Electricity and Gas (Internal Markets and Network Codes) (Amendment etc.) (EU Exit) Regulations 2020

Lord Callanan Excerpts

Thursday 10th September 2020 Lords Chamber

Moved by

[Lord Callanan]

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

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

My Lords, when the transition period ends, direct EU legislation and EU-derived domestic legislation that forms part of the legal framework governing our energy markets will be incorporated into domestic law by the withdrawal Act, a subject with which the House is very familiar. My department is working to ensure that the UK’s energy legislation continues to function smoothly and supports a well-functioning, competitive and resilient energy system for consumers after the end of the transition period. This draft instrument is part of the wider legislative programme preparing for the eventuality that the UK does not reach a further agreement with the EU by the end of the transition period, or if any reached agreement does not cover these relevant policy areas.

Prior to the UK’s departure from the EU on 31 January, my department laid several statutory instruments in preparation for the eventuality that the UK left the EU without a withdrawal agreement. Of course, since these SIs were made, the UK has left the EU under the terms of the withdrawal agreement and, since then, new EU legislation has come into effect. This includes Regulation (EU) 2019/943 of the European Parliament and the Council of 5 June 2019 on the internal market for electricity, which I will refer to as the electricity regulation (recast), as well as Regulation (EU) 2019/942 of the European Parliament and of the Council of 5 June 2019, establishing a European Union Agency for the Cooperation of Energy Regulators, which I will refer to as the agency regulation (recast).

The Electricity and Gas (Internal Markets and Network Codes) (Amendment etc.) (EU Exit) Regulations make amendments, including some revocations, to the following new pieces of EU legislation: the electricity regulation (recast) and three of the EU electricity network codes. These amendments are required to fix deficiencies that would arise when this legislation becomes retained EU law at the end of the transition period under the terms of the withdrawal Act. It also revokes the agency regulation (recast), which will, of course, no longer be applicable after the end of the transition period.

The electricity regulation (recast) and the ACER regulation (recast) form part of a programme of legislation known as the clean energy package, created to further integrate markets across the EU. All of the clean energy package will have entered into force by the end of the transition period. The electricity regulation (recast) sets out the high-level principles and structures for the operation of EU electricity markets and defines relationships between EU bodies with a role in this area. The agency regulation (recast) sets out the role of the Agency for the Cooperation of Energy Regulators—ACER—to co-ordinate energy regulator implementation of the clean energy package and to resolve disputes between member state regulators.

The predecessor to the clean energy package was the third energy package, under which the EU electricity network codes were adopted. The codes introduce common technical rules to promote harmonised operation of energy markets across the EU, and this SI amends three of these codes: first, the High Voltage Direct Current Connections—HVDC—Code; secondly, the Demand Connection Code, or DCC; and thirdly, the Requirement for Generators, or RfG, Code.

This draft instrument makes corrections to deficiencies in the electricity regulation (recast) and three of the EU electricity network codes. The amendments are needed to make the legislation workable in a domestic context after the end of the transition period. These deficiencies include references to EU entity functions, such as the role of member states, and to EU institutions, such as the European Network of Transmission System Operators for Electricity. The deficiencies are removed or replaced with references to entities in Great Britain or other appropriate terms. For example, the term “Member State” is replaced with references to “the Secretary of State”. The draft instrument also revokes the agency regulation (recast) in full on the grounds that it includes obligations that would be inappropriate after the end of the transition period, with of course GB regulators no longer being members of ACER.

This draft instrument aims to maintain existing rules domestically while amending or removing provisions that will no longer function after the end of the transition period. As a result, it will help to maintain the operability and integrity of Great Britain’s energy legislation and maximise business continuity for market participants.

In conclusion, the regulations are an appropriate use of the powers of the withdrawal Act. They will maximise continuity in our energy regulation and business continuity for Great Britain’s market operators. They will also ensure that there is no uncertainty about the role and functions of Great Britain and EU bodies in the market or about the requirements on market participants as we leave the EU. With that, I commend the regulations to the House.

--- Later in debate ---

[Lord Callanan (Con)]

I thank the doughty band of noble Lords who have turned up for yet another of these technical regulations for their valuable contributions. I totally take on board the valid point of the noble Lord, Lord Oates: it would have made more sense to combine our Thursday afternoons into one extended Thursday afternoon and debate some of these regulations together. I am not sure why that did not happen—I think there was some sort of miscommunication between my department and the Whips’ Office—but he is right on this one. This is the last time I will ever agree with a point made by the Liberal Democrats; no such thing will ever happen again.

The Government have of course committed to achieving a smooth end to the transition period for our energy system. As such, a programme of legislation is required to ensure that retained EU law is workable and free of deficiencies by the end of the transition period, and this draft instrument falls within that category of legislation. A failure to address in full deficiencies in the retained EU legislation would create uncertainty and inefficiency in the operation of Great Britain’s market regulation, the role and function of domestic and EU bodies in the markets and the requirements on market participants. Such uncertainty could result in an increase in wholesale prices, which no one wants to see.

I must stress that this draft instrument, and the UK’s departure from the EU as a whole, does not and will not alter the fact that our energy system is resilient, robust and secure. That resilience is built on our diversity of supply. The UK has one of the most secure energy systems in the world, and the industry has well-practised contingency plans to keep energy flowing and to ensure that our energy supplies are safe. In Great Britain the Government have of course been working closely with the electricity system operator, National Grid ESO, and the regulatory body, the Office of Gas and Electricity Markets, to ensure that measures are in place to deliver continuity of supply and confidence in the regulatory framework in all scenarios. To answer one of the questions from the noble Lord, Lord Redesdale, Ofgem is responsible for regulations in this area, as the independent regulator, and it of course controls network operators and pricing in this space.

The Government are therefore confident that the UK’s electricity system will be able to respond to any changes safely, securely and efficiently, whether these changes are a result of leaving the EU or other challenges facing the UK today, such as the coronavirus pandemic. Our energy system will of course still be physically linked to the EU after the end of the transition period, through interconnectors, which bring significant benefits including lower consumer bills and security of energy supply.

Of course, our future energy relationship with the EU is currently being discussed as part of the ongoing negotiations. As set out in the UK’s approach to the negotiations, we are open to an agreement with the EU in this area that provides for efficient electricity trade. However, should we not have reached any further agreement with the EU by the end of the transition period, or if any agreement does not cover the relevant policy areas, there will continue to be significant value in increased interconnection and trade in electricity and gas with our neighbours. This instrument will help maintain the stable functioning of the domestic energy market by fixing deficiencies across retained EU and domestic legislation, while retaining regulatory functions required to keep the market working effectively.

Let me answer some queries. I will write to the noble Lord, Lord Oates, on his point about grid connections for renewables and give him further information. On the ETS, I have to say that I think Michel Barnier was being somewhat disingenuous with his comments in Dublin, because of course the UK has higher carbon pricing and a more efficient carbon trading market than the EU—if anything, we disadvantage ourselves with our higher carbon costs.

The noble Lord, Lord Redesdale, asked about pricing. We recognise, of course, the importance to businesses and households of having access to an affordable, secure and sustainable system of energy, and the UK’s exit from the EU will not alter this. Many factors impact energy prices, including fuel prices, exchange rates and generation mix. Great Britain will remain physically linked, as I said earlier, through interconnectors, and we expect any change in electricity prices as a result of changes to interconnector trading arrangements would fall within the normal range of market volatility.

The noble Baroness, Lady Bowles, and my noble friend Lady McIntosh also asked about interconnectors. The mechanisms for cross-border trade are not expected to fundamentally change after exit. The EU gas market is one of the world’s most developed and provides security through supply diversity, most of which, of course, is not dependent on the EU. The Government have taken steps to enable electricity and gas trade to continue and to maintain the effectiveness of domestic regulation, providing legal clarity for industry on the future operations of Great Britain and Northern Ireland’s energy markets.

The noble Baroness, Lady Bowles, asked about UK TSOs maintaining a relationship with European TSOs. The UK Government understand the importance of co-operation between system; discussions around the appropriate fora for this co-operation are ongoing and form part of the negotiations.

The noble Baroness, Lady Bowles, asked what happens when and if the EU changes the codes and regulations. I am afraid I will also give her the reply that this is subject to ongoing negotiations and I cannot comment further on it at the moment. However, we have amended REMIT in our first set of statutory instruments.

The noble Baroness, Lady McIntosh, correctly stated that this SI just affects Great Britain; it does not affect Northern Ireland or modify EU energy law as it applies to Northern Ireland. It will therefore have no implications for electricity trading through the single electricity market. The electricity trading technical notice makes it clear that trade on interconnectors will become less efficient if a free trade agreement is not agreed with the EU. With less efficient trade, there is of course the risk of increased costs.

Finally, I will write to the noble Lord, Lord Redesdale, with more information on the future of tariffs.

In conclusion, the draft instrument is required to ensure continuity for our energy system and certainty for market participants and consumers. In doing so, it will support the implementation of an effective legislative framework needed for reliable, affordable and clean energy. I commend these draft regulations to the House.

Motion agreed.

Science Research Funding in Universities (Science and Technology Committee Report)

Lord Callanan Excerpts

Wednesday 9th September 2020 Grand Committee

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

My Lords, I am supremely grateful to the noble Lord, Lord Patel, for securing this important debate and for the excellent contributions made by other Members, demonstrating once again the wide range of expertise that exists in this House. I also thank the committee for its inquiry and report, and for raising the important issues affecting science research funding in universities.

I also pay tribute to the universities themselves, which have played and continue to play a vital role in the national response to Covid-19. If I may offer a few examples, we have seen our world-class science and research base in universities across the UK support our Vaccine Taskforce by working tirelessly to research a vaccine for coronavirus. It is thanks to their valuable medical and research expertise that vaccine candidate clinical trials are now taking place at the University of Oxford and Imperial College London. I take a moment here to echo the strong praise of the noble Baronesses, Lady Deech and Lady Walmsley, for the outstanding work of these two world-leading institutions.

In addition, universities have offered vital services such as lab space and accommodation, applying research capabilities to develop the medicine and equipment needed to combat this terrible virus. Many have also repurposed their facilities to carry out testing on those with coronavirus symptoms, and collaborated with industry partners in producing ventilators, PPE and testing equipment for our National Health Service. As of 13 August, UKRI has committed more than £95 million to new research aimed at tackling Covid-19. It has also repurposed research grants of around £80 million to address the effects of the pandemic.

The UK’s world-class universities will continue to play a critical role in delivering local and national economic prosperity, but of course they have been hard hit by Covid-19. That is why we have announced a range of measures to support universities at this difficult time. We have established a joint BEIS-DfE ministerial taskforce on the sustainability of university research, to identify and assess the risks and impacts of Covid-19 on universities and to consider approaches to help manage these risks. A reprofiling of quality-related research funding in England also brought £100 million forward as a short-term measure to help to safeguard university research and as a reassuring signal to the research sector. Some £280 million of funding will sustain UKRI and national academy grant-funded research and fellowships affected by the Covid-19 pandemic.

In sharing responsibility for the future of science and research with our world-leading university system, from the autumn the Government will provide a package of grants and low-interest loans through the sustaining university research expertise fund, or SURE, to cover up to 80% of a university’s income losses from international students for the academic year 2020-21, up to the value of their non-publicly funded research activity. The noble Baroness, Lady Walmsley, the noble Lord, Lord Turnberg, and other noble Lords highlighted the importance of research funding from charities and the impact of Covid-19. Ministers in BEIS and the Department of Health and Social Care have met the Association of Medical Research Charities. Officials continue to engage regularly with the AMRC to discuss these issues and the challenges that the sector faces. The SURE fund aims to help sustain the research capacity of the university research base as a whole. Universities will be asked to demonstrate how they will use that funding to sustain research in areas typically funded by charities and business. Ultimately, we want critical university research capability, including charity-funded medical research, to be sustained and able to contribute to our future R&D ambitions.

We have also announced the pulling forward of an estimated £2.6 billion-worth of forecast tuition fee payments to ease cashflow pressure this autumn. This is on top of the unprecedented package of support for which higher education providers are eligible, previously announced by the Chancellor, such as the Coronavirus Job Retention Scheme and a range of business loan schemes.

In addition, in July, the DfE also announced the establishment of a higher education restructuring regime for those institutions at risk of financial failure. This regime can be deployed as a last resort if a decision has been made to support a provider in England, when other steps to preserve a provider’s viability and mitigate the risks of financial failure have proved insufficient.

Last month we published our R&D road map, which my noble friend Lord Willetts rightly highlighted as a key document, to ensure that the UK is the best place in the world for scientists, researchers and entrepreneurs to live and work, while helping to power up the UK’s economic and social recovery and level up the UK, which the noble Lord, Lord Shipley, rightly highlighted as a key part of the Government’s agenda. The road map builds on the ambitious commitment set out in the Budget to increase public spending in R&D to £22 billion by 2024-25. I therefore assure the noble Baroness, Lady Young, that this puts the UK on track to reach 2.4% of GDP being spent on R&D across the UK economy by 2027.

Through the road map we will test in detail how we can increase our investment in research, unlocking new discoveries and applying research to solving the most pressing problems in government and industry, and across society. In the longer term, we will review how we fund and assess discovery and applied research to cut unnecessary bureaucracy, pursue ambitious “moon shots”, and ensure that institutional funding and international collaboration can support our ambitions. I also assure the noble Lord, Lord Patel, that we are working with a wide range of stakeholders, including universities, to develop the proposals in the road map into a comprehensive R&D plan.

We also recognise that research and innovation are global endeavours, as the noble Lords, Lord Triesman, Lord Mair and Lord Bilimoria, all rightly emphasised. Our aim is to sustain, improve and grow opportunities for international collaboration. Our R&D road map sets out our wider ambition and the steps we will take to deliver this goal, including our relationship with Europe and the next EU research and innovation framework programme, Horizon Europe.

The noble Lords, Lord Patel, Lord Mair, Lord Bilimoria and Lord Shipley, and my noble friend Lady Bottomley all raised points on Horizon Europe and international partnerships. Let me reassure them that fostering international partnerships and global collaboration will play an important part in helping to achieve our ambitions to make the UK the international partner of choice for cutting-edge scientific and research discovery. We have made it clear in the road map that we aim to maintain a close and friendly relationship with our European partners, seeking to agree a fair and balanced deal for participation in Horizon Europe and Euratom research and training programmes.

The noble Lord, Lord Triesman, asked what conditions would prevent association with Horizon Europe. The Government have set out that any agreements relating to Union programmes should contain fair terms for UK participation. This should include fair treatment of participants, a fair and appropriate financial contribution, provisions allowing for sound financial management by both parties, and, of course, appropriate governance and consultation. We will make a final decision once it is clear whether such terms can be reached.

The noble Baroness, Lady Finlay, asked about alternatives to the Horizon programme. As a responsible Government, we are developing alternative schemes to support international research and innovation collaboration, in tandem with the Horizon Europe negotiations. If we do not formally associate with Horizon Europe, we will quickly implement ambitious alternatives as soon as possible from January 2021 and therefore address the funding gap.

We know that universities value research collaboration with the EU and beyond. We are grateful to universities for their ongoing policy insight and engagement with government, including convening round tables for the Smith-Reid review, which considered the future funding landscape, including our relationship with EU research and innovation funding.

Alongside international co-operation, we also want to send a global signal that the UK welcomes scientists and researchers. Our new global talent visa will help this skilled cohort of individuals to access the UK, empowering them to significantly enhance our knowledge base and make critical contributions to scientific and medical research.

The noble Baroness, Lady Randerson, my noble friends Lord Willetts and Lord Kirkhope, and the noble Lord, Lord Rees, all raised the important issue of attracting talented graduates to the UK. We have announced changes to the graduate route to make it easier for some of the best young international graduates to secure skilled jobs in the UK and contribute to our economy and society. The noble Lord, Lord Bilimoria, rightly raised the contribution of international students to the UK. That is why the Government are offering those who complete a PhD from summer 2021 a three-year visa after study to live and work here. Students who have successfully completed undergraduate and master’s degrees will be able to stay for a further two years following their studies.

These reforms are just the start. We will now radically improve our approach to attracting global talent to the UK by setting up a new Office for Talent. This will make it significantly easier for top global science, research and innovation talent to come to the UK and make it their home.

Over the coming months, we will work with the devolved Administrations and key stakeholders, including the major funders of research such as UKRI and the national academies, to develop a comprehensive new R&D people and culture strategy.

Looking ahead to the spending review, we will set out details of this historic investment for our universities. As the noble Baroness, Lady Morgan of Huyton, suggested, this will be critical in giving our researchers and innovators the confidence that they need going forward. I can reassure the noble Lord, Lord Watson, that the Chancellor launched the 2020 comprehensive spending review in July, and it will be published in the autumn.

The noble Lord, Lord Patel, raised an important point about improving the financial resilience of universities and adjustments to QR funding. As part of the spending review and taking advice from UKRI, we will consider the scale and balance of funding for university research and innovation, including funding for QR, and will take financial sustainability issues into account. We will continue to look at the balance of dual support for universities and the role of QR, and we will work with other funders to consider what proportion of the full economic cost of research projects in universities they should be funding.

The R&D road map also sets out our ambition to develop a new compact between government and universities in England which could strengthen accountability for discretionary funding, potentially bringing together existing separate higher education research concordats and reducing bureaucracy for institutions and their staff. It also highlights our commitment to research culture, research integrity and open access to research.

Many excellent points were made during the debate and a number of questions were posed. I hope that noble Lords will understand that it is impossible for me to respond to all of them, but I will go through as many as possible in the available time and hope that noble Lords will accept my apologies if I do not get around to their particular point.

The noble Lord, Lord Patel, asked when the Government intend to publish the terms and conditions of the SURE fund. I can assure him that work continues on the university research support package, with officials working closely with the sector to ensure that the fund is in place by the winter. We hope to share more details with universities in due course, including guidance on how they should apply as well as the terms of the loan. I can also reassure the noble Lord that the SURE fund will provide funding which is in addition to the £280 million announced in June for costed grant extensions from UKRI and the national academies.

Along with the noble Lord, Lord Shipley, and the noble Baroness, Lady Morgan, the noble Lord also raised the issue of the Government’s place-based strategy for research. We are engaging widely with industry, universities, the research community and civic organisations from across the country to help develop an ambitious place strategy for R&D that supports the priorities of areas and communities across the United Kingdom.

My noble friends Lady Bottomley and Lord Kirkhope, the noble Baroness, Lady Warwick, the noble Lords, Lord Shipley, Lord Watson and Lord Bilimoria, and others asked about the Government’s ongoing discussions with the European Union surrounding Horizon 2020. I can tell noble Lords that we aim to maintain a close and friendly relationship with the European Union to participate in the next generation of European research and innovation programmes starting in 2021—that is, both Horizon Europe and Euratom R&T. Negotiations with the Commission are constructive and we are open to participation but, as I said earlier, only if we can agree a fair and balanced deal.

The noble Baronesses, Lady Randerson and Lady Walmsley, and my noble friend Lord Willetts asked me about high visa costs. The Government recognise the importance of a vibrant and successful science, research and innovation sector to the UK’s continued prosperity, and acknowledge that attracting, retaining and developing research talent is at the heart of the R&D road map. We will look to build on existing initiatives by setting up the new office for talent, driving forward further visa reform by reviewing the uptake of different routes by established talent and those on the cusp of success, and reviewing the restrictions and costs that it brings about.

The noble Baroness, Lady Warwick, asked how we will stop the loss of early career researchers. Again, our R&D road map sets out the key commitments already mentioned to ensure that we attract, retain and develop top talent to ensure that the UK is the best place to work, offering careers at all stages that attract a diverse range of people.

The noble Baroness, Lady Finlay, referred to the shared prosperity fund. The 2019 Conservative manifesto committed to creating this UK shared prosperity fund, which binds together the whole of the United Kingdom, tackling inequality and deprivation in each of our four nations. The UK shared prosperity fund will be driven by domestic priorities with a focus on investing in people. At a minimum, it will match current levels of funding for each nation from EU structural funds.

In response to questions from my noble friend Lady Warsi, the noble Baronesses, Lady Walmsley and Lady Young, and others on the Augar review, we have considered the report and its recommendations carefully. We know that post-16 education has an essential role to play in driving economic recovery and future prosperity, so we plan to respond to the Augar report alongside the spending review. We are determined to pursue high-quality educational opportunities that meet our skills needs, fuel our economy and create world-leading outcomes for students.

As many noble Lords have commented, we are right to be proud of the strength of our research and innovation base and the quality of our universities. Research, innovation and knowledge are the drivers of our global competitiveness and a key source of economic advantage. I assure noble Lords that we remain committed to maintaining the UK’s position as a global science superpower, and that we will continue to invest in our universities and in the science and research that will deliver the long-term economic growth and societal benefits, that my noble friend Lord Griffiths of Fforestfach alluded to, enriching the UK for many decades to come.

Once again, I thank everyone for the learned contributions from many Members across the House, and I thank the noble Lord, Lord Patel, for securing this important debate.

Small and Medium-sized Enterprises: Public Procurement Contracts

Lord Callanan Excerpts

Monday 7th September 2020 Lords Chamber

[Lord Choudrey]

To ask Her Majesty’s Government what steps they are taking to ensure that small and medium-sized enterprises are awarded public procurement contracts.

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

My Lords, the Government are determined to ensure that SMEs win public contracts when they offer good value for money. We are committed to tackling the barriers that SMEs face. Each department publishes an SME action plan setting out its commercial strategy to increase spending with smaller businesses. Central government spend figures published for 2018-19 show that SMEs earned £14.2 billion through government contracts. That is nearly £2 billion more than the previous year and the highest since government records began in 2013.

[Lord Choudrey (Con) [V]]

I thank the Minister for that Answer. SMEs account for 98% of the UK’s business population. The Government are prudently seeking to enhance their engagement with the SME sector. In that regard, the Government’s own target for spending with SMEs is 33% by the end of 2022. As we go through one of the worst recessions in our country’s history, there will be a greater desire to achieve economies of scale through higher aggregation of demand in the form of centralised procurement, potentially at the cost of SME participation. However, we know that the SMEs are incredibly innovative and efficient. When given the opportunity, they would be able to drive national economic growth and prosperity. The Government must therefore harness their true potential and ensure that the SMEs are able to play a vital role in the procurement framework and are not left out of the national strategies. Government departments will need to listen to SMEs’ concerns and find solutions without compromising delivery and value for the taxpayer.

[Lord Callanan (Con)]

Each government department publishes its own SME action plan, which describes how it is engaging better with the SME sector to address the department’s own needs and increase spend with SMEs. Particular departments hold early-market engagement events to explain and discuss their requirements with a wide range of suppliers.

[The Lord Speaker (Lord Fowler)]

Short questions, please.

[Lord Lucas (Con) [V]]

My Lords, could my noble friend please tell me what departments are doing to make sure that SMEs can get on the preferred list of companies—where departments use this—and that the buyers within those departments are rewarded for making the extra effort to deal with small suppliers and are not risking their own careers by doing so?

[Lord Callanan (Con)]

The noble Lord makes a very good point. We encourage all SMEs that are interested in bidding for public sector opportunities to use Contracts Finder, which lists all tenders over £10,000. SMEs can create an account to get email updates for opportunities that align with their business interests. Public sector contracts are, of course, awarded after a fair and open competition process and commercial buyers are encouraged to ensure that all tenders are suitable for SMEs

[Lord West of Spithead (Lab) [V]]

My Lords, one area where there is a ready-made opportunity for boosting our industrial output and supporting struggling —and, indeed, collapsing—SMEs is defence. The Prime Minister recently stated that our nation requires

“a shipbuilding industry and Royal Navy that reflect the importance of the seas to our security and prosperity.”

Hurrah for that, but our shipyards—and particularly the SMEs that support them—are in dire straits. They need a commitment to a rolling programme of warship building if they are to survive, and the Navy is desperate for more ships. Can I ask the Minister whether this requirement is being given prominence in the current integrated defence review?

--- Later in debate ---

[Lord Callanan (Con)]

The noble Lord is, of course, well aware that I am not a Minister in the Ministry of Defence, so I shall have to write to him on that.

[Baroness Burt of Solihull (LD) [V]]

Would the Minister agree with me that, as well as being good business, it is morally incumbent on the Government to procure from SMEs owned and run by people who look like those that they serve? If he does agree, could he explain why—despite years of lobbying from people like myself and groups representing BAME and women-owned businesses—the Government still do not know how many such businesses they are procuring from? What you do not measure, you cannot manage.

[Lord Callanan (Con)]

I can tell the noble Baroness that, since its launch in 2012, something like 20% of our start-up loans have gone to entrepreneurs from black, Asian and minority-ethnic backgrounds and, throughout this crisis, we have hosted a series of round tables on our wider support scheme for BAME businesses.

[Lord Wigley (PC) [V]]

My Lords, the Government are keen in their EU negotiations to allow UK companies to benefit from state aid where appropriate. Will the Minister therefore confirm that it is equally important for the Governments of Wales, Scotland and Northern Ireland to ensure that the SMEs within their own territory are helped to secure public procurement contracts for which those devolved Governments are responsible?

[Lord Callanan (Con)]

Of course, I cannot speak for the devolved Governments, but I am sure they are doing all in their power to ensure that as many small businesses as possible receive contracts.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, as you know, the Federation of Small Businesses is running a campaign called “Fair Pay Fair Play” about what it calls the scourge of late payment. Can the Minister enlighten the House as to when key components of this campaign, such as putting the Prompt Payment Code on a statutory basis and giving powers to the Small Business Commissioner, will ever be introduced?

[Lord Callanan (Con)]

We are completely focused on fulfilling the Government’s manifesto commitment to clamp down on late payments and strengthen the powers of the Small Business Commissioner to support small businesses that are exploited by their larger partners. At the Spring Statement, as the noble Lord will be aware, the Government announced that they will require large companies’ audit committees to review payment practices and report them in their annual accounts.

[Baroness Warsi (Con)]

My Lords, does my noble friend have details of the financial value of UK companies that are engaged in delivering EU public procurement contracts? In the run-up to the post-Brexit period, are the Government engaged with these firms regarding support because, for many businesses, this may be their main or whole business?

--- Later in debate ---

[Lord Callanan (Con)]

The noble Baroness asks a good question. Unfortunately, we do not gather data on how many UK SMEs are involved in EU procurements. However, there will, of course, be a high level of access to markets in the EU once the UK has joined the WTO general procurement agreement as an independent member. This is expected to be at the beginning of 2021. The UK’s market access offer for services is the same as the current coverage under the EU’s GPA schedule. Reciprocal coverage will continue once the UK is a GPA party.

[The Lord Speaker (Lord Fowler)]

I call the noble Baroness, Lady Scott of Needham Market. Baroness Scott? No? We will go on. I call the noble Baroness, Lady McIntosh of Pickering.

[Baroness McIntosh of Pickering (Con) [V]]

My Lords, can I ask my noble friend the Minister what opportunities there will be for small and medium-sized businesses in the food sector to bid for contracts to deliver food to schools, hospitals, prisons and other public sector services? This is a wonderful opportunity to have locally produced food locally delivered for local consumption.

[Lord Callanan (Con)]

I agree with the point that my noble friend is making but, of course, each individual contracting authority will have its own strategy for food procurement. The Crown Commercial Service has established a number of frameworks for the provision of food, and this agreement will deliver a UK-wide SME-inclusive food-procurement service for public sector food buyers.

[Lord Bhatia (Non-Afl) [V]]

In the Covid era, small businesses are most at risk and need help from the Government. Can the Minister answer whether he agrees?

[Lord Callanan (Con)]

Of course, all businesses will need help during the Covid crisis, and we have one of the largest programmes of help for companies and businesses in the western world.

[Baroness Altmann (Con) [V]]

My Lords, could the Minister explain to the House the—[Inaudible.]—The procurement process for public contracts is often enormously cumbersome, time-consuming and costly—[Inaudible.]

[Lord Ashton of Hyde (Con)]

My Lords, I am afraid the noble Baroness, Lady Altmann, is completely inaudible, but I suspect the Minister might have an idea of what she is trying to say.

[Lord Callanan (Con)]

If we heard the noble Baroness correctly as she was interrupted, I think she was asking about the bureaucracy associated with public sector procurement contracts. We have removed complex pre-qualification questionnaires from low-value contracts and increased the transparency of opportunities via the Contracts Finder website, which covers current and future public sector contracts and award notices above £10,000 in central government and £25,000 in the wider public sector. Contracts Finder is available on a single, free-to-use digital platform and we encourage all SMEs to access it.

[The Lord Speaker (Lord Fowler)]

My Lords, all supplementary questions have been asked, fortunately, and we now move to the second Oral Question.

Post Office: Horizon Accounting System

Lord Callanan Excerpts

Monday 7th September 2020 Lords Chamber

[Lord Arbuthnot of Edrom]

To ask Her Majesty’s Government what progress they have made in the review of the Post Office’s Horizon accounting system.

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

My Lords, the Government are keen to see this review launched as soon as possible. We are making progress with the appointment of a chair. Once this process is complete, the review will then be formally launched. My colleague, the Minister for Small Business, Consumers and Labour Markets, has also spoken to Paul Patterson—managing director and head of sales and country leadership for Fujitsu UK—who has confirmed that Fujitsu will collaborate fully with the review.

[Lord Arbuthnot of Edrom (Con)]

My Lords, I am grateful to my noble friend. The delay to this review suggests that the Government are having some difficulty finding someone unwise enough to take on the chairmanship. Is my noble friend aware that the historical shortfall scheme, set up to give compensation to sub-postmasters who have suffered through the Horizon fiasco, is not available to those sub-postmasters who have been employed through others—like McColl’s or the Co-op—even though they have suffered in exactly the same way as the rest? Is this not another injustice inflicted on sub-postmasters who have surely suffered enough already?

[Lord Callanan (Con)]

I pay tribute once again to the tenaciousness of my noble friend in raising this sad tale. The historical shortfall scheme was open to people or companies who had, or have, a direct contract with the Post Office, including companies such as McColl’s and the Co-op. Assistants of postmasters or employees of other companies who had no contract with the Post Office would not be eligible, as they had no contractual liability directly to the Post Office.

[Baroness Bakewell (Lab) [V]]

My Lords, there are three strands to this scandal: the continuing failure of the IT scheme, the devious behaviour of the Post Office and the heroic persistence of 550 postmasters and postmistresses. In their case, it has been a story of lost livelihoods, bankruptcies, prison, mental health problems, and now death. Seventeen claimants have died, some without their convictions being quashed; the doctors of one, Julian Mason, spoke of the stress as a contributing factor. There has also been a suicide. Will the Government acknowledge the urgency of this review to bring peace of mind to those who have suffered and, indeed, to hear their evidence before it is too late?

[Lord Callanan (Con)]

I certainly acknowledge the urgency of the situation. We are working as fast as possible to get the review under way and to announce the chair—we will do so as quickly as possible.

[Lord Holmes of Richmond (Non-Afl)]

My Lords, my heart goes out to all the sub-postmistresses and sub-postmasters who have been dragged through this Horizon hell. They have been treated despicably. Will the Government act ahead of this review and pay the legal fees of those brave sub-postmasters and postmistresses who took legal action? They were awarded £57 million; after legal fees that is now down to £11 million. Surely the Government can take that action without having to wait for the review to commence?

[Lord Callanan (Con)]

Of course, there was an agreed settlement for the sub-postmasters who took legal action. It would not be right for the Government to interfere in that settlement.

[Lord Polak (Con)]

As is clear for the individuals and families caught up in the Horizon disaster, life continues to be unbearable. I ask my noble friend the Minister to help me answer my friend Rita Threlfall, the former sub-postmistress from Liverpool, whose story I highlighted in this House on 18 June. She said this weekend: “We seek reasonable justice, and it is still our aim to have a judicial inquiry, as we all feel it is the only way to uncover the truth behind the reason we have suffered financial loss through no fault of our own. But more importantly, it will help us in some way to mend our broken lives.”

[Lord Callanan (Con)]

The lady that my noble friend mentions is one of many tragic cases arising from this. It is indeed an appalling scandal. Of course, there has already been a judicial finding of faults in this, and the comments of Mr Justice Fraser are well worth reviewing. We want to go further than that: we want a proper review, and to be fully assured that through the review there is a public summary of the failings that occurred at the Post Office through this scandal—drawing on the judgments from the Horizon case and by listening to those most affected—without repeating the findings of Mr Justice Fraser.

[Lord Taylor of Goss Moor (LD) [V]]

This has been the most appalling scandal. Those impacted are still waiting for justice, not just for themselves but in holding to account those who appear to have sought, at every stage, to cover up what actually went wrong. Can the Minister give some assurance that the appointment of a chairman, and this going ahead, is imminent, and that those responsible at the Post Office and elsewhere will be held to account?

[Lord Callanan (Con)]

I can certainly give the noble Lord the assurance that the appointment will be made as quickly as possible. We are under no illusion about the urgency of the case and the need to get on with it as quickly as possible. I am hoping that an announcement can be made very shortly.

[Lord Cormack (Con)]

My noble friend the Minister made similar comments three months ago when my noble friend Lord Arbuthnot, to whom we all pay tribute, raised this subject. It is a disgrace. The Government, as my noble friend will agree, have both an actual and a moral responsibility here. Can he remember the old adage that “justice delayed is justice denied”?

[Lord Callanan (Con)]

I agree with my noble friend on this: we need to get on with it. There have been a number of delays, for various reasons, but I am hoping that an appointment can be made imminently, because we all want to see this under way as quickly as possible.

[Lord Stevenson of Balmacara (Lab) [V]]

Can the Minister confirm that the review will not have the powers under the Inquiries Act 2005? Therefore, how will the reviewer compel witnesses, including Ministers, to give evidence, or see the papers necessary to assess, for example, whether lessons have been learned and that whistleblowers in the Post Office will not be treated in such a disgraceful way again in the future?

--- Later in debate ---

[Lord Callanan (Con)]

The review is non-statutory, but the Post Office, Fujitsu and the Government have all committed to co-operate as fully as possible with the review. The chair will, of course, be fully independent of both the Post Office and Government, and will draw conclusions and recommendations as they see fit.

[Lord Hain (Lab) [V]]

My Lords, we all know that sub-postmasters are the pillars of local communities, and yet they have suffered by being compensated for an insultingly small proportion of the losses they incurred through this terrible scandal and the cruel unfairness that followed. The Minister says that he does not want to interfere, but the Government are 100% owner of the Post Office—the Permanent Secretary of the department is its accounting officer and there is government representation on the board. The Government are ultimately responsible for this scandal. It is not good enough to keep delaying this with lots of process and reviews. They must be compensated fully.

[Lord Callanan (Con)]

The court case resulted in a substantial award of compensation and the Post Office has a separate historical shortfall scheme, which it is looking at and progressing. We want to get on with this as quickly as possible. I agree with all the comments which have been made. This is an appalling scandal: it has originated over many years and we are doing what we can to try to get to the bottom of it.

[Baroness Redfern (Con) [V]]

My Lords, so many careers have been ruined and reputations destroyed because of the failings of the Horizon system. How has the Post Office been encouraged to strengthen its relationship with postmasters? Has there been postmaster training to help build a commercial partnership?

[Lord Callanan (Con)]

I have spoken to the chief executive of the Post Office, as has my ministerial colleague who is responsible for this matter. We are conveying the strongest possible message that the Post Office of course needs to have a strong and robust relationship with its sub-postmasters.

[Lord Berkeley (Lab)]

My Lords, I am very grateful to be here; I thought I might have to be scratched as my train was late. The Minister has said that there was a substantial award against the Post Office, but every noble Lord who has spoken has pointed out that most of that went on legal fees. Is it not the duty of the Government to properly compensate the people who have incurred this loss?

[Lord Callanan (Con)]

I am pleased that the noble Lord’s train was not late. I understand the frustration expressed by noble Lords. When I first saw the award, I shared some of that frustration, but that was the process and that was the judicial outcome. There is a separate historical shortfall scheme, which the Post Office is following. We believe that this is the appropriate way for compensation to be awarded.

[The Lord Speaker (Lord Fowler)]

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

Electricity and Gas etc. (Amendment) (EU Exit) Regulations 2020

Lord Callanan Excerpts

Thursday 3rd September 2020 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Electricity and Gas etc. (Amendment) (EU Exit) Regulations 2020.

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

My Lords, when the transition period ends, direct EU legislation and EU-derived domestic legislation that forms part of the legal framework governing our energy markets will be incorporated into domestic law by the withdrawal Act. My department is working to ensure that the UK’s energy legislation continues to function smoothly and supports a well-functioning, competitive and resilient energy system for consumers after the end of the transition period. This draft instrument is part of the wider legislative programme preparing for the eventuality that the UK does not reach a further agreement with the EU by the end of the transition period, or if any reached agreement does not cover the relevant policy area.

I now turn to what this statutory instrument does. Prior to the UK’s departure from the EU on 31 January, my department laid several statutory instruments in preparation for the eventuality that the UK left the EU without a withdrawal agreement. Since then, the terms of the withdrawal Act mean that EU legislation, including new EU legislation brought in during the transition period, will continue to apply in the UK.

This includes three pieces of legislation. The first is Regulation (EU) 2019/943 of the European Parliament and the Council of 5 June 2019, on the internal market for electricity, which I will refer to as the electricity regulation (recast). The second is Regulation (EU) 2019/942 of the European Parliament and of the Council of 5 June 2019, establishing a European Union Agency for the Cooperation of Energy Regulators, which I will refer to as the agency regulation (recast). The third is Directive (EU) 2019/692 of the European Parliament and of the Council of 17 April 2019, amending Directive 2009/73/EC concerning common rules for the internal market in natural gas.

The Electricity and Gas etc. (Amendment) (EU Exit) Regulations 2020 amends six previously laid SIs, which I will refer to as the principal SIs. These principal SIs prepared the UK to leave the EU without a withdrawal agreement. These changes take account of the three new pieces of EU legislation since those principal SIs were made. The electricity regulation (recast) and the ACER regulation (recast) form part of a programme of legislation known as the clean energy package, created to further integrate markets across the EU. All of the clean energy package will have entered into force by the end of the transition period, hence the need for these regulations.

The electricity regulation (recast) sets out the high-level principles and structures for the operation of EU electricity markets and defines relationships between EU bodies with a role in this area. The agency regulation (recast) sets out the role of the Agency for the Cooperation of Energy Regulators—or ACER—to co-ordinate energy regulator implementation of the clean energy package and to resolve disputes between member state regulators.

The principal SIs were made between December 2018 and March 2019 and fixed deficiencies in domestic law and direct EU law, which would become retained EU law at the end of the transition period. These amendments included provisions relating to the original electricity regulation and the original agency regulation. These original electricity and agency regulations have now been repealed, as a result of the recast regulations entering into force on 1 January 2020 and 4 July 2019 respectively.

The principal SIs are now out of date, as they pertain to the original electricity and ACER regulations, which no longer exist because they have been recast by the European Union. This draft instrument fixes those deficiencies by changing references from the original regulations to the recast regulations, omitting now redundant provisions and making changes consequential on the amending gas directive.

The draft instrument also obviously amends references to “exit day” in the principal SIs to instead reflect the reality of the transition period. The draft instrument takes account of changes made to UK domestic law required to implement the new electricity regulation. Finally, it removes provisions relating to Northern Ireland wholesale electricity markets in the previous SIs to avoid any conflict with the Northern Ireland protocol, which requires EU law governing wholesale electricity markets to continue to apply in Northern Ireland after the end of the transition period.

The draft instrument aims to maintain existing rules domestically while amending or removing provisions that will no longer be functioning after the end of the transition period. As a result, this draft instrument will help to maintain the operability and integrity of the UK’s energy legislation and to maximise business continuity for market participants.

In conclusion, these regulations are an appropriate use of the powers of the withdrawal Act, which will maximise continuity in our energy regulation and business continuity for UK market operators and ensure that there is no uncertainty in the role and functions of UK and EU bodies in the market and requirements on market participants as we leave the European Union. I commend the regulations to the House.

--- Later in debate ---

[Lord Callanan (Con)]

My Lords, I thank all noble Lords for their valuable contributions to the debate. The Government are committed to achieving a smooth end to the transition period for our energy system. As such, a programme of legislation is required to ensure that retained EU law is workable and free from deficiencies by the end of the transition period. This draft instrument falls within this category of legislation. Failure to address in full the deficiencies in retained EU legislation, or to ensure that the relevant aspects of the Northern Ireland protocol are able to work properly, will create uncertainty and inefficiency in the operation of both Great Britain and Northern Ireland’s market regulation, the role and functions of domestic and EU bodies in the markets, and requirements on market participants. This uncertainty could result in an increase in wholesale prices.

I must stress that this draft instrument, and the UK’s departure from the EU as a whole, does not and will not alter the fact that our energy system is resilient and secure. This resilience is built on our diversity of supply. The UK has one of the most secure energy systems in the world and the industry has well-practised contingency plans to keep energy flowing and to ensure that our energy supplies are safe.

In Great Britain, the Government have been working closely with the electricity system operator, the national grid, and with the regulatory body, Ofgem, to ensure that measures are in place to deliver continuity of supply and confidence in the regulatory framework in all scenarios. The Government are therefore confident that the UK’s electricity system is able to respond to any changes safely, securely and efficiently, whether these changes are a result of leaving the EU or other challenges facing the UK today, such as the coronavirus pandemic. Our energy system will still be physically linked to the EU after the end of the transition period through interconnectors, which bring significant benefits, including lower consumer bills, as well as security of energy supply.

In response to the questions from the noble Lords, Lord Oates and Lord Grantchester, it is indeed the case that our future energy relationship with the EU is being discussed as part of the ongoing negotiations. As set out in the UK’s approach to the negotiations, we are open to an agreement in this area that provides for efficient electricity trade. Noble Lords will understand that I am unable to go into any further details of our negotiating position at this stage because the negotiations are confidential. However, should we not have reached any further agreement with the EU by the end of the transition period, or if any agreement does not cover the relevant policy area, there will continue to be significant value in increased interconnection and trade of electricity and gas with our neighbours.

This instrument will help maintain the stable functioning of the domestic energy market by fixing deficiencies across retained EU and domestic legislation, while retaining the regulatory functions required to keep the market working effectively.

I will move on to the specific questions I was asked, all of which were of a similar nature. The noble Lords, Lord Oates and Lord Grantchester, and the noble Baronesses, Lady Burt and Lady McIntosh, asked whether the devolved Administrations have been engaged. It remains the case that devolved Administration ministerial consent is not required for these SIs because energy is not a devolved matter for either Scotland or Wales. However, BEIS regularly engages on EU exit and energy matters, and both Governments were informed about the SIs before they were laid in draft.

The situation with Northern Ireland is slightly more complicated. In preparing the electricity and gas amendment regulations, BEIS consulted and worked closely with the Northern Ireland Department for the Economy to get its views on the changes required, and Northern Ireland ministerial consent for the SI was provided. BEIS also engaged with the Utility Regulator on the content of the SI. I cannot remember who asked the question, but the specific request from Northern Ireland was to remove the provisions contradicting the protocol as described above.

The noble Lords, Lord Oates and Lord Fox, and the noble Baronesses, Lady Burt and Lady McIntosh, referred to the single electricity market and Northern Ireland. I can confirm that it is the UK Government’s long-standing position that by far the best outcome for electricity in Northern Ireland is to maintain the single electricity market across the island of Ireland. This has consistently been supported by both the Irish Government and the EU Commission. Continuation of the single electricity market has been achieved through the Ireland/Northern Ireland protocol to the withdrawal agreement, and nothing in this legislation affects that. As to what would happen to the single electricity market if we do not reach any further agreement with the EU, the provisions for the market were established under the Ireland/Northern Ireland protocol to the original withdrawal agreement and that provides the basis for the single electricity market.

The noble Baroness, Lady McIntosh, asked about the impact on prices. Many factors impact energy prices, including fuel prices, exchange rates and energy mix. As I said earlier, we will continue to be physically linked to the EU post exit through a number of electricity and gas interconnectors. We expect that any change in electricity prices in Great Britain as a result of changes to interconnector trading arrangements would fall within the range of normal market volatility. Therefore, we do not expect any significant impact on prices.

Again, with regard to gas markets, the mechanisms for cross-border trade are not expected to fundamentally change after exit. The UK gas market is one of the world’s most developed and provides security through supply diversity, most of which comes through LNG tankers, and is therefore not dependent on the EU.

The UK Government have taken steps to enable electricity and gas trade to continue and to maintain the effectiveness of domestic regulation, providing legal clarity for industry on the future operation of Great Britain and Northern Ireland’s energy markets.

To go into a bit more detail for the benefit of the noble Lord, Lord Oates, and the noble Baroness, Lady Burt, the SI will help support the continued operation of the single electricity market by removing the provisions relating to electricity in Northern Ireland, so that they do not come into force at the end of the transition period and therefore contradict the Northern Ireland protocol. The Northern Ireland protocol provides for a limited set of EU law provisions relating to wholesale electricity markets, carbon pricing and industrial emissions to apply to Northern Ireland at the end of the transition period to ensure the continued operation of the single electricity market. The Northern Ireland Executive are responsible for implementing the Northern Ireland protocol in relation to the single electricity market, as energy is a transferred matter, with my department—BEIS—continuing to provide support where appropriate.

The noble Lord, Lord Grantchester, asked about the difference between the two SIs. They both make technical changes to ensure that retained EU law will work in a domestic context, minimising impact on businesses and consumers should the UK reach no further agreement with the EU or if any agreement does not cover the relevant policy area after the end of the transition period. Most of the changes are minor—for instance, removing references to member states or EU bodies, which will of course be no longer appropriate in the circumstances.

The noble Lord, Lord Fox, in his typically genius way, used the word “electricity” in the title of the instrument to ask a whole series of unrelated questions on targets for offshore wind capacity. I am very happy to write to him with a proper answer to those questions and on the details of the Ofgem consultation, which are, as I am sure he will understand and realise, unrelated to these regulations. As always, however, I commend him on his ingenuity.

In conclusion, this draft instrument is required to ensure continuity for our energy system and certainty for both market participants and consumers. In doing so, it will support the implementation of an effective legislative framework needed for reliable, affordable and clean energy. It is my pleasure to commend the draft regulations to the Committee.

Motion agreed.

Corporate Insolvency and Governance Act 2020

Lord Callanan Excerpts

Wednesday 29th July 2020 Lords Chamber

[Lord Leigh of Hurley]

To ask Her Majesty’s Government what assessment they have made of (1) the operation of the moratorium process set out in the Corporate Insolvency and Governance Act 2020, and (2) whether that process has led to businesses being saved from closure.

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

My Lords, the Government are monitoring feedback from the insolvency industry on how the new moratorium measures are helping to rescue financially distressed companies. The new provisions have been in force only for a short period, and it is too early to know whether any companies have been saved as a result of the moratorium process. Government will review the effectiveness of the measures within three years of Royal Assent.

[Lord Leigh of Hurley (Con)]

The Minister will not be surprised to hear that I still regard it as a shame that companies with bonds—companies rather than businesses—have sought to be rescued. My research indicates that only one, or maybe two, companies have applied for the moratorium. Does the Minister accept that the monitor will now have to do a lot of unnecessary work to prove it is likely that a company will be rescued after the moratorium, and that this might hamper the monitor’s roles as both an adviser to the company and one who has to give an opinion on the company?

[Lord Callanan]

My noble friend is correct; my information is also that there is currently only one company taking part in the moratorium process, so it is too early to say how the measure will proceed. Clearly the role of the monitor is crucial, but as I said, we will review the effectiveness of these provisions in due course.

[Viscount Trenchard (Con)]

My Lords, on 23 June, the Minister told your Lordships’ House that he would monitor the operation of the moratorium closely once the Act came into force and that he would not hesitate to take action if it was required. It is clear from his Answer to my noble friend that action is required. Besides the very sensible proposal by my noble friend to extend the purposes of a moratorium to include the rescue of a business, rather than of a company as a legal entity, does the Minister not also agree that the exclusion of companies that have issued bonds amounting to £10 million has significantly and unnecessarily restricted uptake of the new provisions?

[Lord Callanan]

We are monitoring the operation closely, but as currently only one company is in the process, it really is too early to say how it will work. The exclusion relating to bonds is to protect financial stability. A moratorium could impact on the rating of those bonds and therefore the exclusion ensures the effective functioning of financial markets.

[Lord Allen of Kensington (Lab) [V]]

My Lords, since I last asked the Minister a question, more and more retail businesses have gone to the wall, leading to more job losses. Can he explain why only one company is going through the process, when literally hundreds of companies have gone to the wall? Has the moratorium process failed? If it has, what are we going to do to urgently address the new code? As footfall remains lower than pre-crisis levels, what other steps are the Government taking to avoid wider closures and insolvencies, and more and more job losses?

[Lord Callanan]

As the noble Lord observed, the measures have been in place for only a few weeks. One company has taken advantage of them, but it is an option for companies and the monitors if they think there is a possibility of the company being rescued. I can reassure noble Lords that the Government are fully committed to supporting the retail sector. In addition to the measures that have already been announced, my ministerial colleague, Minister Scully, has had regular calls with key representatives from across the sector and is working hard to address the issues it faces.

[Baroness Kramer (LD) [V]]

My Lords, the Act as passed does not include amendments that would have prevented banks manoeuvring into a position of primacy over small suppliers and creditors, while the Finance Act 2020 deliberately puts HMRC ahead of small suppliers and creditors. Will the Government commit to monitoring on an ongoing basis, not just in three years, any impact on small suppliers and creditors, and will they act if the evidence shows that the harm is actual and serious?

[Lord Callanan]

I can certainly give the noble Baroness that reassurance. These are complicated provisions and we accept that they have been in place for only a short period. We will of course continue to keep a close eye on how they are working out in practice.

[Lord Holmes of Richmond (Non-Afl) [V]]

My Lords, I full-throatedly support the comments of the noble Baroness, Lady Kramer, and my noble friend Lord Leigh of Hurley; I spoke to that effect during the passage of the Bill. I want to ask my noble friend the Minister about the role of the monitor, particularly around passivity and partiality. Are the Government considering passing regulations to require the monitor to submit a statement of their independence and meet a test of independence? Are they considering, in certain circumstances, enabling creditors to challenge the appointment of a monitor?

[Lord Callanan]

As my noble friend is aware, we debated these matters extensively only a few short weeks ago when we passed the legislation. We are keeping all aspects of the legislation under constant supervision. It is a complex Act, with lots of new provisions that we think will benefit companies, and we continue to look at how it is working in practice.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, the success of this new system will depend significantly on the courts being able to deal efficiently with new requests for a moratorium from the new court officer, the monitor. Can the Minister confirm that appropriate support and training has been made available to the court system across the country, now and for the future?

[Lord Callanan]

The noble Lord makes a very good point. I can certainly reassure him that the courts have taken all practical measures within the resources available to accommodate a likely increase in the workload before them. Specialist seminars have taken place to ensure that judges are up to speed with the changes and the processes that have been introduced by the Act. Resources include the numbers of, and the deployment of salary to, fee-paid judges and courtrooms, where required.

[Lord Naseby (Con)]

As someone who was in financial services, I wonder about awareness of the scheme. Is there not a case for putting forward a couple of arbitrary case histories on an anonymous basis—we do not have one yet, but perhaps a framework case could be drawn up initially?

[Lord Callanan]

I understand the point my noble friend makes, but I think that the provisions are fairly well known and understood in the insolvency profession. There is a wide circle of people who know all about them and who specialise in this area, but I am happy to consider my noble friend’s suggestion.

[Lord Hendy (Lab) [V]]

My Lords, in view of the fact that I have just learned that only one company has availed itself of the moratorium process, the answer to my question is now obvious. However, my question is this: has the Minister been able to make any assessment of the effect of the provision that workers be involved in moratoria by being informed? In the light of any such assessment, might it not be better to involve the workforce by consultation in advance?

[Lord Callanan]

I know the noble Lord feels strongly about these matters, and we discussed this during the passage of the legislation. We strengthened the monitor’s role to include a requirement in guidance that the monitor should ensure that the directors of a company have informed all employees that a moratorium has come into force. However, it is too early to see how this will work in practice.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, due to coronavirus and various related measures, there is the potential for a large backlog when the courts and tribunals fully reopen, financial assistance to companies stops, and the whole process of winding-up petitions is removed. What is the capacity of courts, tribunals and practitioners to handle that surge, and how will it be monitored, especially for how it influences choices about and during moratoriums?

[Lord Callanan]

The latest official statistics show that the number of corporate insolvencies decreased by half in June 2020 compared to the same month last year. However, the noble Baroness is right to say that we may well face a large increase in the months to come. We have been working with the courts and have provided the resources to make sure that they can satisfy that demand.

[Baroness McIntosh of Pickering (Con) [V]]

My Lords, my question goes to the independence of the monitor. Will my noble friend and the Government consider requiring a more stringent review by the monitor to support the rescue of a company as a going concern?

[Lord Callanan]

Again, we debated these matters extensively during the passage of the legislation. We are satisfied that monitors are appropriately regulated and that their independence is guaranteed. However, we will keep all these matters under review.

[Baroness Jones of Moulsecoomb (GP) [V]]

My Lords, the Government acted quickly in the pandemic in giving grants and loans to some small businesses. However, those businesses are now coming out of the furlough period, having to pay rent and staff, and might have exhausted their reserves. Have Her Majesty’s Government thought about creating an equity fund to help them survive?

[Lord Callanan]

I thank the noble Baroness for her question. We are aware of proposals for equity investment. For some companies, further debt might not be the right answer. As always, the private sector should be the first port of call, but we will keep the policy under review and will rigorously test any proposals for value for money.

[The Lord Speaker (Lord Fowler)]

My Lords, all supplementary questions have been asked and we now move to the next Question.

UK Internal Market: White Paper

Lord Callanan Excerpts

Wednesday 29th July 2020 Lords Chamber

[Baroness Kramer (LD) [V]]

My Lords, I agree, as does my party, that an internal market is vital to our economic future, but we are a country of nations, and even this Government must recognise that any internal market requires building a significant consensus between the UK Government and the devolved Administrations. Will the Government commit to an impartial UK body to deal with compliance and dispute resolution, to ensure that the devolved Administrations’ concerns on trade and regulations are respected? How will this proposed legislation operate with the Northern Ireland protocol? I can see no way that unfettered access, which this Statement contemplates, fits with the technical and administrative processes required as a consequence of the protocol. Will the Minister explain how much of the internal market framework is essentially designed to enhance the Government’s flexibility to make concessions without engagement with the devolved Administrations, in order to achieve trade deals with countries such as the United States?

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

I thank the noble Lord, Lord Stevenson, and the noble Baroness, Lady Kramer, for their questions. I pay tribute to the support that he offered for the principles of this legislation, for which I am grateful. He asked about the timetable. As he is aware, consultation on the White Paper closes on 13 August and we are committed to bringing forward legislative proposals following that when parliamentary time allows—likely to be as soon as possible after the Summer Recess.

The noble Lord asked about the continuing discussions on common frameworks. Indeed, those discussions continue, and our proposals will maintain consistently high standards across the whole UK, promoting co-operation between the UK Parliament and the devolved legislatures. He referred to the Agriculture Bill and the Trade Bill. Those are, of course, separate discussions and separate legislation, but let him be in no doubt that we are committed to high standards across the whole United Kingdom. Under our proposals, the devolved Administrations will continue to have the power to regulate within their areas, and they are going to gain a whole load of new powers when we leave the European Union transition period at the end of this year and will continue to be able to exercise their powers in those areas, as long as they do not discriminate against goods and services from other parts of the country. He also asked about state aid. I cannot give him a timetable for that, but it is under active consideration by the Government at the moment.

The noble Baroness, Lady Kramer, referred to the creation of a UK body. We are indeed suggesting that for consultation in the White Paper but we envisage that such a body will act to monitor the operation of the internal market across the country. We do not envisage it as having compliance powers, and of course dispute resolution is ultimately a matter for the courts.

The noble Baroness also referred to trade deals. Again, that will be subject to separate legislation—a separate Trade Bill is coming before your Lordships. However, I reiterate that our commitment is to the highest possible standards across the whole country, and we have no intention of watering them down.

[The Deputy Speaker (Baroness Henig) (Lab)]

We now come to the 20 minutes allocated for Back-Bench questions. I ask that questions and answers be brief so that I can call the maximum number of speakers.

[Lord Mackay of Clashfern (Con) [V]]

My Lords, can my noble friend say whether an Act of a devolved legislature could set up an internal market in the United Kingdom, and secondly, whether a fair committee structure will advise the United Kingdom Parliament on the views of the devolved Administrations on that subject?

[Lord Callanan]

My noble friend makes an excellent point, as he so often does. These proposals are designed to ensure that devolution can continue to work for everyone while ensuring that seamless trade in the United Kingdom can continue. From 2021, the devolved Administrations will have power over many more issues than they have ever had before as policy areas formerly managed by the EU flow back to them for the first time. Our proposals would do nothing to stop those Administrations introducing rules and regulations for their own businesses operating within their region, as long as those proposals were not applied discriminatorily.

[Lord Bilimoria (CB) [V]]

My Lords, businesses up and down the UK have worked with devolution for over 20 years. Will the Minister confirm that the proposed UK internal market Bill must continue to respect the devolution settlement while providing certainty to firms as powers are returned from the EU to the UK? Will the internal market work to ensure that costs or barriers to doing business between different parts of the UK are not increased, and, learning from the lessons of Covid, when collaboration has worked so well, will there be even greater collaboration between Westminster and the devolved Administrations? To build on what the noble Baroness, Lady Kramer, said, will we ensure a proportionate and independent approach to adjudication that is respected by all Administrations? Preserving the integrity of the internal single market is the economic glue binding our four nations together.

[Lord Callanan]

I agree with the noble Lord that the internal single market is indeed the economic glue that binds the four nations together. I can confirm that we will continue to respect the devolution settlement and indeed, as I said in response to earlier questions, the devolved Administrations are gaining many new powers as we leave the European Union. There is no power grab involved here—in fact, the opposite is the case—and we will continue to want to work as quickly as possible with the devolved nations and legislatures as much as we can.

[Lord McConnell of Glenscorrodale (Lab)]

My Lords, I am grateful to the Minister for his courtesy on the day the White Paper was launched. I hope that over the coming months, we in both Houses of Parliament will apply rigour to the debates on these proposals, because they are absolutely vital, economically as well as politically, for the United Kingdom.

I will ask the Minister two questions. I am impressed with the idea of the market access guarantee, which is the most novel and interesting proposal for the way we work inside the UK since the Fresh Talent visa of 2004. However, I would like to know how that and the subsidy control proposals that will come forward will be overseen. Will the Government consider an independent mechanism for both or either, and if so, would they give an opportunity to the devolved Governments in Edinburgh, Cardiff and Belfast, to nominate individuals to sit on any body that oversaw that independent mechanism for compliance?

[Lord Callanan]

I thank the noble Lord for his support. I was happy to be able to brief him personally on the proposals, because I know he speaks with great authority on this subject. He is right to refer to the market access commitments. It is a simple set of legal principles which guarantees UK businesses access to trade across England, Scotland, Wales and Northern Ireland. They have tremendous benefits for businesses in Scotland and Wales, as well as those in England. The noble Lord is right to say that we are considering setting up a body to monitor the operation of the single market across the United Kingdom. If we proceed with those proposals, I am sure that it will be sensible to have representation from the devolved Administrations.

[Baroness Sheehan (LD) [V]]

My Lords, the national mood is very much to build back better. That starts with the statutory safeguarding of hard-won improvements in food safety, animal welfare and environmental standards, which the Government have steadfastly refused to do recently during the passage of the Agriculture Bill and other Bills through both Houses. Does the Minister therefore accept that proposed measures in this White Paper do nothing to reassure campaigners, let alone the devolved Administrations, that their voices matter, and that mutual recognition looks very much to be a descending one-way street of falling standards?

[Lord Callanan]

I am afraid I cannot agree with the noble Baroness’s point. We are committed to high standards; we had these debates endlessly during the passage of the EU withdrawal legislation, and similar debates are going on during the passage of the Agriculture Bill at the moment. However, we are very proud of the high standards we have in this country and we will not dilute them. This is not about a race to the bottom.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a pleasure to follow the noble Baroness, Lady Sheehan, and I very much share her concern about the maintenance of standards. In answering Front-Bench questions, the Minister said that national Administrations will keep their powers as long as they do not discriminate against goods from other parts of the country. Can he tell me how that squares with, for example, the Well-being of Future Generations Act in Wales, which aims to set up higher standards of action, in the operation of the economy, with regard to environmental and other matters, and to Northern Ireland, where European standards will apply?

[Lord Callanan]

These proposals will not affect the ability of the Welsh Government to proceed in those environmental areas if that is a power they already have under the devolution settlement. As I said, we are not removing any of the powers that the devolved legislatures already have. In fact, we are increasing the number of powers that they have, and they can use them to the fullest extent. The only proviso is that they do not discriminate against companies and businesses in other parts of the country.

[Lord Caine (Con)]

My Lords, as a unionist, I welcome the White Paper, which deals with hugely important issues for the whole of our United Kingdom. Will my noble friend confirm that the White Paper demonstrates conclusively that by far the biggest market for Northern Ireland goods and services is here in Great Britain? Does that not underline yet again the huge economic benefits that Northern Ireland gains from being an integral part of our United Kingdom—benefits that could never be replicated under any other constitutional arrangements on offer?

[Lord Callanan]

As he so often is on these matters, my noble friend is exactly right. Some 50% of Northern Ireland’s exports are sold to the rest of the UK, and the figures are even higher for Scotland and Wales. We therefore propose to legislate through this measure by the end of 2020 to guarantee unfettered access for Northern Ireland’s businesses to the whole of the UK internal market, which is so important for it.

[Viscount Waverley (CB) [V]]

My Lords, past innovation led to the first industrial revolution, which, when combined, ensured a global reach creating trade, jobs and prosperity, and thus strengthening the union. Yet in today’s globalised world, how will the Minister balance a strong industrial market without sending a message that we have become insular and inward-looking, which would have a negative impact? In drawing attention to my declaration in the register, I ask: have the Government finalised agreement on the posting of UK-wide public sector projects on the European Tenders Electronic Daily site?

[Lord Callanan]

I am not sure I completely understood what the noble Viscount is getting at. Perhaps I can write him on that matter.

[Lord Taylor of Goss Moor (LD) [V]]

My Lords, the Minister did not answer one of the questions put by my noble friend Lady Kramer; perhaps he can now do so. How is unfettered access compatible with the terms of the Northern Ireland protocol?

[Lord Callanan]

I think it is fairly self-evident that we are committed to having unfettered access for goods from Northern Ireland to the UK single market, and this legislation will help to underpin that.

[Lord Wigley (PC) [V]]

My Lords, clearly, it is important to get a UK single market working effectively, and that is seen by all four nations to be on a fair and transparent basis. However, does the Minister recognise that the acceptability of these proposals will depend on the credibility of any dispute resolution system? If so, will all four nations have an equal voice within such a system?

[Lord Callanan]

I hope there will not be any disputes, but if there are, they will be legal disputes and the correct forum for resolving those is the courts system. We have no intention of setting up an alternative dispute resolution procedure when we have one of the best and most efficient court systems in the world to resolve disputes.

[Lord Wei (Con) [V]]

My Lords, the free ports policy, as part of levelling-up the country, was announced to great fanfare last year. Will the White Paper and the policies within it take account of free ports, and what happens if other Administrations disagree on creating such tax-free zones and zones to promote investment into their parts of our country? How will we co-ordinate such a policy as we take back the powers from Europe that will allow us to move ahead with it?

[Lord Callanan]

The free ports policy is unaffected by this legislation. If the power exists for devolved Administrations to create them, it is unchanged by this legislation.

[Lord Bradshaw (LD) [V]]

I have a simple question, of which I have given the Minister notice. Good public transport is essential to the functioning of the union, but public transport is at present in a very weak condition. This could be remedied by a strong message from government that public transport is safe and, to help keep it that way, you should wear a mask. Also, since the coronavirus, travel patterns have changed, particularly season-ticket journeys, and the overdue fares provision is a key factor for the Government. Can we expect an announcement imminently?

[Lord Callanan]

While that is not the subject of this legislation, I can reassure the noble Lord that the Government’s proposals on the UK internal market will not impact on the transport system between the constituent parts of the UK. I totally accept his wider concerns on the need to revive the public transport industry. I believe he is in correspondence with my ministerial colleague, my noble friend Lady Vere, and I am sure she will respond to him shortly.

[Baroness Uddin (Non-Afl)]

My Lords, the building blocks of a post-Brexit, post-Covid society and country must underpin an absolute commitment to harnessing social justice, strengthening business and an economy driven by action to yield a just and equal society, and it must mitigate any systemic discrimination. White Papers do not reach into communities whose lives are impacted by them when they become policies and legislation. Will the Government ensure that these discussions incorporate other government strategies, including on jobs, employment, healthcare and human rights, take into consideration the new paradigm of inclusive market solutions enshrined with corporate social obligations, and operate businesses and organisations free of institutional bias against minority groups—from the boards to management and at all levels of the workforce? Some 69% of women remain low-paid earners, with Muslim women remaining at the bottom of the ladder of the workforce and management hierarchy. Will the Minister’s department commit to embed and publish a gender equality impact assessment of those policies?

[Lord Callanan]

I accept the concerns that the noble Baroness raises, but the UK’s single market proposals—I am talking about the White Paper—have no impact on any of these matters. I will need to write to her separately with regard to the gender impact survey policy.

[Lord Randall of Uxbridge (Con) [V]]

Can my noble friend tell me what will happen if the measures set out in the White Paper are not put in place?

[Lord Callanan]

My noble friend asks a very good question. Without mutual recognition, different rules on products would increase costs and burdens on businesses and hinder trade within the country. Businesses could face serious problems. To give some examples, a Welsh lamb producer could end up being unable to sell their lamb in Scotland, or Scotch whisky producers could lose access to supply from English barley farmers, putting jobs at risk in both jurisdictions. Our modelling shows that a supermarket operating across the UK could face a tariff-equivalent cost of up to 2.3% if differences in food labelling, product packaging and food hygiene regimes arose in different parts of the country. That is why we think this framework is necessary.

[Lord Mackenzie of Framwellgate (Non-Afl) [V]]

My Lords, can the Minister gaze into his crystal ball and outline the consequences if a newly independent Scotland rejoined the European single market, particularly in relation to the management of a hard border with England?

[Lord Callanan]

The noble Lord is asking the ultimate hypothetical question—on one of those things which I hope will never come about. If this legislation did not exist and Scotland were ever to join another trading regime, that would throw up the possibility of a hard border, which would be crucially damaging for Scottish business. Scotland sells more to the rest of the United Kingdom than it does to the rest of the whole world, so unfettered access to other markets in the United Kingdom is crucial to Scotland economically.

[Baroness Ritchie of Downpatrick (Non-Afl) [V]]

Will the Minister outline how the Government intend to achieve the UK internal market arrangements in the devolved regions, particularly Northern Ireland, which has to continue to operate EU state aid rules in the agricultural sector?

[Lord Callanan]

I can tell the noble Baroness that, for as long as the protocol is in force, mutual recognition and non-discrimination will be adapted for British goods moving to Northern Ireland to account for the relevant goods rules that apply there. The UK Government have committed to delivering unfettered access for Northern Ireland businesses to the whole UK market, and we will enshrine this principle in law, as promised in the New Decade, New Approach agreement. Mutual recognition and non-discrimination will support commitments on unfettered access, ensuring that they form part of a coherent UK-wide system.

On agricultural support, discussion continues in order to find an approach to agriculture that works for all of the UK whereby legislation is not needed. Officials have had positive discussions on all issues in scope of an agricultural support framework, including marketing standards, agricultural support spending, crisis measures—including public intervention and private storage aid—data collection and sharing, and cross-border farms. We expect this close collaboration with all the devolved Administrations to continue over the coming months.

Enterprise Act 2002 (Specification of Additional Section 58 Consideration) Order 2020

Lord Callanan Excerpts

Wednesday 15th July 2020 Lords Chamber

Moved by

[Lord Callanan]

That the Order laid before the House on 22 June be approved.

Relevant document: 21st Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

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

My Lords, I thank the Secondary Legislation Scrutiny Committee—particularly my noble friend Lord Lindsay—for reviewing this order and the Enterprise Act 2002 (Share of Supply) (Amendment) Order 2020. The committee reported on these orders, noting that it considers that policy changes made by them are potentially very significant. I look forward to debating the nature of them with colleagues here today. These orders are being debated together because their causes and their consequences overlap. Both amend the circumstances in which the Government can intervene in mergers and acquisitions. Both respond to a need exposed or magnified by the Covid-19 crisis, and both amend the Enterprise Act 2002, which set the legislative framework for the Government to intervene in qualifying mergers and acquisitions.

I will explain briefly what each order intends to achieve and the rationale for so doing, beginning with the specification of additional Section 58 consideration. Section 58 of the 2002 Act specifies the circumstances in which the Government can intervene in mergers on public interest grounds. There are currently three such grounds: national security, media plurality, and financial stability, the last being added in 2008 following the financial crisis. The order adds a fourth public interest consideration to that list, namely the need to maintain in the UK the capability to combat and mitigate the effects of public health emergencies. In short, it ensures that the Government have the power to preserve critical public health and crisis mitigation capabilities in the UK, and that they can therefore safeguard the welfare of the British people.

The need for such measures has been exposed by the Covid-19 pandemic. All Members will recognise the hard work, dedication and commitment of firms up and down the country in responding to the crisis. They have been critical in getting us through the pandemic and will be just as important in rebuilding the economy in its aftermath. However, the very qualities that made these firms so critical to our response put them at risk from opportunistic investors. The vast majority of investors are an immense boon to this country, but an unscrupulous minority use UK capability to advance their own agenda at the expense of the British people.

Recently, we have seen attempts across the world to buy priority access to vaccines, to control the flow of personal protective equipment and to limit the availability of certain drugs. The Government have been clear that we will not allow this to happen to UK firms as a result of qualifying takeovers. The order creates the legislative framework to prevent that from happening.

Companies directly involved in combating public health emergencies, such as drug companies, are those that are most at risk. However, this order also allows intervention to maintain UK capability in mitigating the effects of a public health emergency. That might be necessary if there were risks to firms in our food supply chain, for example, or to companies that allow us to work safely during a pandemic by helping to slow the spread of a virus while allowing us to mitigate the impact on our economy. Such companies may include internet providers, for example, whose fibre broadband allows people across the country to work from home, order food and essentials from their living room and keep in touch with family members.

The second order that we are considering today—the Enterprise Act 2002 (Share of Supply) (Amendment) Order 2020—amends Section 23A of the Enterprise Act 2002. That section includes a list of “Relevant enterprises”, which are sectors where the threshold for government intervention in a merger is lower than that for other businesses. The relevant enterprises listed in the Act are all in particularly sensitive sectors where there is a public interest or a national security case for allowing the Government to intervene more readily. As it stands, Section 23A sets out three such sectors: military or dual-use technologies, quantum technology and computing hardware. The order adds a further three relevant enterprises to the list: “artificial intelligence”, “cryptographic authentication” technologies and “advanced materials”.

Businesses falling within those categories are often at the forefront of research and innovation. They are small businesses producing cutting-edge technology which may not yet be commercially viable, but which can have implications for our national security. Break- throughs in those fields underpin other areas of societal and economic development and are critical to areas such as defence and security. Ownership of businesses in those areas can therefore undermine our national security through espionage, sabotage or exerting inappropriate leverage, and puts us at risk of losing our advantages in security and defence.

I repeat that the vast majority of investors in this country have entirely noble intentions. The order seeks to deal with the tiny minority that invest maliciously with a view to exploit or do harm. The Covid crisis has brought this matter to the fore, magnifying the potential risk to national security. The depreciating effects on sterling and the financial pressures of a decrease in investor confidence all make us more exposed to opportunism. It goes without saying that the Government must be able to mitigate national security risks, and this requires our being able to intervene in mergers in the areas set out in this order, all of which are critical to our nation’s security.

In addition, we propose to make a second instrument before commencement of the share of supply order by the negative resolution procedure. That will allow the Government to intervene in mergers involving the new relevant enterprises where their UK turnover is more than £1 million. That is consistent with the other relevant enterprises listed in Section 23A. The order is a short-term measure that will apply until more fundamental reform can be taken forward in the national security and investment Bill. Such a measure is necessary given the immediate risk that we face as a result of the pandemic.

Having set out what these two orders will do, I will now say briefly what they will not do. They do not affect our commitment to an open economy. They do not alter our appetite or our enthusiasm for investment into the United Kingdom, and they do not change the fact that now, more than ever, foreign investment is the lifeblood of our economy. It created more than 57,000 jobs in 2018 alone. We have no wish to create barriers to business—quite the reverse—and permitting intervention does not mean that the Government will interfere unduly. There have been only 20 interventions under the Enterprise Act and none has resulted in blocked mergers. Rather, these are proportionate, reasonable and necessary measures to maintain capability in public health emergencies and to protect our national security, ensuring that the UK is open for business, but not open for exploitation. I beg to move.

--- Later in debate ---

[Lord Callanan]

First, I thank all noble Lords for their valuable and well-informed contributions to this debate, with the normal high standard of speeches that we have come to expect in this House.

Both these orders are reasonable, proportionate and essential. As has been said, we live in unprecedented times and it is right that, during such times, the Government reassess their powers to intervene in mergers and acquisitions. This crisis has revealed the need for the powers contained in these orders. Government must be able to act to protect our public health emergency capabilities and to scrutinise worrying mergers in the sensitive sectors we have set out. It is worth noting that many comparable countries have taken similar actions, as indeed was pointed out by the noble Lords, Lord Stevenson and Lord Chidgey, the noble Baroness, Lady Falkner, and a number of other noble Lords.

In recent weeks and months, we have seen allies such as Australia and Japan, as well as some of our European partners, update their investment screening regimes to ensure that risks around public health capability can be mitigated. Countries around the world, including the USA and Australia, and a number of our European allies, have also taken similar steps to protect their national security from opportunistic investment in sensitive sectors. We are not alone in taking these measures.

As I have said, these orders do not impact on our commitment to an open, international economy. We have always enthusiastically welcomed inward investment and championed international trade, and we will continue to do so.

I reassure the noble Lord, Lord Foulkes, that we do not expect to need to use these powers frequently, but we will not hesitate to use them if and when the need arises. We have no wish to stifle creativity, nor to burden business with regulatory red tape—quite the opposite. We believe that these measures are a proportionate reaction to the risks before us. We do not intend these orders to deter genuine investment and we do not believe that they will. Indeed, these orders are in keeping with our approach to maintaining an attractive, secure environment for international investors.

I repeat that the amendment to Section 23A of the 2002 Act is a short-term measure that will apply until more fundamental reforms can be taken forward through the national security and investment Bill. Indeed, the noble Lords, Lord Stevenson, Lord Reid and Lord German, and the noble Baroness, Lady Bowles, asked about the NSI Bill. It is right that the Government take a considered and evidence-based approach to long-term reform in this area. As was pointed out, the consultation took place in 2018, and for various reasons the Bill was not introduced at the time. It is a top priority for this Government, but it is right that, in the current circumstances and environment, we look again at the policy to ensure that it is fit for purpose. We are of course in a different geopolitical climate from that of 2018, and it is vital that the Bill provides the right protections. It was announced in the Queen’s Speech for this Session and it will be brought forward in due course. I am afraid that that is as specific as I can be on timing.

A number of questions were posed to me and I will try to deal with as many as possible in the few minutes available to me. The noble Lord, Lord Stevenson, asked whether this will allow for intervention on purely economic grounds. The answer to that question is no. The company involved must be able to provide capability in the UK to combat or to mitigate the effects of a public health emergency.

The noble Lord, Lord German, asked whether the public health measures would persist once the NSI Bill comes into force. The answer to that is yes. We intend to keep the public health emergency interest consideration as part of the Enterprise Act, so that is permanent, but the national security measure will be repealed by the NSI Bill.

The noble Earl, Lord Lindsay, asked about the threshold. The lower threshold of £1 million is considered to be the appropriate level of turnover to capture those businesses that, although fairly small, have a critical role in matters that may affect national security. We believe that that threshold is right.

The noble Lords, Lord Adonis, Lord Liddle and Lord Kennedy, pushed their luck—as is traditional—and went on to subjects which were not directly relevant to the matters under consideration in this debate. Nevertheless, I always try to be as helpful as possible to the noble Lords, so I will say a few words on the CMA. We already have a highly regarded competition regime and it is the role of the CMA to promote competition for the benefit of consumers, business and the economy. We will be appointing a new chairman in due course; the noble Lord will be the first to hear it about it when we do.

The noble Baroness, Lady Falkner, and the noble Lord, Lord Holmes, asked a very good question: why these particular sectors? It is always difficult to define such things but we believe that these sectors are where the risks from mergers that are not covered by the existing thresholds are the highest, and where it is important to act quickly to deal with these issues. Due to the current economic disruption, companies in such sectors may find themselves in difficulty; it is right that the Government are able to step in for national security reasons if required. There is always a difficult balance to strike but we believe that these measures are proportionate and strike the right balance with economic investment.

The noble Lord, Lord Chidgey, asked about cyber acts. The measures in respect of cryptographic authentication are indeed intended to help defend against cyberattacks, as are the reduced thresholds on quantum and military. The noble Lord, Lord Mann, talked about state intervention; I maintain the point that the orders do not provide a direct burden on business but rather enable the Government to intervene, if necessary, on a public interest consideration. We believe that this is a proportionate measure to mitigate against the risk.

The noble Baroness, Lady Jones, returned to one of her favourite subjects: facial recognition. I can tell her that some parts of facial recognition technology will indeed be covered by artificial intelligence and cryptographic authentication. She will be delighted to hear, I am sure, that facial recognition will be covered under the NSI Bill; I look forward to debating the matter further with her then.

To conclude, these orders form key parts of our Covid-19 response and learning. They ensure that the UK can maintain the capability to combat and mitigate the effects of public health emergencies in respect of qualifying takeovers, and they ensure that the Government can intervene more readily in areas of business where mergers implicate the security of our nation. I repeat that they in no way affect our openness to foreign investment; we continue to welcome genuine investment from around the world into this country. Rather, they reflect the fact that our economy can thrive only when the health and security of the British people are protected. With that, I commend these orders to the House.

Motion agreed.

Enterprise Act 2002 (Share of Supply) (Amendment) Order 2020

Lord Callanan Excerpts

Wednesday 15th July 2020 Lords Chamber

Moved by

[Lord Callanan]

That the draft Order laid before the House on 22 June be approved.

Relevant document: 21st Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

Motion agreed.

EU Coronavirus Vaccine Programme

Lord Callanan Excerpts

Monday 13th July 2020 Lords Chamber

[Baroness Thornton]

To ask Her Majesty’s Government whether the United Kingdom will participate in the European Union coronavirus vaccine programme.

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

My Lords, we have had constructive discussions with the EU on this scheme. We have decided not to join since we would not have a say in running it and would not be able to pursue our own negotiations. We will instead continue our own ambitious programme to secure a successful vaccine for the UK public as soon as possible and build collaboration with the EU outside of this framework.

[Baroness Thornton (Lab)]

I thank the Minister for that Answer. I think the noble Lord would not be surprised if some anxiety was not expressed about this issue, for two reasons. First, the Government have form in this pandemic by refusing to take part in the European procurement programme to buy PPE, for example, for which we have paid a price. Secondly, the Health Secretary has said that the Government have rejected the offer to join the EU scheme because they did not want to disrupt the UK vaccines programme, which one understands, and we have secured two deals with

“the two most developed candidates in the world”.

Does the Minister share my concern that the Government may be putting all our vaccine procurement eggs into two baskets? If these two candidates are unsuccessful, what options will be available to the UK, given the aggressive procurement efforts of the United States, China and other countries? What does the Minister think the UK’s role should be in what is turning into a vaccine nationalism—a sort of arms race—with significant worldwide political, economic and public health implications?

[Lord Callanan]

I understand the noble Baroness’s reservations and she makes some good points, but the important point about this scheme is that we would not have been able to take part in the governance of it or as part of the negotiation team. We would have had no say in which vaccines to procure and at what price, in what quantity and for what delivery schedule. We could therefore not have been confident that the scheme would deliver for UK needs. Crucially, we would not have been able to negotiate with a company that the EU is negotiating with in parallel. For all these reasons, we took the decision not to participate. We do not rule out participating in future procurement programmes, and the noble Baroness makes a good point about the nationalisation, as it were, of some countries. We will continue to pursue international collaboration, and we have a number of schemes in which we will continue to take part.

[Lord Triesman (Lab) [V]]

My Lords, I have read what the Government have written to the European Commission saying that involvement with the EU Covid-19 vaccine programme means we would be unable to pursue parallel negotiations with other potential vaccine suppliers. That has come as an astonishing surprise to most of the biopharma industry and it is plainly away from the truth. It is very much like the mistakes that have been made on testing and tracing, and it places the United Kingdom way behind the science curve. Would the Minister agree that, the more vaccines that are created and tested from reliable research, including the EU programme, the more likely it is that a successful research outcome will take place, the more trustworthy the research protocols will be and the more exhaustive the vaccine programme will be in getting a vaccine to people as fast as possible? Would he also agree that ideology must never, in any circumstances, trump the science?

[Lord Callanan]

I am afraid the noble Lord is wrong on his first point, but on his supplementary points I can agree with him. I can confirm that we are supporting a number of different research platforms and vaccine technologies, both through our discussions with companies and through our global efforts, alongside helping to fund research on a vaccine at Oxford University with the help of AstraZeneca. We have committed £250 million of UK aid to the Coalition for Epidemic Preparedness Innovations, an organisation that is working on a global scale to develop a Covid-19 vaccine.

[Baroness Brinton (LD) [V]]

In April, the World Health Organization said that countries must work together to develop a number of Covid-19 vaccines that have concluded successful clinical trials and demonstrate that they can manufacture many millions of doses faster than ever achieved before—none of which is a given. The UK was a signatory to the following World Health Organization declaration:

“We will continue efforts to strengthen the unprecedented worldwide collaboration, cooperation … and we will work tenaciously to increase the likelihood that one or more safe … vaccines will soon be made available to all.”


On this basis, why are the UK Government still refusing to collaborate with the EU vaccine scheme?

[Lord Callanan]

I did not catch all of that question; the audio was a bit poor. If the noble Baroness is saying that we should continue to co-operate on an international level, I would completely agree with her. I set out earlier the reasons why we did not think it was right to participate in this particular EU initiative, but we do not rule out participating in other EU procurement initiatives and we are in discussions on how we might do that.

[Baroness Noakes (Con)]

My Lords, has my noble friend seen the comments of Oxford’s Regius Professor John Bell, who said that the Government’s decision was “sensible”, that the UK has

“a very, very coherent and good vaccine plan”

and that the UK is

“way ahead of Europe in the way we think about vaccines”?

Does he agree that if there is a loser from the UK opting out of the EU plan, it is the EU and not the UK?

[Lord Callanan]

I had not seen the comments that my noble friend refers to, but I agree with them. We do have a number of promising vaccine production methods going on. However, if there are future international collaborations, either with the EU or with other international partners, then we rule nothing out because we need to work together to find an appropriate vaccine.

[Lord Kilclooney (CB)]

My Lords, since Brexit, which I supported, the United Kingdom has withdrawn from the Galileo satellite project, the Erasmus university programme and now the European vaccine programme. Can the Minister please confirm that, in the context of co-operation, we look forward to much co-operation with our European neighbours?

[Lord Callanan]

Yes, I agree with the noble Lord. Whilst we have decided not to participate in this particular initiative, we are committed to strengthening our collaboration with the EU and international partners on vaccines outside this framework. I assure the noble Lord that we will indeed continue to work with our European partners in other areas of mutual interest.

[Lord Campbell-Savours (Lab) [V]]

My Lords, notwithstanding any agreements we could have made with the European Union on vaccine development, what happens if the Chinese get there first with their Sinovac Biotech product or even another Chinese product? Can we have an absolute assurance that we will reject any pressure, trade threat or anything whatsoever from the Trump Administration or any other American Administration to boycott a Chinese product?

[Lord Callanan]

The noble Lord asks a number of hypothetical questions. All I can say is that we will continue to collaborate internationally both in the EU and across the world on vaccine development. It is something that we all have a stake in, and we all need to work together to achieve it.

[Lord Taylor of Goss Moor (LD) [V]]

My Lords, Wellcome’s head of global policy has described the EU policy as “morally right” because it ensures that the priority will be to spread the use and availability of vaccine across all countries according to need, treating those at the highest risk first. If the Government are not to be part of the EU scheme, will they at least commit to ensuring that vaccine is available to all, across borders, by priority and that they will not simply prioritise UK people? The coronavirus is not a respecter of international borders.

[Lord Callanan]

The Prime Minister has already said exactly that. Of course, we want to collaborate internationally; of course, the virus is affecting virtually every country in the world. We have to work across borders, and the vaccine should go to those who need it most.

[Baroness Blackwood of North Oxford (Con) [V]]

My Lords, I understand that the Commission’s vaccine programme has yet to complete a deal, while the Inclusive Vaccines Alliance, led by Germany, France, Italy and the Netherlands, has closed an non-exclusive deal with AstraZeneca for 400 million doses at cost. The IVA states that its mission is to enable rapid action on vaccine procurement to create added value for European nations and beyond. On this evidence, the IVA may be a more effective vehicle than the official Commission programme. Have the Government had any discussions with the IVA on collaboration and, if not, will the Minister undertake to do so?

[Lord Callanan]

I can confirm to my noble friend that we have had discussions with many countries, including those who formed the Inclusive Vaccines Alliance. It is our understanding that the alliance members have now joined the EU procurement initiative, with commercial negotiations being taken forward under that framework. However, as I have said, we will continue to work with the EU and other international partners on development.

[Lord Hunt of Kings Heath (Lab) [V]]

My Lords, the Minister has been keen to acknowledge the benefit of international collaboration. If a number of vaccines are successfully produced, one of the great challenges we face is that a significant proportion of people will not take them. Will he at least talk to the EU about collaborating on a European-wide effort to encourage our populations to take up the vaccine?

--- Later in debate ---

[Lord Callanan]

We are having a number of discussions with the EU on a whole range of initiatives. As I said, we decided not to take part in this scheme for specific reasons, but we do not rule out any future collaboration or co-operation with the EU.

[Baroness Falkner of Margravine (Non-Afl) [V]]

My Lords, in this decision, the United Kingdom has made the right call, given that, like the UK, Germany, France, the Netherlands and Italy have moved to make their own provision prior to the European Commission initiating action. Given that we pay into the multiannual financial framework until the end of 2020, why were we not permitted to be part of the governance and negotiation? Is that likely to happen if there are future projects? If so, it would be understandable if we went our own way.

[Lord Callanan]

Other EU member states would have been able to take part in the governance of the scheme; we would not. Even though the main development is funded from the EU budget, any individual procurement or orders would come from national budgets. Crucially, we would not have been able to negotiate in parallel with other companies with which we already have a good working relationship.

[Baroness Bull (CB) [V]]

My Lords, new research from King’s College London, in which I declare my interest as an employee, suggests that immunity from Covid-19 may last just a few months, indicating that mass, or herd, immunity from the disease is not an effective strategy, that vaccination boosters may be required, and that any cavalier approach to infection on the basis that one might as well get it in order to acquire the protection of immunity is woefully misguided. What assessment have the Government made of the impact of these findings on their vaccination strategy and their approach to vaccine development?

[Lord Callanan]

The Vaccine Taskforce is of course considering all the academic work being done in this field; it is a rapidly developing sphere of science. I am sure that we welcome the work taking place at the institution mentioned by the noble Baroness, but a lot of other research institutes are already looking into it. There are a number of developing vaccine forms which require different manufacturing processes to produce individual vaccines, and we are of course evaluating all of them.

[The Deputy Speaker (Lord Lexden) (Con)]

Viscount Waverley. No? No connection, I think. I call the noble Lord, Lord Dobbs.

[Lord Dobbs (Con) [V]]

My Lords, there have been some pretty knee-jerk reactions to this announcement. Can the Minister confirm that this decision is not about being against co-operation—far from it; it is precisely what Brexit and a new policy are about: a new relationship based on co-operation? However, does my noble friend agree that in this crucial step in our battle against the virus it would be entirely inappropriate to hand over decisions about costs, timing and distribution, and even rationing if it came to that, to a European Commission on which there is not a single British voice?

[Lord Callanan]

My noble friend makes a good point, but this was an individual decision about this particular programme, which we did not think was well suited to UK needs. We would not have been able to take part in the governance of the scheme or be part of the negotiating team. We would have had no say on what vaccines were procured nor on their price, quantity or delivery schedule, nor even on whether they would be made available to people in this country. It was a pragmatic decision on this particular scheme, but we do not rule out future co-operation with the EU on other schemes.