OneWeb

Lord Callanan Excerpts

Wednesday 8th July 2020 Lords Chamber

[Lord Bowness]

To ask Her Majesty’s Government, further to the announcement on 3 July that they will (1) invest $500 million, and (2) take an equity share, in OneWeb, what safeguards are in their agreement with OneWeb to ensure that other shareholders and investors in that company are not hostile to the interests of the United Kingdom.

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

My Lords, the investment in OneWeb is still subject to US court approval and regulatory clearances. The Government undertook appropriate due diligence. We will continue to ensure that this ambitious acquisition safeguards the UK’s interests and maximises future opportunities for this innovative technology. The Government have a special share that provides them with the final say over any future sale of the company and over future access to OneWeb technology by other countries on national security grounds.

[Lord Bowness (Con) [V]]

I thank the Minister for his Answer. As I understand it, we are buying a share in a bankrupt British company whose manufacturing and assets base is in the United States under an agreement yet to be approved by a foreign court, i.e. one in New York state. Can the Minister specify the share that we are buying, tell us who the other parties are, and how the capabilities of the satellites which we propose to acquire compare with the US GPS and EU Galileo? Will there need to be much more expenditure to bring this acquisition and its assets up to that standard?

[Lord Callanan]

The Government will invest $500 million, on an equal basis with Bharti Global Ltd. As part of the agreement, a small equity stake will be held by existing OneWeb creditors. This is not specifically designed for global national positioning systems; these satellites operate in a lower orbit for a number of missions, but primarily for earth observations and tele-communications.

[The Deputy Speaker (Lord Alderdice) (LD)]

I understand that the noble Lord, Lord Willetts, is not with us, so I call the noble Lord, Lord Birt.

[Lord Birt (CB) [V]]

My Lords, I declare an interest as a former member of the board of Eutelsat. LEO is potentially a breakthrough technology, but it is also very high risk, as the collapse of OneWeb so vividly demonstrates. What scale of investment will be needed to build out a commercially viable constellation? How will that investment be funded, whether by debt or equity?

[Lord Callanan]

Given the commercial considerations, at the time I am unable to provide further detail on our ongoing discussions. However, we will have strong representation on the board, we will be fully involved in setting the strategic direction of the business, and we will of course be discussing the future of the business and the merits of bringing in additional shareholders with our partners in due course.

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

My Lords, I am convinced that we should capitalise on our world-leading satellite capability and, if possible, expand it. Although there are risks, putting Galileo in the shade would be very good news, and I congratulate the Government on this vision, albeit that it is high-risk. As we move on from the impact of Wuhan virus and Brexit, does the Minister agree that we must grasp the new technologies of AI, quantum engineering, the internet of things, big data et cetera, and that it is a disgrace that a country with the scientific capability of the UK does not have an equivalent of Silicon Valley? In 1946, it was decided that for national security we should develop an atom bomb. The cost was huge. Does the Minister agree that for reasons of national security, we should generate an equivalent of Silicon Valley and an ability to create a world-beating, resilient telecommunications network, even if the cost is huge, and, ditto, civil nuclear power?

[Lord Callanan]

The noble Lord asks a lot of questions and there is not time to address all of them. We are investing in this as a one-off strategic opportunity to own a satellite communications network, working with Bharti Global Ltd, and to support our ambition for the UK to be a pioneer of novel satellite technologies. We are delighted that our bid was successful.

[Lord Fox (LD) [V]]

As recently as last year, OneWeb raised $1.25 billion, then in March of this year, having launched only a fraction of the satellites that it needs, it filed for bankruptcy protection. Clearly, the American market was not prepared to back it any more. For now, the UK Government, along with Indian tycoon Sunil Bharti Mittal, have committed a further billion dollars. On recent experience, that will last about nine months. How much more will it cost the British taxpayer before the Minister and his colleagues realise that this is not a good investment?

[Lord Callanan]

As I have said, given commercial considerations, I am unable to provide further detail on ongoing discussions, but we will be discussing the future funding of the business, and the merits of bringing in additional shareholders, with our partners in due course.

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

My Lords, I welcome the Government’s stake in OneWeb. It will help deliver high-speed broadband in the UK and the rest of the world. On the issue of risk, does the Minister agree that anyone setting up frontier firms knows that there is no gain without risk?

Turning to the golden share, the Minister said that national security was the consideration. What about a company’s record on theft of intellectual property, abuse of the workforce through modern slavery and other anti-competitive practices? Will they also be taken into account?

[Lord Callanan]

We will use our golden share to full advantage for the British taxpayer. We will take all those considerations into account, but primarily national security.

[Baroness Altmann (Con) [V]]

My Lords, what engagement have the Government had with the astronomy community in the light of OneWeb’s application to launch up to 42,000 new satellites into low-earth orbit and the disruptive reflections that have caused such concern among the astronomy community? Are the Government looking to introduce anti-reflective coatings such as DarkSat or VisorSat, which have been employed by SpaceX?

[Lord Callanan]

As the noble Baroness recognises in her question, this is novel, cutting-edge satellite technology which we are investing in as part of our focused research and innovation in the UK. We want to become a world leader in the space sector, and this provides us with suitable strategic geopolitical opportunities to do so.

[Lord Kilclooney (CB)]

My Lords, who are the other shareholders in OneWeb? What percentage does each shareholder have? Can the Minister confirm that this investment would not have taken place if we had not left the European Union?

[Lord Callanan]

Our membership or otherwise of the European Union is not relevant to this discussion. The other shareholders are, as I said, Bharti Global Ltd and some small shareholders. We have an equal shareholding with Bharti Global Ltd and a small shareholding is held by existing OneWeb creditors.

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

My Lords, this is a very intriguing initiative, although a lot of the details remain opaque. Can the Minister confirm whether the Government intend to transfer some or all of the satellite manufacturing, which is currently based in the USA, to the UK? If so, how many jobs would that generate?

[Lord Callanan]

The noble Lord asks a very good question. Through this investment we will look to leverage our influence to set the strategic direction of the business, and of course we want to see direct manufacturing the UK by both the company and its supply chain expanded.

[Baroness Kramer (LD) [V]]

My Lords, numerous genuinely UK companies that are cutting-edge frontier businesses and high risk would welcome a $500 million investment from the UK Government. They have typically managed their businesses far better than OneWeb, which, as the Minister said, managed to put itself into bankruptcy. Where do they apply for the money?

[Lord Callanan]

This is, as I said, a one-off investment in a cutting-edge satellite technology company which has many applications that the UK can leverage, including defence applications and providing communications, resilience and remote operations where services are currently limited.

[Lord Razzall (LD) [V]]

My Lords, following up the question by my noble friend Lord Fox, are the Government not concerned that the American technological market, which undoubtedly loves these sorts of investments, was not prepared to put in the money and so the company was forced into Chapter 11 bankruptcy? Do the Government accept that very significant further investment will be required to get this off the ground? Are the Government prepared to do that—and, if so, for how much?

--- Later in debate ---

[Lord Callanan]

The noble Lord can be assured that appropriate due diligence was carried out, which showed that this investment will be commercially sound and is likely to make an economic return. As I said in response to earlier questions, we will of course discuss with existing partners and shareholders any new funding requirements for the business.

Covid-19: High Street Retailers

Lord Callanan Excerpts

Thursday 2nd July 2020 Lords Chamber

[Baroness Ritchie of Downpatrick]

To ask Her Majesty’s Government what assessment they have made of the impact on high street retailers of the COVID-19 pandemic.

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

My Lords, the global Covid-19 pandemic has resulted in unparalleled falls in retail sales and high-street footfall. We have provided unprecedented support to high-street businesses. Pubs, shops and hotels will pay no business rates for 12 months. Eligible retail, hospitality and leisure businesses have received cash grants of up to £25,000 and businesses that cannot pay their rent because of coronavirus will be protected from eviction.

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

My Lords, reports today suggest that more than 6,000 jobs were lost in one day in the retail sector. As we emerge from lockdown, we need a plan to regenerate and save retail jobs on our high streets. What further steps will the Government take, including a revamped city centre revitalisation programme and fiscal measures, to ensure that our high streets can thrive now and into the future?

--- Later in debate ---

[Lord Callanan]

The noble Baroness is right to highlight the extent of the challenge that we face. On 30 June, the Prime Minister announced a new deal which puts jobs and infrastructure at the centre of the Government’s economic growth strategy. This includes £900 million for a range of shovel-ready local growth projects in England, as well as £96 million to accelerate investment in town centres and high streets through the Towns Fund this year.

[Lord Pickles (Con) [V]]

My Lords, small avenues of shops close to town centres and in estates have always had a difficult trading environment, but the lockdown has demonstrated their importance to community cohesion. They offer the opportunity to shop locally, a bulwark against panic buying and a promise of normality. In view of these important community assets, what plans do the Government have to protect these assets and enhance them?

[Lord Callanan]

My noble friend is absolutely right to highlight the important role that many of these local shops play in our communities. As I said in the previous answer, we have announced £96 million to accelerate investment in town centres through the Towns Fund. This will provide all the towns selected with between £500,000 and £1 million that they can spend on local initiatives to help their areas.

[Lord Kilclooney (CB)]

My Lords, I declare an interest in a retail unit in the Royal Avenue, Belfast, and in 10 other town centres in Northern Ireland. The Government are to be congratulated on their furlough scheme, which has been of great assistance to retailers and, consistent with health advice, the reopening of hospitality and shops is welcomed. But can the Minister make it clear to us whether any consideration is being given to the reduction of VAT and, secondly, the return of staff to offices in our town centres in Northern Ireland and the United Kingdom, because that would certainly increase footfall in town centres?

[Lord Callanan]

I thank the noble Lord for his supportive comments. He will of course understand that I cannot make any commitments on what the Chancellor may or may not do in his next announcements.

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

My Lords, in a week that has seen the loss of tens of thousands of jobs, as the noble Baroness, Lady Ritchie, said, to the high street, the Government keep mentioning CBIL and CLBIL schemes, which are clearly welcome. However, a number of large retailers I speak to are being denied access to these funds because of the way that EU state aid rules are being applied. When will the Government get the European Commission to change the way it determines an undertaking of difficulty, so that we can ensure that we do not lose further retailers, employers and jobs on the high street?

[Lord Callanan]

The noble Lord raises an important point. The CBIL scheme has been unprecedented and extremely successful. We are aware of difficulties that some companies have in accessing it, for various reasons to do with either problems with the bank or the state aid rules. We are urgently looking at this problem.

[Baroness Thornhill (LD)]

High streets were in decline before Covid-19. In fact, the House of Commons report on high streets and town centres last year talked of significant reform in planning and taxation policy, including the options of an online sales tax and reforms to business rates. While the money the Minister has outlined is clearly welcomed and valued, can he assure us that this fundamental, significant work is still being carried on, because this is where the future success of the high street really lies?

[Lord Callanan]

The noble Baroness raises an important point. We announced a review of the business rates system, which is ongoing, and I am sure we will have more to say on that shortly.

[Lord Naseby (Con) [V]]

Retail is facing a complete revolution with the move to online, added to which there is a fear factor among consumers against spending at the moment. Should we not, first, ditch the “Stay at Home” message and get everybody back to work? To take one example, why cannot the beauty sector go back to work? It has 200,000 female employees, and what honestly is the difference between them and hairdressers? Indeed, while we are about it, why not allow physiotherapists to open, too? Does not the Minister think that it is time to trust all retailers, so that they can make the decision to open safely, within the boundaries that we have set?

[Lord Callanan]

My noble friend is right to highlight these issues. I can only tell him that we have studied the health advice very carefully: we are following the scientific advice from Public Health England and others. It is our wish to get every sector reopened as soon as possible, but he will understand that we need to do that as safely as possible.

[Lord Eames (CB) [V]]

My Lords, some of the hardest hit are small retailers in country and sparsely populated areas, and many of them are in Northern Ireland. What consideration have the Government given to such particular cases of hardship?

[Lord Callanan]

We recognise the vital role played by retailers operating in sparsely populated and isolated areas in the UK, including those in Northern Ireland. As I said, they have benefited from cash grants of up to £25,000, for rateable values of between £15,000 and £51,000. Many rural retailers have also benefited from the business rates holiday, and the doubling of the small business rate relief and changes to thresholds, but we keep these matters under constant review.

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

My Lords, does the Minister agree that we face a fundamental change in behaviour? The survey figures for future use of the high street make grim reading, with data pointing to a near halving of physical visits post pandemic. What plans do the Government have to anticipate this new normal?

[Lord Callanan]

The noble Lord is right to highlight the difficulties that many retailers are facing. There has been a big shift to online retailing as well—of course, many high street retailers do both—but we need to keep these matters under review. The high street is vital to many local communities, so we want to offer them as much support as possible.

[Lord Shipley (LD) [V]]

My Lords, does the Minister agree that a high street business rates system based on open market rental value is no longer fit for purpose? When will the new system be introduced? Will it be in the next financial year, because it is urgently needed?

[Lord Callanan]

The terms of reference for the review were published on 11 March in the Budget. On 28 April, the Treasury set out the timelines for the tax policy consultations in the light of the crisis, and the call for evidence for this fundamental review will be published in the coming months.

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

Does my noble friend agree that shopping locally, not online, helps not just those struggling retail businesses but the environment, by reducing transport emissions and excess packaging?

[Lord Callanan]

I can happily say that I agree with my noble friend on that matter.

[The Deputy Speaker (Lord Russell of Liverpool) (CB)]

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

Environmental Projects

Lord Callanan Excerpts

Thursday 2nd July 2020 Lords Chamber

[Lord Randall of Uxbridge]

To ask Her Majesty’s Government, further to the announcement of a New Deal for Britain by the Prime Minister on 30 June, what plans they have to ensure that environmental projects will be given priority in their economic growth strategy.

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

My Lords, as we recover from Covid-19, the Government intend to deliver a UK economy that is stronger, cleaner, more sustainable and more resilient. As the Prime Minister set out in his speech on Tuesday, we intend to

“build back better, build back greener, build back faster and to do that at the pace that this moment requires.”

The UK has shown that growing our economy and cutting emissions can be achieved at the same time.

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

I welcome the Government’s determination to get the economy moving again, but perhaps my noble friend the Minister could reconfirm their commitment not to let new developments override environmental protections for habitats and species, including the great crested newt.

[Lord Callanan]

My noble friend makes a good point: we want to tackle delays in the planning system to support economic recovery, but that does not mean weakening our environmental protections. We can speed up developments while still maintaining the strong protection for the species he highlights, such as the great crested newt.

[Lord Snape (Lab) [V]]

Does the Minister share the widespread disappointment that, despite the Prime Minister’s green rhetoric on Tuesday, there was no mention of the Conservative Party’s manifesto commitment to spend around £9 billion on a countrywide house insulation scheme? Instead we have promises to spend around £100 million on new road schemes. Does the Minister agree that such schemes inevitably cause more pollution and congestion, are in no way helpful to cutting emissions and certainly do not assist the Government in meeting their published target of being carbon-neutral by 2030?

[Lord Callanan]

No, I do not agree with the noble Lord. Local road schemes can contribute to reducing congestion in many areas. We are still committed to our manifesto commitment of home insulation. The noble Lord will want to watch this space for further announcements.

[Lord Rogan (UUP) [V]]

My Lords, taken at face value I welcome the Prime Minister’s speech, in particular his commitment to accelerate projects

“to drive economic growth in all parts of the country”,

including Northern Ireland. I note that Mr Johnson also set his Government the goal of producing the world’s first zero-emission long-haul passenger plane. Can the Minister tell the House the timescale for this and whether there may be a prominent role for Bombardier’s Belfast plant in its design and manufacture?

[Lord Callanan]

I cannot give the noble Lord specific commitments on Bombardier’s role in this, but it is a world-class aeroplane manufacturer. This is an extremely optimistic long-term goal that the Prime Minister has set out, but we are totally committed to making progress towards it. It will be a tremendous achievement by Britain’s scientists and engineers when we achieve it.

[Lord Robathan (Con) [V]]

My Lords, there is a great deal to welcome in this policy, but I am concerned that any large development inevitably impacts on trees, ancient woodland, wildlife and biodiversity in general. Like my noble friend Lord Randall, I am concerned about some of the measures mentioned. The statement says that the Government will

“set out further measures as part of its green agenda”.

Can the Minister perhaps give us any pointers as to what these further measures might be?

[Lord Callanan]

My noble friend will understand that I cannot go into too many details on this until those announcements are made, but we believe we can get the balance right between protecting our environment on the one hand and cutting out many of the unnecessary delays in our planning system on the other.

[Baroness Kramer (LD) [V]]

My Lords, Germany has just announced €7 billion to drive forward a green hydrogen economy and France has just announced €8 billion to promote its electric car industry. By contrast, Boris Johnson reannounced just £40 million to create 3,000 green jobs. Why did the Prime Minister fail to commit the resources necessary for a green recovery from Covid? Can the Minister now commit to major new resources for energy conservation, especially home insulation, electric vehicles and a new hydrogen economy?

[Lord Callanan]

We are committing resources to all those issues. We are already investing up to £121 million in hydrogen innovation, supporting a range of projects exploring the potential of low-carbon hydrogen for use in heating and transport and the production of low-carbon hydrogen with CCUS and electrolysis technologies.

[Baroness Hooper (Con)]

My Lords, it is good to be back in the Chamber. Does my noble friend agree that all stimulus packages would benefit from a green sheen and that all the capital investment projects referred to by the Prime Minister—from schools to prisons to roads—could now take advantage of this opportunity to build a greener future? In this context, can he assure us that the British Overseas Territories, which contribute so much to our consequence in biodiversity terms, should not be forgotten when they apply for funding for environmental projects, especially as much of their previous green funding came from the European Union? Of course, many of these overseas territories could also contribute to the development of green finance, in which the City of London is leading the field.

[Lord Callanan]

I welcome my noble friend back to the Chamber. I agree with her that we are committed to building back better and greener. I am sure the overseas territories will have an important role to play in that, and of course we will consider requests for funding from them.

[Lord Ravensdale (CB) [V]]

My Lords, while the establishment of a Cabinet committee on climate change is welcome, we need to do more to embed climate consideration in policy-making across government and consider the systems nature of net-zero delivery. Will the Government consider establishing a cross-departmental body to oversee the delivery of net zero and mitigate the siloed thinking inherent in individual departmental responsibilities?

[Lord Callanan]

The noble Lord is correct: the net-zero challenge is fundamentally cross-cutting. That is why in the run-up to the COP 26 summit we will bring forward ambitious plans across key sectors of the economy, including an energy White Paper, a transport decarbonisation plan and a heat and building strategy. We need to avoid siloed thinking in government across these endeavours.

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

My noble friend Lord Snape drew attention to the fact that the Prime Minister’s recent speech made no mention of plans to insulate homes, although this was a £9.2 billion spending commitment in the Conservative manifesto. The Committee on Climate Change noted recently that retrofitting insulation would be the most effective measure in the race to get to zero carbon. Of course, as we have acknowledged in previous exchanges, this would be an excellent and inexpensive new job creator. Has the manifesto pledge been abandoned?

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[Lord Callanan]

We remain completely committed to taking all the necessary action to improve the energy efficiency of the UK’s buildings, delivering a UK economy that is stronger, cleaner, more sustainable and more resilient after the crisis.

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

I draw attention to my interests in sustainable development and renewables, as in the register. The Minister is aware that it is vastly more expensive to retrofit old homes than to build new ones to the right standards in the first place, but the new standards for homes—the elimination of gas, for example—will not come in until 2025. As part of the programme to get people back to work, would it not make sense to make sure that the homes we build are built to the highest standards in the first place and that those standards are brought forward using proven technologies, as some councils are already doing?

[Lord Callanan]

That is an important issue. We keep things such as the building regulations under constant review, but we need to proceed at a pace that the building industry can cope with and that consumers will accept.

[Lord Bilimoria (CB) [V]]

My Lords, we welcome the Prime Minister’s emphasis on promoting a green recovery in his “Build, build, build” speech. Will the Minister inform us whether the formation of the Green Investment Bank, launched in 2012 with £3 billion, was key to backing the offshore wind industry? It was sold to Macquarie in 2017. Will the Government form a new green investment bank? What about collaborating with countries such as India, which has set a target of 100 gigawatts of solar power by 2022 to lead the world in solar power? Should we partner with countries such as India?

[Lord Callanan]

The role of green finance is particularly important; it is one we are working closely on. The former Governor of the Bank of England is leading our efforts on that. Of course, we must partner with many other countries around the world. This is a global challenge and has to be addressed on a global level. India will play a crucial role, as will many other countries.

[The Deputy Speaker (Lord Russell of Liverpool) (CB)]

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

Contracts for Difference (Electricity Supplier Obligations) (Amendment) (Coronavirus) Regulations 2020

Lord Callanan Excerpts

Thursday 2nd July 2020 Lords Chamber

Moved by

[Lord Callanan]

That the draft Regulations laid before the House on 4 June be approved.

Relevant document: 18th 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, the aim of this draft instrument is to limit the negative short-term impact on electricity suppliers of an unexpected increase in the costs of the contracts for difference—CfD—scheme as a result of measures introduced to reduce the spread of the novel coronavirus. Before outlining the provisions, I will briefly provide some context for the benefit of your Lordships.

The CfD scheme is the Government’s main mechanism for supporting new renewable electricity generation projects in Great Britain. The CfD is a 15-year contract between a renewable generator and the Low Carbon Contracts Company—LCCC—a government-owned company that manages CfDs and is at arm’s length from the Government.

Contracts are awarded in a series of competitive auctions that determine the strike price in pounds per megawatt hour that the generator will be paid for the electricity produced. Generators receive revenue from selling their electricity into the market as usual. However, when the market reference price of electricity is below the strike price, generators receive a top-up payment for the additional amount. Similarly, at times when the reference price is above the strike price, the generator pays the LCCC.

The LCCC is the designated CfD counterparty under Section 7 of the Energy Act 2013, and as such it has a power to collect payments from licensed electricity suppliers through the CfD supplier obligation to enable it to make CfD top-up payments to generators. This obligation comprises a daily interim rate levy paid on each megawatt hour of electricity supplied, plus a total reserve amount paid in the form of a lump sum at the start of each quarter to cover uncertainty.

Both rates are set by the LCCC three months ahead of each quarter, based on the LCCC’s forecasts of CfD payments and electricity demand. At the end of each quarter, the LCCC carries out a reconciliation of the amount owed by suppliers, based on the actual payments made to generators and amounts received from suppliers. The LCCC advised BEIS that, because of measures introduced to reduce the spread of coronavirus, it was anticipating a shortfall in funds required to pay CfD generators in the second quarter of this year, from April to June.

The LCCC had observed a sharp fall in electricity demand across the quarter, of around 13%, as a result of the lockdown. This would have meant a significant reduction in the amount collected from suppliers under the interim rate levy. There was also a significant fall in the wholesale price of electricity, which would lead to increased payments to CfD generators of £18.6 million higher than forecast. The combined effect of these unanticipated changes is a forecast shortfall of £121 million between the amount owed to CfD generators and the amount collected from suppliers under the interim rate levy.

To address the shortfall, the LCCC was considering an increase of between 22% and 35% in the interim levy rate part-way through the second quarter of this year. This would have been the first time such action was needed. Electricity suppliers would have faced an unexpected increase in their obligations at short notice and at a time when they were facing significant other pressures. Therefore, in line with efforts to support the economy in the light of the Covid-19 national emergency, the Government agreed to provide a loan of up to £100 million to the LCCC so that it could continue to pay CfD generators during the current quarter without increasing the financial burden on suppliers. The loan is governed by a separate agreement between BEIS and the LCCC and is not covered in this instrument.

Following consultation, the Government also announced that they intended to make changes to regulations to enable the LCCC to defer collection of the additional obligations covered by the loan to the second quarter of 2021. If regulations were not changed, suppliers would face a higher lump-sum payment to the LCCC this month, following the quarterly reconciliation exercise. This draft instrument makes four technical changes to the existing Contracts for Difference (Electricity Supplier Obligations) Regulations 2014 to implement the deferral.

First, it reduces each electricity supplier’s obligation in a quarterly obligation period by the amount of the financial assistance provided by the Government to the LCCC for that purpose, multiplied by each supplier’s market share in that quarter. Secondly, it increases each electricity supplier’s obligation four quarters later by the amount of financial assistance previously provided to the LCCC, multiplied by the supplier’s market share in that later quarter. Thirdly, it enables the LCCC to take into account anticipated receipt or repayment of financial assistance provided by the Government when setting the obligation for a quarter. Finally, it enables the LCCC to repay any financial assistance provided by the Government using moneys collected from electricity suppliers after the reconciliation process following the relevant quarterly obligation period. This deferral will give suppliers more time to prepare for the increase in payments. It provides greater confidence over the level of additional costs that they will face in the second quarter of 2021, enabling suppliers to price future tariffs with minimum cost risk.

I stress that the Government are committed to upholding the self-financing nature of levies in the energy system. The loan to the LCCC and the arrangements for deferring repayment are therefore envisaged to be a one-off response to the current exceptional circumstances arising from Covid-19. However, the mechanism in this instrument is not time-limited and could be used again in the future, if required. This would enable the Government to intervene quickly to ensure that CfD generators can continue to be paid, and burdens on suppliers could be deferred, if a similar exceptional event arose in the future. These legislative changes need to be made ahead of the LCCC’s quarterly reconciliation process that determines suppliers’ obligations for quarter 2 of this year. This is expected to take place on 9 July. Therefore, subject to the will of Parliament, this instrument will enter into force the day after it is made, and I commend these regulations to the House.

--- Later in debate ---

[Lord Callanan]

I thank noble Lords for their valuable contributions to this debate. As so often, they have strayed far and wide on the general subject of renewable energy and government support, as well as addressing the individual points made in this particular instrument. Nevertheless, in an effort to be as helpful to the House as possible, I will address most, if not all, of the points that noble Lords have raised.

Coronavirus is the biggest challenge that the UK has faced in decades. During this turbulent time, the Prime Minister has said that we will take every step that we can to ensure businesses are protected and the economy remains strong. The Government have introduced an exceptional package of financial support for households and businesses to help them through these difficult times. This includes £330 billion-worth of loans and guarantees, tax deferrals, and a package of temporary welfare measures worth over £6.5 billion, including increases to universal credit, working tax credits and local housing allowances.

It was therefore important that the Government took action when the LCCC advised BEIS that, as a result of measures introduced to reduce the spread of coronavirus, suppliers would face a significant unexpected increase in their obligations for the second quarter of 2020. By providing the loan to the LCCC to cover the majority of these unanticipated and exceptional additional costs, and by deferring repayments by 12 months, the Government are ensuring that the impact on suppliers is minimised. It also provides them with greater confidence in the additional costs that they will face in quarter 2 of 2021, enabling them to price future tariffs with minimal cost risk. In addition to protecting suppliers at this time, it is essential that we maintain investor and generator confidence in the CfD scheme by ensuring that payments can be made to renewable generators. This will allow us to continue to deliver on our commitment to provide clean, affordable electricity for consumers.

I can tell the noble Baroness, Lady Jones, that the UK is a world leader in clean growth, with more than £94 billion having been invested in clean energy in the UK since 2010. In the first quarter of this year, the renewables share of total electricity generation was 47%, the highest quarterly value on record and exceeding the share of generation from gas. I am sure that she, as a Green, will welcome these figures. The success of the CfD scheme will be pivotal as we emerge from Covid-19 into a phase of renewed green recovery and economic growth on the path to net zero.

In response to the noble Lord, Lord Oates, I can say that, so far, the CfD scheme has awarded contracts for 16 gigawatts of new renewable energy capacity, including 13 gigawatts from offshore wind. It is also driving down the costs of renewable technologies: for example, offshore wind clearing prices have reduced by 65% since the first CfD allocation round, with projects now being delivered for as little as £39.65 per megawatt-hour of electricity generated. The Government have committed to providing up to £557 million for additional CfDs, giving the industry the certainty that it needs to invest in bringing forward new projects. On 2 March this year, the Government announced their intention to allow pot 1 technologies, including onshore wind and solar, to compete in the next CfD allocation round of 2021. This could provide even more jobs in the solar and onshore wind industries, in addition to the 12,100 already supported, and power millions more homes with clean energy by the end of the decade.

I will move on to some of the specific points raised in the debate. The noble Baroness, Lady Bowles, asked whether Ofgem would take the increased obligation into account when settling the price cap in August. Ofgem has the powers, timing and information necessary to ensure that the impacts of the changes to the supplier obligation provided for in this SI can be reflected in the price cap.

The noble Lords, Lord Grantchester and Lord Oates, and the noble Baronesses, Lady Bowles and Lady Jones, raised the impact on bills. The increase in suppliers’ obligations will be very small; we estimate that it will correspond to approximately 0.1% of a typical domestic annual bill. The precise amount will vary, depending on how much of the loan is used by the LCCC and on the evolution of bills over time.

The noble Baroness, Lady Jones, also renewed our long-standing debate about where we should fund the various schemes from: should it be from general taxation or from levies on bills? She knows my position on this, and I am sure we will continue to have that debate going forward.

The noble Baroness, Lady Bowles, and my noble friend Lord Naseby asked about the responses to the consultation. These have not been published, but the organisations that responded are listed in the Government’s response, and individual responses can be viewed on request. I can tell the House that the measures were broadly welcomed by both electricity suppliers and trade associations.

The noble Lords, Lord Foulkes, Lord German, Lord Kirkhope and Lord Grantchester, asked what similar exceptional circumstances would require these regulations to be used again. Obviously, by the very nature of exceptional circumstances, it is difficult for me to be precise—nobody could have predicted coronavirus —but this intervention can be used again in future if the effects of Covid-19 last longer than anticipated, or in the event of a similar national emergency, whatever that may be, and this will be decided by the Secretary of State on a case-by-case basis. I hesitate to say it, but perhaps it is a case of the noble Lords having to trust the Government on this one. But I can make the general point that we are committed to upholding the self-financing nature of levies in the energy system, and we will not intervene to alleviate normal fluctuations and variances in the LCCC’s forecasts.

My noble friend Lady McIntosh asked how the loan is being financed. It is being financed in a loan agreement between the LCCC and the Secretary of State, and it has been drawn in accordance with government accounting rules and is non-budget. However, as I said at the start, that is not actually the subject of this instrument.

The noble Lords, Lord Kirkhope and Lord Grantchester, asked whether we could be confident that it would be repaid in full by quarter 2 of 2021. We are confident that it will be repaid in full. If suppliers do not pay their obligations, the LCCC has enforcement powers to ensure that they pay. If suppliers go out of business and do not have the collateral available to pay the obligation, the LCCC can mutualise losses across remaining suppliers to repay the loan in full to my department.

I want to just correct slightly the figures quoted by the noble Lord, Lord Grantchester. I think we said that the shortfall in the LCCC was up to £121 million, but the loan provided by BEIS to alleviate that is up to £100 million; the LCCC will be financing the rest of the amount itself.

My noble friend Lord Naseby asked me about Northern Ireland, which is not currently covered by the CfD scheme. That was the choice it made; it is open for Northern Ireland to join the scheme in future if it wishes.

The noble Lord, Lord German, talked about Ofgem’s targeted charging review. Network charging is for Ofgem itself to determine as an independent regulator.

The noble Baroness, Lady Sheehan, asked about the Committee on Climate Change report. We will formally respond to that later this year, but the PM has set up a Cabinet committee focusing on climate change.

My noble friend Lord Holmes talked about Hinkley Point C, which is totally unrelated to this debate. Nevertheless, we remain committed to Hinkley Point C as the first new nuclear power station in a generation. We believe that we negotiated a competitive deal which ensures that we will pay for any construction overruns until the station starts generating.

I am running quickly out of time. The noble Lord, Lord Oates, talked about the potential impact on consumers. We said that it would probably be 0.1%, but of course it will depend on aggregate demand.

The noble Lord, Lord Grantchester, talked about the size of the loan; I have dealt with that. I have also dealt with the issue about exceptional circumstances.

In conclusion, the technical amendments to the supplier obligation mechanism in this SI, combined with the provision by government of a one-off loan, are intended to ease the burden on licensed electricity suppliers at a time of great financial stress due to Covid-19. I commend these draft regulations to the House and apologise if I have not dealt with any individual questions from noble Lords.

Motion agreed.

Electricity Capacity (Amendment etc.) (Coronavirus) Regulations 2020

Lord Callanan Excerpts

Thursday 2nd July 2020 Lords Chamber

Moved by

[Lord Callanan]

That the draft Regulations laid before the House on 4 June be approved.

Relevant document: 17th 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, before outlining the provisions made by this draft instrument, I will briefly provide some context for the benefit of noble Lords.

The capacity market is at the heart of the Government’s strategy for maintaining security of electricity supplies in Great Britain. It secures the capacity needed to meet future peak electricity demand under a range of scenarios through competitive, technology-neutral auctions normally held four years and one year ahead of the relevant delivery year. Those who win capacity agreements —known as capacity providers—commit to providing capacity during periods of system stress in exchange for receiving capacity payments. Capacity payments are funded by electricity suppliers, which recover this cost from consumers.

This draft instrument, together with capacity market rule changes, which have recently been laid, will ensure that the capacity market remains compliant with its state aid approval by giving effect to government commitments recorded in the state aid approval decision. It will also make temporary modifications to support capacity providers in the light of the effects of coronavirus.

I will now briefly outline the context of the capacity market’s state aid approval, before detailing the changes proposed in this SI. The Commission’s state aid approval of the capacity market in 2014 was annulled in November 2018 by a judgment of the General Court of the Court of Justice of the European Union. This introduced a standstill of normal operations of the capacity market until October 2019, when the European Commission completed its reinvestigation of the capacity market and granted state aid approval.

The Commission’s state aid approval in October 2019 recorded government commitments to make technical changes to the capacity market’s design to reflect recent market and regulatory developments, including reforms that my department had already identified through the statutory five-year review of the capacity market conducted in July 2019. Specifically, these draft regulations will reduce the minimum size of capacity which is permitted to compete in the capacity market from 2 megawatts to 1 megawatt. This aligns the capacity market with other domestic energy markets, making it easier for smaller providers, such as demand side response operators, to participate.

This draft instrument will also introduce the arrangements necessary to enable demand side response—DSR— operators, which provide capacity by reducing the import of electricity from the electricity grid, to compete for multiyear agreements if they can meet the relevant capital expenditure thresholds. This will bring arrangements for demand side response operators in line with generation and might encourage greater DSR participation in the capacity market.

The regulations seek to provide a legislative underpinning of the UK’s long-standing commitment to procure at least half of the capacity set aside for the one year ahead of delivery year auction. This is set aside when the target capacity for the auction four years ahead of delivery is set. This change will help provide some certainty around auction volumes and will assist market participants, particularly DSR operators.

Finally, the draft instrument seeks to revoke an exclusion in place since 2014 that prevents a small number of holders of long-term contracts for the provision of an electricity market balancing service—the short-term operating reserve, or STOR—competing in the capacity market. In 2014, STOR contracts were expected to pay out very high revenues, and, to prevent windfall profits, holders of these contracts were therefore excluded. However, since then the energy landscape has changed significantly and revenues from STOR contracts have been much lower than originally anticipated. Therefore, it is no longer appropriate to maintain this exclusion.

I turn to the temporary modifications that this draft instrument seeks to make in recognition of the fact that coronavirus has impacted the ability of capacity providers to meet some of their obligations under the capacity market. The approach that we are taking of making temporary easements is similar to that adopted to support capacity providers during the capacity market’s standstill period last year. This draft SI will support modifications to the capacity market rules to allow a capacity provider which is late in demonstrating that it is ready to deliver capacity in this current capacity market delivery year to access capacity payments that have been suspended if the requirements are met by a later, specified date.

As the disruptive effects of coronavirus might lead to more capacity providers facing termination of their agreements, the regulations will increase the time for capacity providers to issue appeal notices to terminate their agreements to the Secretary of State. It also seeks to provide the Secretary of State with greater discretion when considering appeals: either extending the time for capacity providers to comply with requirements to avoid termination or directing that agreements should be terminated, without a fee, on the grounds that non-compliance was due to exceptional circumstances arising from the effects of coronavirus. That will reduce the risk of terminating capacity agreements where this would have an overall detrimental impact on security of supply.

In conclusion, this draft instrument will ensure continued security of electricity supply by ensuring that the capacity market continues to comply with its state aid approval. It will also reduce the burdens on capacity providers during the coronavirus pandemic. Finally, these changes will maintain confidence in the market. I commend these draft regulations to the House.

--- Later in debate ---

[Lord Callanan]

I thank noble Lords once again for their valuable contributions to this debate. The capacity market has played, and continues to play, a key role in maintaining secure electricity supplies for consumers and businesses in Great Britain. The market is tried and tested, and it is working. It has secured the capacity we need to cope with unexpected peaks in demand until 2024 at prices far lower than expected.

As older, dirtier generating capacity has retired—we are now down to our last coal plant in the capacity market—over 10 gigawatts of new-build capacity has come forward to replace it, including renewables and smart technologies, in response to the noble Lord, Lord Oates, such as battery storage and demand-side response. I will take this opportunity to reply to the question from the noble Lord, Lord Mann, on coal. We remain committed to switching away from coal. It is our ambition to bring forward the date by which unabated coal must be phased out, which is currently 1 October 2024. The closure date for specific stations is a commercial matter, but we hope that they might even close ahead of 2024. We are committed to this switch. We have made changes to the capacity market rules to apply carbon emission limits to existing plant, which should prevent coal securing capacity agreements from 1 October 2024, in line with our ambition. As I said, we hope that they will close earlier.

It is essential that the design of the capacity market adapts to an ever-changing world if it is to continue delivering on its objectives of ensuring security of supply at least cost and supporting our decarbonisation plans. Recent changes include the introduction of carbon emission limits into the scheme, which will prevent the most carbon-intensive capacity competing in future auctions. The list of renewable technologies that can compete in the capacity market has also been expanded to include onshore and offshore wind and solar photovoltaic. These changes will directly support our wider efforts to decarbonise the energy sector.

The proposed changes contained in the instrument continue this trend of continual evolution and improvement of the capacity market. By ensuring that the capacity market continues to comply with its state aid approval, the instrument will ensure the continued operation of the scheme and engender confidence among market participants. Many of the changes contained in the instrument, such as the reduction in the minimum capacity threshold from two megawatts to one megawatt and enabling demand-side response to access multiyear capacity agreements, are in line with the reforms identified in my department’s five-year review of the capacity market, published in July 2019, and aimed at better facilitating the participation of demand-side responses in future auctions.

That brings me to the various questions asked by noble Lords, in particular the Liberal Democrats, who never fail to disappoint in these matters. Actually, though, they posed exactly the question I asked when these regulations were first put in front of me: why are we complying with these commitments if the UK is leaving the European Union? It is indeed a very good question. The noble Lords, Lord Purvis, Lord Oates and Lord Mann, and my noble friends Lady McIntosh and Lord Moynihan all raised similar points.

These commitments are consistent with the domestic policy for the capacity market set out in our five-year review, which my department published in July 2019—in other words, we would have moved to implement them anyway, regardless of our obligations as a member state. We are currently in the transition period as set out in the withdrawal agreement, with which we are all so familiar, so European law continues to apply to the UK until the end of the year. We will then be able to implement our own state aid regime. We are working at pace to develop this policy and will share more details on domestic subsidy control with key stakeholders in due course.

We believe strongly that we must retain our sovereign right when deciding how and when to spend taxpayers’ money to intervene in markets to support business, workers and consumers. The UK’s subsidy control regime will not involve any alignment with EU rules. I realise that is a challenge for the Liberal Democrats, but they will be able to continue to contribute to these debates. We will have our own debates in our own Parliament about what our domestic state aid regime should be, which I think is a good thing.

The noble Lord, Lord Campbell-Savours, and the noble Baroness, Lady Sheehan, talked about interconnectors. We continue to believe that interconnectors make a valuable contribution to the UK’s security of supply, while increasing competition and diversifying our electricity mix. Many of our interconnected markets have a high penetration of renewables and low-carbon electricity; much of the electricity imported into the UK through interconnectors from France is zero-carbon nuclear-generated electricity.

My noble friend Lord Moynihan asked why the state aid commitments are not in the regulations. We have laid out the capacity market rules, which complete the implementation of the majority of the commitments, including the introduction of carbon emissions limits. The final commitment on enabling foreign participation does not need to be introduced now. We will consider further arrangements and consult in due course.

The noble Lords, Lord Purvis and Lord Oates, continue their obsession with the European Union—I am joking, obviously—and ask about participation in the internal energy market. We will not be seeking alignment with EU law. The UK will make independent decisions on our energy policies, and will be leaving the internal energy markets. I am sure they are thrilled to hear that.

The noble Lord, Lord Campbell-Savours, asked why we are not doing more to support pumped hydro. In 2019 we published our five-year review of the capacity market, which noted that some new-build pumped hydropower storage projects have very long construction times that may make participation in the capacity market difficult. Therefore, we are exploring options for addressing this issue. I agree with my noble friend Lord Moynihan that natural gas should continue to play a part in the overall energy mix.

Many noble Lords raised important points about the energy policy in general; they will be aware that we are currently working on an energy White Paper, which will be the best forum for considering the range of challenges faced by the electricity sector as we move towards delivering net zero. This White Paper remains a priority for the Government and will be published soon.

My noble friend Lady McIntosh asked about long-term store contract holders who might not being able to compete. We believe that there is no longer a risk of windfall profits for providers holding both capacity markets agreements and long-term store contracts, and therefore no reason to continue excluding them from the market. Allowing them to be included could increase competition.

The noble Baroness, Lady Sheehan, and the noble Lord, Lord Oates, asked about energy efficiency and supporting continued energy efficiency in homes. We are publishing a home heat review later this year. We are committed to our clean growth strategy aspiration that as many homes be upgraded to energy performance certificate band C by 2035 as is practical, cost-effective and affordable. Furthermore, this draft instrument ensures that the capacity market adapts quickly to address the effects of coronavirus on existing capacity providers by proposing targeted and temporary measures where coronavirus has impacted the ability of capacity providers to meet some of their obligations under the capacity market.

In summary, this draft instrument is necessary to ensure the continued security of electricity supply, by ensuring that the capacity market continues to comply with state aid approval, and by supporting capacity providers during the coronavirus pandemic. I commend it to the House.

Motion agreed.

Committee on Climate Change: Progress Report

Lord Callanan Excerpts

Wednesday 1st July 2020 Lords Chamber

[Baroness Hayman (CB) [V]]

My Lords, I beg leave to ask the Question in my name on the Order Paper and declare 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 Government welcome the committee’s comprehensive and wide-ranging report and agree with it that tackling climate change should be at the heart of our economic recovery. The actions we need to take to achieve our world-leading net-zero target can help to deliver a stronger, cleaner and more resilient United Kingdom following this pandemic. The Government will publish their full response to the CCC by 15 October, as required by the Climate Change Act.

[Baroness Hayman [V]]

I am grateful to the Minister for that response. As he knows, the report concludes that steps the UK has taken in the past year

“do not yet measure up to meet the size of the Net Zero challenge”

and calls for urgent, concerted and cross-government action in the run-up to COP 26 next year. It also, as he says, sets out how economic stimulus measures to recover from the present global catastrophe of Covid-19 can contribute to averting the impending, even greater global catastrophe of unmitigated climate change. Will Her Majesty’s Government therefore commit to a comprehensive policy of creating sustainable jobs and infrastructure across the UK, including in low-carbon power and heating, decarbonising transport and improvements in broadband connectivity?

[Lord Callanan]

The noble Baroness makes some very powerful points. As I said, we will respond formally to the committee in October, but the Prime Minister set out yesterday a number of measures that we will be taking. He said that we will build back better, we will build back greener and we will build back faster. The committee has made a number of recommendations in all the areas she covers, listed by specific government department, and we will respond in due course.

[Lord Oates (LD) [V]]

Can the Minister tell the House whether the new homes that will be built under the initiatives announced by the Prime Minister yesterday will be zero-carbon homes? If not, can he explain why the Government are ignoring the clear recommendations of the climate change committee and undermining their own net-zero target?

[Lord Callanan]

We are not ignoring the recommendations of the committee. As I said, we will respond in due course, but the noble Lord makes an important point about the importance of getting carbon out of new homebuilding. We will be publishing a heat and building strategy in due course.

[Baroness Altmann (Con) [V]]

My Lords, I welcome the positive progress on a new climate risk disclosure framework for pension trustees under the Pension Schemes Bill. I ask my noble friend whether the Government will build on this positive progress by introducing a comprehensive, long-term road map, with a timetable, for the investment sector to align investments with our net-zero targets?

[Lord Callanan]

My noble friend has considerable expertise in this field and I thank her for all her contributions on the Pension Schemes Bill. She rightly pointed out that the Department for Work and Pensions is taking powers to introduce mandatory climate financial disclosure for all occupational pension schemes. Of course, we are not stopping at pension schemes, and last year’s green finance strategy made it clear that we want all listed companies and large asset-owners disclosing in line with the task force on climate-related financial disclosures by 2022.

[Baroness Boycott (CB) [V]]

My Lords, it is terrific that we have a clear net-zero target, but if we are to show leadership in the run-up to COP 26, we must ensure that the UK is measuring its own emissions properly. Will the Government respond to the Committee on Climate Change’s recommendation to include aviation and shipping in our UK climate targets when the sixth carbon budget is set? Will they develop urgent net-zero plans for those challenging sectors?

[Lord Callanan]

Yes, of course we will respond to the committee’s recommendations. The noble Baroness is quite right to point out the importance of getting the metrics right and making sure that we are being assessed against the right targets.

[Lord Grantchester (Lab) [V]]

A key challenge contained in this excellent report is to decarbonise heat and reduce demand through home efficiency measures. What plans and discussions has the Minister had with his colleagues in the Treasury to ensure that households and businesses installing energy-efficient and low-carbon heating are materially better off, in addition to reducing their emissions?

[Lord Callanan]

The Chancellor will be setting out our financial policies in this area when he makes his Statement but, as I said in an earlier answer, we will be publishing a heat and building strategy in due course, which will address many of these issues. The noble Lord’s point is well made.

[Baroness Walmsley (LD) [V]]

My Lords, in its Future Support for Low Carbon Heat consultation, BEIS acknowledges the significant role that heat pump technology will play. Why, then, is the support proposed for heat pump technology restricted to 45 kilowatts, and therefore small-scale domestic settings, cutting out even those currently deployed or planned for supermarkets, schools, universities and businesses? If we are to build back greener, is not this technology worthy of support?

[Lord Callanan]

I very much agree with the noble Baroness that heat pump technology requires support. In line with our commitment to achieving net-zero carbon emissions, we consider the role of heat pumps in driving down emissions extremely important. This includes large-scale heat pumps. We have the clean heat grant, designed as part of a wider package of measures to support the decarbonisation of heat. The focus of the scheme is on supporting the supply chains that will be needed to phase out the installation of high-carbon fossil fuels in heating and take it off the gas grid.

[Baroness Young of Old Scone (Lab) [V]]

I take forward the question asked by the noble Lord, Lord Oates, about zero-carbon housing. Can the Minister assure the House that all of the recovery schemes announced by the Prime Minister yesterday will be subject to a net-zero carbon test and a biodiversity recovery test to ensure that we do not lurch from the Covid crisis immediately to the climate change and biodiversity crisis?

[Lord Callanan]

The noble Baroness makes an important point and, as I said to the noble Lord, Lord Oates, we will be setting out our plans, publishing a heat and building strategy in due course. We will take these important points on board.

[Lord Lilley (Con) [V]]

My Lords, I refer to my interests in the register. Does my noble friend agree that this recession is caused by suppressing supply, not by insufficient demand, so we need to rebuild the supply of goods and services as rapidly as possible across the board? If we limit growth, as the CCC advises, to activities complying with green criteria, we will recover less rapidly than otherwise. If we invest in activities which absorb more resources than they produce—that is, those needing subsidy—we will not increase net supply. Will he treat with a pinch of salt demands by the CCC and others, which use the Covid crisis as an excuse to turn the hose of subsidies in their direction?

[Lord Callanan]

As we recover from Covid-19, we certainly want to deliver a UK economy which is cleaner, stronger, more sustainable and more resilient. Covid-19 has been a powerful reminder of the UK’s vulnerability to systemic risks. Fortunately, job creation and a clean, resilient recovery can be mutually reinforcing, and meeting net zero and our other environmental goals can create employment and economic opportunities.

[Lord Krebs (CB) [V]]

My Lords, I refer to my interests in the register. Yesterday, the Met Office published a new study that concludes that, under some scenarios, temperatures of 40 degrees Celsius could occur regularly by the end of the century. Can the Minister tell us, now or in writing, what proportion of buildings in the UK are designed to cope with those temperatures and whether all new buildings, including homes, schools and hospitals, will be built to cope with extreme heat?

[Lord Callanan]

As I said in an earlier answer, we will set out our plans for a heat and building strategy in due course, but I would be happy to respond in writing to the noble Lord’s detailed question about the proportion required.

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

My Lords, the independent Committee on Climate Change report very much focuses on the fact that territorial emissions have been counted but consumption emissions have not. In fact, it says that

“89% of the emissions associated with the UK’s demand for manufactured products”

are emitted outside the UK. Will the Government shift toward seeing how we can cut those consumption emissions? Also, given that we know we will see a great deal of onshoring in the light of Covid-19—indeed, we heard discussion about this during the earlier Oral Question on China and supply chains—what steps will be taken to ensure that onshoring of manufacturing occurs in a way that produces the lowest possible amounts of carbon?

[Lord Callanan]

The noble Baroness makes an important point. She is of course right to point out that reducing our emissions in this country is fine but, if we just import emissions from other countries, we will have achieved nothing. That is why we have an ambitious outreach and diplomacy strategy to persuade other countries to follow our lead. As the noble Baroness will know, we have the most optimistic and far-reaching targets in the western world. She is right: we must make sure that, as the Prime Minister said yesterday, we build back greener and build back better.

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

My Lords, all supplementary questions have been asked. That concludes the Hybrid Proceedings on Oral Questions.

Competition and Markets Authority

Lord Callanan Excerpts

Thursday 25th June 2020 Lords Chamber

[Lord Berkeley]

To ask Her Majesty’s Government what plans they have to ensure that the interests of (1) consumers, and (2) businesses, in the United Kingdom, are independently and fairly looked after following the resignation of the Chairman of the Competition and Markets Authority.

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

My Lords, the Government are committed to ensuring that markets work well for consumers and businesses and have already ensured that the Competition and Markets Authority has significant powers to investigate and act if it finds that companies are behaving anti-competitively in a market. The CMA will continue to carry out its important functions. We will announce next steps on recruitment for a new chair in due course.

[Lord Berkeley (Lab) [V]]

My Lords, I thank the Minister for that Answer. Does he agree that, for the CMA to do its job properly and enable business to plan in relation to Brexit, the Government must have a robust, updated and properly structured competition policy? I heard what he said, but how will this be achieved? On the latest information I have, the CMA responded with a comprehensive plan on 21 February 2019. Since then, there has been nothing until a letter to the chair of the EU Select Committee arrived at 11.02 this morning; I declare an interest as a member of its sub-committee. Will the Government urgently introduce legislation on competition policies to support consumers in the UK and UK business?

--- Later in debate ---

[Lord Callanan]

We committed in our manifesto to tackle consumer rip-offs and bad business practices. The issues that the noble Lord, Lord Tyrie, set out in the CMA’s letter have helped shape public debate as well as informing government action. For instance, he said that consideration should be given to how to capture the benefits for competition and consumer welfare of the growth in the digital economy. We agree and have set up smart data proposals that we look forward to implementing.

[Lord Desai (Lab) [V]]

My Lords, through the 100 days of Covid we have heard many complaints from consumers who have not been refunded for cancelled trips and cancelled products by the sellers; they have had no recourse. It is a serious situation that the Government ought to look into. If the Government are to make the UK globally competitive after Brexit, as they have promised, it is very important that they adopt a competition policy in line with the latest research in economics. I think they need an economist to head that authority, but the noble Lord, Lord Tyrie, will be difficult to replace.

[Lord Callanan]

I agree that we need a robust competition regime in the UK. That is what we have; the CMA has already announced reviews into many of the practices that the noble Lord highlighted, taking action against profiteering from some pharmaceutical companies, for example. We will not hesitate to take further measures if required.

[Baroness Kramer (LD) [V]]

My Lords, on the Parliamentary Commission on Banking Standards I saw the determination of the noble Lord, Lord Tyrie, to protect ordinary people and businesses from abuses of power in the financial sector. Frankly, if he says that more powers are needed, then more powers are needed. We currently face the dominance of big tech, rip-offs related to Covid, and deregulation following Brexit. Will the Government, instead of being so complacent, urgently implement his proposed reforms to make sure that the consumer, at the very least, has a powerful champion with powerful teeth? If not, we will have a very angry and abused public.

[Lord Callanan]

We are taking action on these matters. We asked the CMA to lead two critical pieces of work: to report on the state of competition, and to set up the digital markets taskforce. The CMA remains one of the world-leading competition authorities. If necessary, we will build on that.

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

Following on from the Furman report, does my noble friend agree that government regulation around those digital platforms should be implemented as soon as possible? Can he give any indication when that might happen?

[Lord Callanan]

We accepted the recommendations of the Furman report in the Budget earlier this year. We are considering what further steps need to be taken.

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

My Lords, following on from the noble Lord, Lord Randall, does the Minister accept that on consumer welfare it is difficult for us to have confidence in his reassurances? When the Government announced this digital markets taskforce a few months ago, they said that

“any future interventions must strike the right balance between promoting competition and innovation on the one hand and avoiding disproportionate burdens on business on the other”.

There was no mention of consumer welfare interests. It is difficult to see how we will make progress on that front, which is what most people worry about when they think of digital market abuse.

[Lord Callanan]

Consumers are best served by free and open competition, appropriately regulated, between businesses. The welfare of consumers is always at the forefront of our thoughts on this.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, the Minister rightly says that consumers depend on fair competition. The outgoing chair has said that the powers of that competition body are not sufficient. He recommended increased powers, and the then Government were very responsive. The Minister has today refused to build on that and say that they will give it new powers. I ask him again: will the Government implement the call for new powers and commit themselves to the absolute independence of the new chair of the CMA?

[Lord Callanan]

On that final point, we will of course run a full and open competition process. We will appoint the best person for the job. We committed in our manifesto to tackle consumer rip-offs and bad business practice. Where we need to give the CMA new powers, we will look at that, but it already has extensive powers, as proven by the cases it is currently pursuing. It is one of the leading regulators in the world and, as I said, we will look at giving it additional powers if necessary.

[Lord Clement-Jones (LD) [V]]

My Lords, the noble Lord, Lord Tyrie, and Professor Furman have clearly spelled out the challenges of the digital age. I heard what the Minister said on this, but do the Government intend to address these issues or will they continue to allow big tech to rampage across our economy in digital markets such as social media, e-commerce, search and online advertising? Will the Government set out their proposals any time soon?

[Lord Callanan]

The regulation of digital e-commerce is extremely important. As I have said, the CMA has set up the digital markets taskforce to study these matters, but they are complicated. This country has one of the best competitive markets in the world and digital markets are an increasingly important part of that. We will look at what further measures need to be taken.

[Baroness Crawley (Lab) [V]]

My Lords, given the unprecedented pressures on consumers from both Covid-19 and the prospect of leaving EU markets at the end of the transition period, will the Government prioritise the CMA’s reforms as set out under its very effective chair, the noble Lord, Lord Tyrie? When will a date be announced for a new competition and consumer protection Bill, as suggested by my noble friend Lord Berkeley?

[Lord Callanan]

I will correct the noble Baroness: we will not leave EU markets at the end of the transition period. We seek in the negotiations to ensure continued access to those markets and for EU companies to have access to UK markets. That is the whole point of the negotiation. We keep all these matters under constant review. We will build on the powers of the CMA if that is required for what consumers need.

[Lord Moynihan (Con) [V]]

My Lords, does my noble friend accept that if the Government are to continue to prioritise consumer protection, they urgently need to address the necessity of strengthening the CMA and legislation to protect consumers, as stated across the Chamber today?

[Lord Callanan]

At the risk of repeating myself, of course we keep these matters under constant review. We will see the outcome of the Digital Markets Taskforce that the CMA is currently involved in and, if necessary, we will take further action.

[The Deputy Speaker (The Earl of Kinnoull) (Non-Afl)]

The noble Lord, Lord Rogan, is not available, so we will go straight to the noble Lord, Lord Hain.

[Lord Hain (Lab) [V]]

My Lords, surely the noble Lord, Lord Tyrie, standing down is a devastating indictment of the unwillingness of Tory Ministers to permit him to do his job properly, as well as the Government’s subservience to vast vested interests and the immense power of digital platforms at the expense of customers and competition. The Covid pandemic means that there will be lots of business casualties, allowing national and especially local monopolies to trample over customers. I am sorry, but the Minister is not coming clean with us; the noble Lord, Lord Tyrie, is both honourable and highly capable: will he tell us straight, please, why Ministers have been so shamefully subservient to tycoons, plutocrats and dodgy dealers that he, an eminent fellow Tory, has been forced to resign from a job he wanted to do properly?

[Lord Callanan]

Well, characteristically the noble Lord has a great grasp of hyperbole, but I do not think that he is fairly characterising the situation here. It is a complicated area of detailed policy. We have an excellent competition regime in this country, the CMA is a highly regarded regulator and, as I said, we will consider giving it additional powers to protect consumer and business interests if that is required.

[The Deputy Speaker]

My Lords, all the supplementary questions have been asked. Therefore, that concludes the hybrid proceedings on these Oral Questions.

Corporate Insolvency and Governance Bill

Lord Callanan Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 23rd June 2020 Lords Chamber

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

My Lords, this has been a very good debate and I thank all those who have contributed. In a sense, the debate around this group of amendments reflects the problem that we have had with the Bill. The Government, rightly, want to progress and to press ahead, but the issues that we are covering are of such substance that they vastly outstrip the time that has been made available for us to do it—hence our needing the Minister to address at the Dispatch Box a wide range of points before many of us can decide how we will deal with our amendments.

The noble and learned Lord, Lord Hope, and the noble Baroness, Lady McIntosh of Pickering, asked about the exchange of letters over the simple question about whether a list of creditors should be provided. The noble Lord, Lord Leigh, and the noble Viscount, Lord Trenchard, asked a justifiable question about whether rescuing a business is the same as rescuing the company, given that in many cases the business is the important issue, particularly when it is linked to the jobs that would be involved. Does the Bill adequately deal with that?

My noble friends Lady Drake and Lady Warwick want to know from the Minister directly at the Dispatch Box whether Amendment 80 goes far enough to recognise the gaming and perverse behaviours that will inevitably follow the moratorium arrangements. In addition to that, my noble friend Lady Warwick specifically asked about the issue of super-priority for financial funds in relation to defined-benefit pensions. Will the Government, with their power, stay alert to the dangers? We need to know.

The noble Baroness, Lady Bowles, made a persuasive case about the way in which the breathing space set up by the moratorium would effectively be destroyed by accelerated payments, and the following speaker, the noble Baroness, Lady Kramer, made that point exactly by explaining why gaming is natural, or even appropriate, behaviour for banks and other lenders, which of course have to maximise the return they are likely to get. If that is inevitable, are the measures in the Bill sufficient? Will the Minister do what he can to reassure us about that? And the noble Lord, Lord Hodgson, whose extensive experience and anecdotes flowed through his speech, rightly raised the Pepper v Hart concern and the issues that will come through in future legislation in relation to what has been said today.

I suppose what I am getting at is that it would have been better if we had had proper amendments and time to debate them in individual groups—not all clumped together in different areas—and did not have to rely on the Minister’s very difficult task of covering all the points raised in today’s hour and a quarter of debate and being convincing about how the words that appear in the Bill, and in the Act when it is published, will be sufficient. However, we are where we are and we need to make progress.

Amendment 75 may be a rather modest issue, as has been said, but it is important in itself as well as for what it might say about the future. I thank the noble Lords, Lord Kerslake and Lord Fox, and the noble Baroness, Lady Altmann, for supporting me in this amendment, and I thank my noble friends Lady Bryan of Partick, Lord Hendy, Lord Hain, Lord Adonis and others for speaking in support. At heart, the amendment seeks to recognise that workers in a company care about its future and, like all other stakeholders, should be informed about what is going on. It supports the view that in a crisis situation all those who work in a company are in it together, and employees may have as much at stake as others who have a financial stake in the company. It also makes the point that those who work in the company in the round, or in the business that the company is carrying out, can and should make a contribution to save it if it is in crisis. Only good can come from a proper process of engagement, information exchange and an exchange of ideas.

I recognise that in a moratorium situation speed may be of the essence. Any arrangements set up that would slow that down also carry the risk that information will be fed out into the public, and that may promote creditor action. We must guard against that but, on the other hand, we should also aim to bring everyone together, not to split off certain groups who, as I hope to argue, could contribute. However, and I wait to hear the Minister deal with this issue when he comes to the Dispatch Box, there may be other ways of dealing with this—measures that could perhaps take into account evidence gained as we go forward. As we discovered in Committee, there may indeed be other issues that need to be wrapped into this first step—the beginnings, perhaps, of a movement to rebalance the relationship between employers and employees and to promote collective bargaining. This may not have been the right amendment or even the right Bill for that approach, but maybe this can be the first step on that journey.

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

My Lords, I thank everyone who has contributed to this excellent debate. The noble Lord, Lord Stevenson, correctly characterised this as a number of different subjects loosely grouped together under the heading of moratorium provisions, and I gladly accept his challenge to try to satisfy the House and deal with all the points that have been raised.

First, to start at the beginning, Amendment 1 was moved by the noble and learned Lord, Lord Hope of Craighead. I thank him for his letter following Committee; as I conveyed in my response to him, I confirm that a copy of that has been placed in the House Library. I agree with him that the monitor needs the details of the company’s creditors at an early stage to enable the monitor to comply with their duty to notify the creditors. I also confirm to him that I agree with the explanation that he provided in his speech. We have recently published draft guidance for monitors that would include that the proposed monitor is expected to ascertain the assets, liabilities and ongoing financial commitments of the company when judging its likelihood of rescue, and that would of course include details of creditors.

I turn to the amendments tabled by my noble friends Lord Leigh of Hurley and Lord Trenchard. I thank them for raising these issues and tabling the amendments, which I know derive from their enormous experience in this area. I wrote to my noble friend Lord Leigh on 17 June. I hope he received a copy of that letter; if he did not, I apologise and will gladly give him another copy. The amendments seek to expand the focus of the moratorium from the rescue of the company to the rescue of the company’s businesses or parts of that business. I am grateful to them, particularly my noble friend Lord Leigh, for taking the time to meet me and officials to discuss that with his various restructuring experts and for them to highlight their concerns to us. In response to my noble friend Lord Trenchard, the moratorium is intended as a company rescue procedure upstream of a formal insolvency procedure. If a pre-pack is the settled intention of the company and its adviser, the moratorium is clearly not for them.

It has long been the Government’s policy that the new moratorium be built around a company in financial difficulty—that is, companies having access to a breathing space before such time as the company itself is beyond rescue. For that reason, the statements made by the monitor on entry to the moratorium and, similarly, the requirements at extension and termination of the moratorium are indeed focused on the rescue of the corporate vehicle. This policy was widely consulted on and received significant support. However, I recognise the point made by my noble friends that the amendment is supported by some rescue professionals working in that field. Still, I reassure them today by telling them that we will be monitoring the operation of the moratorium closely once the Bill comes into force, and we will not hesitate to take action if that is required.

I turn to Amendments 13 and 14, tabled by the noble Baronesses, Lady Drake and Lady Bowles, which seek to change how financial services debts are treated in a moratorium. This is a complicated area so I hope the House will bear with me. The Government want to avoid lenders exercising their rights to accelerate their pre-moratorium debt, thereby potentially gaming the system through a moratorium. That is why amendments have been tabled in my name, and I will talk more about them later, to exclude financial services’ pre-moratorium debts from super-priority or protection from compromise where the debt has been accelerated during the relevant period. The amendments in my name do not prevent a financial services creditor exercising a termination or acceleration clause; nor do they remove the requirement that if the accelerated debt is not paid then the monitor must bring the moratorium to an end. These are important provisions that will encourage lending to companies in difficulty and support the operation and stability of financial markets. The Government want to encourage financial services firms to keep lending to companies in distress. Including debts to these firms in the payment holiday concept could disincentivise them from doing so. That could leave some companies in a moratorium without the finance that they need to recover. In other words, it could jeopardise the very purpose of the moratorium in the first place.

In addition, we have excluded certain financial services contracts from the prohibition of termination clauses. This is vital to ensure that financial markets continue to operate as they do now. To not exclude these contracts could carry wide-reaching, systemic risks to market stability, as market participants could find their transactions suddenly terminated. Legal certainty over how transactions will be treated is vital to the operation of these markets. I appreciate that many noble Lords have raised concerns about this matter, but I hope that the amendments tabled in my name will allay at least some of their concerns. I will talk in a little more detail about those amendments shortly.

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[Lord Fox]

In reference to Amendment 75, the Minister talked about the danger of employees leaking the state of the business. In my experience of acquisitions and disposals in continental Europe, where the pre-briefing of employees is legally required, there has never been an issue with employees leaking the information. The leaks have only ever come from advisers, usually banks. What grounds does the Minister have for making that statement?

[Lord Callanan]

I do not think that I used the word “leaking”. We want the moratorium to be a light-touch procedure with the minimum level of bureaucracy. Of course, it goes without saying that any information being disclosed from whatever source of a company’s intention to go into this procedure could have serious adverse consequences if certain creditors seek to pre-empt the operation of the moratorium. However, we have built concessions into this part of the Bill. I hope noble Lords will be able to accept them. I take on board the noble Lord’s points, although I did not use those words.

[Lord Hope of Craighead [V]]

I am very grateful to those noble Lords who spoke in support of my Amendment 1. I am grateful to the Minister as well for giving me the two assurances which I sought when I introduced the amendment.

I feel that there was a note of some disappoint from some noble Lords that I would not press the amendment, so I will explain very shortly why I took that decision. The letter that was circulated—I am grateful to those responsible for doing that—sets out in some considerable detail the various points which one needs to bear in mind as background to the wording of the Bill. It does, of course, require one to give rather more weight to the guidance than what one finds in the Bill’s wording, which I said was somewhat weak, but I am prepared to accept that guidance and test the matter against the point which the Minister made in Committee that adding a burden on to the directors of the company when a company needs to enter into the procedure as quickly as possible would be undesirable if to do so would be unnecessary.

That really is the essence of the point I asked myself: am I satisfied, in view of what the Minister said in his letter, that the burden would indeed be unnecessary? In the end, the answer to that question was yes. For these reasons—and I express my gratitude again to the Minister for his helpful letter—I beg leave to withdraw the amendment.

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Moved by

[Lord Callanan]

4: Clause 1, page 4, line 23, at end insert—
“(c) in a case where the company is or has been an employer in respect of an occupational pension scheme that is not a money purchase scheme, the Pensions Regulator, and(d) in a case where the company is an employer in respect of such a pension scheme that is an eligible scheme within the meaning given by section 126 of the Pensions Act 2004, the Board of the Pension Protection Fund.”Member’s explanatory statement
This amendment extends the monitor’s duty to give notice that a moratorium has come into force.

[The Deputy Speaker]

I remind noble Lords that Members other than the mover of an amendment and the Minister may speak only once and that short questions of elucidation are discouraged. Anyone wishing to press this or any other amendment in the group to a Division should make that clear in the debate.

[Lord Callanan]

My Lords, the amendments in my name make provisions relating to pension schemes in the moratorium and the restructuring plan. Although the moratorium is not an opportunity for employers to walk away from their liabilities, it may become the point at which preparations for and discussions about a restructuring proposal begin. Where the pension scheme would be a large unsecured creditor in any insolvency, should the employer ultimately fail, restructurings can have a significant and immediate impact on the expected outcome of the scheme.

There is the possibility that the company may seek to reschedule payments to provide working capital to give time to shore up its operations. This might result in lower payments to the scheme for a period of time. A rescue may also involve certain other creditors, such as new lenders providing rescue finance, taking security over company assets. This would mean that there would be less available for other creditors, including the scheme, in the event that any such rescue ultimately failed.

Some insolvency procedures are designated as “insolvency events” under existing pensions legislation. One effect of such designation is that the Pension Protection Fund has a statutory role to play, acting as a creditor in place of the trustees of eligible schemes. However, the new procedures are different. They are not qualifying insolvency events, as they are focused entirely on giving the company every opportunity to achieve a rescue as a going concern. This would be the best outcome for a pension scheme: moving forward with the support of its newly rescued sponsoring employer.

Nevertheless, there is concern that these procedures could result in the pension scheme being disadvantaged as an unsecured creditor of the company. The PPF, as the provider of protection for members of eligible schemes in specified circumstances, could potentially face a greater loss. An example of this would be if the company subsequently fails and the scheme falls into the PPF with a larger deficit than it originally had.

Consequently, it is agreed that there is a need to build in specific protections. These focus on the interests of the scheme and its members, and the interests of the PPF and its levy payers. This would be by ensuring that the PPF has a seat at the table in any restructuring proposal and that its voice is heard. After all, it is the statutory compensation scheme for members of eligible defined benefit schemes, and ultimately bears the risk for the scheme should the company subsequently fail.

The challenge has therefore been to strike the right balance between the interests of the trustees, the board of the Pension Protection Fund, the company and its creditors. Taken together, these amendments achieve this balance. They provide for both the PPF and the Pensions Regulator to get appropriate information in the case of both a moratorium and a restructuring plan. The regulation-making power will allow the Secretary of State to provide for the board of the PPF to act in the place of the trustees of the scheme as a creditor in certain circumstances. The board of the PPF and the Pensions Regulator will have the right to the same information as creditors, concerning the start and end point of a moratorium and any change in the monitor, in specified circumstances. The board of the PPF will have the same rights as trustees to challenge in court the monitor’s or director’s actions in specified situations where the interests of the trustees as a creditor are considered to be unfairly harmed by those actions.

Where a restructuring plan is proposed and the company is a sponsoring employer, provision is made for the board of the PPF and the Pensions Regulator to receive the same information sent to creditors, in specified circumstances. This means that they are informed that a proposal has been made and they can then consider what action, if any, to take.

In respect of both the moratorium and the restructuring plan, where the trustees of a PPF-eligible scheme are a creditor of the company concerned, the proposed amendments provide a regulation-making power. This power will give the board of the PPF the ability to exercise the creditor rights of the trustees; again, in appropriate circumstances. These rights include attending the creditors’ meeting, voting on the restructuring plan and making representations to the court. The powers are drafted to allow an appropriate balance between the trustees and the Pension Protection Fund’s interests by allowing creditor rights to be exercised concurrently where appropriate. Conditions can also be placed on the exercise of any rights given to the board of the PPF.

Restructuring will always involve trade-offs. Employees will be concerned that the rescue ensures that their jobs are secure, but at the same time they will be interested in the impact on the company pension scheme if they are a member. The changes tabled in my name have balanced the interests of employees and scheme members with those of a company and its creditors, giving them all the best chance for survival, in our view. I beg to move.

[Baroness Bowles of Berkhamsted [V]]

My Lords, I welcome the amendments tabled by the Government to address the position of the Pension Protection Fund and the Pensions Regulator where there is a relevant scheme. The amendments give them the right to be notified of moratorium events and give the Pension Protection Fund rights to challenge the monitor or directors, vote as a creditor and make representations to the court.

An amendment on the issue that remains unaddressed was originally tabled in Committee by the noble Baroness, Lady Altmann; we have tabled one on Report with her support. The noble Baroness, with her great experience in pensions, will speak next.

Amendment 15 concerns the status of pledged assets and whether the court can give permission for their disposal without the Pension Protection Fund’s permission. In the absence of an amendment, those assets are not protected, which unravels the basis on which settlements over funding and deficits are made with trustees.

The effect of that is twofold: the actual disposal of the assets, which may be unfavourable to the pension scheme; and, even without any of that happening, the fact that such a possibility exists raises doubts about the numerous pledges that underpin contribution agreements. It is far from desirable to have to revisit them but, without any assurance, it would seem necessary for trustees to think about that and seek more cash funding. That would be bad at any time, but when companies are facing more difficult times due to the pandemic and its after-effects, it would be particularly unwelcome. That is the reasoning behind the amendment, and I know that other noble Lords are well able to illustrate the problem further.

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[Lord Lennie (Lab) [V]]

My Lords, straight off the bat, I too welcome the Government’s movement on this specific part of this necessary Bill. There will be a sense of relief for direct benefit pension funds and their trustees, the Pension Protection Fund and the regulator. As has been said, all will now have rights of access to information about the intentions of companies and to voice their opinions about the decisions that are being contemplated; a seat at the table, access to court and so forth. This will be true throughout the UK.

When a company seeks a moratorium or when it considers other actions in a potential redundancy and insolvency circumstance, the monitor will be required to notify the pension scheme, the PPF and the regulator to have due consideration of their views about the proposed action. In the event that a moratorium comes to an end or if the monitor changes, the pension scheme trustees and the PPF must be informed. This will mean in effect that the debts owing to a direct benefit pension scheme do not rank below other finance debts. That would recognise the real status of a pension as deferred earnings and should not allow others to accelerate the debt position at the expense of pension provision, as was feared in the original text. These changes have come about due to the strength of the arguments put by my noble friends Lady Drake and Lady Warwick, the noble Baroness, Lady Bowles, on the Liberal Democrat Benches, and the noble Lord, Lord Balfe, and the noble Baroness, Lady Altmann, on the Conservative side. I congratulate them on achieving this much.

However, can the Minister provide the reassurance being sought about the value of direct benefit schemes being put at risk by the sale of assets, and ultimately the whole working of the PPF? Will he closely monitor and consult on any necessary remedial actions that may arise from his examination of this issue? The Minister can take the credit due to him for his part in bringing forward these amendments to the Bill, and they are welcome. But can he confirm that the Government will stay alert and ready to intervene on behalf of pensions and the PPF in the event that the measures in this legislation do not go far enough in protecting them?

[Lord Callanan]

My Lords, I take this opportunity to thank everyone who has spoken in this important debate, and I am grateful for Amendment 15 because it is a very important provision. I am also grateful to noble Lords for their continuing efforts to ensure that pensions are treated appropriately through this Bill. None the less, I hope that they will agree that we are now seeking to introduce specific and satisfactory provisions to deal with pensions’ interests.

I also take this opportunity to assure noble Lords that where charged property is disposed of, it can be done only with the permission of the court and where the court believes that it is necessary to support the rescue. Where the court is satisfied and gives its permission, the net proceeds must go towards satisfying the amounts secured by the charge before they can be used in any other way. From a practical perspective, this amendment is not necessary. If a company in a moratorium was going to court to seek permission to dispose of charged assets, it would at the least have had to have had a conversation with the person to whom those assets are charged. Well before giving clearance to the company to dispose of such assets, the court will of course take account of their views at the hearing.

In response to my noble friend Lady Altmann and the noble Lord, Lord Hain, we have been in detailed discussions with colleagues in the DWP, along with both the Pensions Regulator and the Pension Protection Fund, in the formulation of these amendments. We are seeking to ensure that the PPF is able to play a role in a company’s rescue plan where it is appropriate for it to do so. Let me also provide the assurance that the noble Lord, Lord Lennie, was looking for. Of course, we will continue to monitor these arrangements to ensure that they act in the fairest possible way for all the different stakeholders in the process that I referred to earlier.

On that basis, I hope that I have been able to provide sufficient reassurance to noble Lords and that they will feel able to not move their amendments when the time comes. I beg to move.

Amendment 4 agreed.

Moved by

[Lord Callanan]

5: Clause 1, page 5, line 43, leave out from beginning to end of line 2 on page 6
Member’s explanatory statement
This amendment removes a Henry VIII power to change a list of documents.

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Moved by

[Lord Callanan]

8: Clause 1, page 6, leave out lines 29 to 32
Member’s explanatory statement
This amendment removes a Henry VIII power to change a list of documents.

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Moved by

[Lord Callanan]

11: Clause 1, page 8, leave out lines 8 to 11
Member’s explanatory statement
This amendment removes a Henry VIII power to change a list of documents.

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Moved by

[Lord Callanan]

18: Clause 1, page 22, line 35, at end insert—
“(c) in a case where the company is or has been an employer in respect of an occupational pension scheme that is not a money purchase scheme, the Pensions Regulator, and(d) in a case where the company is an employer in respect of such a pension scheme that is an eligible scheme within the meaning given by section 126 of the Pensions Act 2004, the Board of the Pension Protection Fund.”Member’s explanatory statement
This amendment extends the duty to give notice that the monitor has changed.

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Moved by

[Lord Callanan]

24: Clause 4, page 35, line 33, leave out “changing the definition of “the relevant documents”” and insert “adding to the list of documents”
Member’s explanatory statement
This amendment narrows the power to change a list of documents, so that it is confined to adding to the list. The power could subsequently be re-exercised so as to remove anything added.

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Moved by

[Lord Callanan]

37: After Clause 7, insert the following new Clause—
“Administration in Great Britain: revival of power about sales to connected persons
(1) Paragraph 60A of Schedule B1 to the Insolvency Act 1986 (which expired in May 2020) is revived.(2) For sub-paragraph (10) of that paragraph substitute—“(10) This paragraph expires at the end of June 2021 unless the power conferred by it is exercised before then.””Member’s explanatory statement
This amendment revives paragraph 60A of Schedule B1 to the Insolvency Act 1986, which expired in May 2020 by virtue of the sunset provision in sub-paragraph (10) of that paragraph.

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[The Deputy Speaker (Lord McNicol of West Kilbride) (Lab)]

I remind noble Lords that Members other than the mover of an amendment and the Minister may speak only once and that short questions of elucidation are discouraged. Anyone wishing to press this or any other amendment in the group to a Division should make that clear in the debate.

[Lord Callanan]

My Lords, the Government have listened carefully to the concerns raised by noble Lords in Committee and elsewhere.

Where used appropriately, pre-pack sales can perform a useful rescue function. In some instances, sales to connected parties are beneficial. However, we accept that the nature of the transaction and the speed with which it is carried out might also provide some opportunities for mischief. This could particularly be the case during the current crisis. The Government acknowledge that there may be a risk of an increase in the use of pre-pack sales, which could adversely affect businesses already struggling as a result of Covid-19.

The Government therefore propose amendments to revive the power, which expired in May 2020, to regulate sales in administration to connected parties, and to introduce a similar power in Northern Ireland. These government amendments will revive paragraph 60A in Schedule B1 to the Insolvency Act 1986. This will enable the Secretary of State to make regulations to prohibit or impose requirements or conditions in relation to the sale of property of a company by the administrator to a connected person, in circumstances specified in the regulations. This power will expire at the end of June 2021, unless it is previously exercised.

The amendments will also insert a new power in Schedule B1 to the Insolvency (Northern Ireland) Order 1989 to enable similar regulation of sales to a connected person in Northern Ireland. This power will also be time limited until the end of June 2021, unless previously exercised. Regulations made under the power in Northern Ireland must be laid in draft and approved by a resolution of the Northern Ireland Assembly. And we are going further: ahead of using the power, we will publish the Government’s review of existing voluntary measures in respect of pre-pack sales this summer to help further inform the public debate on this issue. I beg to move.

[Lord Hodgson of Astley Abbotts]

My Lords, I have Amendment 45 in this group but, before I speak on it, perhaps I may say that I entirely support the Government’s Amendments 37 and 38. They are very sensible and have my unequivocal support.

I turn to Amendment 45, to which the noble Lord, Lord Vaux, the noble Baroness, Lady Bowles, and my noble friend Lady Altmann have added their names. I am most grateful to them and indeed to other noble Lords all across the House who have been in touch with me to say that it seems a sensible way of proceeding. We discussed this matter at length last Wednesday. I shall try to avoid repeating myself, although of course I need to fill in the story for those who have just joined in at this stage.

Like my noble friends Lord Callanan, Lord Leigh and Lord Holmes of Richmond, I recognise that pre-packs have their uses. As I said in the debate last week, they are a useful spanner in the toolbox of the insolvency practitioner. However, they are open to serious abuse, as my noble friend Lord Callanan admitted a moment ago. Let us quickly run through a real-life example, and here I will slightly repeat what I said last week.

I ask noble Lords to imagine the following. You are a director of a company that is struggling because of past operating losses, which have led to large debts being accumulated; or perhaps it is a very old, established engineering or industrial company that has a long tail of pension liabilities that get increasingly heavy. Insolvency and administration loom over you, but you and your fellow directors feel that somewhere in the business is a really profitable activity. However, the company is worth saving only if you can get rid of all your debts. Therefore, you, as a group of directors—maybe with some associates—find an administrator and say that you would like to make an offer for the bits that you want. That offer might be very substantial but, equally, it might be £1 or £1,000. That is the key to the problem that we are trying to tackle here. Nobody can say that anything is wrong where a fair-value, full-price offer is made.

You make a nominal offer on, say, a Friday, which means that the company is put into administration over the weekend. On Monday, you advertise it in the newspapers and after four days, if the administrator has had no competing offers, he or she can say that they have tested the market and have obtained a fair price. It is of course vanishingly unlikely, although possible, that within four days anybody will be able to come up with an offer de novo, from a standing start. Your group, having paid the money to the administrator, is now the proud owner of a company that is without all its liabilities to suppliers great and small, local and national, as well as to the Pension Protection Fund—but you might be the very people who led the company to the edge of disaster in the first place.

Many in your Lordships’ House would ask “How could this possibly be?” It has an awfully superficially attractive political ring to it. A Minister, a councillor or a Member of Parliament can get up and say, “Look, I’ve just saved 300 jobs.” That sounds awfully good, but nobody weighs on the scale what is happening elsewhere. For every debt that you have written off, another company loses money. It might be a small local supplier that might have to make redundancies of its own and might itself, in extremis, go into receivership. There is also the general damage to the local economy, as there is to the Pension Protection Fund. This has always seemed to me, at least, to be a very unfair way of proceeding unless it is properly supervised.

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[Lord Stevenson of Balmacara [V]]

My Lords, my name is on Amendment 46, as I strongly support the noble Baroness, Lady Neville-Rolfe, in her attempt to revive the powers taken in the small business Act 2015. We supported her in 2015 and pressed then for action to be taken against the abuses which were occurring in the pre-pack cases that came to light at the time.

However, as the noble Baroness said, thanks mainly to the rhetoric of the noble Lord, Lord Hodgson, and my noble friend Lord Mendelsohn, the Government have done a U-turn. Therefore, purely on consistency grounds, it is logical and right that we should support Amendments 37 and 38 in the name of the noble Lord, Lord Callanan. When he responds, I hope that he will confirm that he intends to use these powers and to act urgently.

I have been in discussion during the past couple of weeks with the noble Lord, Lord Hodgson of Astley Abbotts, about his Amendment 45. In the absence of government Amendments 37 and 38, I would have backed his proposal. However, I have an old-fashioned view about statutory powers being operated by non-statutory bodies such as the pre-pack pool. Given that the powers sought by Amendment 45 are contained within those to be taken under Amendments 37 and 38 and that, as the noble Lord, Lord Hodgson, admitted, there are some problems with the existing arrangements —the noble Lord, Lord Vaux, called them “murky” and denigrated the standards being achieved—I am minded to support the Government on this issue.

[Lord Callanan]

I thank my noble friends Lord Hodgson, Lady Altmann and Lady Neville-Rolfe, as well as the noble Lords, Lord Vaux and Lord Stevenson, and the noble Baroness, Lady Bowles, for their amendments, which would regulate pre-pack sales in administration.

It goes without saying that pre-pack sales have been a contentious subject during debates on this Bill in both Houses and, as some Members have indicated, on previous Bills. There was an impassioned debate about pre-packs in Committee, and I am grateful for the helpful contributions made during that debate by many of the aforementioned noble Lords, as well as the noble Lord, Lord Mendelsohn. I have certainly benefited from speaking to many of them in separate meetings with officials in trying to plot a route forward on this issue.

During that debate, I briefly explained some of the reasons why I did not think that Amendment 45, now brought back on Report, would be suitable. These included that the need for a positive opinion from a member of the pre-pack pool might create a potential conflict with the statutory objective of the administrator, which is to achieve a better result for creditors as a whole than if the company were wound up. There would also be a problem in that the amendment would prevent a sale without an opinion from the pre-pack pool even where the creditors had agreed that it should go ahead.

Moreover, whether a sale went ahead would be entirely dependent on a member of the pool assessing that it was not “unreasonable”, but the amendment provides no guidance on what “unreasonable” means in this context. This is likely to create significant uncertainty for businesses as to what is allowed and, of course, a significant risk of legal challenge.

Amendment 45 would capture only pre-pack transactions that had been negotiated with an associate before a company entered administration. The definition of “connected person” in paragraph 60A of Schedule B1 is drawn more widely than the definition of “associate” in Amendment 45, so the scope of the government amendment is in this case broader.

I also mentioned in Committee that there could be a difficulty in restricting supply of opinion to the pre-pack pool. I know that my noble friend Lord Hodgson expressed scepticism about my reasoning, but it is a proper concern that this could raise issues regarding anti-competitiveness.

My noble friend also suggested that pension liability could be removed. I point out to him that the Pension Protection Fund has confirmed that it does not generally see any evidence that pre-pack sales are being used to abandon pensions liabilities. Further, it considers that the Pensions Regulator has sufficient anti-avoidance powers to act as a deterrent against the misuse of pre-pack sales for the purposes of dumping a pension scheme.

I can say in response to a number of noble Lords who asked me questions—for instance, my noble friend Lady Neville-Rolfe, the noble Baroness, Lady Bowles, and the noble Lord, Lord Stevenson—that, if the government amendment is passed, we will publish in the summer a review of the existing voluntary measures to reform pre-pack sales and will set out in that report proposals for when and how we will regulate.

The amendment in the names of my noble friend Lady Neville-Rolfe and the noble Lord, Lord Stevenson, took a different approach—it would partially resurrect a previously lapsed power to regulate sales to connected persons in administration. The amendment does not quite go far enough to be workable but, as I set out earlier, we now have government amendments in that space, which I hope will work well; we have decided to table our own amendments to regulate pre-pack sales.

Having said that, and with the reassurances that I have given to the House, I hope that noble Lords will accept the assurances and information that I have been able to provide and will therefore not move their amendments when the time comes.

Amendment 37 agreed.

Moved by

[Lord Callanan]

38: After Clause 7, insert the following new Clause—
“Administration in Northern Ireland: power about sales to connected persons
(1) The Insolvency (Northern Ireland) Order 1989 (S.I. 1989/ 2405 (N.I. 19)) is amended as follows.(2) Schedule B1 (administration) is amended in accordance with subsections (3) to (5).(3) Paragraph 61 (powers of administrator) becomes sub-paragraph (1) of that paragraph.(4) After that sub-paragraph insert—“(2) But the power to sell, hire out or otherwise dispose of property is subject to any regulations that may be made under paragraph 61A.”(5) After paragraph 61 insert—“61 Regulations may make provision for—(a) prohibiting, or(b) imposing requirements or conditions in relation to,the disposal, hiring out or sale of property of a company by the administrator to a connected person in circumstances specified in the regulations.(2) Regulations under this paragraph may in particular require the approval of, or provide for the imposition of requirements or conditions by—(a) creditors of the company,(b) the High Court, or(c) a person of a description specified in the regulations.(3) In sub-paragraph (1), “connected person”, in relation to a company, means—(a) a relevant person in relation to the company, or(b) a company connected with the company.(4) For the purposes of sub-paragraph (3)—(a) “relevant person”, in relation to a company, means—(i) a director or other officer, or shadow director, of the company;(ii) a non-employee associate of such a person;(iii) a non-employee associate of the company;(b) a company is connected with another if any relevant person of one is or has been a relevant person of the other.(5) In sub-paragraph (4), “non-employee associate” of a person means a person who is an associate of that person otherwise than by virtue of employing or being employed by that person.(6) Paragraph (11) of Article 4 (extended definition of company) applies for the purposes of sub-paragraphs (3) to (5) as it applies for the purposes of that Article.(7) Regulations under this paragraph may make incidental, consequential, supplemental and transitional provision. (8) Regulations may not be made under this paragraph unless a draft of the regulations has been laid before, and approved by a resolution of, the Assembly.(9) This paragraph expires at the end of June 2021 unless the power conferred by it is exercised before then.”(6) In Article 2(2), in the definition of “regulations”, after the words “and paragraph 16 of Schedule A1”(which are repealed by paragraph 3(b) of Schedule 7 to this Act) insert “and paragraph 61A of Schedule B1”.”Member’s explanatory statement
This amendment confers a power to make provision under the law of Northern Ireland about sales to connected persons in the context of an administration. It is similar to the corresponding power in Great Britain (which is revived by one of the Minister’s other amendments).

--- Later in debate ---

Moved by

[Baroness Bloomfield of Hinton Waldrist]

39: Clause 10, page 64, line 17, leave out from “30” to end of line 18 and insert “September 2020.”
Member’s explanatory statement
This amendment alters the definition of the “relevant period” that applies for the purposes of Clause 10 so that the period ends with 30 September 2020.

--- Later in debate ---

Moved by

[Lord Callanan]

41: Clause 11, page 65, line 40, leave out from “30” to end of line 41 and insert “September 2020.”
Member’s explanatory statement
This amendment alters the definition of the “relevant period” that applies for the purposes of Clause 11 so that the period ends with 30 September 2020.

--- Later in debate ---

Moved by

[Lord Callanan]

43: Clause 13, page 70, line 10, leave out from “30” to end of line 11 and insert “September 2020.”
Member’s explanatory statement
This amendment alters the definition of the “relevant period” that applies for the purposes of subsection (1)(a) of Clause 13 so that the period ends with 30 September 2020.

--- Later in debate ---

Moved by

[Lord Callanan]

47: Clause 20, page 79, line 6, at end insert—
“( ) the need for the provision made by the regulations is urgent,”Member’s explanatory statement
This amendment makes urgency a condition of the exercise of the power in Clause 18.

--- Later in debate ---

Moved by

[Lord Callanan]

49: Clause 22, page 80, line 14, leave out from “which is” to end of line 15 and insert—
“(i) after the period of one year beginning with the date for the time being specified in subsection (1), or(ii) after the period of two years beginning with the date on which this Act is passed, but”Member’s explanatory statement
This amendment prevents regulations under Clause 18 being made more than two years after Royal Assent.

--- Later in debate ---

Moved by

[Lord Callanan]

51: Clause 24, page 80, line 29, after “applies,” insert “or
(b) regulations made under section 23 which make provision by amending an Act or an Act of the Scottish Parliament,”.Member’s explanatory statement
This amendment and the Minister’s final amendment to Clause 24 provide for regulations under Clause 23 (consequential provision etc) which amend an Act or an Act of the Scottish Parliament to be subject to the made affirmative procedure.

--- Later in debate ---

Moved by

[Lord Callanan]

54: Clause 28, page 83, line 5, at end insert—
“( ) the need for the provision made by the regulations is urgent,”Member’s explanatory statement
This amendment makes urgency a condition of the exercise of the power in Clause 26.

--- Later in debate ---

Moved by

[Lord Callanan]

55: Clause 30, page 84, line 11, leave out from “which is” to end of line 12 and insert—
“(i) after the period of one year beginning with the date for the time being specified in subsection (1), or(ii) after the period of two years beginning with the date on which this Act is passed, but”Member’s explanatory statement
This amendment prevents regulations under Clause 26 being made more than two years after Royal Assent.

--- Later in debate ---

Moved by

[Lord Callanan]

56: Clause 32, page 84, line 28, after “applies,” insert “and regulations made under section 31 by the Department which make provision by amending an Act or Northern Ireland legislation,”
Member’s explanatory statement
This amendment and the Minister’s final amendment to Clause 32 provide for regulations made by the Department for the Economy under Clause 31 (consequential provision etc) which amend an Act or Northern Ireland primary legislation to be subject to the made affirmative procedure in the Northern Ireland Assembly.

--- Later in debate ---

Moved by

[Lord Callanan]

59: Clause 33, page 85, line 22, after “applies,” insert “or
(b) regulations made under section 31 by the Secretary of State which make provision by amending an Act,”Member’s explanatory statement
This amendment and the Minister’s final amendment to Clause 33 provide for regulations made by the Secretary of State under Clause 31 (consequential provision etc) which amend an Act to be subject to the made affirmative procedure.

--- Later in debate ---

Moved by

[Lord Callanan]

62: Clause 39, page 88, line 43, at end insert “if the Secretary of State considers it reasonable to do so to mitigate an effect of coronavirus.”
Member’s explanatory statement
This amendment would mean that the power to make regulations under clause 39(1)(b) could be exercised only if the Secretary of State considered it reasonable to exercise the power to mitigate an effect of coronavirus.

--- Later in debate ---

Moved by

[Lord Callanan]

64: Clause 40, page 89, line 34, at end insert “if the Department considers it reasonable to do so to mitigate an effect of coronavirus.”
Member’s explanatory statement
This amendment would mean that the power to make regulations under Clause 40(1)(b) could be exercised only if the Department for the Economy in Northern Ireland considered it reasonable to exercise the power to mitigate an effect of coronavirus.

--- Later in debate ---

Moved by

[Lord Callanan]

66: Clause 41, page 90, line 39, leave out “negative resolution” and insert “made affirmative”
Member’s explanatory statement
This amendment changes Clause 41 so that provision that could formerly have been made by the negative resolution procedure now has to be made by the made affirmative procedure (or the affirmative procedure).

--- Later in debate ---

Moved by

[Lord Callanan]

69: Clause 42, page 91, line 35, leave out “negative resolution” and insert “made affirmative”
Member’s explanatory statement
This amendment changes Clause 42 so that provision that could formerly have been made by the negative resolution procedure now has to be made by the made affirmative procedure (or the affirmative procedure).

--- Later in debate ---

Moved by

[Lord Callanan]

71: Clause 43, page 92, line 12, after “procedure” insert “(see section 29 of the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10))”
Member’s explanatory statement
This amendment is needed in light of the Minister’s other amendment to Clause 43(1).

--- Later in debate ---

Moved by

[Lord Callanan]

74: After Clause 43, insert the following new Clause—
“Modified procedure for regulations of Northern Ireland departments
(1) During the period of six months beginning with the day on which this section comes into force, any relevant provision that may be made by a Northern Ireland department by regulations that are subject to the affirmative resolution procedure may be made by regulations that are subject to the made affirmative procedure.(2) In subsection (1)“relevant provision” means—(a) provision under Article 13HA(1) of the Insolvency (Northern Ireland) Order 1989 (power to modify moratorium provisions in relation to certain companies);(b) provision under Article 13HAA(1) of that Order (moratorium: power to make provision in connection with pension schemes).(3) For the purposes of this section—(a) “regulations that are subject to the affirmative resolution procedure” means regulations that may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, the Assembly; (b) “regulations that are subject to the made affirmative procedure” means regulations that—(i) must be laid before the Assembly as soon as reasonably practicable after being made, and(ii) cease to have effect at the end of the period of 40 days beginning with the day on which the regulations are made, unless during that period the regulations are approved by a resolution of the Assembly.(4) In calculating the period of 40 days mentioned in subsection (3)(b)(ii), no account is to be taken of any time during which the Assembly is—(a) dissolved,(b) in recess for more than 4 days, or(c) adjourned for more than 6 days.(5) Where by virtue of this section a Northern Ireland department makes regulations that are subject to the made affirmative procedure and the regulations cease to have effect because they are not approved within the period mentioned in subsection (3)(b)(ii), the fact that the regulations cease to have effect does not—(a) affect anything previously done under or by virtue of the regulations, or(b) prevent the making of new regulations.(5) In this section “the Assembly” means the Northern Ireland Assembly.”Member’s explanatory statement
This amendment modifies the regulation-making procedure for certain regulations for the first six months.

--- Later in debate ---

Moved by

[Lord Callanan]

76: Schedule 1, page 103, line 2, after “Schedule” insert “, apart from paragraph 2,”
Member’s explanatory statement
This amendment limits the Secretary of State’s power to amend new Schedule ZA1 so that it cannot be used to amend paragraph 2 (exclusion from eligibility for companies subject to moratorium or insolvency procedure etc).

--- Later in debate ---

Moved by

[Lord Callanan]

77: Schedule 3, page 107, line 24, leave out from “debts” to end of line 27 and insert “(within the meaning given by section 174A);
(b) priority pre-moratorium debts (within the meaning given by section 174A).” Member’s explanatory statement
This amendment reflects the changes made by the Minister’s amendments to new section 174A of the Insolvency Act 1986 (on page 109 of the Bill).

--- Later in debate ---

Moved by

[Lord Callanan]

85: Schedule 4, page 124, line 26, leave out from “30” to end of line 27 and insert “September 2020.”
Member’s explanatory statement
This amendment alters the definition of the “relevant period” that applies for the purposes of Schedule 4 so that the period ends with 30 September 2020.

--- Later in debate ---

Moved by

[Lord Callanan]

86: Schedule 5, page 154, line 7, after “Schedule” insert “, apart from paragraph 2,”
Member’s explanatory statement
This amendment limits the Department’s power to amend new Schedule ZA1 so that it cannot be used to amend paragraph 2 (exclusion from eligibility for companies subject to moratorium or insolvency procedure etc).

--- Later in debate ---

Moved by

[Lord Callanan]

87: Schedule 7, page 158, line 17, after ““Part 1A,”” insert “Article 148A(3A),”
Member’s explanatory statement
This amendment paves the way for the Minister’s amendments to new Article 148A of the Insolvency (Northern Ireland) Order 1989 (on page 160 of the Bill).

--- Later in debate ---

Moved by

[Lord Callanan]

96: Schedule 8, page 168, line 11, leave out from “30” to end of line 12 and insert “September 2020.”
Member’s explanatory statement
This amendment alters the definition of the “relevant period” that applies for the purposes of Schedule 8 so that the period ends with 30 September 2020.

--- Later in debate ---

Moved by

[Lord Callanan]

97: Schedule 9, page 186, line 24, leave out from second “a” to end of line 28 and insert “priority pre-moratorium debt.”
Member’s explanatory statement
See the explanatory statement for the Minister’s second amendment on page 186 of the Bill.

--- Later in debate ---

Moved by

[Lord Callanan]

102: Schedule 10, page 205, line 30, leave out from “30” to end of line 31 and insert “September 2020.”
Member’s explanatory statement
This amendment alters the definition of the “relevant period” that applies for the purposes of Part 1 of Schedule 10 so that the period ends with 30 September 2020.

--- Later in debate ---

Moved by

[Lord Callanan]

104: Schedule 10, page 212, line 6, leave out from “30” to end of line 7 and insert “September 2020.”
Member’s explanatory statement
This amendment alters the definition of the “relevant period” that applies for the purposes of Part 2 of Schedule 10 so that the period ends with 30 September 2020.

--- Later in debate ---

Moved by

[Lord Callanan]

105: Schedule 11, page 213, line 16, leave out from “30” to end of line 17 and insert “September 2020.”
Member’s explanatory statement
This amendment alters the definition of the “relevant period” that applies for the purposes of Part 1 of Schedule 11 so that the period ends with 30 September 2020.

--- Later in debate ---

Moved by

[Lord Callanan]

107: Schedule 11, page 218, line 41, leave out from “30” to end of line 42 and insert “September 2020.”
Member’s explanatory statement
This amendment alters the definition of the “relevant period” that applies for the purposes of Part 2 of Schedule 11 so that the period ends with 30 September 2020.

--- Later in debate ---

Moved by

[Lord Callanan]

108: Schedule 14, page 236, line 5, leave out “or the Treasury under” and insert “under paragraph 2(2)(a) of”
Member’s explanatory statement
This amendment is consequential on the Minister’s other amendment to Schedule 14

Corporate Insolvency and Governance Bill

Lord Callanan Excerpts

3rd reading & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords
Tuesday 23rd June 2020 Lords Chamber

Moved by

[Lord Callanan]

That the Bill do now pass.

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

My Lords, first, I thank the House of Lords Public Bill Office and the House clerks for their support and their extremely hard work in ensuring that this emergency Bill could be expedited through the House to support businesses as a matter of urgency in these unprecedented times.

Secondly, I place on record my thanks to the Bill team, Andy Ormerod-Cloke, Muneera Lula, Jess Bradbury and all the team, both in BEIS and in the Insolvency Service, who have worked so hard on the Bill. I am sure Members will appreciate the untold hours that went in on evenings and weekends to assist in the progress of this legislation and to provide help and guidance to me, my noble friends Lady Bloomfield and Lord Howe and many other noble Lords who we have spoken to and consulted over the last couple of weeks on all sides of the House. I am grateful to all Members for their contributions. The Bill team and the Insolvency Service did a splendid job operating in, let us not forget, extremely difficult circumstances. They can be proud of their work and they are a credit to the Civil Service.

I also thank my private office team, Marty and Jenny, for ably assisting me in co-ordinating the various bits of government to come together on the Bill. I pay tribute to the Opposition spokesmen: the noble Lords, Lord Stevenson and Lord Fox. This made a pleasant change from my previous job, piloting the Brexit legislation through, where, as Members can imagine, there was no common ground whatever. This has been an historic day: I have actually won three votes in the House, which is the quite amazing pinnacle of my ministerial career. It can only be downhill from here. I am grateful to them for their constructive engagement. They have acted responsibly, recognising that this is emergency legislation, and have worked with us to improve the legislation where that was required. On behalf of the Government, we have been pleased to accept the many constructive contributions. The Bill leaves this House in a much better and improved form than when it entered it. We have been responsible and have acted where necessary, and I hope Members will agree that the Government have responded to their concerns.

I mentioned them earlier but I the other members of the ministerial team—my noble friends Lady Bloomfield and Lord Howe—who have assisted me in pushing this measure through. As a result of this legislation, I hope that many otherwise viable companies will no longer face the threat of insolvency. The measures that the Bill introduces will give our businesses the vital support that they need to keep themselves afloat, thereby preserving jobs and maintaining productive capacity, enabling the foundations to be late for this country’s economic recovery.

Once again, I thank noble Lords for their scrutiny of the Bill. It has, as I said, been much improved thanks to the amendments that have been made during its passage. I hope Members will think that the Government played a constructive role in reacting to many of the concerns they have raised. I hope that the other place will promptly accept these amendments so that the Bill can come into force as a matter of urgency. I beg to move.

[Lord Fox]

My Lords, the Minister was right that this is an important Bill because it is about people’s jobs, livelihoods and future prosperity. I think we all agreed from the outset that that was the objective here, and in many respects we have managed to fulfil it. I join the Minister in thanking the Public Bill Office, which as usual has been extremely helpful when it comes to marshalling our amendments.

I especially pick out the Bill team. Normally when I look at the Box over there, there is a team looking tired, wan and reasonably pleased that their job is reaching the end. They must have had some very long days. I assume that the Bill team are somewhere out there in the ether, so I thank them for their work.

I thank my own team: my colleagues who have sat through this process, on the Benches and virtually, and Sarah Pughe, who has kept us more or less on the straight and narrow. I thank my opposite number the noble Lord, Lord Stevenson, and the ministerial team—the noble Lord, Lord Callanan, the noble Earl, Lord Howe, and the noble Baroness, Lady Bloomfield—for their open and cheerful approach to the Bill. I think we got a glimpse of why the noble Lord was cheerful: this Bill is nowhere near as bad as what he has just been doing.

That is true, but it was still a difficult Bill. It is a big Bill of mixed intent, in that some of it is permanent and some of it is not, and it was an accelerated process. It has not been easy, and of course we leave here wishing that things were different from the way they are. This feels like the end of something but I suspect, given the powers and the intent that the Government have to trim, modify and improve the Bill, it may be a question not of “Farewell” but rather of “See you later”.

Emissions: Housing

Lord Callanan Excerpts

Monday 22nd June 2020 Lords Chamber

[Lord Teverson]

To ask Her Majesty’s Government whether they plan to publish (1) a route map, and (2) a plan of action, to insulate the United Kingdom’s existing housing stock in order to meet the net-zero emissions target by 2050, and if so, when.

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

Yes, the Government plan to publish a heat and buildings strategy in due course, which will set out the immediate action that we will take to reduce emissions from buildings, including the deployment of energy-efficiency measures and low-carbon heating as part of the ambitious programme of work required to enable the mass transition to low-carbon heat and set us on a path to meeting our net-zero 2050 emissions target.

[Lord Teverson (LD)]

My Lords, I thank the Minister for his reply. Can he be more precise on “in due course”? This is an important part of building back better and is absolutely essential to our net-zero target for 2050.

[Lord Callanan [V]]

I note the noble Lord’s impatience but cannot go much further, beyond saying that we aim to get the strategy out this year.

[Lord Young of Cookham (Con) [V]]

My Lords, in its report on energy efficiency last year, the BEIS Select Committee recommended that the winter fuel payment, which costs around £3 billion per year, be refocused and the savings invested in energy-efficiency programmes for fuel-poor households. Before the pandemic, the last Government rejected this, but can the Minister encourage the DWP and the Treasury to have another look at this proposal, which would help to achieve our zero-carbon commitment, tackle fuel poverty and promote a green recovery?

[Lord Callanan [V]]

As always, my noble friend asks a very good and pertinent question, but we continue to believe that the winter fuel payment gives reassurance, particularly to poorer pensioners, that they can keep warm during the colder months, so we will continue to pay £200 for households with somebody who has reached state pension age and who is under the age of 80, or £300 for households with somebody aged 80 or over.

[Baroness Boycott (CB) [V]]

Retrofit is a resource-intensive job creator, and therefore a good way to come out of the pandemic in a sustainable way, so what commitment have the Government made to retrofit publicly owned or publicly funded buildings, including all our schools and educational facilities?

[Lord Callanan [V]]

We have a number of schemes which public buildings and others can take advantage of. The noble Baroness raises a very good point. We will continue to insulate and upgrade as many of these buildings as possible.

[Lord Maxton (Lab) [V]]

My Lords, can the Minister make it quite clear that there is no such thing as UK housing? In Scotland, housing has been a devolved matter ever since I was first an MP, 41 years ago. Under previous Administrations it was a matter for the Secretary of State for Scotland, and now it is for the Scottish Parliament. Therefore, on the important issue raised by the noble Lord, Lord Teverson, can the Minister confirm that he has had meetings with his opposite numbers in the devolved Governments of Scotland, Wales and Northern Ireland?

[Lord Callanan [V]]

I am happy to agree with the noble Lord that fuel poverty is devolved. I have not personally had meetings with members of the Scottish Government or the Welsh Government, but I am always happy to do so.

[Lord Oates (LD) [V]]

Does the Minister agree that in addition to insulating the existing housing stock, we must replace the boilers in these homes if we are to meet our net-zero target? Is he aware that as of today this means replacing over 2,000 boilers every day, 365 days a year every year until 2050—and we have not even started yet? What will the Government do about that?

[Lord Callanan [V]]

We do not necessarily need to replace every boiler. There are a number of alternative courses of action. One would be to investigate the use of hydrogen as an alternative. Already we have pilot programmes that will enable boilers to be quickly and easily upgraded to work on hydrogen.

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

It is obviously important to upgrade existing stock, but some local authorities have set up carbon offsetting schemes which allow carbon-intensive building developments to go ahead with building inadequate housing for the future. Will the Government close this loophole?

[Lord Callanan [V]]

I am happy to have further discussions with the noble Baroness to see exactly what that loophole is, but we remain committed to working with local authorities to take this agenda forward.

[Lord Bourne of Aberystwyth (Con) [V]]

My Lords, given the likely increase in unemployment, the need to reboot nationally and internationally post the pandemic, and our chance to give a global lead at COP 26 in Glasgow, will my noble friend use his best endeavours to ensure that our Government follow up on this positive idea put forward by the noble Lord, Lord Teverson?

[Lord Callanan [V]]

My noble friend is entirely right. As the holders of the incoming presidency of COP 26, the Government will continue to press for much greater ambition around the world to reduce emissions, build resilience, co-operate and support each and every country.

[Baroness Meacher (CB) [V]]

My Lords, in response to the Minister’s reply to the noble Lord, Lord Teverson, and his encouraging reference to hydrogen, does he agree that the UK Government urgently need a UK-wide hydrogen strategy which includes sustainable domestic heating, transport and energy-intensive industry? Germany is about to confirm such a strategy, and many other countries are doing the same. Will the Government respond positively to the hydrogen industry’s campaign to have this important strategy? Companies are willing to invest £1.5 billion in it if the Government are behind them. Will he talk to key people about their plans?

[Lord Callanan [V]]

Of course. I am always willing to have meetings with stakeholders and others about this important area. As I said in response to a previous question, we continue to investigate with other people—for instance, boiler manufacturers—how hydrogen can contribute to our climate goals in the future. It is an important point to make.

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

I shall follow up the question asked by the noble Baroness, Lady Boycott. Given the low cost of creating a job retrofitting loft and wall insulation in our housing stock, can the Minister confirm that this green new deal approach will feature in the Government’s forthcoming economic recovery plan?

[Lord Callanan [V]]

I can confirm that we will do that. The noble Lord makes a very good point. We noted with interest the analysis in the Smart Growth America report that a job in home insulation could be created for £59,000, which is less than for comparative jobs, such as road maintenance. The most recent release by the Office for National Statistics shows that in 2018 energy-efficiency products supported the largest number of full-time jobs—about 114,000—of any sector in the low-carbon and renewable energy economy.

[Lord Palmer of Childs Hill (LD) [V]]

My Lords, my noble friend Lord Teverson called for a plan of action and asked what the plan of action is. What we have heard from the Minister is an ambition. Will he say what action the Government are going to take? For instance, will there be technical advice on older houses? Will there be different advice for those in older buildings and for buildings with cavity walls? Will there be help with double glazing? I have heard nothing about action; I have heard only about ambition.

--- Later in debate ---

[Lord Callanan [V]]

We are taking action in a number of areas. We are spending something like £640 million a year under the ECO scheme to support fuel-poor and vulnerable households in precisely the sort of work that the noble Lord mentioned. We want to go further, and that is why we need the strategy to which I referred.

[The Earl of Shrewsbury (Con) [V]]

My Lords, in the case of grade 2 and grade 1 listed buildings, will planning authorities be advised to relax their rules to enable insulation work to be carried out?

[Lord Callanan [V]]

The noble Earl makes a very good point. We are committed to working with the planning authorities to help us in our aspiration for green growth and in bringing as many homes as possible to reach EPC band C strategy by 2035. As we develop those policies, we will need to consider the interaction with planning restrictions where that is appropriate.

[The Lord Speaker (Lord Fowler)]

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