National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021

Lord Callanan Excerpts

Monday 1st November 2021 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021.

Relevant document: 13th Report from the Secondary Legislation Scrutiny Committee

Motion agreed.

Climate Change: Global Temperatures

Lord Callanan Excerpts

Wednesday 27th October 2021 Lords Chamber

[Baroness Jones of Moulsecoomb]

To ask Her Majesty’s Government what assessment they have made of the report of the Intergovernmental Panel on Climate Change, published on 9 August; and what policy areas they intend to reassess in response to the finding that global temperatures are rising faster and will have worse consequences than previously predicted.

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

The IPCC report reaffirms the importance of net zero. On 19 October, we launched the net-zero strategy, supporting up to 440,000 jobs and leveraging up to £90 billion in private investment by 2030. Our strategy sets out clear policies and proposals for keeping us on track for our coming carbon budgets and our ambitious NDC.

[Baroness Jones of Moulsecoomb (GP)]

How on earth does that and the Government’s net-zero plan fit with the fact that the Chancellor has just given us a Budget that is so carbon intensive that we should all just give up everything that we are bothering to do? He has reduced the duty on domestic flights, which are the most carbon-intensive form of travel, and he has frozen the fuel-duty escalator for the 12th year. This Treasury does not understand the climate emergency, and the noble Lord, who hears us all here, has to take that back.

[Lord Callanan (Con)]

Of course I always take the noble Baroness’s comments back to the department for discussion, as she well knows. I think that she is being a little unfair with her comments and I know that she would not want to be. The Chancellor has also announced £3.8 billion-worth of funding for domestic low-carbon heat installation systems, social housing decarbonisation and public sector decarbonisation—we talked about that in our statement a few days ago. It is important to bear in mind that many communities in the UK—people who live on remote islands et cetera—rely on their air services. Domestic aviation accounts for less than 1% of UK emissions. I also remind the noble Baroness that the Chancellor recently announced considerable funding—something like £180 million—for sustainable aviation fuel.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, working with the devolved Administrations, could the Minister indicate what new policy proposals the Government will bring to COP 26 next week, in respect of financial innovation, green finance and technology, to ensure that a comprehensive scheme of carbon capture is in place to assist with climate change mitigation by the Government’s 2030 target, over and above the Budget today, which was rather limited in this respect?

[Lord Callanan (Con)]

Some noble Members opposite have obviously listened to a different Budget from the one that was actually announced. We have £1 billion-worth of funding for carbon capture, usage and storage proposals. The noble Baroness will be aware that, only the other day, we announced the first two clusters in north-west and north-east England. These are world-leading, exciting proposals; no one else in the world is being as ambitious as we are on CCUS.

[Lord Oates (LD)]

My Lords, returning to the issue of domestic air passenger duty, does the Minister recognise that short-haul flights are the most carbon-intensive form of travel? Ahead of COP 26, what signal does the Minister believe it sends to announce a cut to domestic air passenger duty while presiding over a record rise in rail fares—one of the least carbon-intensive forms of travel?

[Lord Callanan (Con)]

I refer the noble Lord to the answer that I just gave to the noble Baroness, Lady Jones. Many communities in the United Kingdom rely on air travel for international and internal connectivity. Some parts of our nation are islands, separated by water that trains do not go across. Therefore, it is important to retain connectivity. At the same time, the Chancellor also announced an increase in long-haul air passenger duty.

[Lord Lilley (Con)]

Is not the premise of the noble Baroness’s Question—namely, that global temperatures are rising faster than previously predicted—the reverse of the truth? When the IPCC was established, it forecast that over the ensuing 30 years, now complete, the global temperature would rise by 0.3 degrees per decade. In fact, it has risen by just 0.17 degrees per decade—barely half that amount—and all 39 models used by the IPCC produce estimates higher than reality. Reality is actually quite reassuring.

[Noble Lords]

Oh!

[Lord Callanan (Con)]

I can see that the noble Lord has the House with him on that one. Even putting aside his scepticism about the accuracy of the IPCC report, surely even he would agree that, given the current spike in gas prices, for instance, it is a good thing to reduce our usage of carbon-intensive fuels. If we can generate more electricity domestically in a renewable and green way, that has to be a good thing because it reduces our reliance on importation.

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

My Lords, can we park the constant sideline bickering over China’s CO₂ emissions? The discussion pre-COP 26 is unbalanced. We hear endless criticism of China for its 6.5 tonnes per capita emissions record, while there is a deafening silence over the record of the English-speaking world of Australia, Canada and America with their average emissions of 15 tonnes per capita—two and a half times those of China. The China bashing needs to stop. No wonder it may not attend COP 26.

[Lord Callanan (Con)]

I am sorry, but I just do not agree with the noble Lord. China is responsible for one of the largest emissions totals in the world. This is very much a global problem and, if we are to make any progress, every nation has to make its contribution, including not only the English-speaking world but also China.

[Lord Mackay of Clashfern (Con)]

Can my noble friend say whether any of the pumps that are being suggested to substitute for gas boilers in our homes are yet in a state to be widely used?

[Lord Callanan (Con)]

I can reassure my noble and learned friend on that basis. Heat pumps are a mature heating technology and currently the market-leading low-carbon option. I am also delighted to tell him that the largest UK manufacturer, Mitsubishi in Scotland, produces 10,000 of them a year.

[Baroness Sheehan (LD)]

My Lords, the unpredicted intensity of freak events such as the heat dome in the US and Canada has left scientists reeling. Oceanographers are monitoring with concern the anomaly in the Gulf Stream, which helps to regulate our world’s weather, and the cold spot south-east of Greenland is particularly worrying. Does the Minister accept that it is time to stop dicing with the future of our planet, to keep fossil fuels in the ground and therefore to ditch the abominable policy that places a legal duty on our Government to extract every last drop of oil from the North Sea?

[Lord Callanan (Con)]

The Committee on Climate Change has made it clear that we still need fossil fuels for the transition. I remind the noble Baroness that the UK is responsible for only 1% of worldwide emissions. Yes, we must do our bit, which we are—we are a world-leading power in that respect—but we also need to work on a worldwide basis with other nations, because just stopping emissions in the United Kingdom will not solve the problem.

[Lord McConnell of Glenscorrodale (Lab)]

My Lords, the Government had four key objectives for the summit next week in Glasgow. The third of those, and the one that was in many ways among the most important because of the failure to deliver it over the past decade, was the objective on finance and delivering $100 billion per annum of support for those developing countries that would miss out as a result of moving towards net zero. The Government have admitted this week, in advance of the summit, that that objective is not going to be met. Does the Minister agree that one reason for that might just be the fact that our Government—our country—withdrew on their commitments to the world’s poorest people this year and that that might just have affected the atmosphere around decision-making and the commitments that might then be made by others?

[Lord Callanan (Con)]

No, I do not accept that, because the UK, even after the recent reduction, still has one of the largest international climate finance facilities in the world. Again, on international finance, we are world-leading as well. It was an immense diplomatic effort to get many other nations on board—credit goes to the Prime Minister and to Alok Sharma for managing to do that. We have got the commitment, albeit maybe not as early as we would have hoped for, from 2023.

[Lord Mann (Non-Afl)]

What is the target date for the Minister’s own departmental buildings to be carbon neutral?

[Lord Callanan (Con)]

As the noble Lord is probably well aware, under the heat and buildings strategy, another of the Chancellor’s announcements last week, we have allocated hundreds of millions of pounds to the public sector decarbonisation scheme to go with the £1 billion that we have already spent in the past year on the PSDS. I could point the noble Lord to numerous examples across the country, both in London and elsewhere, of excellent schemes where the public sector is using these funds to deliver meaningful carbon reductions.

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

The Minister mentioned the carbon capture and storage facilities that have been approved. He will also be aware that the one that was most ready to go ahead is at St Fergus in Aberdeenshire, but that was not given approval. Why? Are the Government deliberately setting out to upset Scotland and the Scottish Executive?

[Lord Callanan (Con)]

I think that the noble Lord knows the answer to his own question. A rigorous process was gone through to determine which schemes should get the go-ahead. It is not true that the scheme to which he referred was the most advanced. An independent panel of experts studied all the bids. It is not the case that we are not going ahead with the scheme; it is on the reserve list. It will almost certainly proceed, but just not in the first wave.

Ethnicity Pay Gap Reporting

Lord Callanan Excerpts

Monday 25th October 2021 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 Boateng, for this debate. I am sure that we all agree that it has been both interesting and informative, and I am grateful to all who have contributed. I make it absolutely clear that the Government are committed to building back better from the pandemic. A key part of building a fairer economy is ensuring that our businesses and other organisations reflect the nation’s diversity, from factory floor to boardroom. We know that some companies face challenges ensuring equal access and fair representation of people from all backgrounds in the workplace, but the picture is complex, and outcomes vary substantially between ethnicities and by gender within ethnic groups.

In 2016, the Government asked my noble friend Lady McGregor-Smith to examine the barriers faced by people from ethnic minorities in the workplace and consider what might be done to address them. One of her recommendations was that government should legislate for the mandatory reporting of ethnicity pay data. The government response said that, while we were persuaded by the case, we expected businesses to take the lead in reporting voluntarily.

One year on, it was established that some limited progress had been made. Given this outcome, we published a consultation on mandatory ethnicity pay reporting. The consultation responses raised a series of issues. Establishing a standard ethnicity pay reporting framework is considerably more challenging than was the case for gender pay gap reporting. There are genuine difficulties in designing a methodology that provides accurate figures and allows for interpretation and meaningful action from employers, employees and the wider public, so we have continued to work with businesses and other organisations to better understand the complexities identified through the consultation.

We are also considering the findings of the Commission on Race and Ethnic Disparities, which were published earlier this year. This very good report makes an important contribution to both the national conversation about race and the Government’s efforts to level up and unite the whole country. In its report, the commission pointed to the statistical and data issues that can affect ethnicity pay reporting and proposed a voluntary approach. It recommended that

“all employers that choose to publish their ethnicity pay figures should also publish a diagnosis and action plan to lay out the reasons for and the strategy to improve any disparities.”

It further recommended that

“pay data should be disaggregated by different ethnicities to provide the best information possible to facilitate change. Account should also be taken of small sample sizes in particular regions and smaller organisations.”

To support employers undertaking this exercise, the commission recommended that

“the Department for Business, Energy and Industrial Strategy … is tasked with producing guidance for employers to draw on.”

We are committed to taking action, but we want to make sure that we are doing the right things that will genuinely help to move things forward. Key to that is determining what it makes sense to report on and what use the data may be put to. The commission’s report and our further work with businesses and other organisations identify a wide range of technical and data challenges that ethnicity pay reporting brings.

First, there is statistical robustness. In 2019, the Royal Statistical Society argued for a minimum sample size per category of at least 100 in order to draw valid conclusions. The purpose of this was to ensure that the calculation of a pay gap statistic would be reasonably reliable when interpreted by a non-statistician.

Secondly, there is anonymity. It should never be possible to identify any individual from ethnicity pay gap analysis. This means that a sample size has to be large enough so that it is not possible to link a number of individuals of the same ethnicity to a particular pay band.

Thirdly, there is data collection and the important issue of business burdens. A survey of over 100 organisations by PwC in August 2020 found that almost 35% did not currently collect any ethnicity data, with half identifying legal and GDPR requirements as a barrier to collecting the data. Among those organisations that did collect data, around half said that they were unable to publish their ethnicity pay data due to poor or insufficient data driven by low response rates.

Fourthly, there is reporting on a binary basis. One way to mitigate low employee declaration rates is to combine all individuals from an ethnic minority background into a single group for reporting purposes, but such an approach risks masking the significant variations in labour market outcomes between groups, and therefore the relevance of any action plan.

Fifthly and finally, there are skewed results. Reporting at a more granular level risks results being skewed by particularly large or small pay values because of low numbers within particular ethnic groups. The uneven geographical distribution of specific ethnic groups complicates the issue further. All of this creates complex challenges when deciding how best to take forward ethnicity pay reporting.

The Government are committed to taking steps to help employers tackle disparities in the workplace. We are now considering in detail what we have learned from the ethnicity pay reporting consultation, our further work and the commission’s report, and we will set out our response in due course.

I will pick up some points from the debate. The noble Baroness, Lady Falkner, made some good points about ensuring that any guidance for or support to businesses is not bureaucratic but focused on the issues where they most need support. I agree with her that we should focus our efforts on some of the drivers of the pay gap. The noble Lord, Lord Bilimoria, raised some interesting views from the CBI. I agree with him on the importance of business being inclusive.

The right reverend Prelate the Bishop of Bristol made an excellent contribution, and I agree with some of what she had to say. There is something of a precedent for requiring organisations to collect, share or publish ethnicity data. I also agree that it is possible to collect and publish such data under GDPR rules, but I return to the point I made earlier: that we must be very mindful when developing our approach of the burdens that collecting and publishing the data might impose on businesses, and which are appropriate and would be impactful.

The noble Lords, Lord Bilimoria and Lord Sikka, both mentioned the Parker review, which was set up in late 2015 and published its recommendations in October 2017, the main target being to ensure that all FTSE 100 companies have at least one person from an ethnic minority background on their board by the end of 2021, and for the FTSE 250 to do it by 2024. Although the review was not formally commissioned by Ministers, BEIS monitors its progress by providing annual statistical updates on FTSE 350 companies. It is financially sponsored by EY. Sir John and its steering board have agreed to continue to engage with business leaders to encourage adoption of the recommendations.

I agree with the noble Baroness, Lady Blower, that EPR provides an imperfect picture of race and ethnicity in work, and this is one of the challenges that we are working through to find the right balance between data that is actionable and comparable and the business burdens.

Finally, the noble Lord, Lord Boateng, said that this was all in the “too difficult” box, but it is in fact a difficult challenge to develop a standard ethnicity pay reporting system. We will announce the way forward in due course, taking account of a range of reviews, including those of the Commission on Race and Ethnic Disparities, the CIPD and the CBI, all of which we are currently talking to about how best to support employers.

I finish by thanking the noble Lord and all those who have contributed to the debate today.

Private Equity Takeovers

Lord Callanan Excerpts

Thursday 21st October 2021 Lords Chamber

[Lord Sikka]

To ask Her Majesty’s Government what assessment they have made of the takeover of United Kingdom companies by private equity firms; and in particular, their effect on the economy.

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

My Lords, the UK’s merger regime recognises that investors play a major and positive role in the UK economy and that many UK sectors have benefited substantially from takeovers and mergers. On the few occasions that private equity-funded acquisitions have raised concerns, the Government have always carefully monitored developments and taken action when there were clear public interest grounds.

[Lord Sikka (Lab)]

My Lords, the typical business model of private equity includes high leverage, financial engineering, tax abuse, pension dumping, job losses and asset stripping. This trail of destruction includes Silentnight, Bernard Matthews, Debenhams, Maplin, Cath Kidston, Toys “R” Us, Four Seasons and much more. When will the Government commission an independent inquiry into the impact of private equity’s destructive practices on all stakeholders?

[Lord Callanan (Con)]

The UK’s merger regime, which I remind the noble Lord was put in place by the last Labour Government, recognises that overseas investors play a major and positive role in the UK economy, and that many UK sectors have benefited substantially from takeovers and mergers. Such transactions can help to boost UK jobs, increase management efficiency and support businesses to grow on the world stage. We benefit from being an open and accessible economy.

[Lord Browne of Ladyton (Lab)]

My Lords, I am sure that the Minister is aware of the latest Bank of England financial stability summary, which specifically warns that the current level of debt-fuelled US equity takeovers poses a growing threat to the UK economy. Bearing that in mind, what assessment has he made of the US National Bureau of Economic Research’s academic study, which found that when private equity firms buy up public companies, employment shrinks 13% in two years after the acquisition, and the fact that that has prompted senior Democrats to introduce the Stop Wall Street Looting Act to prevent private equity funds forcing companies they purchase to take on new loans to extract dividends they could not otherwise afford? Does he appreciate the irony of the potential of that Act becoming law in the US?

[Lord Callanan (Con)]

My Lords, of course we look at all transactions closely and there are specific grounds to intervene, set out by the Government that the noble Lord was actually a member of, as I said. We recognise the need for greater accountability for large private companies, including those owned by private equity. We published plans to do just that in our proposals on restoring audit and governance.

[Lord Fox (LD)]

My Lords, I am sure that the Minister is aware of the acronym ESG, which stands for environmental and social governance—an important way of making sure that businesses behave properly. But there are different reporting standards for listed companies and private equity companies. Will he ensure that all companies trading in this country report on a level playing field? Will he undertake to make sure that everybody affirms the same ESG standards?

[Lord Callanan (Con)]

As the noble Lord is aware, there are a multiplicity of different international standards, but we are of course introducing the transparency requirements on climate disclosures, as he knows. We have the audit reform proposals, which will extend the reporting requirements to many large private companies as well. We will publish our response to that consultation shortly.

[Lord Bassam of Brighton (Lab)]

My Lords, according to the financial market data company Refinitiv, private equity firms have made over 345 bids for British companies this year—the highest number since records began back in 1984. We need to ensure that new owners act responsibly, so does the Minister have confidence that the regulatory bodies have sufficient oversight and powers to intervene when private equity owners of British companies fail that duty? How can we build national economic resilience at home to promote global Britain abroad if companies are being bought up so easily and cheaply?

--- Later in debate ---

[Lord Callanan (Con)]

My Lords, we benefit in global terms from being an open and accessible economy. That brings in billions of pounds-worth of inward investment. My noble friend Lord Grimstone, who is in charge of the Office for Investment, works extremely hard to attract overseas investment. We must be very careful not to send out the message that we do not welcome inward investment into this country. That was something recognised by the previous Labour Government and certainly something recognised by this Government. Of course we keep these matters under review. We have introduced the National Security and Investment Act, which gives us additional powers to intervene on national security grounds, and we extended the grounds on which the Secretary of State can intervene under the Enterprise Act.

[Baroness Wheatcroft (CB)]

My Lords, some private equity companies are good managers of businesses, others rather less so. Does the Minister agree that, given the need of the Treasury to bring in extra cash, the treatment of carried interest—the favourable tax treatment of private equity operators—is no longer sustainable?

[Lord Callanan (Con)]

My Lords, I have never noticed any lack of interest from the Treasury in extending the tax base whenever it possibly can, but the current tax rules reflect the hybrid nature of this reward. If investment managers realise their carried interest gain within three years, that gain is treated as income and taxed accordingly. This approach is also followed by other comparable jurisdictions.

[The Lord Speaker (Lord McFall of Alcluith)]

Lord Dubs? Not present? I call the noble Lord, Lord Holmes of Richmond.

[Lord Holmes of Richmond (Con)]

My Lords, does my noble friend agree that inward investment and an economy open for global business are good, but where a UK target company has been built largely and perhaps sometimes exclusively on taxpayer-funded government contracts, should we not reconsider the current regime?

[Lord Callanan (Con)]

It is difficult to give specific examples, but there are grounds under national security, financial stability, media plurality or public health emergencies for the Secretary of State to intervene in mergers and takeovers, and, of course, the CMA monitors competition grounds. Beyond those factors, we welcome inward investors and I agree with the noble Lord that we should be an open and accessible economy.

[Baroness Chakrabarti (Lab)]

My Lords, everyone agrees that there is a benefit in investment, but we are not talking about long-term or even medium-term investors. We are talking about short-term profiteers. They are opaque, undertaxed and underregulated. Will the Minister sense the mood of this House and consider regulating in this area, not just on national security grounds but on human security and economic security grounds?

--- Later in debate ---

[Lord Callanan (Con)]

We have not defined exactly what national security is, so there are grounds for the Secretary of State to intervene if we consider it appropriate. But, beyond the measures that I set out, we believe there is merit in us being an open, accessible economy, open to inward investment—and I would not characterise all private equity in the same way as the noble Baroness did.

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

Lord Callanan Excerpts

2nd reading
Thursday 21st October 2021 Lords Chamber

Moved by

[Lord Callanan]

That the Bill be now read a second time.

Debated in Grand Committee on 19 October.

[The Deputy Speaker (Lord Faulkner of Worcester) (Lab)]

I remind the House that the debate before Second Reading on the Bill took place in Grand Committee on 19 October, and call the noble Lord, Lord Callanan, on behalf of the noble Lord, Lord Greenhalgh.

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

My Lords, I beg to move formally that the Bill now be read a second time.

[Lord Cormack (Con)]

My Lords, I would like to put it on record that I took part in the debate in Grand Committee. Because the timing was changed twice, many who wished to take part in that Second Reading had to withdraw. This is not a very satisfactory way of proceeding. It is exceptional and I would like my noble friend’s assurance that he does not wish to do this again. Second Readings should take place on the Floor of your Lordships’ House.

[Lord Callanan (Con)]

My Lords, much as I would like to reassure the noble Lord, these matters are not within my control. As he is no doubt well aware, these are matters agreed between the usual channels of the main party groupings. There have been extensive opportunities to take part in briefings and other matters related to the Bill.

Bill read a second time and committed to a Grand Committee.

Shortages: Protection for the Vulnerable

Lord Callanan Excerpts

Wednesday 20th October 2021 Lords Chamber

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

My Lords, there is no shortage of energy, and the Government have taken action to increase the supply of HGV drivers. The supply of fuel and food is secure. Protecting vulnerable consumers is our top priority, which is why our energy price cap will remain in place. We are supporting vulnerable and low-income households through initiatives such as the £500 million household support fund, the warm home discount, winter fuel payments and cold weather payments.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, I do not agree with the Minister that everything has been fine following the shocks that we have suffered from Covid and Brexit over the past few months, and neither would the underprivileged in our society. Are the Government doing some contingency planning, as we have really big threats coming, possibly with climate change, to protect the most underprivileged and deprived in society to ensure that they are looked after? People are talking in the press about forms of rationing. We could look for schemes through which we could protect them more than we do at the moment. Similarly, we need to get out and make certain that people who are working on the front line are given all the protection they need—including petrol—so that they can get to work and so on. That has certainly not been happening in the past few weeks.

[Lord Callanan (Con)]

My Lords, I can tell the noble Lord that the poorest and most vulnerable are always at the heart of our policies in this area—we always seek to protect them. It is, however, important to emphasise that there is no shortage of essential items, and we have taken action to ensure that supply chains remain robust.

[The Lord Bishop of Durham]

My Lords, one of the other necessities mentioned by the noble Lord, Lord Brooke of Alverthorpe, is food. Nationally and globally, we waste a third of all food. When 1.7 million children, between September 2020 and February 2021, were living in food poverty along with their families, surely there must be a better way. This week, the Earthshot Prize celebrated Milan’s citywide food-waste policy, which saves 260,000 meals-worth a year. What steps are Her Majesty’s Government taking to encourage and support the better local collection and distribution of food waste in the UK more effectively?

[Lord Callanan (Con)]

The right reverend Prelate makes a good point. Everybody across all levels of government—national and local—want to do all they can to minimise food waste. Of course, we are always looking for additional ways to protect the most vulnerable.

[Baroness Altmann (Con)]

My Lords, shortages of energy and food have driven up the cost of basic necessities. Does the Minister agree that the poorest pensioners are likely to struggle most, as they spend so much of their budget on these items? What are the Government doing to increase take-up of pension credit, as 40% of pensioners who are entitled do not claim it and therefore do not get access to the warm home discounts, cold weather payments and so on that this benefit could provide for them? With 40% of pensioners not receiving that benefit, what will the Government propose to improve the situation?

[Lord Callanan (Con)]

My Lords, nearly 1.5 million people across Great Britain do receive pension credit, but I agree with my noble friend that many are not claiming what they are entitled to. We are working constantly to increase awareness of pension credit; we recently joined forces with Age UK and various celebrities to try to encourage pensioners to check their eligibility for access to this important benefit.

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

My Lords, could we not provide statutory protection of a national scheme for individuals acting as service providers and the needy, whereby individuals—perhaps even neighbours —acting as volunteer service providers, could take on responsibility for arranging appointments and performing other designated life tasks? This would all be under clearly defined model arrangements, thereby relieving pressure on statutory providers. There is an army of volunteers out there, but many are wary of liability. A national scheme could complement existing charity arrangements.

[Lord Callanan (Con)]

The noble Lord is right. During the pandemic, we saw the massive difference that volunteers can make to people’s lives. Our role in government in volunteering is as a steward, enabling a further unlocking of the voluntary sector. We are always aiming to simplify the routes into volunteering to help match up supply and demand.

[Baroness Janke (LD)]

My Lords, in the light of the upsurge of food, energy and living costs looming this winter, does the Minister agree that the best way in which to support the most vulnerable people is to restore the £20 uplift and reverse the 5% cut to 4.4 million families? If not, what special measures will be on offer, particularly to people with disabilities, who have suffered most disproportionately during the pandemic, through loss of income and support, increasing care charges, poor access to essential services and generally feeling forgotten and not cared about? How will they be protected from cold and hunger in the coming months?

[Lord Callanan (Con)]

I know that we have debated these matters a lot in the House recently, and I know that the noble Baroness will be aware that the uplift to universal credit was only ever meant to be temporary. I outlined earlier some of the many schemes that we have on offer to pensioners and those living in fuel poverty to help them get through this crisis.

[Lord Grantchester (Lab)]

In the energy market, when consumers were encouraged to switch suppliers to find the best deal, it was to encourage competition and innovation among utility companies. Are the Government still confident that the supplier of last resort mechanism is the correct outcome for suppliers and consumers in the process in a competitive energy market?

--- Later in debate ---

[Lord Callanan (Con)]

The answer to the noble Lord is yes. A number of energy companies have, sadly, gone to the wall, but the supplier of last resort scheme has so far been successful in transferring to other providers. We have other administrative regimes in place should they be necessary but, so far, the SoLR process has worked well.

[Lord Howell of Guildford (Con)]

My Lords, the shortage of energy is going to be felt by those households which simply cannot afford the soaring energy prices. Given the forecast that gas prices are going to go up another 30% next year on top of the already very high levels, are the Government considering further measures to alleviate the intense hardship that this will cause for millions of families? This could be done, if not by removing VAT, which may be difficult, by vastly expanding the warm homes discount or easing or temporarily suspending some of the many green levies that bump up our energy bills. Is some further action being contemplated?

[Lord Callanan (Con)]

Of course, my noble friend will be aware that domestic fuel, such as gas and electricity, is already subject to a reduced rate of 5% of VAT. He will understand, I am sure, that I cannot comment on any speculation about any other changes that might happen in the Budget, beyond saying that protecting consumers is our top priority, which is why the energy price cap will remain in place. I announced earlier the other levels of support that we have in place.

[Baroness Lister of Burtersett (Lab)]

My Lords, millions are already made vulnerable by poverty—too often deep poverty—and food insecurity. The pandemic has underlined the need for a decent social security system that protects them in difficult times. I repeat the question, because the answer to the noble Baroness, Lady Janke, was so inadequate: will the Government therefore rethink their decision to end the £20 universal credit uplift as a first step towards ensuring that social security benefits are adequate to meet needs? The proposed local authority household support fund that the Minister mentioned is not a solution that provides security for those in vulnerable circumstances.

[Lord Callanan (Con)]

I think we have a difference of opinion here. As I said to the noble Baroness, Lady Janke, the universal credit uplift was only ever meant to be temporary. The opposition parties do not accept that, but that was the case. We recognise that some people continue to need extra support, which is why we introduced the £500 million household support fund.

[Baroness McIntosh of Pickering (Con)]

I refer to my position as president of National Energy Action. Does my noble friend share my concern that there are currently 4 million people in fuel poverty? Will he use his good offices to ensure that everyone has a warm home this Christmas?

[Lord Callanan (Con)]

Of course, we are constantly looking at the various schemes we have. We announced £850 million for the home upgrade grant yesterday, which will go precisely to those my noble friend is concerned about—the fuel-poor living in rural areas.

[Lord Whitty (Lab)]

My Lords, I declare an interest in that I chaired a commission on vulnerable consumers of energy, two or three years ago. The industry has taken on some of the recommendations; Ofgem and the Government have taken on rather fewer. Does the Minister not recognise that the way Ofgem has licensed over 100 new competitors without any requirement that they look after vulnerable consumers has caused distress and the kind of fuel poverty that has already been raised? Over 100 licences have been given. Competition benefits consumers, but it has to be accompanied by resilience and reliability. Will the Government and Ofgem look at this again?

[Lord Callanan (Con)]

Of course, we always keep these matters under review, but to a certain extent the noble Lord answered his own question: competition is good for the consumer, and the extent and array of competition in the energy market has produced lower prices for many consumers. Obviously, in a competitive market, particularly with the recent spikes, some companies will go to the wall, but there are protections in place for those consumers under the follow-up process that I talked about with the noble Lord, Lord Grantchester. But of course we always keep these matters under review.

Net Zero Strategy and Heat and Buildings Strategy

Lord Callanan Excerpts

Wednesday 20th October 2021 Lords Chamber

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

I thank the noble Lords, Lord Grantchester and Lord Oates, for their comments, even though the screen indicated the noble Lord, Lord Oates, had been renamed Lord Fox for most of his contribution. I am pleased to say he has been reincarnated in a different guise.

I was pleased to have the initial support of the noble Lord, Lord Grantchester. It deteriorated slightly from there, but never mind. On funding commitments, since the 10-point plan was announced, and including the commitments yesterday, that makes a total of £26 billion worth of public investment. More importantly, that has leveraged £90 billion of private sector investment into this sector as well. I can confirm the figure of £950 million for the home upgrade grant, which will particularly benefit the homes of low-income families in off-gas areas.

Both the noble Lords, Lord Oates and Lord Grantchester, mentioned the boiler upgrade scheme, which I can confirm will have £450 million over three years: £5,000 for air-sourced heat pumps, £6,000 for ground-sourced heat pumps. What most noble Lords missed, and a number of commentators as well, is that this is not the totality of our support for heat pumps. We are also installing a considerable number under the social housing decarbonisation fund, the public sector decarbonisation scheme and, of course, from 2025 when the new housebuilding strategy comes into force, there will be, pretty much, no alternative option for new builds than to install low carbon heating, so that will see a further acceleration. We are currently installing about 30,000 heat pumps a year: roughly 10,000 as a result of subsidy schemes and 20,000 in new builds. This is a massive ramping up.

If the green homes grant taught us anything, it is that we cannot just inject a large amount of funds and expect the industry to change overnight. There is a huge amount of transformational change taking place. To the credit of many private sector companies, they are coming forward with ambitious plans themselves. If I may mention but one: I visited Octopus yesterday morning. It has a fantastic new training centre in Slough and is proposing to employ and retrain hundreds, if not thousands, of currently qualified gas engineers to enable them to install heat pumps in the new revolution. The chief executive told me that by April next year, including this new grant system, they hope to be offering heat pumps for costs roughly comparable to existing gas boilers. I know that many other private sector companies have similar plans.

Clearly, heat pumps are expensive at the moment, but this is all about government funding, pump-priming the market, helping the private sector to innovate and bring the costs down. I am sure noble Lords will accept, that it is a strategy that was extremely successful in the offshore wind market. Costs for offshore wind were initially very expensive and are now comparable to, or possibly even cheaper—we will find out in the contracts for difference round—than existing fossil fuels.

I was surprised to hear that both the Labour Party and the Liberal Democrats now seem to be in favour of banning boilers. Our position is that it is certainly our aim and ambition that by 2035 we will be able to move away from installing gas boilers. Crucially, before we do that, we need to make sure there are viable alternatives in place. We certainly hope—given the figures that I gave for heat pumps—that by 2030 there would be comparable offers on the market, and alternatives in place. Maybe the hydrogen offer will be comparable by then. We will certainly consult on the possibility of making all boilers hydrogen-compatible, to enable that transition to take place, but as of yet the jury is very much out on whether there will be the ability, at reasonable cost, to produce the enormous quantities of hydrogen that would be required if we were to get anywhere close to it replacing natural gas. I am on the record as saying it is more likely that we will end up using it for industrial processes—trains, HGVs et cetera—rather than the large-scale replacement of gas for domestic heating. Although already, of course, there are trials taking place of hydrogen being injected into the gas main. Injecting up to 20%, it is still possible to work with existing appliances.

The noble Lord, Lord Grantchester, also raised the issue of electric vehicles, and I can tell him that a further £620 million of funding for zero emission vehicle grants and EV infrastructure was announced. We allocated a further £350 million of the up to £1 billion automotive transformation fund, to support the electrification of UK vehicles and, importantly, their supply chain, as well, of course, as a £3 billion integrated bus network, and £2 billion to enable towns and cities to be cycled or walked.

The noble Lord, Lord Grantchester, ended by talking about a pick-and-mix approach. I fundamentally disagree —this is a comprehensive strategy, looking at every individual sector of the economy in turn and outlining a comprehensive strategy of how they all need to do their bit to contribute towards the legally binding net-zero target.

I am grateful that the noble Lord, Lord Oates, started on a positive note before things descended. He asked me for details of the funding under the heat and building strategy. We have talked about the boiler upgrade scheme, and the social housing decarbonisation fund that is bubbling away in the background. They are extremely successful schemes, and I recommend that noble Lords visit some of the excellent schemes we are already installing. That is a further £950 million and £800 million respectively over 2022-23 and 2024-25. A further £1.4 billion over 2022-23 to 2024-25 is being invested in the public sector decarbonisation scheme, with the aim of reducing emissions from public sector buildings. There is £338 million for the heat network transformation programme and £270 million for the green heat network fund, sector regulation and new heat network zones by 2025.

I understand why noble Lords will always call on us to do more, but I think this does represent a comprehensive strategy tackling all parts of the economy and shows how they can all do their bit to contribute towards our decarbonisation goals. It was even recognised by the BBC’s environmental analyst Roger Harrabin. This is an extremely ambitious programme and is world leading.

[Baroness Bennett of Manor Castle (GP)]

My Lords, reports suggest that a companion document to the net-zero strategy entitled Net Zero: Principles for Successful Behaviour Change Initiatives was published and then withdrawn a few hours later. The report suggests that this government document raised concerns over the expansion of airports contained in government policy and tax exemptions for the aviation sector. It said that the Government needed to do more to make behavioural changes easy and affordable, and align commercial interests with net-zero outcomes. It proposed carbon taxes, a financial levy on food with a high-emission footprint, and forcing the markets to be more transparent to enable consumers to choose more sustainable options. Will the Minister confirm if these reports are true? Will he tell me why this report was withdrawn and what its status is now?

[Lord Callanan (Con)]

I believe there were some documents that were published in error, but they have been withdrawn. Fundamentally, we do not believe in telling people what to eat or how to live their lives. Our focus is on helping people, incentivising them to make green choices, and to make those choices easier and cheaper. As we transition to net zero, we will be tech- led using British technology and innovation, just as we did in the last innovation revolution. I appreciate that the Greens want to lecture people and instruct them; I believe that carrots are much better than sticks.

[Lord Liddle (Lab)]

My Lords, I welcome this Statement. I have not had the opportunity, as yet, to read all the documents. I fear the criticism that I made in the debate on levelling up on Thursday is relevant. There is a clarity of destination about the Government’s policies, but no viable plan to get there. The thing that stuck in my mind is that when we are looking at the necessary move away from gas central heating, the incentives being offered for heat pumps—the £450 million over three years—is clearly inadequate, in comparison with the huge scale of the challenge.

I have always understood the noble Lord, Lord Callanan, to be a Conservative who believes in the use of market mechanisms—they are what Conservatives normally support. Can he tell me the Government’s estimate of the rise in gas prices that would be necessary to persuade the public, under market mechanisms, to install heat pumps?

[Lord Callanan (Con)]

The noble Lord will be pleased to know that I do believe in market mechanisms. His question is impossible to answer, and let me explain why. Heat pumps are three to four times more thermodynamically efficient than existing gas boilers. At the moment, because of the costs of various policies on the production of electricity to successfully decarbonised the electricity sector, there is an imbalance in pricing. The Treasury and the Government have accepted that we need to do something about rebalancing gas and electricity prices. Now is clearly not the time to do this, when we are experiencing record gas prices. In the longer term, and bearing in mind that this is a 15-year strategy, we need to change the balance of these costs. We are committed to do so. There are other market mechanisms of which I could speak in favour. We will consult on a market mechanism for gas boiler manufacturers to have a certain proportion of their sales be in heat pumps. I repeat what I have said before: the boiler upgrade scheme is not the only support mechanism we offer for installing heat pumps.

[The Lord Bishop of Durham]

The Minister and I live in the same region, where masses of new building is going up. I have had only a quick read of the document —we have not had time for anything other than that—and there is a lot about retrofitting in it. Given that we have all the technology and knowledge now, can the Minister explain why new builds are not being built to a net-zero target from this year or perhaps next? Everything is in place to be able to do this. We are delaying too long.

[Lord Callanan (Con)]

The decision was made by what was then the Ministry of Housing, Communities and Local Government that the future homes standard would kick in in 2025. There is a long process of consultation to go through with industry to ensure that the standard is applicable, that the supply chain is there, and so on. The right reverend Prelate will be pleased to know that we are changing what is called Part L of the building regulations next year. This will also produce substantial carbon savings in advance of the future homes standard coming in in 2025.

[Lord Whitty (Lab)]

My Lords, I thank the Minister for answering a question I asked a few weeks ago, to which he did not then really reply. I asked when the owners and landlords of buildings and housing will know whether hydrogen is to be the basis for what is currently the gas network. In one place, the document says that it will be “in” 2026, and in another it says “by” 2026. Either way, building owners have five years during which they will not know whether or not their heating systems can be transferred to hydrogen. The Minister is tonight deeply sceptical about whether we would have enough hydrogen, given its other uses, as earmarked in this document, and the need for an increased production in hydrogen for transport and industry. Can the Minister go further and indicate whether any buildings or housing will be convertible from natural gas to hydrogen, or whether some buildings in areas of industrial hydrogen use could be transferred to it? There are three scenarios, varying from nil hydrogen for home heating to it being used for something like a third of home heating by 2050. Will this mix now take place? Do we have to wait till 2026 for any sort of answer to this question?

[Lord Callanan (Con)]

I would like to give the noble Lord a direct answer: it is genuinely impossible to say, at the moment. Let me explain why. It is clear that hydrogen will play a major role in our economy. It will probably contribute to some heating, but I have given my view based on current technology. It is perfectly possible to use hydrogen for heating and gas boilers; the technology exists now—I have seen it. Two houses have been built our area—for the benefit of the right reverend Prelate—of Gateshead—which are entirely hydrogen-fuelled. They have hydrogen boilers, hydrogen hobs and hydrogen gas fires. They work perfectly well — I have cooked an egg on a hydrogen hob.

The question is where we get the hydrogen from. There are two ways of producing it: either from natural gas through carbon capture storage for blue hydrogen, or through electrolysis to produce green hydrogen. You then have to ask yourself the question: does it make sense to use green electricity to generate hydrogen to heat homes, or is it more sensible just to use electricity in the first place to heat the home through a heat pump? That is a question about thermodynamics and conversion and there will be different solutions in different places.

We can say with certainty that the future of home heating will almost certainly be taken over by three technologies: electrification through heat pumps; a greater use of heat networks, for which we have allocated funding; and a certain percentage from hydrogen. The reason we have announced our hydrogen strategy, are funding lots of research programmes and are consulting on a market mechanism to generate large amounts of hydrogen is to try to kick-start the market—to get it going and to bring in private sector investment and ingenuity. This will help to generate large amounts of hydrogen—cheaply, we hope. But we do not yet know to what extent the technology will develop, how much we will be able to produce at reasonable cost, and whether it will be suitable for use in home heating or whether it will be more sensible to use it in industrial processes. We have a multi-pronged strategy. As soon as we have more information, I will be sure to update the noble Lord.

[Baroness Randerson (LD)]

The Government have announced that new-build housing will have charging points for electric vehicles. But the Minister will know that many houses and much other accommodation do not have access to driveways or sufficient space for such points. People will rely increasingly on electric vehicle charging points in public places. Their rollout has been very slow, and those that exist are in a very unreliable condition. More than two years ago, legislation came to this House and was passed which gave the Government considerable powers to improve their availability by making public charging points easier to use and easier to pay for and to ensure that they were better maintained. That legislation has not been implemented. Why not?

[Lord Callanan (Con)]

I believe that it has been implemented. As I said earlier, we have allocated £620 million for vehicle grants and for further funding for local EV infrastructure. This is being rolled out across the whole country. Many local authorities are installing EV charging points in lamp posts, in publicly accessible areas. Grants are available for the installation of electric charge points in the home. Many are being rolled out in service stations and petrol stations. The infrastructure is being rolled out. I understand that the noble Baroness is impatient for it to be done faster, but it is happening.

[Baroness Bennett of Manor Castle (GP)]

My Lords, given that I cannot see anyone else rising, perhaps I may return to a point raised by both Front-Bench spokespeople about the ending of the sale of gas boilers by 2035. The Government’s document seems to say that this is a confirmed ambition. Can the Minister explain what a “confirmed ambition” means? Given that the Climate Change Committee recommends that these should be ended for residential properties by 2033 and for commercial properties as early as 2030, and given that the International Energy Agency says that there should be a global international ban by 2025, why is this so late?

[Lord Callanan (Con)]

I understood that I had explained that earlier in my answer to the noble Lords, Lord Grantchester and Lord Oates, but I am happy to do it again for the benefit of the noble Baroness. It is an aim—an ambition—that by 2035 we will be able to move away from the installation of gas boilers, but we want to make sure that cheap, easily available and affordable alternatives which cost no more to buy or run than a gas boiler are in place. We are fairly certain that the technology will be available. That is why we are supporting so many of our insulation schemes and the heat pumps that we spoke about earlier, but we want to make sure that the technology is available. This also chimes in with the question asked by the noble Lord, Lord Whitty—hydrogen will play a role, but we do not know to what extent at this stage. I understand the impatience of noble Lords, but this is a strategy to be rolled out over many years.

[Baroness Bennett of Manor Castle (GP)]

My Lords, given that there are 19 million homes in the country marked on the bottom rung for energy efficiency—D or below—and that the Heat and Buildings Strategy stresses in its introduction the need for a fabric-first approach, can the Minister tell me why there are no firm proposals to replace the scrapped green homes grant or funding for improving the fabric of our homes?

[Lord Callanan (Con)]

The noble Baroness has obviously not been paying attention to what I have said, but let me repeat the figures yet again. She might want to go and look at some of the fantastically successful delivery we were doing for low-income families under the local authority delivery scheme. We spent hundreds of millions of pounds on that; we have already rolled out the first phase of the social housing decarbonisation fund, and we are investing £950 million and £800 million respectively over the next two years. I referred earlier to the home upgrade grants. All these are paying for home insulation measures for the most vulnerable in society and for people on low incomes. I am sorry if the Greens are not aware of that or do not support it, but we are investing these very large sums of money to upgrade the fabric of people’s homes and install low-carbon heating systems in them. I have been out and viewed many of these schemes.

[Lord Grantchester (Lab)]

If I may also take advantage of being able to jump up again on the Minister, I would mention one aspect of the spread of areas to be covered with new developments: nuclear. There was no mention of nuclear in the Statement. Are any updates to the small modular reactors policy being brought forward by the Government?

[Lord Callanan (Con)]

I am happy to tell the noble Lord that there was mention of nuclear in the Statement, and we announced £120 million for a nuclear innovations fund. I can also tell him that we will have more to say on our nuclear ambitions shortly.

[The Lord Bishop of Durham]

It is obviously the evening to get a second go. Yesterday, the Transition Pathway Initiative launched the Global Climate Transition Centre, which will be a key part of the COP 26 financial infrastructure, to assess 10,000 companies on their alignment with the net-zero pathway and support accountability and action on this very important issue. Understandably, that is not in the paperwork, because it was announced yesterday. Is the Minister aware of the Transition Pathway Initiative—which has been around for a while now—and the Global Climate Transition Centre, and what actions will the Government take to support these initiatives?

[Lord Callanan (Con)]

Yes is the answer to the right reverend Prelate’s question. They are excellent initiatives, and they are indicative of some of the leadership of many of our leading companies and how they are committing to net zero. Many of them are going to be displaying at COP, and it is great to see some of the biggest businesses in our land also helping us on the pathway to net zero.

Energy Prices: Electricity Bills

Lord Callanan Excerpts

Wednesday 13th October 2021 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

I beg leave to ask the Question standing in my name on the Order Paper and declare my interest as president of National Energy Action.

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

My Lords, the largest element of gas and electricity bills, which is wholesale costs, has increased significantly. The Government are committed to protecting customers, especially the most vulnerable. Households will continue to be protected throughout the winter by the price cap and through the warm Home discount and the winter fuel payment and cold weather payment schemes. A new £500 million household support fund has also been made available to councils to help the most in need over the winter.

[Baroness McIntosh of Pickering (Con)]

Given the record rise in wholesale gas prices and the fact that many fuels such as heating oil, coal and LPG, on which many rural dwellers depend, are not covered by the price cap, will the Government immediately lift the green levies on household bills, which account for 25% of the total, but ensure that energy companies pay for the green infrastructure from which they will ultimately profit, while targeting all available financial resources on those on the lowest incomes with the least efficient homes, to ensure that a further 1.5 million are not forced into fuel poverty?

[Lord Callanan (Con)]

Heating oil and LPG are of course not covered by any of the levies that my noble friend refers to—that is, they are separately controlled. There is a free market in them and they have not gone up nearly as much as gas prices. But as with every other utility, the energy companies pass through the cost of investment in the sector’s networks to end consumers, as well as the cost of additional energy infrastructure investment and environmental and social policies.

[Lord Allen of Kensington (Lab)]

I declare my interest as chairman of Balfour Beatty and my other interests as in the register. When, back in July, I raised the issue of the high energy costs affecting the competitiveness of our steel industry, the Minister appeared to agree. Yet since then, the Government have offered no support when energy costs have gone through the roof. This will impact on jobs and people’s lives throughout the country. As Gareth Stace put it well the other day, according to the newspapers, the energy crisis of today will be the steel industry crisis of tomorrow. What assistance are the Government currently giving to the steel sector and others that are highly dependent on energy consumption? More importantly, what are they planning to do not next year or next month but in the coming weeks to address this crisis?

[Lord Callanan (Con)]

Many of these energy-intensive industries are already freed from the cost of the emissions trading scheme by being issued with free permits but, beyond that, the noble Lord makes a good point. My colleague the Secretary of State is regularly in urgent discussions with all these industries and, of course, we are urgently seeking a solution across government as to how we can do something to help.

[Lord Oates (LD)]

The Minister will be aware of the bitter irony at this time of energy crisis that some £1 billion was spent in the last 12 months on paying wind generators not to generate energy. We need a proper energy policy that builds storage. When will the Government come forward with storage solutions that mean that this energy is generated and directed to green hydrogen, battery storage, compressed air or other forms or storage?

[Lord Callanan (Con)]

Of course, we do have a comprehensive energy policy. Many of the technologies that the noble Lord refers to are difficult and expensive, but we are funding research into a lot of them. The problem with electricity, as the noble Lord will be aware, is that it is very difficult and expensive to store on a large scale.

[Lord Howell of Guildford (Con)]

My Lords, it is obvious that in the short term, with soaring international gas prices, what can be done is understandably limited. Rescue support for heavy energy users obviously will help if it comes quickly, but should we not also consider temporarily suspending some of the heavy green surcharges, carbon penalties and the latest, rather poor idea, of taxing gas even further? For the medium term, have the real lessons been learned, namely that for an orderly and sustainable energy transition, we need more gas and electricity storage for back-up and swing supplies, a rapid sort-out of our faltering nuclear replacement programme, some coal-fired stations in reserve, and low rather than high home fuel prices to ease widespread hardship and prevent backlash?

[Lord Callanan (Con)]

We are taking a range of important steps to decarbonise the electricity system and to provide more homegrown electricity generation as our supplies from the North Sea dwindle. The problem with my noble friend’s argument is that providing more storage does not alleviate the high prices. Many European countries have much greater levels of gas storage, but their prices are even higher than those in the UK.

[Lord Walney (CB)]

My Lords, will the Government redouble their efforts to persuade our European partners to resist the siren voices from the Kremlin over Nord Stream 2, in the knowledge that President Putin’s regime will only try to exacerbate this cost-of-living crisis and not bring benefit to our or European citizens?

[Lord Callanan (Con)]

The noble Lord makes an extremely good point. We remain very concerned about the impact of Nord Stream 2 on European energy security and particularly on the interests of Ukraine. We will continue to raise our significant concerns about the project, defend the interests of Ukraine, support future arrangements and give a significant transit role to them.

[Lord Grantchester (Lab)]

My Lords, Labour will make Brexit work. Can the Minister confirm that he believes that the measures of support are sufficient this winter to help those in fuel-poor households and those with poorly insulated homes?

[Lord Callanan (Con)]

We always keep these things under review, but I outlined the many steps that we are taking and if necessary, we will look further at what we can do to help.

[Lord Roberts of Llandudno (LD)]

My Lords, does the Minister agree that the foolhardy thing is that universal benefit has been completely demolished just when the poorest, most vulnerable people will be fighting to keep warm this winter? Will the Government not reverse that decision, and can they give us something fresh that will help the most vulnerable in a very harsh winter?

[Lord Callanan (Con)]

I outlined earlier the support mechanism that we already have in place: the warm home discount, the winter fuel payment, cold weather payments and an additional £500 million household support fund, which has been available to councils to help the most in need over the winter.

[Baroness Jones of Moulsecoomb (GP)]

The Scottish Parliament, through the Green Party Minister Patrick Harvie—

--- Later in debate ---

[Baroness Jones of Moulsecoomb (GP)]

It has committed £1.8 billion to home energy efficiency measures. Given that this Government want to be world leading and they have a bit of a gap to fill, will they commit a proportionate amount—bearing in mind that there are 10 times more homes in England—of £18 billion?

[Lord Callanan (Con)]

I have not had a chance to meet the noble Baroness’s colleague yet. I was supposed to meet him a couple of weeks ago, but the meeting was cancelled. I look forward to discussing these important matters with him. As the noble Baroness will be aware, we are already spending considerable sums on home insulation and heating upgrade measures—some £1.3 billion over the last year. Of course, I cannot predict what might happen in the Chancellor’s spending review, but we are already investing considerably in home insulation measures.

[Lord Mackay of Clashfern (Con)]

I wonder who is responsible for this unprecedented rise in the price of wholesale gas?

[Lord Callanan (Con)]

The noble and learned Lord is tempting me. Gas is traded in international markets, so the biggest factors influencing prices are global trends in supply and demand. Higher wholesale gas prices have been seen internationally since 2021.

[Viscount Waverley (CB)]

My Lords, is there a correlation between consistency of supply from certain national gas producers and the state of some bilateral relations, with the EU generally and indeed further afield, that might be inhibiting the continuity of supply? If so, are ambassadors exploring strategy options with this in mind, and would the Minister care to give us some specific examples?

[Lord Callanan (Con)]

Security of supply is of course absolutely vital. The UK derives this through its diversity of suppliers and by reducing reliance on any single source. In addition to our considerable domestic production, we import gas from Norway, Belgium, the Netherlands and further afield, via LNG terminals. Of course, through our ambassadors we are in regular contact with our energy partners, including Norway, the EU Commission and the International Energy Agency.

[Lord West of Spithead (Lab)]

My Lords, for several years a number of us have been banging on about the looming national shortage of electricity. My concerns are that our present nuclear power stations are going out of service at an increasing rate and that no nuclear sites are being built or planned, yet they are absolutely crucial for the provision of round-the-clock, weather-independent, low-carbon electricity. We have all seen, as we expected, that renewables alone do not cut the mustard when we really need it. Does the Minister agree that there is an urgent need to complete Hinkley Point C and to get the final investment decision for Sizewell C? When will the decision to go ahead be made?

[Lord Callanan (Con)]

I agree with the noble Lord. It has been a mistake and, indeed, it was a mistake for his party to announce a moratorium from 1997 on any new nuclear development, which lasted for 10 years. We need to get on fast with building new nuclear capacity, and we are doing just that. It will form a vital part of our baseload electricity demand.

UK Property Ownership: Overseas Jurisdictions

Lord Callanan Excerpts

Wednesday 13th October 2021 Lords Chamber

[Lord Wallace of Saltaire]

To ask Her Majesty’s Government what plans they have to increase the transparency of property ownership in the United Kingdom following media reports of the use of overseas jurisdictions to hide the identity of the beneficial owner.

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

My Lords, the Government remain committed to establishing a new beneficial ownership register of overseas entities that own UK property in order to combat money laundering and achieve greater transparency in the UK property market. The register requires primary legislation for it to be established, and the Government will legislate when parliamentary time allows.

[Lord Wallace of Saltaire (LD)]

Does the Minister recognise the complete contradiction between asserting complete sovereignty over Northern Ireland and failing to reassert sovereignty over who owns what land and property in the United Kingdom, as well as failing to prevent dirty money flowing in from authoritarian states? Why have the Government not yet found time to prioritise legislation that enables British citizens to know who owns what?

[Lord Callanan (Con)]

I think these are two completely separate issues that the noble Lord is confusing. As I said, it remains a priority for the Government. We have already published a draft Bill, we have carried out pre-legislative scrutiny on the matter and we will legislate as soon as parliamentary time allows.

[Lord Sikka (Lab)]

My Lords, the UK itself is a barrier to transparency. Any crook from anywhere in the world can form a company here without any checks on the authenticity of directors, and can conceal illicit financial flows. The Government have had 11 years to reform Companies House but have failed to do so. Can the Minister explain why reform of Companies House has not received greater priority?

[Lord Callanan (Con)]

We are already investing £20 million in the reform of Companies House to provide many of the services the noble Lord refers to, but many of the reforms also require primary legislation and we will legislate when we can. The noble Lord is not correct in his basic assertion: the UK’s anti-money laundering regime was reviewed by the Financial Action Task Force and the UK achieved the best rating of any country assessed so far in the round of evaluations.

[Baroness Ludford (LD)]

My Lords, Guardian reporter Luke Harding, involved in analysing the leaked Pandora papers, has said, “There is a message for the super-rich here: don’t hide your cash under a palm tree because, sooner or later, an investigative journalist will find it.” That is just as well, because the Government seem very relaxed about dirty money buying up London. Why have only four unexplained wealth orders—McMafia orders—been issued since 2018 and none since July 2019? Is the Minister relaxed that a government assessment last November concluded that money laundering through the UK had actually increased since 2017?

[Lord Callanan (Con)]

As I just said in the previous answer, we are absolutely not relaxed about this and we are determined to root out any financial chicanery and money laundering where possible. Investigations in which a UWO may assist are likely to be complex: application to a court for a UWO may take many months or years, but enforcement authorities continue to seek opportunities to utilise unexplained wealth orders in appropriate cases. These are difficult and complex matters.

[Baroness Falkner of Margravine (CB)]

My Lords, the noble Lord mentions the establishment of the register, which is long overdue. Will he tell the House what merit he finds in our continuing to support the existence of anonymous shell companies? As the Tax Justice Network has just said, nobody behaves better when they cannot be seen.

[Lord Callanan (Con)]

If the noble Baroness means shell companies in British Overseas Territories and others, they are also convinced of the need for transparency and we continue to press them to provide full ownership and transparency details on these companies.

[Lord Bassam of Brighton (Lab)]

My Lords, it is hard to take seriously the Government’s claim that they aim to lead the global fight against illicit finance, or the register that the Minister has referred to. The Government claim they have impressive controls, but it is now three years since their consultation ended on the draft registration of overseas entities Bill, so can the Minister tell the House what plans they have to tackle our high-risk score, stop money laundering and protect the UK against terrorist financing?

[Lord Callanan (Con)]

As I said, the Financial Action Task Force that we established got the best rating of any country assessed so far in the round of evaluations in countering money laundering. We are opposed to it and we will do all we can to fight it, as noble Lords will want us to do. We intend to legislate on the registration of beneficial ownership and will do so as soon as parliamentary time allows.

[Lord Fox (LD)]

My Lords, as we all know, “legislate when time allows” is a phrase to kick things into the long grass. The evidence to date is that this item is nestling very deep in the long grass. The Government have had the time and the opportunity to bring forward legislation, so can the Minister be clearer to your Lordships’ House why they have not done so?

[Lord Callanan (Con)]

It is absolutely not an intention to kick it into the long grass: it remains a priority, which is why we published the draft Bill, why we invited pre-parliamentary scrutiny and why we have acted on many of the recommendations that were issued during that time, but there remains a lot of pressure on the parliamentary timetable and we will legislate when time allows.

[Lord Harries of Pentregarth (CB)]

One hundred and thirty countries have now signed up for a global tax arrangement with a minimum tax threshold of 15%. What will Her Majesty’s Government’s attitude be towards tax havens where the tax is very much lower than that and which fail to sign up to this regime? In particular, what will their attitude be to UK property owners who register their property with companies in such tax havens?

[Lord Callanan (Con)]

The Chancellor continues to work with other jurisdictions to expose many of these havens and to increase the tax take. Only recently, the G7 Finance Ministers agreed a minimum corporation tax that has been implemented in many countries across the world. So, the Chancellor and HMRC need no lessons to try to increase the tax take.

[Baroness Donaghy (Lab)]

My Lords, we are talking about £170 billion-worth of property owned offshore. Think what the tax revenue could buy to sort out the energy crisis, the social care crisis and the low pay crisis. Will the Government bring back some legislation, or have they listened to the society for the protection of oligarchs? Ministers themselves claim that 75% of the property industry supports tougher action against foreigners who use the UK to wash their dirty cash. Is it not time that the Government made some parliamentary time for this?

[Lord Callanan (Con)]

Again, the noble Baroness is confusing different issues. Having hereditary beneficial ownership—which we are greatly committed to and would be, I think, a great step forward—provides transparency. It does not, of course, itself increase the tax take. But she can be convinced that HMRC is very seized of this issue and is intending to increase the taxation take where it can possibly do so. Since 2010, the UK Government have secured and protected over £250 billion in tax revenue that would otherwise have gone unpaid, including an additional £3 billion from those trying to hide money abroad.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the Minister has said “when parliamentary time allows” a number of times. But, of course, your Lordships recently passed the Financial Services Act. Transparency International recently analysed 400 corruption and money laundering cases and identified 600 UK businesses, institutions and individuals that have helped those corrupt cases. Does the Minister acknowledge that the Financial Services Act, so recently passed, is inadequate in regulating the actions of our businesses and needs to be strengthened?

[Lord Callanan (Con)]

I am not familiar with the details of that Act, but, as I said and will repeat again: the register of beneficial ownership remains a priority; the role of Companies House remains a priority; and we will come to this when parliamentary time allows.

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

Could the Minister explain why we should not come to the conclusion that the reluctance to take action on this and other tax evasion and avoidance is because of the very generous donations given by Russians to the Tory party and Tory MPs?

[Lord Callanan (Con)]

The noble Lord would be incorrect if he came to that conclusion. HMRC and the Chancellor have taken robust action against tax avoidance and evasion and will continue to do so. Many of the complaints I get from people about HMRC are that it is too aggressive in pursuing individuals and companies for its tax take. So, it will take no lessons from the noble Lord in wanting to increase its tax take.

[Lord Alton of Liverpool (CB)]

My Lords, the All-Party Parliamentary Groups on Hong Kong and on Uyghurs, on which I serve as vice-chair, have drawn the Government’s intention to the impunity of those such as Carrie Lam and Chen Quanguo, involved in the destruction of Hong Kong’s democracy and the Uighur genocide. Will the Minister instigate a UK asset audit of such officials and the families of those responsible for these depredations, and accelerate scrutiny of Chinese-UK property developments, such as Nine Elms in south London? This has borrowed £430 million from banks, potentially leaving us vulnerable to collateral damage from the Evergrande crisis, with liabilities—in a re-enactment of the South Sea bubble—now topping some £2 billion.

[Lord Callanan (Con)]

The financing of development activity is, of course, a commercial decision and the Government do not intervene in those investments. But, in March 2021, in a co-ordinated effort with the European Union, the US and Canada, the UK imposed sanctions, including travel bans and asset freezes, on several Chinese officials in response to the human rights abuses against the Uighur community. I assure the noble Lord that we continue to monitor the situation. The UK has introduced global human rights sanctions regimes, complementing our anti-money laundering measures, including those implicated in human rights abuses, ensuring that they cannot utilise funds that have been obtained illicitly in the UK.

[The Lord Speaker (Lord McFall of Alcluith)]

My Lords, that concludes Oral Questions for today.

Emissions Trading Scheme: Transport

Lord Callanan Excerpts

Monday 11th October 2021 Lords Chamber

[Lord Oates (LD)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I draw attention to my interests as set out in the register.

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

My Lords, the UK Emissions Trading Scheme replaced the UK’s participation in the EU Emissions Trading Scheme on 1 January 2021. The UK ETS applies to energy intensive industries, power generation and aviation. In the energy White Paper we

“committed to exploring expanding the UK ETS to the two thirds of uncovered emissions”,

and we will set out our aspirations in due course.

[Lord Oates (LD)]

I thank the Minister for his Answer, but could he give the House some indication of the timescale in which the Government intend to bring shipping within the UK ETS? If they do not intend to do so, what alternative approach will they take to curtailing maritime emissions, which are currently forecast to rise by 50% by 2050?

[Lord Callanan (Con)]

I recognise the points the noble Lord makes and he will be aware that, in the transport decarbonisation plan, there is a commitment to assess how economic instruments could be used to accelerate decarbonisation measures alongside all the other aspirations of the plan.

[Baroness Blackstone (Ind Lab)]

How do the Government intend to respond to the report from the Climate Crisis Advisory Group on carbon pricing, which says that emissions reductions from the advanced economies fall far short of what has been promised? I quote:

“Much stronger policy action across all sectors is needed”.


In particular, can he indicate the Government’s intention on a carbon border adjustment mechanism, and whether such a mechanism could raise nearly €10 billion a year as the Financial Times has claimed?

--- Later in debate ---

[Lord Callanan (Con)]

Of course, these matters are never as simple as the noble Baroness makes out. Building on the previous Answer from my noble friend Lord Agnew, I say that it is important to recognise that the UK is proceeding faster than any other G7 country in our decarbonisation efforts. I am aware that the EU is looking at a carbon border adjustment mechanism—we will see if it happens or not—and of course we will look at the proposal.

[Baroness Boycott (CB)]

Are the Government supportive of the citizens’ climate assembly recommendation to introduce a frequent flyer levy? This would fit well with the polluter pays principle, which Ministers have advocated previously at the Dispatch Box, and the burden would fall on those most able to pay, something I am sure the Minister would deem fair.

[Lord Callanan (Con)]

I am sure the Chancellor will want to update Parliament in due course on any proposed levies.

[Lord Grantchester (Lab)]

Clearly the Government have not thought through the present crisis. So often it is the poorest throughout the world who bear the brunt of climate change. How will the Government apportion costs for the UK ETS to cover all forms of transport?

[Lord Callanan (Con)]

The effect on poor people, including in the UK, will be one of the factors that we will need to consider when expanding the ETS. These are important fiscal measures. We will need to look at them properly and consider all the implications, and we will set out our thinking in due course.

[Lord Fox (LD)]

My Lords, as the Minister pointed out, these schemes cover energy-intensive businesses. However, if the disorderly situation that is currently under way continues, manufacturers of ceramics, steel and cement—energy-intensive businesses—will not have any emissions to trade because they will have collapsed. Can the Minister clear up what is happening? Have talks between BEIS and the Treasury happened, as the Secretary of State said yesterday, or was the Treasury right that no talks have happened? When will the Minister let us know what is going on? Can the Government clear up this mess?

[Lord Callanan (Con)]

I agree with the comments made by my Secretary of State yesterday. There are always ongoing discussions between government departments on a huge range of measures, and I am sure that the Treasury and BEIS will be closely involved in further discussions.

[Lord McConnell of Glenscorrodale (Lab)]

My Lords, at the start of the pandemic last year, as a result of the lockdowns there was a significant problem in developing countries around the world in trading, due to the lack of access to shipping and other forms of freight. This problem could be exacerbated by the correct action to reduce and—I hope—eliminate emissions. Will the Government ensure that the COP 26 summit in Glasgow delivers enough funding and other forms of support to developing countries to make sure that there can be a just transition?

[Lord Callanan (Con)]

Again, in this matter we are leading with the funds that we have supplied to developing countries and we have promised. The Prime Minister and the joint president at COP are engaged in discussions as we speak, to try and drive up the commitment of developed countries to help lower-developed countries with their aspirations.

[Lord Berkeley (Lab)]

My Lords, air is the most polluting of all modes of transport, and most air transport is excluded from the UK Emissions Trading Scheme because it is international. Will the Minister confirm that he is working hard to bring CORSIA—the Carbon Offsetting and Reduction Scheme for International Aviation—within the scheme and make some positive announcement for COP 26?

[Lord Callanan (Con)]

The noble Lord makes a good point. The ETS already exists for domestic aviation and aviation to the European Economic Area. There is also a separate scheme developed by ICAO, which he referenced. We will need to look at how we implement that in the UK and its interaction with the UK ETS.

[Baroness Young of Old Scone (Lab)]

With apologies to Jane Austen, it is a truth universally acknowledged that ambitious action as early as possible this decade is required to reduce CO₂ emissions as early as possible. The Minister says that we are moving faster than anyone else, but the Government have stated that the implementation of any expansion to the UK ETS following the first review of the scheme will not happen until 2026. Does he agree that this is far too slow? Can he tell the House why it is utterly unambitious?

[Lord Callanan (Con)]

As I said in previous answers, we recognise the urgency of taking swift action on climate change. I repeat: we are moving faster than any other G7 country. I accept that the noble Baroness and other Opposition Members would like to be even more ambitious, but we must look at the implications of that on the competitiveness of British industry and the effect on people’s fuel bills, et cetera. These are important matters and we must consider them in the round.

[Lord Davies of Brixton (Lab)]

My Lords, I welcome what the Minister has said about the extension of the ETS to shipping, but will he take this opportunity to indicate the degree of urgency that the Government place on this issue, particularly the scandal of the continued use of bunker fuel by shipping worldwide?

[Lord Callanan (Con)]

We agreed to undertake a review of the extension of the ETS to maritime emissions in the transport decarbonisation plan, and will do so. However, like aviation, this is an international issue; ships do not just stay in British territorial waters but move overseas as well. Therefore, we need to work with our international partners and the EU to come up with solutions to this.

[Baroness Blake of Leeds (Lab)]

My Lords, in the Government’s recent transport decarbonisation plan, no modes of transport other than aviation were mentioned in relation to the UK Emissions Trading Scheme. Could the Minister tell the House exactly why this was? Also, building on the excellent points made by my noble friend Lord Berkeley, can he update us on exactly how the ETS will be developed to accelerate aviation decarbonisation?

[Lord Callanan (Con)]

I do not agree with the noble Baroness. The transport decarbonisation plan was the first such plan in the world. It sets out how the transport sector will move on a path to net zero and includes consulting on a world-leading pledge to end the sale of all new polluting road vehicles by 2040 and net zero in aviation by 2050. It is a world-leading, ambitious plan. I am sorry that the noble Baroness does not support it.

[Baroness Wilcox of Newport (Lab)]

If the Government are minded to review their policy and include all forms of transport, will the Minister consider seeking the views of municipal bus companies such as Newport Transport, which is the clear leader in Wales, in their moves towards zero-emissions electric buses? It is the first operator in Wales to achieve a modern-day emissions-free squadron service. I know that Newport City Council and the transport company would be willing to share their experience of this excellent practice with the UK Government.

[Lord Callanan (Con)]

I am sure we would be very happy to take into account the views of Newport Transport. I congratulate it on its commitment to zero-carbon transport. Of course, many other local authorities and bus companies around the UK are also developing battery buses, hydrogen buses, et cetera, so great progress is being made.