noble friend Lady Noakes is necessary.

I turn to Amendment 3. In our view, the Government’s Chief Scientific Adviser will bring a somewhat unique perspective to the ARIA board in their independent advisory capacity, with awareness of science and technology across government. It is important to emphasise that he or she will be on the board in their capacity as an independent adviser, not in their science and technology strategy capacity. Indeed, it is perfectly possible for there to be two different people in those roles. It is also important to emphasise that they will not do so on a privileged basis. Other non-executives will have been appointed for their expertise, their wide experience and their special knowledge of different facets of the research and development system, and they will equally provide ARIA with independent advice in the best interests of the organisation and its objectives, as the Chief Scientific Adviser will.

[Lord Lansley (Con)]

Before my noble friend moves off this particular point, he will know, and the Committee will have observed, that in paragraph 18 of Schedule 1 the Government are proposing to take a power to substitute somebody else or some other office for the Chief Scientific Adviser. What my noble friend was just saying gave me the impression that this is something that might be contemplated in circumstances where the two roles that he refers to are held separately.

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[Lord Callanan (Con)]

That is the exact point. At the moment they are occupied by the same person, but at some point in the future there might be other arrangements. It is just to ensure that the Secretary of State has the maximum flexibility.

I turn to the recruitment and appointment of ARIA’s board members. I am happy to confirm to the noble Lord, Lord Davies, that we will of course follow the normal and usual procedures for the appointment of directors and non-executive directors of public bodies. Amendment 6 seeks to disqualify a non-executive member if the individual has been a Minister of the Crown or a person employed by a government department. While I understand that the likely intention of this amendment—which will perhaps make my noble friend Lady Noakes and some of the contributors on this grouping unpopular—is to ensure that we have the highest calibre of individuals represented on ARIA’s board, I believe it could have the opposite effect. It would undermine the Secretary of State’s ability to run an open and fair recruitment process, as it would narrow the search field on a somewhat arbitrary basis. It could also prevent the appointment of an individual with demonstrable scientific or technical experience—some of whom may well be in this Room today—just because that individual had served in public office or as a civil servant. That seems very unfair to me, and I see no obvious logical reason for depriving ARIA of such expertise.

Amendments 5 and 7 would require the Secretary of State to inform the Commons Science and Technology Committee before appointing ARIA’s first CEO and chair, and to make arrangements should the committee wish to call them for evidence. As noble Lords are aware, we are currently recruiting for the CEO role. We will launch the chairman recruitment following the conclusion of that process, so that we are able to recruit the right person to work alongside the CEO as a complementary leadership team. I can confirm that we will of course write to the committee on the announcement of both positions; it may then choose to invite the appointee to give evidence to it on their vision and functions in ARIA. I strongly submit that it is not for the Government or Parliament to specify in legislation what a Select Committee should or should not do. It is perfectly capable of deciding for itself whether it wishes to summon individuals to give evidence—or not, as the case may be. Given the robust appointment process and the committee’s standing powers to invite witnesses to give evidence, I really believe that a special provision in legislation for a pre-appointment hearing is not necessary.

I acknowledge that the balance between giving ARIA the autonomy that I think everybody here is agreed it should have and ensuring a certain amount of accountability to government, the National Audit Office, et cetera, is an issue on which noble Lords will hold different views. It is a difficult balance to strike, but I hope that I have been able to convey to the Committee why we believe we have the correct balance as it stands. On that basis, I hope noble Lords will not press their amendments.

[Lord Fox (LD)]

I asked some specific questions about the future legal structure of ARIA and the nature of who its members are. I do not think the Minister had time to answer.

[Lord Callanan (Con)]

I will write to the noble Lord with the legal details he requires.

[Baroness Noakes (Con)]

My Lords, I can probably help the noble Lord, Lord Fox. In the case of public corporations created by statute, it is quite common that they are the members. It is not usually drafted as if the board is a separate legal entity.

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[Lord Broers (CB)]

I have just a word of disagreement on some of this. Short-termism has been our problem; we must keep the timescales long enough. If you keep pulling the plant up and looking at the roots, it will not grow. On the other hand, one thing that we should practise from the beginning is what is in Amendment 16 from the noble Lord, Lord Ravensdale. The one thing that technologists have made a mistake on in the last decade or two is not to bring social scientists in early, to really look at the implications of what their technology will do. I strongly support that amendment, but I have severe reservations about the others.

[Lord Callanan (Con)]

I thank noble Lords who have contributed. These amendments relate to ARIA’s annual report and to other information to be provided to Parliament. As set out in Schedule 1, ARIA’s accounts must be prepared annually, alongside an annual report, which it will send to the Secretary of State, who must lay the report in Parliament.

Addressing Amendment 11 first, I am happy to assure the noble Baroness that ARIA will be audited by the National Audit Office—and I reassure the noble Viscount, Lord Stansgate, on that as well. The point was also well made by my noble friend Lady Noakes that the National Audit Office will be able to conduct value-for-money examinations of ARIA; the National Audit Office never shows any reticence to do precisely that. Indeed, it is able to do that as per the National Audit Act 1983 in the usual way, and the same controls apply to many other public organisations. As some of my spending schemes, within my responsibility, have been subject to National Audit Office examinations, I can assure noble Lords that it is extremely rigorous, as indeed it should be.

Other amendments relate to the specific contents of ARIA’s annual report. I agree on the importance of robust transparency and reporting arrangements in this regard. That is why ARIA’s annual report will align with the Government Financial Reporting Manual, which, for example, could require ARIA to publish information on its aims and achievements, performance, organisational structure, corporate governance and accountability.

On the list of projects that was asked for in Amendment 12 by the noble Baroness, Lady Chapman, publishing a list of delivery partners is not one, in my view, for primary legislation. The details of the annual report will be part of the framework document and, of course, the annual accounts will provide details of exactly where ARIA spends its money.

Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill

Lord Callanan Excerpts

Wednesday 10th November 2021 Grand Committee

[Baroness Blake of Leeds (Lab)]

I start by thanking my noble friend Lord Lea for moving his Amendment 3. I know that we will have further discussions on the issues relating to it.

Like the noble Lord, Lord Fox, I do not want to go over the extensive debate that both noble Lords missed at Second Reading. The points made were so pertinent; I think most of us will have received extensive correspondence around the circumstances in which different creditors, in particular, find themselves.

I will limit my comments on my amendment to drawing together all the expressions of concern from the previous discussions about the lack of scrutiny. There is a real sense about a course of action being followed that enables people who should not be practising an opportunity to continue doing so in other ways. Most of all, I ask the Minister to look at whether we could establish an inquiry into unlawful behaviours relating to dissolved companies.

The other question that has come out of these discussions concerns the capacity of the different organisations. Can the Minister confirm what assessment he has made of the Valuation Office Agency’s capacity to deal with non-Covid-related material changes in circumstances? Continuing on the issue of resource, there is real concern about BEIS and the Insolvency Service. We recognise and welcome the requirement for the Secretary of State to report on the resources and powers available to the Secretary of State, BEIS and the Insolvency Service in relation to this Bill.

I understand that support staff at BEIS, represented by the PCS union, recently announced the possibility of strike action. They called for improved working conditions and an end to low pay. Does the Minister expect that further support staff will be required by BEIS in order to undertake the fulfilment of the new responsibilities?

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

I thank all the speakers on this group. I will take the points made in turn, starting with Amendment 3 in the name of the noble Lord, Lord Lea. I get the impression that his amendment intends to expand the information that the court can consider when it hears an application for the disqualification of a former director of a dissolved company to include that person’s conduct in all other insolvent or dissolved companies. If that is the case, I am happy to assure the noble Lord that the court is already able to consider such evidence, whether through the report supporting the disqualification application or through the evidence submitted either in defence of the application or in mitigation by the defendant. It is also possible for the Secretary of State to introduce information provided by third parties, such as regulators, in support of a disqualification application. I hope that the noble Lord will concede that his amendment is unnecessary.

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[Lord Lea of Crondall (Non-Afl)]

My Lords, I thank the Minister for those responses. Before I withdraw the amendment, I would add that he dismissed a point I made without looking at the context in which I made it. The House of Commons Library briefing, Phoenix Trading and Liability of Directors, covers the starting up of

“a phoenix company following the liquidation of the original company”.

However, the briefing says:

“The Insolvency Service may also investigate a failed company (and the role of its directors) where there are concerns about either the trading practices of the company or the circumstances surrounding the failure of successive companies.”


The ability of the Insolvency Service to investigate

“the failure of successive companies”

in a liquidation scenario should, logically, be extended to investigations into successive dissolved companies. I am not quite sure whether the Minister responded to that point; maybe he would like to respond now.

[Lord Callanan (Con)]

I am happy to make it clear for the noble Lord again. The misconduct, or otherwise, of directors of previous companies can already be taken into consideration, and is in many ongoing cases. It can be considered by the court and the Secretary of State can submit further evidence, as can creditors themselves. I assure the noble Lord that evidence of previous misconduct or previous companies can always be taken into consideration.

[Lord Lea of Crondall (Non-Afl)]

On this problem of serial offending, as it were, and the limitation of the courts to look into it, I will take time to clarify exactly what issue has been reported. This will ensure there can be no misunderstanding on Report, where it will come out, as to where there is a problem at the moment, so that we are not talking at cross purposes.

This has been a useful opportunity to drill down into some of these matters. We will return to them on Report. I thank my noble friend for agreeing with me; we will both need to composite some of this material into a shorter amendment on Report. At the moment, I trust that the Minister and the department will reflect on the merits of what has been said. I beg leave to withdraw the amendment.

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[Lord Leigh of Hurley (Con)]

I rise to support Amendment 8, to which I have added my name, and thank the noble Lord, Lord Fox, and the noble Baroness, Lady Pinnock, for doing the hard work on the drafting. It is much appreciated. I am happy to support the amendment.

First, I disclose my interests as set out in the register, not least that I am a shareholder and chairman of Manolete Partners plc, which is an AIM-listed insolvency litigation firm. It does not exactly touch the Bill, but it is worth drawing your Lordships’ attention to it. Over many years, I have been a director of a large number of companies and other relevant organisations, one or two of which have become dormant and subsequently been dissolved—although, I hasten to add, with no loss of anyone else’s money.

I, too, thank R3 for its briefing and its perennial helpful guidance and advice. I apologise for not being present at Second Reading. As this Committee now knows, that was due to a last-minute change of date; I associate myself with the remarks made by the noble Lord, Lord Hunt of Kings Heath.

The Bill is sorely needed, and the Government’s proposals in respect of dissolved companies are very welcome. However, there has been much debate on the effectiveness of the measures proposed in Clause 2(6), which is what we are here to discuss this afternoon. I note that there was much debate on this subject in the other place. At that point, proposals were put down for new clauses that are broadly in line with this amendment, which is slightly different in its purpose from the amendment in the name of the noble Baroness, Lady Blake.

I think we all agree that the route proposed in the Bill is better than a criminal sanction because there is a lower burden of proof. On resources, which have been mentioned by a number of noble Lords, it is difficult to know what the numbers might be. It is worth noting that there are some 500,000 company dissolutions a year in the UK, of which some 5,000 might need investigation by the Insolvency Service. That figure of 5,000 has been out there for some time. The reason it has been quoted is that it is the number of companies that have been struck off and where a process has been started to put them back on the register, so we know that there are at least 5,000 companies a year that have gone back on the register. To do that costs a few thousand pounds, so many people are deterred from bothering to go to court to get companies put back on the register, with all that entails. There might in fact be many more cases worthy of investigation under the proposed new, simpler system, which we all welcome. This will be a big increase from the 1,200 cases a year, I think, that are currently investigated, hence the concern that this clause seeks to address.

In the other place, the Minister, Luke Hall, is not a BEIS Minister. That goes back to the poignant points made by my noble friend Lord Cormack that a hybrid Bill sometimes suffers from one Minister addressing parts of the Bill that do not centre on his or her expertise. We are extremely fortunate to be blessed with the great knowledge and experience of the BEIS Minister in front of us this afternoon. Mr Hall assured the other place in Committee that the Insolvency Service produces reports on its own activities, which is correct. However, these amendments would ensure that specific questions we would want answered are addressed in those reports, and with a degree of independence. I am not sure that a report by the Insolvency Service would be able to determine the points we made, as it is bound to be accused of a conflict of interest in opining on whether sufficient powers and resources are available to it. It would be nice to see an independent report laid before Parliament.

As the noble Lord, Lord Fox, said, the acid point we really need to be told is how much money is recovered from directors through this route for creditors other than HM Government. We would all be delighted to see them, through HMRC or any other agency, recoup all the proceeds they are owed, but will the Secretary of State continue to look with quite the same zeal as we know he or she will for government money when it comes to acting for other creditors? Perhaps the Minister will be able to set out—this afternoon or later—exactly how the Government intend to prosecute culpable directors and recoup the funds.

The Minister mentioned compensation orders as the route to recoup funds but, as I understand it, compensation orders can be used to benefit only one creditor, so can the Minister comment on how they will be widened to benefit other creditors? In addition to explaining how the compensation orders will be used, will the Minister set out whether dissolved companies with culpable directors will then be put through an insolvency process?

I hope this might be addressed on Report and a commitment made to look at how Companies House operates—particularly to consider some of the ideas raised during the passage of this Bill, such as not letting Companies House strike off a company until the Insolvency Service has had a good opportunity to look at the exact circumstances of it being struck off.

Finally—and I hope the Minister will allow me to raise this matter in this debate—I wonder whether he feels moved to comment at some point in Committee or later on some of the interesting issues raised by the noble Lord, Lord Sikka, at Second Reading. They were not addressed in our previous sitting, and I think there should be some opportunity, at the very least for a right of reply for the insolvency profession and others on some of the very serious accusations made at Second Reading. It would also be helpful if the Government could commit to set out their view on the insolvency profession and its regulation at some point.

[Lord Callanan (Con)]

I thank all noble Lords who contributed to what was a good short debate on Amendments 4, 5 and 8. I completely agree that it is very important that we closely monitor the effectiveness of the new legislation and make sure that our departments are adequately resourced to do the work asked of them.

I start with the amendment of the noble Baroness, Lady Blake, on the reporting of enforcement outcomes. I hope that she will be reassured to hear that there is a wealth of insolvency enforcement statistics. They are published regularly by the Insolvency Service and are readily available on this internet thing.

The published data includes figures for company insolvencies across the UK and personal insolvencies in England and Wales, as well as some of the data behind those figures, which the noble Baroness might be interested in, such as regional variations. Those statistical releases are made every three months, but, since the Covid pandemic started, experimental releases of monthly data concerning numbers of insolvencies have been provisionally added by the Insolvency Service. This additional information has been extremely valuable as an indicator of the impact of Covid on insolvencies. From my point of view, the number has been lower than I expected, which is good news.

Specifically regarding the Insolvency Service’s enforcement activities, information on numbers of disqualification orders is published and updated monthly. Those figures include the number of companies that are wound up in the public interest and a breakdown of disqualification orders and undertakings obtained under the relevant section of the Company Directors Disqualification Act under which they were sought. Those monthly figures also include lengths of periods of disqualification and, furthermore, there is an annual report on the nature of misconduct in disqualification allegations.

Perhaps the noble Baroness could have a look at all that published information and check that it is adequate for her requirements. I hope that this reassures her that, when she does the online search, she will find all the information she requires. There is a copious amount of excellent, helpful data. If the Bill is subsequently passed, future reports will include disqualification numbers made against former directors of dissolved companies.

The noble Lord, Lord Fox, made the very good point that it is important to see evidence of returns to creditors, but I make the important distinction that the disqualification mechanism is for deterring misconduct and protecting the public. It is not, in fact, intended primarily to be a method of recovering funds to creditors. However, he will be pleased to hear that compensation orders can be issued in respect of disqualified directors, who may be required to make good financially on the damage that they have caused, which I suspect is the outcome that we all looking for.

Both the noble Lord, Lord Fox, and the noble Baroness, Lady Blake, asked a good question about the numbers of additional staff. I assure them both that the point I made earlier applies: resources are not limitless, the Insolvency Service already has a team set up for this precise purpose, and a complaints portal is waiting to go live, although of course we will not activate it until the Bill is passed and given Royal Assent.

My noble friend Lord Leigh asked about the number of cases that have been referred to. If I may respectfully correct him, the number of cases investigated that he cited was actually the number of successful disqualifications. There will be many more cases investigated where it will have been determined that there was no public interest in proceeding. That is a difficult judgment that officials in the Insolvency Service and, ultimately, the Secretary of State will take.

My noble friend also asked about the regulation of insolvency practitioners. As I think he is aware, we are reviewing the regulatory framework that governs them to ensure that the best possible outcomes are achieved for creditors. He will be delighted to hear that we will publish the proposed reforms to the insolvency profession shortly, which I hope will go some way to assuaging his concerns.

I move on to the figures that we will publish and the impact assessment in terms of a post-disqualification review. Did the noble Lord want to intervene?

[Lord Fox (LD)]

I intervene given that the Minister is moving on. I specifically asked what tools would be available to deliver compensation. The Minister referred only to compensation orders; the noble Lord, Lord Leigh, made it clear that there are extreme limitations to those and if you talk to the professionals, they have a great deal of doubt about how effective they can be overall. Will the Minister either address that now or come back to us in letter form to explain how these compensation orders can be used to compensate people more widely or, if they cannot, what other options there are?

[Lord Callanan (Con)]

I outlined the issue of enforcement orders, but I am very happy to clarify any additional tools available to the Insolvency Service and to other agencies directly—though not connected to this Bill—to help recover funds both for public authorities and individual creditors. I will write to him about that.

As I said, we have already committed in the legislation to conduct a review into how it is working in practice. That will be done within five years of commencement of the legislation, in line with our better regulation requirement. It is too soon to determine exactly how that review will look, but it will likely be informed by overall case numbers and will include an assessment of whether the new powers are being used as intended.