Manufacturing Post Brexit

Lord Callanan Excerpts

Thursday 26th January 2023 Lords Chamber

[Lord McNicol of West Kilbride]

To ask His Majesty’s Government what plans they have to support manufacturing in the United Kingdom following the UK’s departure from the European Union.

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

My Lords, following the UK’s departure from the European Union, the Government are focused on transforming our industrial heartlands by attracting inward investment, future-proofing businesses and securing high-wage, high-skilled jobs. We continue to support manufacturing through programmes in strategically important subsectors such as aerospace, automotive and life sciences, and we have committed nearly £650 million to fund the High Value Manufacturing Catapult centres, and nearly £200 million to the Made Smarter programme.

[Lord McNicol of West Kilbride (Lab)]

I thank the Minister for his Answer. Trade exports with the EU are down 15% since Brexit; paperwork and delivery times are up, while regulatory divergence, which was heralded as one of the key Brexit benefits, has so far been very limited. As divergence increases, manufacturers see only additional cost, extra paperwork and further disruptions. What further steps is the Minister’s department taking to support UK manufacturers, their employees and their supply chains to overcome the frustrations that they face on a daily basis? What does his department’s detailed cost-benefit analysis of further and future regulatory divergence show?

[Lord Callanan (Con)]

There are tremendous opportunities facing the UK following Brexit. We can have regulatory freedom in a number of areas where we were constrained by the EU. I do not want to cast doubt on the noble Lord’s figures, but manufacturing in the UK is doing well. According to Make UK, which is the largest UK manufacturing trade body, manufacturers are continuing to increase investment in the next 12 months, more than half of manufacturers plan to increase investment in both people and training within the next 12 months, and a further 57% are planning to increase investment in new product development. Manufacturing is doing well. We should not talk it down.

[Lord Howell of Guildford (Con)]

When we look to supporting manufacturing industries, is not the immediate question what we are all going to do in the face of rising American protectionism and subsidies, particularly in the motor sector? Are we going to challenge them? Are we going to join with the EU in its enormous plan for subsidies to counter American subsidies, or are we going to do nothing or go it alone?

[Lord Callanan (Con)]

My noble friend makes an important point. The Inflation Reduction Act in the US is clearly going to have big effects on the UK and Europe. We need to work together with our friends and partners in engaging with the US to try and convince them that a rise in global protectionism is really not the way to go.

[Lord Fox (LD)]

My Lords, if you talk to the trade associations—Make UK for example—they will also tell you that their members and the manufacturing industry are facing massive headwinds: increased costs, broken supply chains, increased paperwork when they try to export to the EU, a shortage of skilled people and a rising cost of capital. They look over the fence to other countries: they see Governments in the European Union and in the US that are seeking to work out plans to help their industries. Then they look here and see empty words and press releases, but nothing behind them. So when are we going to have actual plans, real road maps and proper support?

[Lord Callanan (Con)]

The noble Lord obviously wrote his question before I gave the earlier answer, because the figures that I quoted on increased manufacturing investment—more than half of manufacturers plan to increase investment in people and industry—were from Make UK, so the noble Lord is painting an unnecessarily gloomy picture.

[Lord Leigh of Hurley (Con)]

My Lords, would my noble friend agree with me, in respect of manufacturing post Brexit, that R&D is a very important part of manufacturing growth? The ONS revised statistics show that research and development in the UK was £33 billion just before Brexit; last year, it was £42 billion. This is in part thanks to the Government’s R&D tax credits of £6.7 billion last year. Will BEIS encourage the Treasury to ensure that the scheme to combine SME and larger companies’ R&D will not prejudice SME companies in claiming the invaluable R&D tax credits they need?

[Lord Callanan (Con)]

My noble friend makes an important point, and I know that he is very expert in this area. The Government are taking steps to increase our international competitiveness, by increasing the research and development expenditure credit from 13% to 20%; we will increase our economic competitiveness in that way. As part of the ongoing R&D tax relief review, I know that the Treasury is looking at this issue carefully.

[Lord Woodley (Lab)]

My Lords, Honda closed its factory primarily because of Brexit, when, unlike Europe, we removed those tariffs on vehicles coming in from Japan. Twelve years ago, the Government’s Automotive Council, which I had the privilege of sitting on, set aside £400 million—a lot of money in those days—to entice battery manufactures into the UK. It was small change compared to the billions of state money being put in by Germany, China and Japan. So, with respect to the Minister’s answer the day before, it is not nostalgic to nationalise Britishvolt; it is strategic, irrespective of the relatively small but very important battery production by some car companies that is taking place now. My question is: if we failed in battery mega factories, what is the Government’s strategy now for the industry? Is it hydrogen vehicles or whatever? Without investment and without strategy, we will have no industry in 25 years’ time.

[Lord Callanan (Con)]

I know that the noble Lord is passionate in his views on this, but I am afraid that I just do not agree with him that nationalising the car industry is the way forward. The noble Lord will have been around in the 1970s when we saw the decimation of the UK car industry under state control. The future is not state control; the future is what we are doing, which is incentivising manufacturers to move to the UK. The case of Britishvolt is very disappointing, but the money that we had available remains on the table. We very much hope that other companies will show interest in the excellent site in Cambois, near Blyth, and we continue to do all that we can to encourage investment in the UK.

[Lord Patel (CB)]

My Lords, the Minister mentioned the Government’s support for life sciences, and I applaud the Government for their strong support. But recent reports, particularly from big pharma in the United States, suggest that despite the £1 billion investment we had last year, it is now slowing down compared with investment in Europe and the USA. What other encouragement can the Government give to have inward investment from overseas?

[Lord Callanan (Con)]

I know that the noble Lord is very expert in this area, and we have discussed it before. We need to do all that we can to encourage life science investment; the UK has one of the most successful life science sectors in the world. We need to make sure that investment continues to flow into this country, and we want to use all the policy levers open to us to make sure that that success story continues.

[Lord Allan of Hallam (LD)]

My Lords, why does the Minister think that UK car production has fallen to its lowest level since 1956? Do the Government have plans to invest in particular in the charge point infrastructure that will be needed for the UK car industry to make a successful transition to electric vehicle production?

[Lord Callanan (Con)]

The noble Lord makes a good point. We need to do lots of things to help us on the journey to electric vehicles. Charging infrastructure is an important point. We have very ambitious plans to invest in thousands of new chargers, which are being rolled out. We already have one of the largest charging networks in Europe, but we need to do an awful lot more. In addition, as I mentioned, encouraging gigavolt battery manufacturing plants in the UK is particularly important. There is a lot that we need to do to support our electric vehicle plans.

[Lord Marlesford (Con)]

My Lords—

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[Lord Marlesford (Con)]

My Lords, Britain has over the decades sadly lost its pre-eminent position in nuclear power. Has my noble friend noticed that Rolls-Royce has today announced a new nuclear academy of excellence in Derby? Will he recognise that this is a real opportunity to move forward with the experience Rolls-Royce has in small modular reactors?

[Lord Callanan (Con)]

I completely agree with my noble friend. There is a great future ahead for small modular reactors. We want to support Rolls-Royce as much as we can in this area. We are rolling out support for Great British Nuclear and the SMR programme.

[Lord Bassam of Brighton (Lab)]

My Lords, I declare an interest as director of Business in the Community, the UK’s biggest responsible business network. The fall in manufacturing in the UK since the 1970s has been quicker than almost any other developed country, despite jobs in the sector paying 12% more than equivalent sectors and being seen as key to growth and bringing pride back to Britain. As the noble Lord from the Lib Dem Benches pointed out, it is reported today that UK car production is at its lowest level since 1956. It seems to us that the Government have accepted the decline, so what plans do they have seriously to arrest it? We have not heard enough from the Minister today and we do not hear enough from the Government on this point. We want manufacturing to recover. “Made in Britain” should be a slogan we should all be proud of.

[Lord Callanan (Con)]

I certainly agree with the noble Lord’s last statement, if not many of his earlier ones. There is always more that we can do. We continue to support UK manufacturing, but the UK is one of the largest manufacturing nations in the world—it is the ninth globally by output. Manufacturing contributed £205 billion of gross value added to the UK economy and supports 2.5 million jobs, most of them outside London, which is a good thing. Of course we always need to look at new policies and regulations. I am sure the Opposition will support our new regulatory freedom to help make things easier for the manufacturing industry, but let us get behind British manufacturing and not be so gloomy.

Hospitality Industry

Lord Callanan Excerpts

Tuesday 24th January 2023 Lords Chamber

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

My Lords, officials at the Department for Business, Energy and Industrial Strategy use a range of data sources, including the ONS, Statista and IBISWorld, to assess the impact of the current economic situation on hospitality businesses. In addition, Ministers and officials work closely with hospitality businesses and the main trade bodies, including UKHospitality, the British Beer and Pub Association, and the British Institute of Innkeeping, which provide us with valuable data on levels of trading and economic performance.

[Baroness Twycross (Lab)]

My Lords, the cost of living crisis is causing hardship not only to individuals and families but to the businesses that employ millions of people in the UK hospitality sector. Many of those businesses are on the brink of closure, not least due to food inflation and spiralling energy costs. Will the Government reverse their decision to reduce support for the sector in relation to energy bills and retain a permanent lower rate of 12.5% VAT? Will the Government also commit to updating their hospitality strategy, published in 2021, to ensure that the sector can meet the challenges that it now faces?

[Lord Callanan (Con)]

The noble Baroness makes a good point. We will certainly keep the hospitality strategy under review. It is worth recognising that we have offered considerable support to the sector, as we have to all businesses. I am afraid that we cannot continue to provide such levels of support. Nevertheless, support is available through business rates relief and other policies, and we continue to liaise closely with the sector.

[Viscount Hailsham (Con)]

My Lords, would it not be helpful to make an assessment of the impact on the livelihood of those who work in the hospitality sector of the damage caused by the strikes on the railways?

[Lord Callanan (Con)]

My noble friend makes an important point. The sector estimates that the railway strikes have cost it over £1 billion in lost revenue during the strike period, so they do have a significant impact.

[The Earl of Clancarty (CB)]

My Lords, it is a mystery to most people why, if oil and gas prices are coming down, energy bills are still high. For hospitality and arts venues, these bills have increased massively in the last year. Is the Minister aware that, according to the Night Time Industries Association, for most of 2022 one venue closed every two days? The Government should, and can, do much more to help, particularly considering that some energy companies are making huge profits.

[Lord Callanan (Con)]

That depends on what the noble Earl defines as an energy company. Many of the energy retailers are making very little money—in fact, they are losing money. Nevertheless, the noble Earl makes an important point. We want to make sure that there is no price gouging going on. We are in regular contact with Ofgem officials, and I have met with them. One of my ministerial colleagues has met with the energy supply companies to make sure that they are also doing all they can to support these vulnerable businesses.

[Lord Wigley (PC)]

My Lords, does the Minister appreciate that one of the significant problems facing the hospitality industry has been the shortage of labour, a direct result of the Brexit of which he was such an enthusiastic supporter? What will the Government do to enable the hospitality industry to get suitable labour for the next season?

[Lord Callanan (Con)]

I am not sure that I would equate the two issues, but I am happy to debate this with the noble Lord some other time. There are some labour shortages in the hospitality sector, as there are in others. We want to get the message across that industry needs to invest in workers from this country, rather than relying just on immigration all the time.

[Lord Addington (LD)]

My Lords, following up on that last question, would the Minister like to decide in the short term where he will get his workers from? If the industry contracts, there will be nowhere for them to go and we will all lose. Could he comment on that?

[Lord Callanan (Con)]

It is not necessarily the case that the industry is contracting: this year, revenues were ahead of where they were before the pandemic. There are some businesses closing and others are opening, and employment is up since before the pandemic.

[Lord Kamall (Con)]

My Lords, a few noble Lords have referred to the impact of Brexit. Can my noble friend the Minister assure us that, when it comes to future immigration policy, whether for the hospitality sector or others, we look not only to white Europe but to non-white, non-Europe, to make sure that we no longer have a racist immigration policy?

[Lord Callanan (Con)]

My noble friend makes an important point. We need to have a fair and balanced immigration policy, treating all parts of the world equally.

[Lord Woodley (Lab)]

My Lords, I declare an interest, in that many thousands of workers in the hospitality industry are members of my union, Unite. As the Minister knows, new figures show that one in seven jobs in this sector are now completely unfilled. It is impeding businesses dramatically, to the tune of 16% of their revenues, and reducing productivity and potential profits—profits are falling by the wayside. Does the Minister therefore support the industry’s call to lower visa requirements, as other noble Lords have mentioned before, to help address the chronic staff shortages, reduce VAT to 10% for 12 months, as has been mentioned, and continue the energy support for at least the next 12 months.

[Lord Callanan (Con)]

I know that the Home Office keeps all visa policies under review. If the noble Lord will forgive me, I will leave the setting of VAT to the Chancellor, but I am sure he has heard the call that the noble Lord has made.

[Baroness McIntosh of Pickering (Con)]

My Lords, will my noble friend look favourably on keeping the alcohol duties at their current levels while the hospitality industry continues to suffer due to the crisis we are currently experiencing?

[Lord Callanan (Con)]

Again, I know that the Chancellor keeps alcohol duty levels under constant review. I am sure that I am the same as all other noble Lords, who would love to see them reduced, but if you raise this with the Treasury, it will say that it has lots of demands for tax and duty reductions and not many people offering to increase others to make up for them.

[Baroness Blake of Leeds (Lab)]

My Lords, can we stress the scale and extent of the problem that we are discussing right now? Last month, 320 food services were forced to initiate corporate insolvency procedures, 41% more than in the same month in 2019, pre-Covid. Overall, in 2022, the hospitality sector contracted by 5%, with almost 5,000 venues closing, nine out of 10 of which were independent. This is incredibly damaging, not only to the wider economy, as well as the communities they serve, but particularly to all those who have lost their livelihoods. What urgent steps are the Government taking to help this vital sector recover and rebuild?

[Lord Callanan (Con)]

The noble Baroness makes an important point. Any business going under is regrettable and a tragedy for all those involved, but we must not exaggerate the problem. Following sharp decline throughout the Covid-19 pandemic, output has now recovered in the hospitality sector. In December 2022, it was about 8.5% above 2019 levels. We are continuing to offer support to the sector with energy bills and business rates relief.

[Baroness Doocey (LD)]

My Lords, will the Government prioritise the expansion of the youth mobility scheme visa to our European neighbours? This would help enormously with the huge number of vacancies in the tourism sector, and it would also provide opportunities for British businesses in Europe.

[Lord Callanan (Con)]

As I said in reply to an earlier question, the Home Office keeps visa policies under constant review. Where there are demonstrable shortages of labour in certain sectors, I am sure that the Home Secretary and other Ministers will want to look closely at them.

[Baroness Wheatcroft (CB)]

My Lords, one of the problems affecting the tourism industry is the lack of tax-free shopping. We are sending people to France and Italy when they should be coming here, at a time when our hotels and hospitality industry need that business. Will the Minister commit to reconsidering that policy and looking at the effects of it?

[Lord Callanan (Con)]

Again, noble Lords are tempting me to go down the path of Treasury policy. I know that the Chancellor has heard many of the representations that were made to him about tax-free shopping. If he has anything to announce, I am sure we will hear about it in the Budget.

[Baroness Foster of Oxton (Con)]

My Lords, does the Minister agree that although the unemployment figures are low, which is a good sign, there are still 1.5 million people who are claiming unemployment benefit. What can the Government do to really ensure that every effort is being made to get these people back to work?

[Lord Callanan (Con)]

My noble friend makes an important point, and it links in well with some of the other questions that we considered. Before we reach for the easy solution of immigration, we want to make sure that all opportunities are offered to people who are already in this country and that those who are unemployed and claiming benefits can get back into work. That would be a great thing, and we will do all we can to assist that process.

[Lord Harris of Haringey (Lab)]

My Lords, the Minister answered the first Question by telling us about all the sources of economic information that his department collected on the hospitality industry. Subsequently, he has told us that he is concerned about the economic costs, and he quoted a precise figure of the costs of the transport disputes on the hospitality sector. What is his department’s assessment—plus or minus—of the economic effects of leaving the European Union?

[Lord Callanan (Con)]

The figure I quoted was based on anecdotal evidence that was given to us, but there are lots of different figures flying around for all sorts of different impacts. The biggest impact, of course, was from the Covid pandemic, and clearly energy price rises have had an impact. We keep all of these matters under review.

Prepayment Meters

Lord Callanan Excerpts

Tuesday 24th January 2023 Lords Chamber

[Baroness Blake of Leeds (Lab)]

My Lords, Citizens Advice has reported shocking stories of families having their homes forcibly entered and left disrupted after forced installation of prepayment meters, at a time when they are already anxious about the cost of energy and making ends meet, with no certainty of the situation improving. The Government are right to conduct a review, but how does the Minister justify allowing this practice to continue in the meantime?

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

Well, I say to the noble Baroness that the Government recognise the importance of protecting customers, including those on a prepayment meter. This weekend, the Secretary of State set out a five-point plan on prepayment meters. He wrote to energy suppliers, calling on them to take every possible step to support consumers in difficulty. The Government want to see much greater effort from suppliers to help consumers who have payment problems, including offers of additional credit, debt forgiveness or tools such as debt advice. It is worth bearing in mind that the licence conditions set out that forcible prepayment installation should happen only as the absolute last possible resort.

[Lord Teverson (LD)]

My Lords, there is an irony here when it comes to prepayments, in that those who are worst off have to pay more because prepayment customers pay heavier tariffs than those on direct debit or other means of payment. Surely, this is a fundamental unfairness and one that creates even greater fuel poverty. Should there not be regulations to equalise the costs to consumers?

[Lord Callanan (Con)]

I say to the noble Lord that prepayment customers do not pay higher tariffs than other customers. They pay slightly more because of the cost of servicing prepayment meters. It is an important distinction. If we were to equalise the cost, that would mean that other customers would pay more to service that, and many other customers in fuel poverty are on credit meters—so I am afraid that there is no easy answer to this problem.

[Baroness Altmann (Con)]

My Lords, will my noble friend take back to his department the need not only to look at the forcible installation of prepayment meters but the installation of smart meters? An elderly gentleman I know, living alone, had a smart meter installed. He did not wish that, but it was forced on him. It was installed somewhere he could not see it. He had to climb on to a stepladder to operate it. Inadvertently, he had not paid his bill and he was cut off and left without heating, lighting, computing or a telephone for days and ended up calling an ambulance because his smart meter had let him down. Can my noble friend assure us that any investigation for vulnerable customers will include smart meter installation as well?

[Lord Callanan (Con)]

I say to my noble friend that I would like to hear more about that case, because I can see a number of potential problems with what she had to say. First, nobody is forced to accept a smart meter. I am the Minister responsible for smart meters and I know that it is the policy that is maintained. Secondly, if you have a smart meter, you do not need to look at the smart meter—that is the whole principle of it. You have a separate display unit, which will provide you with the information that you need. So I would be interested to hear more about that particular case if my noble friend would let me know.

[Baroness Uddin (Non-Afl)]

My Lords, the Minister said that he was not aware of anyone who had been forced to have a smart meter, but, as far as I know, all new social housing tenants are being forced, whatever the methods are, to have smart meters. A number of families in the east London area have contacted me since these issues have been made public. They are saying that they are aware that the cost is considerably more than for their neighbours, who do not have them. Will the Minister ensure, whatever the review is, that the public are made aware that this is a more costly option and that they have the right to the option that is the most affordable for those who cannot afford these very expensive smart meters?

[Lord Callanan (Con)]

I am sorry, but the noble Baroness is absolutely wrong. First, nobody is forced to have a smart meter. Secondly, if you have a smart meter, you pay the same tariff. There is no difference in cost just because of the particular meter you have. Smart meters are, in my view, a great innovation and provide a lot of comfort and ease for consumers—but there is no difference in the tariffs between normal meters and smart meters.

[Baroness McIntosh of Pickering (Con)]

My Lords, is my noble friend aware that prepayment meters lose the option of the direct debit reduction, so those customers are actually paying a premium rate? Also, in Committee on the Energy Bill, I mooted the idea of a social tariff for the most vulnerable customers, which the Government are now looking at. Will my noble friend bring forward amendments on Report in that regard?

[Lord Callanan (Con)]

As I said, people pay slightly more for prepayment meters because of the cost to suppliers of servicing those customers. The issue of social tariffs is of course different. I have had this debate with my noble friend before. We had a system of social tariffs that was replaced by the warm home discount, which was found to be a better way of supporting vulnerable customers. But, of course, we will continue to look at the issues.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I feel as though I have to state the blindingly obvious, which is that being asked to pay more for servicing a prepayment meter that you do not want is not fair. To anyone in the normal world, saying that the tariff is the same just makes the Minister sound like someone who does not understand the normal world. Ordinary people are paying more for a prepayment meter that they do not want but which is being imposed on them, and they are the people who have the least money. It is ludicrous.

[Lord Callanan (Con)]

The noble Baroness says I do not understand, but I have lived in properties with prepayment meters and I very much understand the issues. No one is forced to have a smart meter or a pre- payment meter, either, except in the limited circumstances that I have outlined, particularly for customers who are in levels of debt, and we have put in place a number of measures to try to reduce that as much as possible. I have outlined the steps that we are taking with suppliers to make sure that those are imposed on customers only in the last possible circumstances.

[Lord Harris of Haringey (Lab)]

My Lords, the argument that the Minister has trotted out, that it costs more to sustain customers who are on prepayment meters and that is why they pay more, is of course based on the days—I remember writing about this 40 years ago—when people used to put coins in the machine and then somebody had to come and empty the box. That necessarily cost the suppliers more. Nowadays, however, people have to go and have their key recharged and pay in advance, so the companies are getting the money earlier than they do for everyone else on a credit meter. So why are these customers paying more?

[Lord Callanan (Con)]

I am well aware of how the system works. The fact remains that to put in place commissions to shops and others that sell the credit to service prepayment customers over those who pay via direct debit costs suppliers more. Under the licence conditions that have existed for many years, suppliers are permitted to recover what it costs to operate those particular customers.

[Lord Cormack (Con)]

My Lords, anybody who has been a constituency Member of Parliament knows that forcible entry into a home is a terrifying experience. The noble Baroness, Lady Blake, asked an extremely simple question: could this not be suspended until inquiries are complete? Why can the Minister not give an affirmative answer to that question?

[Lord Callanan (Con)]

Because none of these matters is simple. We have called on the suppliers to impose a voluntary moratorium, and we are working with them to try to implement that, but, of course, if we do that there are other options for suppliers, involving bailiffs and various other methods of collecting debt that are also not to be recommended. These are difficult issues that we have to deal with. To get a warrant requires a process through a magistrates’ court and, if a person wishes to object, they can go along and get their case heard by a magistrate.

[Baroness Butler-Sloss (CB)]

My Lords, if the suppliers will not help, what are the Government going to do to help the people who cannot afford this?

[Lord Callanan (Con)]

The Government have put in place a considerable package of support, involving tens of billions of pounds of price support, which applies to prepayment customers as well as to others. Nobody denies that this is a difficult time, with energy prices being so expensive, but the noble and learned Baroness is well aware of the package of support that we have offered.

[Baroness Lister of Burtersett (Lab)]

My Lords, the i newspaper has shown that thousands of cases are being put through magistrates’ courts without any proper assessment of the case at all, with no one having the opportunity to put their case. The Minister is doing a lot of urging of energy companies to do the right thing, but, if the imposition of prepayment meters on vulnerable households continues, at what point would the Government be willing to take effective action? How many people have to go cold before that point comes?

[Lord Callanan (Con)]

Warrants are put through in bulk only when they are not contested. People are informed of applications to courts and, if they wish to contest the application, they are entitled to a separate hearing and their arguments will be heard by the magistrate. That is how justice works in the UK.

Electric Vehicle Battery Production

Lord Callanan Excerpts

Monday 23rd January 2023 Lords Chamber

[Lord Lennie (Lab)]

My Lords, 12 months ago, £100 million was made available by the Government to Britishvolt to help unlock the necessary private finance and the company’s future. Ministers were falling over themselves boasting about how they were supporting 3,000 highly skilled direct jobs and a further 5,000 jobs in the supply chain in the north-east of England. But the money never materialised, and we all now know the consequences. Does this signal the end of the Government’s green industrial revolution, at the expense of these jobs and the key role they would have played in the electric vehicle industry and the wider decarbonisation of the UK’s economy?

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

No, is the short answer to the noble Lord’s question. Of course, before we make any government money available, we do the appropriate due diligence. As a result of this work, the funding was designed so that agreed milestones had to be achieved for the company to draw down substantial amounts of taxpayers’ funds. In the event, it was not able to meet those milestones, so the money was not handed over. I am sure the Opposition would like us to be careful with public money. If the alternative had happened and we had handed over the funds and the company had still gone into administration, I am sure the noble Lord would have been on his feet demanding an inquiry into why we had been so careless with public funds.

[Lord Naseby (Con)]

My Lords, given that, as I am sure my noble friend agrees, gigafactories are a vital part of our industrial infrastructure going forward, is there not a case for publicly stating that they must be home grown and for calling together successful UK companies such as Rolls-Royce and BP, and entrepreneurs such as Sir James Dyson, to try to find a structure that will take this forward? Unless something like that happens, is it not a fact that it will result in imports from China?

[Lord Callanan (Con)]

The Government stand willing to talk to any manufacturers that want to establish such facilities. There have already been a number of excellent investments in the UK, supported by the automotive transformation fund. The site in Cambois that was going to be developed by Britishvolt remains available. Subject to the decisions of the administrators and the local authority, we very much hope that a project can be taken forward there.

[Baroness Randerson (LD)]

My Lords, the collapse of Britishvolt is a symbol of the Government’s failure to create an industrial strategy to fill the void left by Brexit. It is about much more than the loss of one potential factory, because it threatens the future of the UK car-manufacturing industry as a whole. The SMMT and the Advanced Propulsion Centre estimate that we need 90 to 100 gigawatt capacity by 2030 to supply the electric vehicle industry. Current capacity is 2 to 2.5 gigawatts, so rapid expansion is urgently needed. There is a forest of gigafactory projects throughout Europe. Why does the Minister think those Governments have succeeded, while our Government have failed to create the industry needed? What discussions have the Government had in recent weeks with UK-based vehicle manufacturers, which are seriously concerned about the current void?

[Lord Callanan (Con)]

We have constant discussions with UK motor manufacturers and of course, we are always available for further discussions with companies that want to bring forward projects. The noble Baroness, as usual, is completely wrong. Already there have been substantial investments in this country. On 1 July 2021, Nissan and Envision announced a £1 billion investment to create a north-east EV hub. The site will produce a projected 100,000 battery-electric cars each year. Ford has committed a total of £380 million to make Halewood its first EV component site in Europe. Pensana received an in-principle offer of government support for its £145 million factory near Hull to make metal for magnets. So, this investment is coming. Of course, it was disappointing that the Britishvolt project was not successful, but the site remains an excellent one for this investment. Subject to discussions with the local authority and the administrators, we hope it can be taken forward.

[Lord Liddle (Lab)]

My Lords, what does the Minister anticipate the future of Jaguar Land Rover to be if there is no battery factory to supply it in the UK?

[Lord Callanan (Con)]

Jaguar Land Rover has an exciting future. It is an excellent company, providing brilliant vehicles that are exported all over the world. I am sure that it wants to make sure that its supply chain is appropriately robust.

[Lord Walney (CB)]

What would the Government do differently in future? What have they learned as a result of this failure—or is the Minister’s position genuinely that it is just one of those things, and these things happen?

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[Lord Callanan (Con)]

I think we acted appropriately. We agreed a grants award with this company, and we very much hoped that that project could be taken forward. It was a substantial amount of grant aid, but appropriate due diligence was done. The company produced a business plan and we set out an agreed series of milestones that it needed to meet, including securing the necessary private investment, before the public funds could be released. Unfortunately, it did not manage to achieve that. As I said in response to the noble Lord, Lord Lennie, noble Lords would have criticised me if we had released the funds and the company had then gone into administration.

[Lord Forsyth of Drumlean (Con)]

Jaguar Land Rover and Mini are iconic examples of British culture and manufacturing. How can the Minister be satisfied with new Jaguar Land Rovers only being supplied with one key because the company does not have chips, and with electric Minis being made in China? Surely this cannot be right, and the Government need to get a grip on this.

[Lord Callanan (Con)]

I know that my noble friend has personal experience of problems with his keys, and I hope they are resolved. That is not intended as an obscure comment—his is a genuine complaint, and I know it will be resolved. Of course, it is always regrettable if manufacturing is outsourced overseas, but the UK car industry has been successful in the past, and we have one of the biggest car industries in Europe. A massive programme of transformation is required in the industry as we move towards more electric vehicles, but I am sure that the industry will rise to the challenge.

[Lord Fox (LD)]

My Lords, the Minister, given his intimate knowledge of the trade and co-operation agreement, will know that there is an important clause relevant to this. In 2024, the rules of origin for electric vehicles change, increasing the need for local content. Because batteries make up so much of electric cars, we cannot achieve that local content without batteries being built in this country. Will the Minister tell the House whether his department speaking to the other relevant departments in government to reopen this negotiation? Is it this Government’s intention to push back the commencement date of this clause, because without doing so, we have a really serious problem here?

[Lord Callanan (Con)]

Like the noble Lord, I am familiar with the rules of origin provisions of the TCA. There was a lot of debate about this at the time, and we continue to keep an eye on it. Of course, there are discussions across government. One of the reasons for setting up the automotive transformation fund was to attempt to get more of these gigafactories into the UK, and we stand ready to talk to any other prospective investors to do that.

[Lord Sikka (Lab)]

My Lords, since 2016, UK car production has nearly halved. Honda has closed its factory in Swindon and BMW is moving production of its electric Mini from Oxford to China. We really need to make sure that we have good infrastructure, especially when it comes to electric batteries. With that in mind, would the Government consider bringing Britishvolt into public ownership? That is the only way to make sure we have a viable local player.

[Lord Callanan (Con)]

I note the noble Lord’s nostalgia for the great, successful British industries of the 1970s under public ownership, but I do not think that is a viable suggestion. Government has proved that it is not good at running businesses and industry—we should leave that to the private sector, with appropriate government support where required.

[The Lord Bishop of Durham]

My Lords, the Minister loves the north-east, just like I do, and has noted that this is an extremely suitable site. Is not part of the problem that the return on investment is a very long way forward, so will the Government consider upping the amount they are willing to commit upfront to enable production on this site?

[Lord Callanan (Con)]

The amount of money on offer here was very considerable. I am not going to get into details of commercial negotiations but as I said, we stand ready to talk to any potential investor in that site or any others. The right reverend Prelate is right that this is one of the best sites in Europe for such a facility: it has the right shape, connections and location. We are optimistic it will be taken forward, but as the right reverend Prelate will understand, I am not going to get into commercial negotiations at this point.

REUL Bill: Trade Unions and Workers’ Rights

Lord Callanan Excerpts

Monday 23rd January 2023 Lords Chamber

[Lord Balfe]

To ask His Majesty’s Government what discussions they have had with trade unions concerning changes to workers’ rights proposed in the Retained EU Law (Revocation and Reform) Bill.

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

My Lords, the Department for Business, Energy and Industrial Strategy is responsible for labour relations and works closely with trade unions. Engagement is essential for developing and delivering our policies and, during the pandemic, helped to support jobs and keep workers safe. For example, the unions and business worked together to help to deliver a package of economic support through the job protection retention scheme, which protected millions of jobs.

[Lord Balfe (Con)]

I thank my noble friend for his reply but it is not an Answer to the Question, which was whether the Government had discussed this proposed legislation with the trade union movement, 2 million of whom vote for the party on this side of the House. Does he agree that it would be a good idea to talk to the trade union movement about this? Until that has happened, would it not be a good idea for those parts of the legislation that provide for worker protection not to be revoked without further representation?

[Lord Callanan (Con)]

We engage with the trade unions regularly. There have been a number of meetings in recent weeks, particularly about strike action, but the retained EU law Bill is not about workers’ rights; it is about retained EU legislation and the consequences that will flow from that. However, there will be a full opportunity to debate that in the House in the near future.

[The Earl of Kinnoull (CB)]

My Lords, the Explanatory Notes for the Bill when it was introduced in September last year said confidently in the overview at paragraph 16 that there were 2,400 pieces of legislation involved. The Explanatory Notes for the introduction to this House say that there are 3,200. First, I wonder whether any of the 800 bits of legislation that have turned up in the interim affect workers’ rights. Secondly, how confident is the Minister that 3,200 is the final number?

[Lord Callanan (Con)]

We are of course continuing to do detailed work on this matter. There will be an opportunity to debate that in full in the House in the near future, and I am sure that the noble Earl will want to make his contribution on that. We will update the dashboard shortly.

[Lord Fox (LD)]

I will follow on from the question from the noble Earl, Lord Kinnoull. How many members of the Minister’s team are currently out there working on this Bill? How many of them are looking for the lost legislation that seems to be appearing every day? How many members of his department are being used for that purpose rather than working on industrial strategy, which is what it is there to do?

[Lord Callanan (Con)]

I do not have a precise number but there are of course a number of civil servants working on the legislation that is before Parliament and has been discussed extensively in the House of Commons. Every department is engaged in looking through its EU legislation to see what is there. Obviously most of the main pieces have been identified, but sometimes there are obscure Acts and regulations that they are still discovering.

[Lord Woodley (Lab)]

My Lords, unfortunately the Minister has selective amnesia, and that is very worrying. This appalling Bill places many of our precious and hard-fought-for employment rights on the chopping block to be axed at the whim of the Secretary of State and, frankly, that is shameful. The Tory manifesto promised that Brexit would allow us to raise our standards in workers’ rights and not diminish them at all. Can the Minister give a cast-iron guarantee that, come 1 January, workers will keep their rights to holiday pay, TUPE protection, parental leave and of course protection for pregnant part-time workers? In fact, will he confirm that no existing employment rights will be weakened or, worse, scrapped?

[Lord Callanan (Con)]

The noble Lord has a good line in hyperbole but, as normal, he is absolutely wrong. UK employment rights do not depend on EU law. I will give him some examples. UK workers are entitled to 5.6 weeks of annual leave; in the EU, it is only four weeks. We provide a year of maternity leave, with the option to convert it to parental leave; the EU minimum is just 14 weeks. Our labour standards are some of the highest in the world. We are proud of that, and it does not depend on what the EU does.

[Lord Cormack (Con)]

My Lords, we placed an arbitrary date on Brexit, and we got the Northern Ireland protocol. Did we not learn the lesson that to place an arbitrary date and say that all this must be done by the end of this year is flying in the face of common sense?

[Lord Callanan (Con)]

I thank my noble friend for his view on that. I am sure we will have a full debate on the proposed sunset date for regulations. I do not think the system with the Northern Ireland protocol is the same as the Bill.

[Lord Hannay of Chiswick (CB)]

My Lords, does the Minister agree that, rather than the sledgehammer approach that this Bill takes, it might be more sensible if the Government simply proceeded with bits of law where they could produce better law than exists in the European Union? Could that criterion be imbedded in all the choices?

[Lord Callanan (Con)]

That criterion is imbedded in all choices. The whole idea of the REUL Bill is that we can have a proper look at EU retained law, change its status, see what is appropriate for the UK and what is not, and what can be removed and improved. That is the fundamental purpose of the Bill, but I am sure we are going to have all these discussions as the legislation proceeds.

[Lord Watts (Lab)]

My Lords, why are the Government so obsessed with making workers’ rights worse than they are now? Will he answer the question asked by my noble friend Lord Woodley? Why will he not give a guarantee that no workers’ rights will be diminished by this legislation?

[Lord Callanan (Con)]

I thought I had answered the noble Lord, Lord Woodley, but let me repeat the point for the noble Lord, Lord Watts, who obviously was not listening closely. UK employment rights do not depend on the European Union. Let me give him some more examples of how our rights are better than in the EU. The right to flexible working for all employees was introduced in the UK in the early 2000s; the EU agreed such rules only recently. The UK introduced two weeks of paid paternity leave in 2003, but the EU has got around to that only recently.

[Baroness McIntosh of Pickering (Con)]

My Lords, given that most of the directives and regulations within the EU retained law Bill fall within the brief of Defra, will my noble friend commit to employing more experts in this field, even on a temporary basis, who will be able to take a view as the Bill proceeds and before its implementation?

[Lord Callanan (Con)]

I will leave the appropriate Ministers to commentate on what is happening in Defra. The noble Baroness is right that a lot of retained EU law belongs in Defra. I am sure Defra is looking very closely at what can be changed, modified or repealed as we speak.

[Baroness Chapman of Darlington (Lab)]

My Lords, this is a dangerous way to proceed. It is very unlikely that the Government have thought through what they want to do with these 3,000 or maybe 4,000 pieces of legislation. It is also unlikely that in this House, in the three days the Government have so far suggested that we should have to consider them, we should be successful in doing our jobs as effectively as we might like. Will the Government please think again about the rash, foolhardy way they are going about rewriting important rules on workers’ rights?

[Lord Callanan (Con)]

I can see that we will have lots of interesting debate when this legislation arrives. The noble Baroness is wrong; we are not just considering all the regulations in the timescale she identified. If the regulations need to be updated, then each will of course come to this House for consideration, as all secondary legislation does.

[Lord Howell of Guildford (Con)]

My Lords, my noble friend the Minister probably needs a touch of support on this matter. Is it not the position that, if we were to take these 3,000 to 4,000 regulations and really examine the aspects of each one, after 40 years of being members of the European Union, that would take us years and not one year? Also, do we even have the capacity as a Parliament to deal with the complexities of such an enormous range of law changes?

[Lord Callanan (Con)]

My noble friend makes an important point. The concern now from the Opposition for all these regulations is touching, but of course they did not show such concern when they were introduced into UK law without any consideration in the first place.

[Baroness Wheatcroft (CB)]

My Lords, has the Minister recently read or listened to the speeches of Tony Danker, the director-general of the CBI? He is very clear that his members do not want this legislation; that they find it, even as potential legislation, damaging to their markets; and that, should it go ahead, it will undoubtedly shrink the market further for British exports, which have suffered enough already.

[Lord Callanan (Con)]

I have not seen the comments which the noble Baroness attributes to the director-general of the CBI, but I will certainly look at them. However, I am not sure how our repealing redundant pieces of legislation in this House affects overseas markets.

[Lord Tugendhat (Con)]

My Lords, as there are different ways of encouraging growth, is it not absurd to carry out an exercise that adds uncertainty to both sides of industry and creates a barrier to initiative?

[Lord Callanan (Con)]

All new legislation provides some uncertainty until it has been agreed by Parliament. I will put it another way: if there are redundant acts on the statute book and overregulation, that is good for business and industry. Of course we will consider each of those items of regulation in turn and look at them closely. We will repeal those that can be repealed and will improve and modify those that can be improved or modified.

Net Zero (Industry and Regulators Committee)

Lord Callanan Excerpts

Friday 20th January 2023 Lords Chamber

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

My Lords, I thank the noble Lord, Lord Hollick, for the report from the committee and for securing this important debate. I am grateful also for many of the other contributions. I start by apologising to the noble Lord that the reply from Secretary of State is not with him. It is with the Secretary of State at the moment, who has been away in Davos this week. Nevertheless, it should not have been beyond the wit of government to get the reply to him by this debate. I am also grateful to members of the Industry and Regulators Committee, and to all those who provided written and verbal contributions, which enabled the preparation of such a thorough report.

Like other Members, I am proud that, under this Government, we were the first major economy in the world to enshrine net zero into legislation. We set out in the net-zero strategy a bold vision for a decarbonised economy by 2050 and a net-zero power system by 2035. That shows that we have not lost any of that ambition.

I was very interested in the contribution from the noble Lord, Lord Burns, particularly given his former position. I am tempted to say it is a shame that he is not still in that position, given some of my recent discussions with that department, but perhaps that is a conversation we should have privately. He rightly focused on a road map to net zero. Although we do not yet know what the exact technology and energy mix will look like in 2050, we have a clear plan and a clear strategy for getting there—and, in doing so, we can manage at least some of the uncertainty he mentioned by forging the future ourselves.

We are working to make our clean energy future a reality with many brilliant and innovative British businesses, to help to industrialise emerging technologies, from British-built hydrogen-fuelled aircraft engines to small modular reactors that could each power 1 million homes. We are building on these success stories in the sectors where we already lead the world. Last year we completed the world’s largest wind farm at Hornsea 2, harnessing the high winds of the North Sea to deliver clean, affordable and secure energy for Britain, alongside the second- and third-largest wind farms, which are all in UK territorial waters and all done by us.

In the British Energy Security Strategy, we set out a new ambition: to deliver up to 50 gigawatts of offshore wind by 2030, including up to 5 gigawatts of innovative floating offshore wind. With the support of the offshore wind acceleration task force that we set up to drive forward delivery, alongside some of the measures in the Energy Bill to which the noble Lord, Lord Whitty, and others referred, I am confident we will succeed. It will be a challenge, because we have been so successful at rolling it out in this country that now the rest of Europe wants to do the same, which will of course present some inevitable problems with the supply chain. Nevertheless, it is a challenge that we are determined to meet.

Other noble Lords referred to another key challenge that we face, which, for a secure, cost-effective and low-carbon energy system, is storage. That is why we are committed to deploying enough large-scale and long-duration energy storage technologies to balance our overall energy system. To do that, we are working with industry to develop the best policy to enable investment by 2024. As noble Lords said, we are investing in nuclear, too, to complement the wind, solar, tidal and geothermal energy that we have, and play a vital role in beyond-the-grid applications, including the production of hydrogen and synthetic fuels for future use. Last year, we gave the green light to the development of Sizewell C, with a £679 million investment, which represented the first state backing for a nuclear project in over 30 years. This marks a milestone in a nuclear renaissance for our country as we pioneer new approaches to deliver not just reliable clean energy for Britain but new industries, new skills and, of course, new jobs.

The noble Lord, Lord Bilimoria, pointed to the exciting potential of SMRs, and we are working hard to set up Great British Nuclear and actively engaging industry to develop a delivery model and funding strategy for small modular reactors that addresses market needs, too, providing backing for a technology which, as the noble Lord said, promises to make nuclear quicker, cheaper, and easier to deploy. It is an industry in which the UK is very much at the very cutting edge globally.

My noble friend Lord Reay mentioned the important role of oil and gas. I also recognise, as I have stated many times in this House, the role of our own North Sea gas reserves, to ensure security of supply as we transition to net zero. As other noble Lords mentioned, it is a transition, and we will very much need gas during that transition. This exemplifies our whole-system approach to meeting our net-zero ambitions, where we tackle this most complex of challenges and drive forward technological developments on all fronts. That includes technologies such as carbon capture, usage and storage. The noble Lord, Lord Birt, highlighted the importance of CCUS, which does not just offer a green alternative for our heavy industries and a way of securing our electricity sector through decarbonising natural gas usage but opens up the possibility of delivering negative emissions through greenhouse gas removal.

As the Climate Change Committee has observed, CCUS

“is a necessity, not an option”.

We are determined to deploy it in a way that is designed to drive value for money for taxpaye1rs and consumers. It is a priority for this Government and we are progressing at pace. We will invest up to £1 billion to establish carbon capture and storage in up to four industrial clusters by 2030. The first two clusters have already been selected and, in August, we published a shortlist of associated projects taken forward into the track 1 due diligence phase. Further detail on the track 2 process will be set out later this year.

We are working to deliver the CCUS business models. In November, we published the dispatchable power agreement and, in December, we published the hydrogen and industrial carbon capture business models along with an update on carbon capture and storage network codes. CCUS also provides a way to power up the production of low-carbon hydrogen, a potential fuel of the future where, again, our expertise puts us right at the cutting edge. We have confirmed our intention to proceed with a producer-focused hydrogen business model, which will be critical to unlocking private investment in new low-carbon hydrogen production. We are supporting fuel switching to hydrogen in industry through nearly £400 million in energy transformation funding; we are also working with industry and regulators on hydrogen heating.

The noble Baroness, Lady Northover, noted the role of heat pumps. We are investing here and in the boiler upgrade scheme; I was happy to give evidence on that to the noble Baroness’s committee recently. The scheme provides financial support for the installation of low-carbon heat technology, primarily heat pumps, in homes and small non-domestic buildings to help support the transition away from fossil fuel heating. The scheme offers an upfront grant payment to help customers overcome the high upfront capital cost of low-carbon heating technologies, which will be crucial in the transition away from fossil fuel systems.

This winter has shown us just how important energy efficiency is for bringing down bills for British households. That is why the Government have so far committed to spending £6.6 billion in this Parliament on decarbonising buildings. Much of the work will be led by our new Energy Efficiency Taskforce, further details of which we will announce shortly. This will spearhead a new national effort to reduce energy demand and achieve our ambition to reduce the UK’s final energy consumption from buildings and industry by 15% by 2030.

In his opening speech, the noble Lord, Lord Hollick, recognised the crucial role of investment. Since March 2021, the Government have committed a total of £30 billion of domestic investment for the green industrial revolution. Over the next 15 years, we will work with the private sector to facilitate investment of something like between £280 billion and £400 billion in the power system in technologies such as offshore wind, hydrogen, energy storage and nuclear. Our Ten Point Plan for a Green Industrial Revolution, together with the Net Zero Strategy and the British Energy Security Strategy, are already expected to drive an unprecedented £100 billion of private sector investment and support 480,000 jobs by 2030. Bloomberg New Energy Finance estimates that, in 2021 alone, around £24 billion of new investment was committed in the UK across low-carbon sectors.

Last year, the Government published investor road maps on electric vehicles, hydrogen, CCUS and the aviation sectors. We are committed to publishing a comprehensive update to our Green Finance Strategy in the first half of this year. As noble Lords will know, we are also progressing the Energy Bill, which will help to liberate private investment in clean technologies, protect consumers and reform the UK’s energy system so that it is safe, efficient and resilient.

On the strategy and policy statement, as noble Lords would expect, the Government have prioritised work in relation to high global gas prices recently. We are making progress and have now completed the first-stage consultation with the devolved Administrations and Ofgem. Since the change of government, we have restarted work on the statement and are preparing for a public consultation in the spring.

My noble friend Lord Reay highlighted the critical role of Ofgem. The report also recognises Ofgem’s important role in enabling the net-zero transition. Its primary statutory duty is to protect the interests of existing and future consumers, which of course includes their interests in the reduction of greenhouse gases. The Government continue to maintain that an additional net-zero duty for Ofgem is not necessary.

I agree with the noble Baroness, Lady Donaghy, and others on the Industry and Regulators Committee, about the importance of effective scrutiny and effective governance arrangements. Our current governance arrangements are effective, and we continue to evolve and strengthen our overall approach, taking into account the recommendations of the committee’s report, the Public Accounts Committee, the NAO and other bodies.

I hope that the noble Baroness, Lady Blake, appreciates that I cannot say too much about the Cumbria mine, but I assure the House that I understand the strength of feeling of many Members on that.

The noble Lord, Lord Whitty, commented on energy prices and reflected on how the world has changed since the report was published. Since then, we have stepped in to support the British people and households with unprecedented support to help them to pay their energy bills. On fairness and affordability, the Government’s plan to publish a call for evidence was somewhat superseded by the turn of events and the announcements on energy price support over the last six months, including the decision to suspend the so-called green levies through the energy price guarantee.

The noble Lord, Lord Bilimoria, asked about the programme of hydrogen village trials. In May, the Government and Ofgem announced that Cadent and NGN’s proposals for potential hydrogen village trial locations in the two shortlisted areas, one in Redcar and one in Whitby, near Ellesmere Port, would be developed in more detail. We expect to make a decision on the location of the selected village trial later this year.

The noble Lords, Lord Whitty and Lord Birt, and the noble Baroness, Lady Blake, commented on and noted the publication of the Skidmore report, which was commissioned and welcomed by the Government. We will of course reply to that later this year. The Government remain committed to achieving net zero by 2050 by pursuing a pro-business and pro-growth approach to meeting our target and ensuring that the costs, as well as the benefits, are shared fairly, protecting consumers, workers and businesses. The target remains a government priority, and, as many Members observed, the net-zero transition will provide huge opportunities for jobs, investment, innovation and exports.

We have already achieved a lot on our road to net zero: between 1990 and 2019, we have grown our economy by 76%, at the same time as cutting emissions by over 44%, decarbonising faster than any other G7 country. I know that many noble Lords want to go further and faster, but we should recognise that we have already achieved a lot. The Government will carefully consider the proposed recommendations and will respond to the review later in the year.

The noble Lord, Lord Whitty, mentioned the role of the future system operator. Net zero is creating new challenges for our energy system, and it is crucial that the system is managed in a way that promotes a safe and secure energy system and that the best possible advice is available to inform the many crucial decisions that will be needed. The FSO will also have responsibilities in both the electricity and the gas systems, which will bring together the planning of both systems to drive competition and maintain a robust and secure system during the important transition to net zero. The FSO will be regulated by Ofgem and will provide accountability and a known framework for sector engagement. Its funding will be allocated through the price-control process, also managed by Ofgem. It will serve as an expert body, with comprehensive understanding of the system and its inner workings, adopting a holistic view to achieving net zero while maintaining energy security.

The Government are committed to ensuring that the costs of the UK’s energy transition are fair and affordable for all energy consumers. Recent rises in wholesale energy prices have added pressure to energy bills. The Government understand the difficulties that households and businesses face, and we have taken comprehensive action to support energy consumers. Our focus continues to be on providing robust support for energy consumers: for households, through the energy price guarantee until March 2024, plus further targeted support for the most vulnerable households, and for non-domestic consumers through the energy bills relief scheme until March 2023, and the energy bills discount scheme for the following year.

The Government are extending the energy price guarantee from April 2023 until April 2024 so that the typical household will pay an average yearly energy bill of £3,000— we emphasise that that is an average, not a cap—and are continuing to support UK businesses through the energy bills discount scheme. Alongside support for households and businesses, the Government are working to ensure that energy bills remain affordable in the long term. Our exposure to volatile gas prices underscores the importance of the plan, which I think the whole House agrees will build a strong, home-grown renewable energy sector. The Climate Change Committee agrees that our net-zero strategy and the British energy security strategy represent comprehensive and viable plans for reaching our world-leading target of eliminating our contribution to climate change by 2050, which we are well on the road to implementing.

This Government have a clear vision and a clear strategy for a transformed clean energy system, and the drive to continue that, delivering for the British people.

Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Amendment) Regulations 2022

Lord Callanan Excerpts

Wednesday 18th January 2023 Lords Chamber

Moved by

[Baroness Bloomfield of Hinton Waldrist]

To move that the Regulations laid before the House on 6 December 2022 be approved.

Relevant document: 24th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 17 January

Motion agreed.

Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Amendment) Regulations 2022

Lord Callanan Excerpts

Tuesday 17th January 2023 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Amendment) Regulations 2022.

Relevant document: 24th Report from the Secondary Legislation Scrutiny Committee

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

My Lords, these regulations were laid before the House on 6 December 2022. We have already passed legislation concerning the energy bill relief scheme pass-through requirement for heat suppliers, which ensures that benefits from the energy bill relief scheme, known as the EBRS, are passed through to end consumers on heat networks. This legislation also provides for a route to resolve disputes between consumers and heat networks on these pass-through requirements.

This statutory instrument amends the pass-through regulations, introducing a requirement on heat suppliers to send a simple notification to provide information to the Secretary of State by 6 January 2023. This information, which includes heat suppliers’ names, business addresses and contact details, will be shared with the energy ombudsman and the Consumer Council for Northern Ireland to support their handling of domestic and micro-business consumer complaints. This information will also be shared with the Office for Product Safety & Standards—the OPSS—for enforcement purposes.

The SI strengthens the OPSS’s powers of enforcement, enabling it to request information from suspected heat suppliers to determine whether they fall within the scope of the regulations. The OPSS may also impose existing civil sanctions, including a monetary penalty on heat suppliers who fail to comply with the requirements to notify, join the redress scheme or provide information. The monetary penalty has been modified, providing for a maximum of £5,000 to provide an effective deterrent for non-compliance.

The SI also amends the existing regulations to reduce the administrative burden on heat network companies, removing the requirement for heat suppliers to provide information about the calculation of the benefit when they first notify end-users about the scheme, while retaining the requirement to provide these calculations in the next bill.

The EBRS and the corresponding pass-through regulations have been introduced as a critical component of support for consumers on heat networks and complement other support that the Government are providing with energy and the cost of living. We expect that the notification requirements will facilitate the consumer complaints handling process and that the strengthened enforcement powers will result in a higher number of heat suppliers passing on the EBRS discount to their customers. I commend the regulations to the Committee.

[Lord Teverson (LD)]

My Lords, I thank the Minister for going through this piece of secondary legislation, which concerns what is clearly an important subject: making sure that the money that is in effect discounted from bills gets through to the final consumer.

It is probably unfair to say this but, having read through this instrument, I would be amazed if the dispute process is ever used or anybody ever gets round to being able to take advantage of it. To be honest, a maximum fine of £5,000 hardly seems a great deterrent to anybody, but there we are; I suspect it will be not a great deal of money in terms of the P&L account of any of these providers, so I am rather surprised that it has been pegged at that amount.

The thing I am really interested in is that, as I read it, a core part of this piece of legislation is finding out the contact details of heat suppliers. If we do not know that information, how do we get in touch with the suppliers to find it out? I do not understand that. Given the fact that this measure was supposed to have happened by 6 January, as this is all in retrospect, clearly this has happened; I am just interested to understand from the Minister whether the Government have had good responses and replies from everybody. How do they know that everybody has replied? I would be interested to understand that.

The only other area I want to probe—the Minister will forgive me, as I should clearly know this—is the Office for Product Safety & Standards, because I had never heard of it before. I am sure it is a well-known organisation in certain parts of the sector, but I am interested in briefly understanding to whom it reports, its status and whether it is tooled up to do this work effectively. However, I thank the Minister, as this is clearly important secondary legislation and I support making the scheme effective.

[Lord Bassam of Brighton (Lab)]

My Lords, I do not have a great deal to add and obviously we do not oppose these regulations, but it seems that they have come forward urgently because the department appeared to forget, when making the original regulations, that—as the noble Lord, Lord Teverson, said—there is no complete register of heat suppliers in place that would enable the original legislation to be properly carried out. The original legislation went through without a word about why the department did not know who the energy suppliers were and how that made the legislation somewhat redundant and difficult to implement.

It seems that we have in front of us a rapid and somewhat scrambled fix to try to rectify that original problem. No doubt the Minister will tell me that I am wrong, but it seems to exist because the department forgot that a rather central part of the method of getting money to customers is through heat suppliers, which should be known to the department to make them pass the money through. Why is the scheme so last-minute and retrospective? Should it not have been up and running and operating earlier so that customers could benefit?

The Explanatory Memorandum for this SI says that this must happen in order to get money to customers over the winter period, so my question to the Minister is: how has this happened? Why have the regulations been introduced suddenly, and why now when this should have been done earlier? How much time has been lost in getting money to customers as a result of the scheme being incomplete when it was introduced? Finally, have customers lost out or been disadvantaged in any way? That is probably the key point, because people are getting much higher bills than they would have expected a year or 18 months ago. Judging from my experience, although I am not struggling to pay, people are being shocked and taken aback.

I looked at the Explanatory Memorandum and it seemed there were one or two errors. The instrument makes corrections to definitions of “end-user”, “intermediary” and “scheme benefit”. That seems glaring. The Explanatory Memorandum says that suppliers need

“more time to provide their customers with detailed calculations”.

I would have thought that that problem could have been anticipated and dealt with earlier. That is a concern. I also spotted, in the “policy background” section that

“The heat network sector is not currently comprehensively regulated and there exists no complete record of heat suppliers.”


This is quite revealing. I appreciate that the instrument attempts to address this, but it is something of a gap to have left in the first instance. Although I was sort of impressed by the consultation exercise, a workshop with 120 heat suppliers in October hardly seems a complete consultation to my way of thinking. In its section on impact, the Explanatory Memorandum also refers to “light-touch notification”, so that heat suppliers

“in effect are given an extension on the deadline for making the much more comprehensive notification under the”

billing regulations.

I may have misunderstood this, but I do not think I have. By my way of reading it, it is not an entirely happy story. I look forward to hearing the Minister’s explanation of why and how this came about.

[Lord Callanan (Con)]

I thank both noble Lords for their valuable contributions to this brief debate. The Government have put in place robust measures to support consumers in response to the energy crisis. For heat network consumers these measures include the EBRS—energy bill relief scheme—or alternative funding for those without a domestic electricity meter, and the energy price guarantee for electricity. These schemes are up and running, shielding heat network consumers and countless others from excessive energy bill increases this winter.

The measures in today’s SI continue this work by strengthening the legal framework for ensuring that cost reductions from the EBRS received by heat networks are passed on to heat network consumers, leading to immediate short-term benefits to consumers over this winter. This SI results from wide-ranging engagement with industry, including trade associations, heat suppliers and consumer groups in the sector, and ensures an approach which works for both consumers and businesses. The changes are based on practicalities, meaning consumers will be informed of key information without placing an undue burden on heat suppliers.

Turning to the specific points raised by the noble Lords, I start with the noble Lord, Lord Teverson, who asked the obvious question: great minds think alike, as it is the same one I asked when I was introduced to this statutory instrument. How do we know that we have received a good response, as the deadline has already passed, and that everyone has replied? The figures are that, as of last week, we have received notifications from over 2,800 heat suppliers. Previous data obtained from notifications collected under the Heat Network (Metering and Billing) Regulations indicated that there were approximately 2,600 heat suppliers in 2018. We therefore judge that heat supplier engagement with the EBRS pass-through notification form has been good.

Of course there are some enormous heat networks, which everybody knows about, but also some quite small heat networks. Many developers just develop a block of flats, install a heat network and then subcontract out its management to a secondary company—some with great success and others with not such great success. Many people do not realise that they are on a heat network until they have already moved into the property, because it has elements of monopoly about it. If the noble Lord had been present in the debates on the Energy Bill, he could have discussed the fact that we are introducing powers to regulate heat networks, which will be given to Ofgem. We have been having debates separately with the noble Lord, Lord Teverson, and others on that but at the moment the sector is essentially unregulated, which has caused problems in some areas. There are some very bad examples of networks, which we will attempt to rectify.

The noble Lord, Lord Teverson, also asked about the role of the OPSS in ensuring enforcement, which was similarly raised by the noble Lord, Lord Bassam. The OPSS already had a role to receive notifications from heat suppliers and is therefore a natural fit. Notifying is actually a simple process, which should take about five minutes to complete. We would press any heat network suppliers which have not already notified—from the figures, we think that the vast majority have—to do so as soon as possible to ensure the avoidance of enforcement action. Again, all the big ones were known anyway and have complied. It is possible that there might be an odd mansion block or small block of flats somewhere, or some remote properties, that have not yet notified but we think the vast majority have.

If the supplier has not submitted its notification by 6 January or within 30 days of beginning operations, or for any new heat suppliers that began operating after 7 December last year, the OPSS may issue a notice of intent which makes clear the required actions and gives the business the opportunity to become compliant with the regulations. Should the heat supplier then continue to fail to do so, the OPSS may issue a notice of compliance, which sets a final deadline for the supplier to submit its notification after which point, if it is still non-compliant, it may be issued with the penalty fines that I referred to earlier. If the heat supplier does not engage with the ombudsman, or the Consumer Council in Northern Ireland, customers can recover the benefit that they are owed as a civil debt.

In response to the questions asked by the noble Lord, Lord Bassam, about why we are having the debate only after the notification window has closed, these regulations came into effect the day after they were made, on 7 December. This debate has no real bearing on the notification window but is to give time for parliamentary scrutiny and to ensure that this affirmative SI, as it was, does not now fall. We thought the “made affirmative” procedure was appropriate, given the time-sensitive nature of this work. Customers need support as quickly as possible, so ensuring prompt EBRS pass-through is important to provide that support. That underlines the rationale of running the notification window from the earliest possible date after the regulations were made.

The noble Lord, Lord Bassam, also asked a very reasonable question about why we are amending relatively new SIs. The answer is that following the initial regulations, which were made very rapidly given the urgent nature of the problem, we have taken on board feedback from the sector to ensure that this final approach now works for both businesses and customers.

The noble Lord also asked why the definitions of intermediaries have been amended. The amendments distinguish obligations that do not apply to an intermediary who is also an end-user. That could be a landlord, for example. The requirement to join the redress scheme will not apply unless the intermediary is provided with a scheme benefit by way of a discount or reduction under the Energy Bill Relief Scheme Regulations, nor will it apply to a person who supplies heating to the final customer unless that person is provided with a scheme benefit by way of a pass-through under these regulations. A landlord provided with a pass-through amount under the pass-through regulations, which it in turn must pass on to its tenants, will not be required to join the redress scheme unless that landlord also supplies heating through a district or communal heat network. Similarly, an intermediary who is also an end- user will not be required to notify an authorised person of their name, business address and contact details.

The noble Lord also asked why heat network suppliers are being given an extension on the requirement to complete their heat network metering and billing notifications. The answer is that these regulations will introduce minimal costs on heat networks. The information required is information that heat suppliers will already have access to, and we are not requiring heat suppliers to provide information beyond that which they already provide to government under the Heat Network (Metering and Billing) Regulations. We consider that the benefit of heat network consumers receiving lower heat prices resulting from the EBRS pass-through will significantly outweigh these relatively minor administrative costs to heat suppliers. By completing the notification requirement under these regulations, a heat supplier gains an extension in complying with the Heat Network (Metering and Billing) Regulations until 31 March 2023, so this further reduces the burden on the business over what, I think we agree, will be a challenging winter period.

I hope I have successfully answered the questions from both noble Lords, and therefore I commend these regulations to the Committee.

[Lord Teverson (LD)]

Can I just follow up on a couple of things? Given that this is an unregulated sector and one in which there are issues, as the Minister said, will the OPSS undertake some sort of random survey of end-user customers to make sure that this is getting through to them, so that there is some form of check? I would be interested to understand whether the Minister or his department has any estimate of the proportion of final consumers who have now received payment.

[Lord Callanan (Con)]

Consumers would not receive payment as such; they would just receive the appropriate discount off the bill presented by the heat network. I am sure the OPSS will want to monitor the market. I think it will primarily be driven by complaints from customers. I assure the noble Lord that, based on my postbag, customers are very willing to complain, both to their Member of Parliament and directly. Because the OPSS is responsible for the original billing regulations, it is best placed to carry out this work and I am sure it will conduct the appropriate market monitoring.

Motion agreed.

Energy Bill [HL]

Lord Callanan Excerpts

Committee stage
Monday 16th January 2023 Grand Committee

Moved by

[Lord Callanan]

222ZA: Before Clause 225, insert the following new Clause—
“Chapter 1Offshore wind electricity generationMeaning of “relevant offshore wind project”In this Chapter, “relevant offshore wind project” means a project involving the planning, construction, operation or decommissioning of—(a) a generating station in the UK marine area, that generates electricity from wind, or(b) infrastructure, in the UK marine area, used or intended for use in connection with a generating station within paragraph (a).”Member's explanatory statement
This new Clause, to be inserted as the beginning of a Chapter 1 for Part 11 of the Bill about offshore wind electricity generation, defines what is meant by “relevant offshore wind project”.

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

My Lords, I will also speak to Amendments 222ZB, 222ZC, 222ZD, 222ZE, 222ZF, 242I and 246A in my name. They will deliver on commitments we made in the British Energy Security Strategy to support the simplification of the offshore wind consenting process while continuing to protect our marine environment and meet our international conservation obligations.

The UK is a leader in offshore wind—we have the most installed capacity in Europe, as the Committee will be bored of hearing me say. Our ambition is shared across the devolved Administrations and we recognise the key role of Scottish projects in particular, as well as Welsh projects in the Celtic Sea. We will continue to work with the devolved Administrations as the Bill progresses through Parliament and as we develop subsequent secondary legislation to ensure a streamlined and efficient consenting process across the whole of the United Kingdom.

Amendment 222ZA sets out definitions for the subsequent clauses and Amendment 222ZB allows the use of strategic compensation measures to discharge obligations under the habitats regulations, the Marine and Coastal Access Act 2009 and the Scottish and Northern Irish equivalents. If all feasible options to avoid, reduce or mitigate any adverse impact on protected sites have been exhausted, the consenting authority may decide that an offshore wind project is in the public interest. However, it must first satisfy itself that sufficient compensatory measures are taken or secured before granting consent.

Identifying ecologically robust and securable compensatory measures in the marine environment frequently causes delays to project consent. To date, these measures have been delivered on a project-by-project basis. This is likely to become increasingly challenging. This amendment will enable earlier identification and agreement of suitable compensatory measures on a larger scale across multiple projects, which will help to support quicker decision-making on consents. Ministers in the devolved Administrations will retain their current roles in consenting. This amendment will ensure that they are also able to agree and secure strategic compensatory measures to satisfy compensation obligations for projects to which they consent.

Amendment 222ZC will enable the creation, operation and management of one or more marine recovery fund. The funds, once established, will be an optional mechanism for offshore wind developers to discharge a specified consenting condition that will help to compensate for damage to a protected site by paying into the fund. The Secretary of State will be able to delegate functions connected with the marine recovery fund. It is our intention to delegate the functions necessary for devolved Administrations to operate their own funds where appropriate, so that their Ministers may choose to use a marine recovery fund to undertake the delivery of measures related to projects to which they consent.

Amendment 222ZD will help to speed up the consenting process by streamlining assessments, including the habitats regulations assessment process. It will do this by enabling future regulations to address environmental protection of all protected marine sites early enough in the pre-application planning process to inform adequate and ecologically robust mitigation measures. This amendment also allows the Government to consider enabling developers to provide compensatory measures that improve wider marine ecosystems. I must emphasise that this broader approach would be considered only where developers have already avoided and mitigated their environmental impacts, and where like-for-like measures are not possible. Consent decisions will remain subject to advice from Defra’s statutory nature conservation bodies and their equivalents in the devolved Administrations.

Amendment 222ZE requires the Government and the devolved Administrations to consult each other, as well as statutory nature conservation bodies and marine regulatory bodies, on changes to the process prior to making regulations on environmental assessments.

In addition to Amendment 222ZA, Amendment 222ZF sets out some key definitions for the purposes of these new clauses. Amendment 242I ensures that the provision about affirmative procedures in the UK Parliament does not apply to regulations made by the Scottish Ministers under Amendment 222ZD, which will instead be subject to affirmative procedure in the Scottish Parliament. Amendment 246A sets out the commencement date of the clauses in this chapter. With that, I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, it would be churlish of me not to congratulate and thank my noble friend the Minister and the department on bringing forward the amendments to which he just referred. He promised these at Second Reading and they form part of a package, from April 2020, in the British energy security strategy. So far, so good. However, as I mentioned at Second Reading, in the EU Energy and Environment Sub-Committee some two or three years ago we took evidence to the effect that there should be a moratorium, particularly given the scale of the programme, the numbers involved and the massive area to be covered by offshore wind development; as my noble friend said, that is a very ambitious programme. However, the government amendments are flouting the mitigation hierarchy that I am sure he would wish to sign up to. The amendments seem to be proceeding to the end stage, which is only meant to be a last resort in law: that is, mitigation and compensation.

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We have a huge opportunity here to move this agenda forward at pace and build in the safeguards that we need now so that we do not have to come back again if things go awry.

[Lord Callanan (Con)]

My Lords, I thank all noble Lords for their contributions to this debate and the broad support for the government amendments. I congratulate the noble Baroness, Lady Worthington, on summarising quite well the dilemma that we all face in these matters: we can spend lots of time doing lots of very detailed environmental assessments and take everything into account, but the practical effect is that we continue with the existing power generation system that we know is damaging. I am not pretending that any of these issues is easy, but we think that we have provided a balance.

I start by providing reassurance that these amendments will not change the level of environmental protection, only the responsibility for delivering those actions, to ensure that they are implemented at the earliest opportunity and across a broader area than planned.

I thank my noble friend Lady McIntosh for her Amendments 242C and 242D on the impact of offshore wind farms on wildlife and marine habitats. On her first amendment, I reassure her that the Government already have in place rigorous environmental protection processes which each offshore wind development must undergo. These include a requirement for the Secretary of State to consult the relevant statutory nature conservation body and an examination of each application by an examining authority—in this case the Planning Inspectorate—which makes an independent recommendation to the Secretary of State. When developers submit their applications, they are required to provide information to enable the competent authority—in this case the Secretary of State—to undertake various assessments, including an environmental impact assessment and, where relevant, a marine conservation zone assessment and/or a habitats regulation assessment. These evaluate the impacts that the projects will have on the environment throughout their operational life cycle, from construction right through to eventual decommissioning.

Turning to Amendment 242D, I welcome my noble friend’s interest in our marine protected areas network. The current planning and legislative frameworks already ensure that offshore wind developments undergo rigorous scrutiny to identify impacts on marine protected areas, including the environmental assessments that I have just outlined. If at any stage of its life cycle the offshore wind farm would have impacts on protected sites and those impacts cannot be avoided, reduced or mitigated, but at the same time the project is considered to be in the public interest, then the Secretary of State, as the appropriate authority, has a duty to ensure that the necessary compensatory measures are put in place.

Defra is currently leading work with the offshore wind industry and other stakeholders to develop a library of ecologically robust and commercially feasible strategic compensation measures. Those compensation measures within the library will have had their effectiveness and feasibility tested before they are ever placed in that library. We also intend to introduce a set of offshore wind environmental standards for offshore wind farms, including a noise standard. The standards will apply across the industry and will, we hope, reduce the overall environmental impact of the sector.

It should not be automatically assumed that offshore wind developments will necessarily be harmful to marine protected areas. In many cases, such developments, as the noble Baroness, Lady Worthington said, may be compatible with the conservation objectives of the marine protected area in question. In any event, the Secretary of State cannot provide consent for an offshore wind development unless they are satisfied that the sequential legislative tests have been met.

[Baroness McIntosh of Pickering (Con)]

I understand that in Norway oil and gas firms are required to publish the environmental data that they hold. Would my noble friend see fit to ensure that the same happened here? What sort of environmental impact assessment is done before planning is given?

[Lord Callanan (Con)]

I have just outlined to my noble friend all the different assessments that are carried out before permission is given. The Planning Inspectorate makes a recommendation to the Secretary of State, and all those documents are published when relevant consents or others are given. If that is not the case, I will correct that for my noble friend, but as far as I am aware they are all published.

In respect of the comments that were made about the onshore grid, the amendments here apply only to the offshore elements of the wind farm development, which are the generation station itself and the offshore transmission. The building and the upgrade of the onshore network infrastructure—I am well aware that that is a very controversial subject in certain parts of the country, particularly East Anglia, at the moment—will always be subject to separate planning applications from National Grid, which is undertaking that work.

I reassure my noble friend that the wider offshore wind environmental improvement package has an evidence programme looking at all environmental impacts of offshore wind and how to address them, including a workstream on the impact of noise on marine mammals. The offshore wind environmental standards will use that evidence base to suggest any appropriate mitigation measures that developers can take. With that explanation, I hope my noble friend is reassured that existing legislation provides for robust protection for wildlife and for our marine habitats, and will therefore feel able to not press her amendments.

I turn to the question from the noble Lord, Lord Teverson, about whether the fund is voluntary. The marine recovery fund will be an optional framework through which developers could discharge a condition of their consent, to compensate for any adverse environmental effects on a protected site or sites that cannot otherwise be avoided or mitigated. Developers will of course retain the ability to deliver compensation outside the MRF. Again, Defra is currently looking at a range of potential operators for the fund. We will set out further details in the regulations when they are tabled, and I am sure we will have further debates on that important subject. I thank noble Lords for their contributions to the debate.

[Baroness McIntosh of Pickering (Con)]

Would my noble friend explain the status of the mitigation package, with compensation coming last and mitigation, recovery and all the other aspects coming first? What is its status in law?

[Lord Callanan (Con)]

Yes, of course, mitigation avoidance will always come first. It is only as a last resort, if it cannot be avoided or mitigated, that compensation will be looked at as an alternative—only at the very last stage.

[Baroness Worthington (CB)]

Has the Minister considered whether, if the development is actually increasing biodiversity because of the no-take effect, it should get credits, and maybe money back?

[Lord Callanan (Con)]

That is a very interesting point from the noble Baroness, which we will take into account.

Amendment 222ZA agreed.

Moved by

[Lord Callanan]

222ZB: Before Clause 225, insert the following new Clause—
“Strategic compensation for adverse environmental effects(1) This section applies where a public authority is subject to one or more environmental compensation obligations in relation to one or more relevant offshore wind projects. (2) “Environmental compensation obligation” means—(a) a statutory duty (however expressed) to secure that measures are taken to compensate for adverse environmental effects of a project, or(b) a statutory condition (however expressed) requiring a public authority, before granting consent for the doing of an act by a person (“P”) in connection with a project, to be satisfied that P will take or secure the taking of measures to compensate for adverse environmental effects of the act.(3) The public authority may determine that—(a) measures taken or secured by the authority in the exercise of any of its functions, or(b) measures to be taken or secured by the authority in the exercise of any of its functions,are to count towards discharging the environmental compensation obligation or obligations to which the authority is subject.(4) In this Chapter, “adverse environmental effect” means—(a) anything that adversely affects the integrity of any site comprised in the national site network, or(b) anything that hinders the achievement of the conservation objectives stated for a protected marine area.(5) The measures referred to in subsection (3) may be measures taken at the site or sites of the project or projects to which the measures relate or elsewhere.(6) In this section—“act” includes omission;“the national site network” has the same meaning as in the Conservation of Habitats and Species Regulations 2017 (S.I. 2017/1012);“protected marine area” means an area designated under—(a) section 116 of the Marine and Coastal Access Act 2009 or section 13 of the Marine Act (Northern Ireland) 2013 (c. 10 (N.I.)) (marine conservation zones), or(b) section 67(1)(a) of the Marine (Scotland) Act 2010 (asp 5) (marine protected areas);“statutory” , in relation to a duty or condition, means imposed by or under primary legislation.(7) For the purposes of subsection (3), a public authority (“authority A”) may, with the consent of another public authority (“authority B”), treat measures taken or secured (or to be taken or secured) by authority B as taken or secured (or to be taken or secured) by authority A in the exercise of any of its functions.(8) In subsection (4)(b), the reference to the conservation objectives stated for a protected marine area is a reference to the conservation objectives stated for the area pursuant to (as the case may be) section 117(2)(b) of the Marine and Coastal Access Act 2009, section 14(2)(b) of the Marine Act (Northern Ireland) 2013 or section 68(3)(b) of the Marine (Scotland) Act 2010.”Member's explanatory statement
This new Clause provides that where a public authority is under obligations relating to the provision of environmental compensation in relation to one or more relevant offshore wind projects, the authority may allocate measures taken or secured by the authority towards the discharge of those obligations.

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[Lord Callanan (Con)]

Well done to the noble Baroness, Lady Blake, for avoiding the question.

I thank everyone who has contributed today; it has been a fascinating debate. In the context of the Energy Bill, I think it is the first we have had on the fundamentals of our energy policy, with both sides: those who, in the case of the noble Baroness, Lady Bennett, seem to want to ban everything, and those who take a more pragmatic view of the issues. I will attempt to set a centre course of a sensible, pragmatic energy policy, which is the one we will follow.

I will address the various amendments, starting with Amendments 224 and 227, tabled by that fascinating pairing: on the one hand my noble friend Lord Moylan and on the other the noble Baroness, Lady Bennett. I will also address the contribution from the noble Baroness, Lady Worthington.

I begin by stating our fundamental policy of driving down demand for fossil fuels as we transition to our legally binding net-zero economy. Of course, the noble Baroness’s Amendment 227 would have significant ramifications. At a time of global energy crisis, an orderly transition underpinned by oil and gas is the best approach and it is crucial to maintaining our energy security of supply.

Outside the rarefied world that the noble Baroness lives in, Greens in other parts of the world are having to live up to these difficult choices in the real world, in real policy. At the moment, the German Greens are quite hilariously justifying the expansion of a massive new coal mine—producing lignite coal, one of the dirtiest forms of coal—in northern Germany, because of the energy crisis. The noble Baroness, Lady Bennett, might think it is funny for us all to sit in the cold and dark, relying on unstable sources of power, but the rest of us think that we need to supply this country with the energy it needs. We need to set the country on a net-zero transition, but we need to do it gradually and responsibly. We set this out in the British Energy Security Strategy, where we set out our long-term plan for greater energy security, including references to domestic gas supply. In the Autumn Statement, the Chancellor built on that and set out that the Business and Energy Secretary will publish further details on our energy independence plans in due course, and we will do so.

The North Sea Transition Authority launched the 33rd licensing round on 7 October 2022. This is expected to deliver over 100 new licences, which will put more UK gas on the grid. I repeat: it will not put more gas on the grid—it will put more UK gas on the grid. I have had this debate many times in the Chamber with the noble Baroness, Lady Sheehan, and I still fail to see how she does not think that this is a good idea. In our transition, as we are reducing our demand, it makes sense to have that gas from relatively low carbon-producing sources rather than importing highly polluting, high-carbon fracked gas from other parts of the world.

[Baroness Sheehan (LD)]

So the gas produced from the licences that will be issued in the 33rd round will not be traded on the commodities market—is that what the Minister is saying?

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[Lord Callanan (Con)]

Of course it will be traded on the commodities market, but the vast majority of it will be moved, produced and used in the UK. We have relatively limited ways of exporting gas. We have some interconnector pipelines, which, interestingly, over the summer were used extensively to build up continental supplies of stored gas ready for the winter. Most of our LNG terminals are used for importing; very few are used for exporting. The gas will be subject to the international price—I totally accept that; we cannot isolate ourselves from the international market—but the vast majority of the gas would be used and produced on the UK market. Unless the Lib Dems are telling us that we are going to tell everybody to switch off their gas boilers, turn off their heating and sit in the dark and cold—which I do not think is a practical policy, but I look forward to seeing that in focus leaflets, if that is what they really believe—this is a sensible way of proceeding, gradually reducing our demand over time. The Climate Change Committee accepts this as well.

I hope that the noble Baroness will find some reassurance in the landmark North Sea transition deal between the Government and industry. This deal will help to reduce emissions, ensuring a net-zero basin by 2050, and support our goal of decarbonising the wider economy. We have seen the sometimes wildly opposing views on this matter, but the Government believe that we can pursue a pragmatic, sensible, middle ground approach—our Lib Dem approach, if you like—to meet our climate ambitions while also ensuring British energy security.

I turn to Amendment 227A, tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. As drafted in the proposed amendment, the Oil and Gas Authority’s name change to the NSTA would occur only in the Energy Act 2016. However, the OGA is mentioned in a large amount of primary and secondary legislation which would also need to be changed. The Government recognise the importance of this change, and we are currently considering all the legislative options to amend the statutory name of the OGA to the NSTA in all places where it occurs. The amendment also seeks to remove the NSTA’s statutory principal objective to maximise the economic recovery of UK petroleum and add a new obligation regarding net zero. As I have just said on the previous amendments, in my view, maximising economic recovery of oil and gas need not be in conflict with the transition to net zero.

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[Lord Teverson (LD)]

I will not detain the Minister for long, it was interesting that he referenced the Climate Change Committee in response to my noble friend’s amendment. That same letter said,

“the evidence against any new consents for coal exploration or production is overwhelming.”

I am sorry that the Minister accepts part of that letter, but maybe not the other part. The Minister has nobly and served well a number of Administrations, including the one during COP 26, and I would like to know how he reconciles the COP 26 statements by his own department with the opening of that new coal mine.

[Lord Callanan (Con)]

The decision was taken by a different department, by DLUHC, in a quasi-judicial manner. It is likely to be the subject of judicial proceedings, so I cannot comment in detail on that decision, as the noble Lord will understand. I am sure we will be having this debate lots of times in future.

I move on to the question from the noble Baroness, Lady Blake. The reasons for the Secretary of State’s decision are set out in full in his published letter on GOV.UK, which takes into account matters like the demand for coal, climate change and the impact on the local economy. To reiterate the point of my noble friend, coking coal is used in the production of steel—it is not used in power generation—which is, of course, crucial to building the infrastructure that we all wish to see more of, such as offshore wind turbines.

On fracking, I thank my noble friend Lady McIntosh for her contribution. The Government have been clear that in line with the commitment made in the 2019 Conservative manifesto, it is adopting a presumption against issuing any further hydraulic fracturing consents for the extraction of shale gas. That position is, in effect, a moratorium. This will be maintained until compelling new evidence is provided that addresses the concerns around prediction and management of induced seismicity.

I move on to my noble friend Lord Lilley’s amendment. I welcome his thoughtful contributions to today’s debate, as well of those of my noble friend Lady Altmann. British Standard 5228, which my noble friend quoted, recommends procedures for noise and vibration control in respect of construction and open-site operations. It is not a measure designed to reduce the risk of induced seismicity. The potential for induced seismicity from hydraulic fracturing is a result of the injection of fluid deep underground, at depths of one kilometre or more. Seismicity induced by hydraulic fracturing is therefore different in nature from vibration directly induced by a construction site, and the application of BS 5228 would therefore not be appropriate.

My noble friend Lord Moylan tabled an amendment about the composition of our domestic gas supply. A review of the Gas Safety (Management) Regulations 1996 is currently under way. The Health and Safety Executive has been reviewing these regulations, which govern gas quality, and is consulting on a set of proposed changes. The HSE’s consultation closed in March 2022, and it will be aiming to publish its response in due course. BEIS has worked closely with the HSE and has taken regular opportunities to input into the process in both an analytical and a policy capacity. A statement by the Secretary of State at this stage is therefore unnecessary as the publication of the Government’s formal response will be tantamount to just that. I hope my noble friend will understand that in advance of that document, I cannot comment as it would not be proper.

The noble Baroness, Lady Sheehan, tabled two amendments in this group. On Amendment 222A, I should say at the outset that tax matters are an area for the Treasury. Since the introduction of decommissioning relief deeds—DRDs—the Treasury issues a Written Ministerial Statement at the end of each financial year updating on DRDs, including the total number of DRDs in force during the past financial year, past payments under DRDs and the projected value of future payments under ongoing DRD claims. While a DRD claim may arise where a company has defaulted on its decommissioning obligations, the tax system also provides tax relief for decommissioning costs in recognition that decommissioning is a significantly expensive and statutory obligation. HMRC publishes information annually on the estimated sum of all forecast tax relief payments due to decommissioning as part of its annual report and accounts.

[Baroness Sheehan (LD)]

I thank the Minister for his comments on decommissioning. He is unwilling to move further on the amendment, but will he at least commit to writing with the current estimate of the Exchequer costs of decommissioning if prices were to fall to less than $5, in line with Clause 1(3)(c), and to explain how these risks are being managed? I think that would be within scope.

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[Lord Callanan (Con)]

Decommissioning relief deeds are private contracts between the Treasury and the relevant company. That is a matter for the Treasury. I cannot give a commitment on behalf of the Treasury. I suspect that the best option would be for the noble Baroness to take it up with Treasury Ministers.

[Baroness Sheehan (LD)]

I hope the Minister will not mind me pressing on this issue. I am not asking for anything commercially secret but just for some assurance, which I think the PAC and the NAO have sought, that the Government have a handle on the liability and risks which they are potentially exposing taxpayers to in the future.

[Lord Callanan (Con)]

As I said, the noble Baroness should take this matter up with the Treasury. I cannot give commitments on its behalf. I do not know the details. I have set out the position on DRDs. As far as I am aware, this is not tax or revenue legislation. I suggest that the noble Baroness take this up with a Treasury Minister.

I move on to Amendment 227AA on the prohibition of flaring. The Government are already taking steps to drive down routine flaring and the similar practice of venting. The UK has committed to the World Bank’s Zero Routine Flaring by 2030 initiative, and we are working with regulators towards eliminating this practice as soon as possible. Through the North Sea transition deal, industry has committed to accelerating compliance with the World Bank initiative ahead of 2030. We are making good progress: in 2021, total flared gas and vented gas reduced by 20% and 22% respectively, relative to 2020. Furthermore, the North Sea Transition Authority, as the lead regulator on these matters, expects all new developments to be planned and developed on the basis of zero routine flaring and venting.

With the explanations on these various points, I hope that the noble Baroness will feel able to withdraw her amendment.

[Baroness Sheehan (LD)]

I thank the Minister, but I have to say that I am not hugely satisfied with the responses on decommissioning tax reliefs. I take up the point made by the noble Lord, Lord Lilley, about stranded assets and who will pick up the risk. In a scenario where, say, Shell decides that a particular field has become uneconomic for it to exploit commercially and decides to sell on that asset, which is then picked up by another entity which, in turn, goes bust, who will pick up the cost of that decommissioning? I hope that the Minister will be able to quickly address that.

In terms of flaring, I am really disappointed. It is such a no-brainer. Since 1991, Norway has been able to ban flaring—and, within that, I would include venting—yet our Government cannot give that commitment, when we have made commitments at COP 26 and COP 27 under the Global Methane Pledge, and we continue to do this. It really is on a par with asking countries to ban coal and then giving permission for our own coal mine in Cumbria to go ahead. It is just incomprehensible, and I hope that the Minister can quickly address that before I withdraw my amendment.

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[Lord Callanan (Con)]

I have made my comments.

Amendment 222A withdrawn.

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[Lord Lennie (Lab)]

My Lords, I will also be brief. I do not want to provoke another debate—two hours on this would be unnecessary. We are all doing our bit by keeping this Room at low temperature in terms of this debate. I do not know whether they can turn the heat up a bit, as I think that would be helpful to all of us.

[Lord Callanan (Con)]

The noble Baronesses, Lady Sheehan and Lady Bennett, are in charge of heating.

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Moved by

[Lord Callanan]

227C: After Clause 237, insert the following new Clause—
“Meaning of “relevant nuclear pension scheme”(1) In this Chapter, “relevant nuclear pension scheme” means—(a) a pension scheme maintained by or on behalf of the NDA under or by virtue of section 8(1)(a) or (b) of the Energy Act 2004, or(b) subject to subsections (2) and (3), a scheme that provides for the payment of pensions or other benefits to or in respect of persons who are, or have been, employed to perform duties relating to matters that correspond or are similar to matters in respect of which the NDA has functions.(2) A scheme of a kind mentioned in subsection (1)(b) is a relevant nuclear pension scheme only to the extent that the pensions or other benefits are provided in connection with employment by a person with public functions.(3) Subsection (1)(b) does not apply to—(a) a UKAEA pension scheme (within the meaning given by paragraph 1(1) of Schedule 8 to the Energy Act 2004);(b) a scheme that provides for the payment of pensions or other benefits to or in respect of persons specified in section 1(2) of the Public Service Pensions Act 2013 (schemes for persons in public service).(4) In this section, “the NDA” means the Nuclear Decommissioning Authority.”Member’s explanatory statement
This new Clause defines “relevant nuclear pension scheme” for the purposes of the Chapter consisting of the new Clauses in Lord Callanan’s name inserted after Clause 237.

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[Lord Callanan (Con)]

I will start my remarks by talking about the amendments on a new net-zero duty on Ofgem. While the Government agree with their intent, we do not believe that they are necessary, because Ofgem already has a decarbonisation objective in law. The Energy Act 2010 amended the Gas Act 1986 and the Electricity Act 1989 to modify Ofgem’s principal objective—that is, protecting the interests of existing and future consumers, including their interests in the reduction of targeted greenhouse emissions. Ofgem agrees that its principal objective includes an obligation to support delivery of our net-zero targets, and it would be keen to avoid any confusion over the need to balance decarbonisation, affordability and security of supply. This will be supported by the upcoming strategy and policy statement setting out the Government’s priorities, including those that will help to deliver net zero as a guide for the regulator. As the noble Lord noted, the Government published the results of Chris Skidmore’s net zero review on 13 January, and we will carefully consider the recommendations proposed and respond to the review in the spring.

On the amendment to designate a strategy and policy statement for the purposes of the Bill, this replicates the provisions set out in the Energy Act 2013 so, again, we think that this is unnecessary.

Amendment 229, tabled by the noble Lord, Lord Teverson, and the noble Baroness, Lady Hayman, is on onshore wind. As the noble Baroness said, on 22 December the Government launched a consultation on making changes to the National Policy Planning Framework so that local authorities can have more flexibility to respond to their communities when they wish to host onshore wind infrastructure. On improving infrastructure to ensure access-to-grid connections for onshore wind, the Government are already making strides, publishing a comprehensive strategic framework for the electricity networks. As has been said, the Government included onshore wind in the latest contracts for difference round, where it played a key part in securing almost 1.5 gigawatts of power, including 900 megawatts of mainland projects.

On the annual reporting of onshore wind deployment, BEIS in fact already publishes quarterly and annual statistics for all renewable sources of electricity, including generation and capacity of onshore wind.

On Amendment 233, on decarbonising the capacity market, the most recent capacity market four-year-ahead auction was held in February 2022. There was a record investment in low-carbon flexible capacity; for example, it included more than 1 gigawatt of new-build battery storage. I can reassure the noble Lord, Lord Teverson, that the Government recognise the need to ensure that the design of the capacity market is aligned with the wider decarbonisation of the power sector. As he noted, the Government published a consultation on this on 9 January, aiming to consult on design changes to the capacity market. I assure him that the consultation proposes measures that support greater investment in low-carbon capacity, including demand-side management.

I turn to Amendment 239 from the noble Baroness, Lady McIntosh, on energy from waste. The Government are committed to minimising waste; making better use of existing energy sources will play an important role in our journey to net zero. It is estimated that the total power exported by energy-from-waste plants in the UK in 2021 was approximately 2.9% of total net UK electricity generation. The Government have already made good progress in diverting waste away from landfill and maximising the energy that can be recovered from non-recyclable waste. Waste holders already have a legal duty to act in accordance with the waste hierarchy, which prioritises the prevention of waste arising in the first place, followed by preparing items for reuse and then recycling them. Only then should waste be sent for energy recovery, with only that which cannot otherwise be managed sent for disposal, including to landfill.

All energy-from-waste plants are largescale and, therefore, electricity. While some have private wire connections, most of the power is exported to the grid rather than locally. Therefore, it is not practical to ensure that all electricity produced from waste is used locally. However, of course, it is possible to ensure that heat produced from those waste plants is used locally, and there are some excellent examples of that, including a large plant in east London. The Government believe that our existing provisions in this Bill are sufficient to promote that heat and power source. We discussed that a couple of weeks ago, when we discussed heat network zoning, which will accelerate the deployment of heat networks provisions and ensure that waste heat sources connect to local heat networks and ensure greater use of waste heat sources, such as residual household waste.

Finally, on Amendments 241, 242B and 242H in the name of the noble Lord, Lord Ravensdale, we recently published our intent to allow the use of nuclear-derived fuels to receive support from government fuel support programmes—particularly a form of sustainable aviation fuel—but we do not support the wording of these amendments. We look forward to working together through the passage of this Bill to permit the support of nuclear-derived fuels while not categorising nuclear-derived fuels as “renewable”.

On Amendment 242B, the Government agree that nuclear should play a critical role in decarbonising the UK’s energy sector. However, accepting this amendment would pre-empt the outcome of the further work that is required in this area, which was announced in the WMS by the noble Baroness, Lady Penn, on 14 December. I therefore hope that noble Lords will not press their amendments.

[Baroness Bennett of Manor Castle (GP)]

Before the Minister sits down, will he acknowledge that this debate has been extraordinarily truncated and that this wide range of issues will need to be fully examined on Report?

[Lord Callanan (Con)]

I am sure that we will have lots to discuss about lots of issues on Report.

[Lord Teverson (LD)]

My Lords, there have been some excellent responses. We are getting somewhere on the capacity market and onshore wind. I thank the noble Baroness, Lady Hayman, for her support on onshore wind and my amendment. I had not realised there would be the contract for difference, and I take that as very positive. As the Minister knows, I like to be positive about these things.

However, I find it very difficult that the Government and the Minister will still not bite the simple bullet around Ofgem and the decarbonisation of the grid. It is having a practical effect as regards moving the whole transmission system forward—it really is. Those dilemmas about objectives that he talks about are the same for the future system operator, yet it has that objective.

I am sure that we will come back to this on Report. It is certainly my intention to work with others of a similar mind to find the right amendment and back whoever wishes to bring it forward. However, at this stage, I beg leave to withdraw the amendment.

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[Baroness Bennett of Manor Castle (GP)]

The noble Lord, Lord Bruce of Bennachie, has presented very interesting proposals. Like the noble Lord, Lord Teverson, I think this offers us one way forward on the crucial issue of energy efficiency, but I have a question for the noble Lord, Lord Bruce. Would he agree that a useful role for the energy efficiency commission would be ensuring systems to educate people to install this new technology properly, so that people such as the plumber whom he cited had the information available to ensure that they knew that what they were installing would work for their customers?

[Lord Callanan (Con)]

I thank the noble Lord, Lord Bruce, for his amendments. I will take up the question from the noble Lord, Lord Teverson, first. The answer is absolutely; we have an extensive programme called the Energy Efficiency (Energy Using Products) Regulations. They are largely similar to those we had in the European Union, but we have extended them and taken them further. We have recent regulations on more efficient lighting and there are others coming, as well as some on the more popular white goods that people use. I would be happy to send him more details of that.

I move on to Amendment 234 from the noble Lord, Lord Bruce. The Government agree of course with the principle of having an independent body to advise on targets and timetables for energy efficiency policy and net-zero policy more broadly. But we already have that body: the Climate Change Committee fulfils that role. He will also be aware that the Government will announce further details about the energy efficiency task force that was announced by the Chancellor and the Business Secretary late last year. There is a lot of detailed work happening on that at the moment. We hope to have more to say very shortly.

On Amendment 235, the Government fully recognise the importance of energy storage and its ability to help us to use energy more flexibly and decarbonise our electricity system more cost-effectively. Our measure to define electricity storage provides long-term clarity and certainty over its treatment in regulatory frameworks. That will facilitate storage deployment going forward. At this stage, however, it is premature to set a target for the sector. We do not yet know the full extent of the system requirements for storage. Especially in the context of high energy bills and having to pay for increased storage, it would not be responsible to set storage target at this time, as we could set a target that is too high or too low and favour a more expensive technology over a relatively cheaper one. Instead, our approach is to remove barriers and spur innovation for all low-carbon flexibility technologies. We published the 2021 Smart Systems and Flexibility Plan with actions to facilitate the deployment of these technologies, including storage at all scales.

The Government are not in disagreement with the noble Lord, except on the narrow issue of targets. I hope he recognises our commitment to enabling the deployment of flexibility, including energy storage, across our energy system to even out fluctuations in generation and demand and therefore deliver the best outcomes, which we all want, for our consumers. Therefore, I hope that he will see fit to withdraw his amendment.

[Lord Bruce of Bennachie (LD)]

My Lords, I am grateful to the Minister for that response. As I said, I accept that the Government have been doing quite a lot, but I still believe they can do an awful lot more. I hope that those initiatives yield results.

On the noble Baroness’s intervention, I do not think it is a question of people not knowing how to install heat pumps; it is about people having expectations of heat pumps that do not suit every property. I speak from my own personal concerns. I have a house built in 1910; it is not the most efficient house. I inquired about a heat pump, and was told that if I was lucky I would get an ambient temperature of about 14 degrees, which would cost me about £10,000. I could get the ambient temperature up to 18 or 19 degrees as long as I spent £120,000 on increasing the insulation in the house. But other houses could be upgraded much more cheaply, so I suggest that they should be prioritised.

I am sorry, but I do not think the Scottish Greens are realistic about what they think can be achieved between now and 2025. In places such as Aberdeenshire and the Highlands, they will find a kickback when people are told that they cannot have an oil-fired boiler, there is no gas and we do not have a viable alternative for their property—yet.

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Moved by

[Lord Callanan]

242I: Clause 239, page 204, line 8, at end insert—
“(6) Subsection (3) does not apply to regulations made by the Scottish Ministers under section (Assessment of environmental effects etc).”Member's explanatory statement
This amendment ensures that the provision about affirmative procedure in the UK Parliament does not apply to regulations made by the Scottish Ministers under the new Clause relating to assessment of environmental effects of offshore wind projects (which will instead be subject to affirmative procedure in the Scottish Parliament).

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Moved by

[Lord Callanan]

243: Clause 241, page 204, line 22, after “Parts” insert “9A,”
Member's explanatory statement
This amendment provides that the new Clauses in the name of Lord Callanan, to be inserted as a new Part after Clause 201, extend to England, and Wales, Scotland and Northern Ireland.

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Moved by

[Lord Callanan]

244: Clause 242, page 205, line 11, at end insert—
“(ba) Part 9A, except sections (Directions to scheme administrators) and (Financial assistance to scheme administrators and participants);”Member's explanatory statement
This amendment provides that the new Clauses in the name of Lord Callanan which contain provision about ESOS regulations (but not those making provision about directions or financial assistance) come into force on the day on which this Bill is passed.

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Moved by

[Lord Callanan]

245A: Clause 242, page 205, line 21, leave out “161” and insert “162”
Member's explanatory statement
In consequence of the notice given by Lord Callanan of his intention to oppose the Question that Clause 161 stand part of the Bill, this amendment removes the reference to that Clause from the list of provisions that are to come into force two months after Royal Assent.

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Moved by

[Lord Callanan]

247: In the Title, line 8, after “premises;” insert “about energy savings opportunity schemes;”
Member's explanatory statement
This amendment amends the long title to insert reference to the new Clauses in the name of Lord Callanan to be inserted as a new Part 9A after Clause 201.

Industrial Action

Lord Callanan Excerpts

Wednesday 11th January 2023 Lords Chamber

[Lord Fox (LD)]

My Lords, I thank the Minister for taking questions on the Statement and congratulate the noble Lord, Lord Lennie, on his contribution. I will try to focus my questions and comments on how the Minister expects this to work.

The coming Bill is interesting because it introduces the concept of a minimum service level. Of course, in the Bill, the actual levels of service are not defined—true to form, this Government will come back with secondary legislation to do that. Can the Minister give your Lordships’ House at least an idea of what criteria will be used to come up with the minimum service levels? Will they be the same right across the country or will, for example, rural and urban areas have different minimum service levels? These are important issues.

There is, however, a wider issue around service levels. Taking yesterday as an example—when there were no strikes, as far as I am aware—can the Minister tell your Lordships’ House whether the tens of thousands of people waiting weeks to see their GP were getting a minimum service level? Were the people across Britain waiting sometimes tens of hours for ambulances getting a minimum service level? Were the people trying desperately to travel by train from Manchester to London experiencing a minimum service level? This is the baseline from which this legislation is working, and it is clearly not good enough. The public expect and deserve higher minimum standards than they are getting today, and on every day when there are no strikes.

Instead of addressing this issue, which I would define as the Government’s duty of care, the Bill passes the onus on to individual workers in these sectors. It is not the Ministers, the bosses or indeed the union leaders who will be sacked if the Government’s standards are not met; it is individual workers. I want briefly to illustrate this. If the Bill is enacted, the Secretary of State will impose a minimum service level. In the event of a strike, employers will be required to identify named employees who will be mandated to work via a work notice. At that point, these individuals are deprived of their right to strike on pain of probable dismissal. That does not square with the Secretary of State’s statement that this does not infringe the right to strike.

I know the Minister, and I am sure that, in his heart, he knows that a different approach is needed to deliver the service levels we need in this country. First, as was mentioned by the noble Lord, Lord Lennie, we need to plug the huge hole in our public sector workforce. We literally need hundreds of thousands of new people in order to deliver the basic service levels we require. A serious Government would be working with everyone in every part of these vital sectors. Can the minister tell your Lordships’ House one thing in this legislation that will help to build a bigger, better workforce in this country? Of course, a necessary first step is sorting out the pay disputes.

Turning to the NHS, the Government have absented themselves from negotiating the pay round, citing the inviolability of the pay review body. This position would have more credibility had not the Government suspended the body as recently as 2018, instead negotiating directly to deliver the 2018-21 pay agreement. What has changed since 2018 that means the Government will no longer directly negotiate with workers on this issue?

The original Bill, over the summer, targeted only rail. As we have heard from the noble Lord, Lord Lennie, the impact assessment identifies more than a dozen risks and unintended consequences—not least, I hasten to add, the proliferation of sub-strike action such as overtime bans, which would cripple the NHS and is already crippling our rail services. The current Bill steps beyond the Government’s manifesto commitment and adds five more sectors. Given the differences between the two Bills, when will the Government publish an updated impact assessment?

Finally, I am sure it is extremely frustrating running a public service in the United Kingdom, but can the Minister tell us how many bosses actually asked His Majesty’s Government for this legislation? Can he point to any appetite for this beyond the Back Benches of his own party? As I said, we will take a practical approach to scrutinising this legislation when it comes to your Lordships’ House.

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

My Lords, I thank the noble Lords, Lord Lennie and Lord Fox, for their contributions. I start by placing on record the Government’s thanks to public sector workers, especially those working in the NHS. Their work is greatly valued and I know that all noble Lords here today are very grateful for the work they do.

Let me say in response to the noble Lords that while the pressure on the public sector is of course recognised—there are unprecedented strains, particularly on the health service at the moment—it is regrettable that multiple unions have taken the decision to strike. The public are understandably worried about access to emergency care and they are tired of the ongoing chaos on many parts of our public transport network. The Government want to resolve these disputes where that is possible and Ministers across government have been meeting union representatives this week to find meaningful ways forward that are fair and reasonable to the taxpayer. While these conversations continue, it is sensible and reasonable for the Government to take steps to reduce the disproportionate impact that strikes can have on the wider public and on our economy, and that is why we have taken the decision to introduce this legislation.

Let me be clear: we hope that in many cases we will not have to use the powers the Bill gives us. Where unions reach voluntary agreements—as is the case with the nursing unions at the moment—to provide adequate minimum levels of service that keep people safe and help the economy and society to function, we will not regulate those sectors. However, it is absolutely right that the Government have the power to act in key services where that does not happen.

The noble Lord, Lord Lennie, raised the issue of international compatibility, particularly with the ILO. I can reassure noble Lords that as part of the introduction of this legislation, the Secretary of State signed a statement of compatibility with the ECHR, and a memorandum to this effect has been published. I will place a copy of that memorandum, in addition to the delegated powers memorandum, in the Libraries of the House. Since the noble Lord quoted the ILO, let me quote the ILO back to him. The ILO itself states that minimum service levels can be a proportionate way of balancing the right to strike with the right to protect the wider public, and that is exactly what we are doing.

Let me address head on the issue raised by both noble Lords, Lord Lennie and Lord Fox, with their fairly alarmist statements about it somehow being the Government’s policy to sack workers as part of this legislation. I clarify for the record and for noble Lords that that is not the case. It is a ridiculous exaggeration. When it comes to the position of this Government on the number of key workers, we are in favour of increasing them, not sacking them.

Both noble Lords referred to other European countries. There is a certain irony in this, because normally, both noble Lords press me to adopt what other European countries are already doing—they normally quote it, particularly the Liberal Democrats, as an example of what we should be doing in this country. It is the case, although noble Lords might not like it, that many European countries and other global democracies have minimum service levels. They are facing precisely the same challenges and protecting the wider public from disproportionate impacts of strikes. In fact, many of those countries ban strikes completely in blue light and border security areas. Of course, we are not proposing to do that. This legislation does not ban the right to strike. The Government will always defend workers’ ability to withdraw their labour, but in line with what the Liberal Democrats normally ask us to do, this legislation actually brings us into line with what many other modern European countries already do.

Both noble Lords asked me about implementation and the detail of how these would work in practice. We will consult on how they will be applied to rail, ambulances and the services. These consultations will outline the proposed approaches for MSLs in each service—they will differ across different services, of course—and I will endeavour to have published during the passage of this legislation each consultation expected to be published. I look forward to engaging with noble Lords on this issue in more detail during the passage of the Bill.

The noble Lord, Lord Lennie, suggested that the Government should focus on resolving the disputes with the unions and do away with this legislation. As the Prime Minister promised last week, we are building a better future for the country by halving inflation this year, growing the economy and getting our national debt down. If we met all the inflation-busting demands of the unions, we would be shooting the economy in the foot and making life harder for other workers up and down the country. The answer to his point is that we are doing both. Of course, we will continue to talk and negotiate with the unions, but it is right that we take action to make sure that the public are protected where necessary.

[Lord Pannick (CB)]

My Lords, the Minister will know that Clause 3 of this Bill is the most extraordinarily wide Henry VIII clause, which will allow Ministers, by regulations, to amend or repeal not just legislation already passed but any legislation to be enacted later in this Session. Is that not the clearest possible sign, together with the framework nature of the Bill, that the Government have not yet worked out how their policy will be implemented in practice?

[Lord Callanan (Con)]

That is not the case at all. We have outlined the services that minimum service levels will be applied to, but it is right to consult widely on how the appropriate regulations will work in practice. As I have said, if voluntary MSLs are in place—as they are in some sectors at the moment—and we do not need to regulate those sectors, that is a preferable way to proceed.

[Baroness Donaghy (Lab)]

My Lords, I was chair of ACAS for seven years. Has ACAS been consulted about these proposals? If not, why not? I was asked by a friend who sits on a school board how, if a head teacher decided to sack all the staff in their school, any minimum service or safety level would be fulfilled. Would the Government step in to provide staff?

[Lord Callanan (Con)]

As I said in response to earlier questions, we do not desire or wish to sack any public sector workers in any sectors. We are in the business of increasing the number of public sector workers, not sacking them.

[Lord Balfe (Con)]

My Lords, I declare my entry in the register of interests. The Explanatory Notes to the Bill say:

“This Bill and subsequent regulations are designed to enable employers to require enough workers to work so as to ensure minimum service levels”.


How will they make them work? I am the president of BALPA, the pilots’ union. We have an understanding with all the airlines that any pilot who feels unfit to fly the plane can declare themselves as such. What about a train driver? Will you say to them, “You’ve got to drive this train, however you feel” or will there be a back-up? Frankly, this legislation is just not thought through. What are the sanctions? You cannot direct people to do this without having some sanctions.

Much has been made of Europe. The European Trade Union Institute, the holding body for the international trade union movement, has fact sheets on 48 countries in Europe. Britain comes well down the list on flexibility of labour. Although a number of countries supposedly have agreements, they do not appear to be enforced. How much study has the Minister done?

My next brief point is that we are taking a chance, are we not? You can take a horse to water, but you cannot make it drink. I see here shades of 1972: the dockers in Pentonville prison and a Government completely out of control who then ask the country—as Ted Heath did—“Who runs Britain?” and they say, “Not you, mate.” For the first time in modern history, the Labour Party has committed itself to doing something, which is to repeal this if it becomes an Act. I actually believe the Labour Party, because the Bill is so ridiculous that it could not stand on the statute book anyway. Does the Minister wish to provide us with an autumn of fun and games—because that is when this will stretch on to—or would he like to advise his department to go back to the drawing board and see whether this is a sensible way of solving a problem which probably does not exist?

[Lord Callanan (Con)]

There were a huge number of questions in my noble friend’s statement. He asked me for examples of other European countries, which I am happy to provide to him. In Spain, France and Belgium, there are statutory minimum service levels in the ambulance and fire services. Many other European countries have statutory bans on border service workers striking at all. He raised the spectre of people going to prison, but that is not the case. There is no element of criminality involved in this. This is not the criminal law; it is the civil law. He asked me how it would work in practice. When a minimum service level is set, an employer will issue enough work notices to sufficient workers to ensure that the key sectors are covered in order to provide those minimum service levels.

[Baroness Blower (Lab)]

My Lords, the Minister and the Government are being a little disingenuous when they refer to what happens in Europe. I am delighted to follow the noble Lord, Lord Balfe. The fact is that the countries the Minister listed, generally speaking, engage in sectoral collective bargaining, and where there are minimum service levels—if they are implemented at all; it is a moot point whether or not they are—they are within the framework of sectoral collective bargaining. The Minister will know that about 80% to 90% of workers in various areas in other countries are covered by sectoral collective bargaining, but that is not the case here. Will the Minister consider putting in place a structure for sectoral collective bargaining before we move to what is clearly unworkable legislation on this basis? While I am on my feet, perhaps I could ask the Minister to respond to my noble friend’s question about ACAS.

[Lord Callanan (Con)]

There are not just minimum service level obligations in other European countries, there are outright bans on striking. For instance, there are bans on border security strikes in Germany, Spain, Italy, France and Belgium. We are not proposing to go nearly as far as those countries have in banning strikes in these areas. We are merely suggesting that unions should provide minimum services during strikes. As for consultation, the legislation was drawn up very quickly and in haste. We have not been able to do all the consultation we would like, but noble Lords will be reassured to know that for the actual implementation of the secondary regulations—which will contain most of the detail—we will of course carry out full consultations.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, I have to return to the European precedents that the Minister cited—the Prime Minister has cited them as well—starting with France. Can the Minister tell us how successful the legislation has been in France? How many fewer days of strikes were there in France last year, compared to the United Kingdom?

[Lord Callanan (Con)]

I cannot give the figures for the number of days lost in France to strike action off the top of my head. I will ask a rhetorical question: if the legislation will be so ineffective and have no effect whatever, what are the Opposition so concerned about?

[Lord Foulkes of Cumnock (Lab Co-op)]

Will the Minister write to me with those figures? I think they will be very instructive. If he writes to me and puts a copy of the letter in the Library, we can use it when we come to debate this.

[Lord Callanan (Con)]

I am here to respond on what happens in the United Kingdom, but if the figures on days lost in France are easily available, then of course I will supply them.

[Lord Clarke of Nottingham (Con)]

My Lords, in principle, I am in favour of the Bill. Obviously, while we must preserve the worker’s right to take industrial action, no responsible person is going to go on strike with consequences that might even threaten the life of fellow citizens if this is taken too far in some public services, such as the health service, at the moment. One would hope that in even the bitterest industrial dispute both sides would have in mind that their argument over whatever aspect of pay, terms or conditions they are at odds on should not lead to serious harm to the greater public good and, in particular, vital things such as people’s health and safety.

I am listening to this debate with interest to see how that essential level of service is to be determined. If we ever face a situation in which strikers are being totally unreasonable and trying to cause immense damage to further their pay claim, that raises all kinds of problems about martial law and everything else to try to keep things going. However, if an employer sets out the minimum level of service in their area—as will be required—how objective will that be? What judgment will be made about what is essential? In theory, could an employer say that all employees should stay at work to maintain an essential level of service? Is there a requirement for some consultation about that level? Can any challenge be placed to the level the employer sets down, short of legal challenge and an attempt for judicial review?

In the present circumstances, we would all like to be reassured that the bitter disputes going on in the public sector, which we all hope will be resolved, will not threaten people’s safety or vital national interests. However, how exactly will we check that the powers of the Bill will not be abused, with some public or private sector employer deciding its own definition of a vital level of employment? In debating the Bill, we will need to have considerable detail and give considerable thought to what it will mean in an industrial dispute in practice, day by day and on the ground, and how it will be applied.

[Lord Callanan (Con)]

I welcome my noble friend’s support for this legislation in principle. I am happy to reassure him that the minimum service level will not be set by employers; it will be set by Parliament through affirmative regulations. Of course we will consult widely on those regulations. There will be regulations in each individual sector because, as he correctly states, the level varies from sector to sector. This House will vote on those regulations when we bring them forward, but it is our preference not to have to bring them forward. As I mentioned earlier, the nursing unions are very responsible and agree minimum service levels already—voluntarily—so we therefore hope not to need to legislate there, but of course that is not the case for ambulance drivers, where we may need to take action.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, I regret that we are having the strikes; I speak with some background in the trade union movement. I urge the Government to be careful. They have had great difficulties in dealing with climate change demonstrators—it is extraordinarily easy these days to disrupt the operation of business in this country. I do not know what the Government would do if they set their minimum levels and they required the employer to get the employees to do the work, and all those employees went off sick. What action would they take and how would the law stand? The Government should be very careful indeed before they move forward, and I am surprised to hear that they have not even consulted ACAS. If we do not watch out, we will go over some silly old ground that we have covered before which caused great damage to the country, so I urge the Government to act with care and caution.

[Lord Callanan (Con)]

I welcome the noble Lord saying that he regrets the strike action—I think that is the first time I have heard anybody from the Opposition say that they regret the inconvenience that has been caused to the public. I take in good heart his other comments; of course we will proceed with care and caution, and with full consultation. However, we are very clear that this action needs to be taken in some sectors, because the public are getting tired of the disruption caused by the actions of one or two unions to their ability to go about their daily business.

[Lord Fox (LD)]

My Lords, I will follow up on the point made by the noble Lord, Lord Clarke. It is quite clear that the Government will not be setting the personnel levels that companies will need to deliver the service levels that the Government are setting. It will be up to local management to decide how many people they need. The point that the noble Lord made was not addressed by the Minister; perhaps Second Reading will be a chance to go through that in more detail.

The Minister will have to address the point about sanctions. What happens if named individuals on work orders refuse to work? He says, “We have no intention to sack people” but essentially, if someone refuses to do something, that is grounds for sacking. There are two sides to this, and when we come to Second Reading, the Minister will have to be able to answer these sorts of questions on the operational detail that I was talking about. Can he undertake to come back on Second Reading with that level of detail so that we can move forward sensibly on this legislation?

[Lord Callanan (Con)]

As I said in my short remarks, the overall minimum service level will be determined in regulations approved by Parliament, and the noble Lord is right that the implementation of that—in other words, how many workers will need to turn up to deliver that service level, plus, presumably, a few for reserve, et cetera, for those who might be sick on the day—will need to be set by individual employers on the ground in response to the different circumstances that will apply. The ultimate sanction is the same as for anybody who does not turn up to work now: they are in breach of their contracts and they will lose their right to unfair dismissal protection.

[Lord Pannick (CB)]

The Minister makes the point that the regulations are crucial to the operation of this statutory scheme. Will he undertake that, when the House comes to debate the Bill at Second Reading and in Committee, draft regulations will be made available?

[Lord Callanan (Con)]

We will do our best to deliver the regulations in the first three sectors that we said we will legislate in, so that noble Lords will have a full opportunity to study them as we are debating the legislation.