Offshore Petroleum Licensing Bill

Debate between Lord Callanan and Baroness Blake of Leeds

Committee stage
Tuesday 23rd April 2024 Grand Committee

[Baroness Blake of Leeds (Lab)]

I acknowledge the comments from the noble Baroness, Lady Jones, and the noble Earl, Lord Russell. To repeat the concerns as outlined at Second Reading, our belief is that the tests identified in the Bill will be impossible to fail and are thereby fundamentally flawed, as my noble friend Lord Lennie has previously outlined.

Amendments 12 and 15 in my name are straight- forward. The intention is to be as simple as possible, leaving out “liquified” from the Bill to include all natural gas imported into the UK. We need to achieve clarity, which is not present in the current wording. If the Government want to keep it in, they should be open about the consequences. Liquified natural gas will always be more greenhouse gas intensive in production than UK natural gas. The North Sea field will not meet our total demand for oil and gas, as we know. We need to replace these tests with ones that produce a proper judgment about whether a licence should be issued. The main consideration should be whether issuing a licence is in line with our climate change goals.

Another disappointment with this Bill, as we have discussed, is that there is no reference to previously introduced climate change compatibility tests into production generally—quite an omission. Including only LNG presents a serious problem. We acknowledge that substantial amounts of natural gas come into the UK from Norway via the pipeline. The production of that gas is substantially cleaner than that of UK natural gas. Indeed, we need to be sure that managing the decline in demand for gas is at the heart of a successful net-zero transition. The best and fairer test would be to consider gas imports in the round.

We are trying to amend a Bill that is deeply flawed, as I have previously recognised. I recognise the opposition of the noble Baroness, Lady Jones, to the Bill as a whole. I believe that this a simple way in which we could make some improvements; I look forward to the Minister’s comments with interest.

[Lord Callanan (Con)]

The noble Baroness, Lady Jones, tabled notice of her intention to oppose Clause 1 standing part of the Bill so let me begin my remarks by briefly outlining the purpose of that clause. Under the Petroleum Act 1998, offshore oil and gas licences are administered by the Oil and Gas Authority, which is operating as the North Sea Transition Authority. A seaward production licence grants exclusive rights to the licensee to explore, bore for and produce oil and gas from the geological formations that lie beneath the UK’s offshore waters, within an area defined by the licence. Additional permissions are required before any activity can take place.

Periodically, the NSTA launches licensing rounds inviting companies to apply for such licences. During this process, interested companies submit bids and licences are awarded to bids that promise to ensure the economic recovery of the UK’s oil and gas resources, while of course supporting the drive to net zero by 2050. This existing arrangement means that industry does not have certainty as to when—or, indeed, if—the NSTA will launch a new licensing round. This clause provides that certainty by amending the Petroleum Act 1998 to place a duty on the NSTA to invite applications for seaward production licences in each annual period, which runs from October to September each year. This is subject to two tests being passed: that the average carbon intensity of domestic UK gas is lower than the average carbon intensity of imported liquified natural gas; and that the UK remains a net importer of both oil and gas.

Together, these tests, which will be conducted by the NSTA, will ensure that the annual duty on the NSTA applies only where this supports our wider energy security and energy transition objectives. If the annual duty is triggered, the NSTA proceeds with the current licensing process. It will remain a matter for the NSTA as an independent regulator to decide how many and which blocks or part-blocks to offer for applications—with a minimum of one block—and to ensure and apply the appropriate criteria for determining those applications. It will remain the responsibility of the NSTA to decide whether to offer and grant any licences at the conclusion of that process and whom to offer them to; the NSTA will retain the discretion to grant licences outside of this new annual process in the usual way where needed.

I assure noble Lords that the offering and granting of licences under the new annual process will remain subject to the existing rigorous environmental regulatory requirements. These include the obligation written into the NSTA’s strategy to assist the Secretary of State in meeting the target of net zero by 2050. Indeed, I want to be clear that nothing in this clause contradicts our steadfast and, of course, legally binding commitment to achieving net zero by 2050. We do not need to choose between either delivering net zero or supporting our domestic oil and gas sector; the two things are not mutually incompatible.

Amendments 11, 13, 14 and 16 in the name of the noble Baroness, Lady Jones, and Amendments 12 and 15 in the name of the noble Baroness, Lady Blake, seek to amend the carbon intensity test. This test looks at historical carbon dioxide emissions from the production and supply of natural gas during an assessment period spanning the preceding three years. The test is passed if, during that timeframe, per unit of energy, the carbon emissions of producing gas domestically were lower than the average carbon emissions from the production and delivery of liquefied natural gas from all geographic locations.

The amendment put forward by the noble Baroness, Lady Jones, seeks to change the test to include in the comparison all imported and produced petroleum products, including crude oil, and all forms of natural gas. The amendments put forward by the noble Baroness, Lady Blake, seek to include an assessment of the carbon intensity of all imported natural gas.

It is important to recognise that the markets for oil and gas work very differently; it is not possible to make the same comparisons for oil as it is for gas. In the case of gas, we have a choice either to maximise domestic production or to import more. The more gas we produce domestically, the less we need to import; that seems obvious to me. For oil, we do not have that same choice because oil has to be refined before it is used. For historical reasons, UK oil is generally processed abroad—predominantly in Europe, where our production supports the energy security of our European allies. So a comparison of the carbon intensity of imported oil versus domestically produced oil would be the wrong one to make.

Turning to the test for gas, LNG has been chosen as the relevant comparator as it is a critical marginal source of energy, providing an essential buffer source—especially in winter, when gas demand is higher. Over the past decade, LNG has become an increasingly important method of moving natural gas to market. This will only intensify in the coming years because UK natural gas production peaked in 2000 and the UK has been a net importer since 2004 in order to meet domestic demand.

It is fortunate that some of the UK’s gas imports, in particular pipeline imports from Norway, have relatively low production emissions. However, it is a fact that Norwegian production, like our own, is declining. We will still need gas in the coming years as we transition to net zero. With both UK and Norwegian production declining, it is likely that LNG will play an increasingly important role. During periods of high demand in winter, LNG is a key, flexible source of supply; this role will only increase over time as UK and Norwegian production declines. Producing less domestically means importing more carbon-intensive LNG, which is why a comparison with LNG is the right one to make, in our view, and why we have included it in the Bill.

With the explanation I have been able to provide, I hope that it is clear why the test focuses on LNG and not comparators with oil, which is completely different, or other forms of gas. I therefore ask the noble Baroness to withdraw her amendment.

Paying Polluters: UN Report

Debate between Lord Callanan and Baroness Blake of Leeds

Monday 22nd April 2024 Lords Chamber

[Lord Callanan (Con)]

As the noble Earl is probably aware, there are discussions in the OECD at the moment about the use of these clauses. As I said, we are responsible for the ones that we have signed, recognised and arbitrated against, and we very carefully ensure that these clauses protect our right to regulate in these circumstances on energy and climate change matters. The success of that has meant that we have seen no successful claims against the UK.

[Baroness Blake of Leeds (Lab)]

My Lords, while we will of course hear a lot about the importance of investor confidence, it is as important to ensure that Governments, particularly of less affluent and more vulnerable nations, are able to fulfil their climate commitments. It is estimated that those Governments fulfilling their commitments under the Paris Agreement might be liable to pay up to $340 billion in future cases under this system. Can the Minister tell us the Government’s assessment of what the impact of this system will be on limiting the increase in global temperatures to 1.5 degrees centigrade above pre-industrial levels?

[Lord Callanan (Con)]

The noble Baroness is using the generality to refer to the specific. ISDS clauses are very useful in a whole range of different areas. I accept her point that there is some evidence of their misuse in the case of energy and climate change policies, and we will work with international partners to see how this can be mitigated. We are very careful to make sure that the ones to which we agree preserve our right to regulate. Other countries take their own decisions, of course.

Offshore Petroleum Licensing Bill

Debate between Lord Callanan and Baroness Blake of Leeds

2nd reading
Tuesday 26th March 2024 Lords Chamber

[Lord Callanan (Con)]

If the noble Baroness is asking me if they pay billions in taxes and make billions in profits, then yes, I guess the answer is that the international oil companies do very well out of it. Of course, some of them are also financing renewable infrastructure. Some of the big oil and gas companies are helping to invest in CCUS in this country. We very much hope that they will continue to make profits, because it pays our pension funds and a lot of investors, and a huge amount of money into the UK Exchequer that the Liberal Democrats are normally very keen on spending. The noble Baroness needs to allow that money to be raised in the first place. The companies are responsible for decommissioning their assets.

The Government continue to work with the NSTA and the Health and Safety Executive to ensure that well decommissioning is progressing in line with the relevant safety and environmental regulations and standards. That is exactly the same as has been happening previously. The UK has a very robust decommissioning regime whereby operators are responsible for decommissioning their assets at the end of their useful life. This regime of course includes protections for taxpayers, so that the costs fall on those operators. I hope the noble Baroness is reassured by that.

I was of course also pleased to hear the support of the noble Lord, Lord Bruce, for the jobs in the sector. He has a lot of relevant experience, particularly in north-east Scotland. This is in line with the words of Sir Ian Wood:

“Owing to a world-class oil and gas sector, the North East … is home to the critical mass in skills and expertise that will be crucial to ensuring that we successfully accelerate new and green energies, protecting and creating jobs as we do so”.


I am pleased to have the support of the Labour Party, but we must retain those skilled jobs in the industry, and our firm belief is that this Bill will help us to achieve exactly that.

To conclude, the Bill will give industry the certainty and confidence it needs to continue to invest in the North Sea, strengthening our energy security and supporting the energy transition as we move towards our goal of net zero, through the introduction of annual licensing rounds, subject, of course, to all the appropriate tests being met. I look forward to continuing the scrutiny of the Bill as it progresses through the House, but in the meantime, I beg to move.

[Baroness Blake of Leeds (Lab)]

Before the Minister sits down, could he answer my question about whether discussions are continuing on the issue of methane, as was raised in the other place, and particularly the withdrawal of the amendment from the right honourable Alok Sharma? Can we expect to have some discussion on where those conversations might lead us, if they are indeed taking place?

[Lord Callanan (Con)]

As I always do, I will listen very carefully to the point of view the House expresses in Committee, and, as is normal practice, as a Government we will then consider whether there are any concessions or changes we want to offer in the Bill. I am sure we will want to talk further to the noble Baroness and her colleagues at that point.

Home Insulation: Health and Mortality Rates

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 19th March 2024 Lords Chamber

[Baroness Blake of Leeds]

To ask His Majesty’s Government what recent assessment they have made of the impact of current levels of home insulation on health and mortality rates.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, evidence of the health benefits of government insulation schemes is gathered as part of those schemes’ evaluations. Recent evaluations show that schemes had a positive impact on general health. For example, improvements in the health of someone in the household were reported after the installations from our government energy efficiency schemes. Of course, the health impacts are higher for those with pre-existing health conditions.

[Baroness Blake of Leeds (Lab)]

Recent reports, including by Sir Michael Marmot, have made a clear link between poor home insulation—coupled with the cost of living crisis and high energy costs—and devastating impacts on the health outcomes of thousands of the most vulnerable people across the country, young and old. What cross-cutting analysis are the Government undertaking to reassess fully the impact of their performance in delivering home insulation in the light of the chronic health outcomes highlighted?

[Lord Callanan (Con)]

I just explained in the Answer to the noble Baroness that as part of all our energy efficiency schemes, we do evaluations afterwards of the effect on people’s bills and health. We are spending over £12 billion over this Parliament and the next on insulation schemes, because we know they make a crucial difference.

Advanced Modular Reactors: Criticality Tests

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 19th March 2024 Lords Chamber

[Lord Callanan (Con)]

Of course there is always more that we can do to support these projects, but we are supporting them with massive financial resources and research and development designs. It is always concerning if foreign companies are taking control of some of these projects, but we nevertheless have a really good scheme of projects in the UK and we are supporting them.

[Baroness Blake of Leeds (Lab)]

My Lords, it is very welcome to hear that the Government plan to invest in new nuclear research and development. However, after their failure to build a single nuclear power station in 14 years and with the rollout of small modular reactors proving to be a protracted process, can the Minister give us a date for the conclusion of the SMR competition?

[Lord Callanan (Con)]

It is great to see that Labour now supports new nuclear projects, because that was not always the case for previous Governments. As I said to my noble friend Lord Howell, we want to see them in production by the early 2030s.

Heat Pumps

Debate between Lord Callanan and Baroness Blake of Leeds

Wednesday 6th March 2024 Lords Chamber

[Baroness Blake of Leeds (Lab)]

My Lords, the number of heat pumps per 100,000 people in the UK is about eight times lower than the average across the EU. What steps are the Government taking to investigate how other countries have found success in raising their adoption rates, and will they apply any lessons learned to increase our own adoption rate, which is far lower than it needs to be?

[Lord Callanan (Con)]

The noble Baroness is right; it is lower than it needs to be, which is why we have plans to expand the installation rates up to the levels that I mentioned. We have a number of schemes to support that: the clean heat market mechanism, which I mentioned; the boiler upgrade scheme; and we increased the grants to £7,500. We support it under the social housing decarbonisation fund, and under the eco scheme as well. We have ambitious plans to expand the installation rate.

Overhead Electrical Transmission Lines

Debate between Lord Callanan and Baroness Blake of Leeds

Thursday 29th February 2024 Grand Committee

[Lord Callanan (Con)]

Yes, I absolutely concede the noble Lord’s points but, given the modern policy environment and all the legal impacts, much energy infrastructure that was built many years ago would be very difficult to build today. In past generations, consumers were perhaps much more understanding of installations of nationally significant infrastructure than they are now. I absolutely accept the noble Lord’s point. In all these considerations, it is also about balance—balancing out competing factors, of which cost is one and convenience is another, but security of supply is an equal factor that also needs to be considered. I suspect that the noble Lord is probably considering the low-voltage distribution network rather than the high-voltage transmission aspect of the supply.

My noble friend Lord Swire talked about the different creative technologies available for laying underground cables and asked whether the Government had considered those factors. Ultimately, it is not for the Government to opine on those matters. Those innovative solutions are quite rightly being driven forward by industry and they are a brilliant example of how we can use such innovations to support the delivery of our energy infrastructure ambitions and our net-zero infrastructure. The transmission owners and others are the experts in this field and, of course, we will continue to liaise with and support them in their endeavours.

I hope I have—but I suspect I have not—succeeded in persuading noble Lords that undergrounding is far from being the silver bullet in our endeavour to expand our network transmission infrastructure and meet our net-zero targets. In fact, using underground rather than overhead lines may in some respects have the opposite effect and lead to more delays rather than fewer, given that the installation takes much longer. In some cases, the upfront costs are perhaps not worth it in the longer term, as my noble friend Lord Effingham suggested. In our bid to greatly expand our domestic energy production and meet the needs of households up and down the country, I am afraid that we need to act and build networks faster than we have ever done in the past.

It is for those reasons, which I have talked the Committee through, that the Government have decided to maintain our policy position of a starting presumption of overhead lines for electricity network developments in general. That is not to say that the Government stand idly by while communities living in the path of new transmission infrastructure are affected; it is quite the opposite. That is why, at last year’s Autumn Statement, the Chancellor announced proposals for a community benefits scheme for communities living near transmission network infrastructure, which the noble Baroness, Lady Blake, asked about. The communications campaign is due this year and I invite the noble Baroness to get in touch directly so that we can provide more details on it.

I am afraid that I am running out of time, so I will move to my conclusion. I will write to noble Lords if I have not answered any of their points.

I do not need to tell the Committee that, as with so many issues, no policy is etched in stone indefinitely. In fact, the Government would not be doing our job properly if we did not keep policies under review. However, that falls far short of committing to look again at the Government’s current policy on undergrounding less than two months after it came into force. Now is not the time. The Government can determine whether this should be reassessed if and when more evidence is provided by industry. For now, the best place for the majority of transmission infrastructure is—I am sorry to say—up in the air, for technical, operational, environmental and cost reasons and, most importantly, to protect consumer bills.

[Baroness Blake of Leeds (Lab)]

May I ask for a written response with reference to the community benefit packages and the consultation package, just to give us an update? Several months have gone by and we should be moving on this.

[Lord Callanan (Con)]

I would be happy to write to the noble Baroness on that matter.

Hydrogen Production Revenue Support (Directions, Eligibility and Counterparty) Regulations 2023

Debate between Lord Callanan and Baroness Blake of Leeds

Monday 18th December 2023 Grand Committee

[Baroness Blake of Leeds (Lab)]

Can I just put on record my appreciation for the incredible contribution that the noble Lord, Lord Teverson, has made in this area? I certainly benefited enormously from our working closely on the Energy Bill, and going forward from that.

I also echo the Minister’s comments on the progress that has been made; during the passage of the Bill, there were times when we wondered how we were going to get through it. I assure the Minister that the announcement of the first funding round, with its 11 successful green hydrogen projects, has been noted and is welcome. I certainly look forward to hearing about their progress.

I want to make a few comments on the regulations before us. As we have heard, this statutory instrument is one of the first to follow from the 2023 Act and we know that there are more to come. The regulations cover, in particular, the process whereby the hydrogen low-carbon business plan will be implemented during the initial allocation period of contracts for hydrogen producers; all of this goes towards the target of 10 gigawatts of hydrogen production.

As I understand it, schemes will be identified and quality-assured by the Minister, who will then direct the hydrogen counterparty—it is identical in structure to the low-carbon contracts company—to provide contracts for companies that have been deemed eligible. All of that is absolutely fine and the right thing to do, especially when we consider the initial allocation process.

The Explanatory Memorandum states that the initial allocation will give way to a competitive tender process later on. Some more detail on that would be useful as we go forward; perhaps it will be forthcoming. However, at this moment in time, we are considering the initial allocation process, which is to be informed by the centrepiece of the SI: the low-carbon hydrogen standard, which has been outlined for us today. This refers to a detailed document setting out the greenhouse gas emissions and sustainability criteria that programmes applying for an allocation contract should follow.

I note the stringent qualifying criteria for a project’s eligibility. Of course, they require a project not to exceed a certain level of carbon emissions and to measure fugitive hydrogen—that is, the process whereby hydrogen is produced and all the implications around hydrogen—for its duration. It is a system-wide standard for the low-carbon nature of that hydrogen. For a project to get a direction from the Minister, it must comply with the standard when it receives agreement to proceed.

I just want to pick out that point. As we understand it, the standard will evolve. Indeed, the standard to which the SI refers is version 2 of the UK low-carbon hydrogen standard; that evolved from the initial standard, which was produced immediately after the Act was passed. Version 2 has emerged from consultation with the correction of various elements of the initial standard that could have caused difficulties. It has tightened up several matters that were uncertain, difficult or in need of clarification. It is absolutely clear in the documentation and the Explanatory Memorandum that it is intended that the standard will evolve; this means that the department envisages that it will produce further iterations of the standard in future. The low-carbon hydrogen standard as it currently stands is therefore likely to change. Does the Minister think that this will present some difficulties for those companies that have had their contracts approved? Clearly, although they will be signing up under version 2, they may not necessarily comply if we move on to versions 3 or 4—or more. It would be good to get some assurances around what the implications will be for companies in the earlier rounds.

There needs to be a bit of thought about whether those companies could be disadvantaged as we go forward. Will the Minister have some discretion in considering this? Of course, it could go either way, although it is very unlikely that there would be a relaxation of the carbon emission standards, but there is something to pick up there. Is it possible that, with these changes, companies might be put in a place where there are more costs, expense and planning? It would be useful to have more understanding of the methodology that will be used to determine whether companies are continuing to adhere to the standard once it is set in the contract. From the initial comments, I understand that the Minister is satisfied that this will work well. Could he expand on some of the changes that might come along?

During the consultation, some respondents suggested that further information could be published in a contract register, including outturn volumes, CO² capture rates and CO² capture quantity. It is obvious that a balance needs to be struck between transparency and what useful information is kept confidential but, as making this information public seems like it would have a positive impact, is it that the impact is not deemed significant enough to lower confidentiality? Alternatively, is it that there are further drawbacks to publishing this information that have led the Government to proceed with the initial approach? A bit more clarification around that decision-making would be welcome. On the other hand, 10 of the 23 respondents disagreed with information that the Government are proceeding with publishing, primarily due to the financial aspects. Could the Minister please elaborate on the decision-making process there?

I welcome the progress that has been made and look forward with interest to see how we can move forward in the area of hydrogen, which seems to be fairly fraught—I note the comments of the noble Lord, Lord Naseby. I am also interested in the response on the review. It is very noticeable that that is missing, because of the process. But, in such a new departure, a review would be useful and welcome.

[Lord Callanan (Con)]

I thank all noble Lords for their contributions to the debate. Low-carbon hydrogen will be an essential part of our future energy mix, and the hydrogen production business model seeks to address one of the key barriers to its deployment: the higher cost of low-carbon hydrogen, compared to higher-carbon counterfactual fuels. The Government remain committed to delivering on our hydrogen ambitions—first, those to help support energy security, but also our decarbonisation goals.

The message from the 2023 progress report from the Climate Change Committee was the need to deliver policies to enable deployment at scale of new industries such as hydrogen. I think that sentiment is widely recognised across this House and by industry. Last week’s announcement represents a major step forward in helping producers to deliver a fuel of the future today, backing some of our fantastic businesses here in the UK to go greener. These regulations are vital to enable those contracts to be awarded, so that projects can take the investment decisions that will kick-start the deployment of low-carbon production in all parts of the United Kingdom. But we are not stopping there. A new second round of funding is already available for producers to apply for, so that they can develop the next round of projects and then subsequent ones that help to build on that success. I will deal with some of this in more detail as I go through the questions raised by noble Lords.

Limiting Global Temperature Increase

Debate between Lord Callanan and Baroness Blake of Leeds

Wednesday 13th December 2023 Lords Chamber

[Lord Callanan (Con)]

We are into semantics and wording, but a transition away with clear deadlines is, in our view, a phase-out in all but name. It is not the language that we would have preferred, but in a multilateral negotiation there has to be compromise. We are very clear on the trajectory we are following. We have published numerous plans about our transition. We are accelerating the rollout of renewables and reducing our use of oil and gas, and that will continue.

[Baroness Blake of Leeds (Lab)]

My Lords, I too recognise today’s COP agreement as an important moment for the world. It is the first time there has been a global commitment to a transition away from fossil fuels. There will always be those vested interests pushing back, as there was at COP. The reality is that limiting global warming to 1.5 degrees still requires much to change. Despite the Minister’s attempts to reassure us, it was disappointing that, when their leadership was most needed at COP, our Government put their party infighting first. To keep 1.5 degrees alive, they will need to do better and lead by example. Therefore, as a result of the statement released this morning, what plans do the Government have to show strong international leadership and to make sure that we bring in the changes of direction needed? Are there any plans for changes at this moment in time or not?

[Lord Callanan (Con)]

I repeat the answer I gave earlier: these statements demean the noble Baroness. The UK provided fantastic leadership. We have an official, Alison Campbell, who co-chaired a number of the panels. She was the penholder on a number of these negotiations. We succeeded in all of our aims. There was robust political leadership; Graham Stuart was there. For a lot of the time, our own Minister, my noble friend Lord Benyon, was there. There were many other Ministers who were also there. There was no gap in UK representation or in the agreements that we achieved.

Climate Change: Phasing Out Fossil Fuels

Debate between Lord Callanan and Baroness Blake of Leeds

Wednesday 6th December 2023 Lords Chamber

[Lord Callanan (Con)]

I am sorry to disappoint the noble Baroness, but I have not seen those particular remarks. I am sure they were excellent, and I will certainly take the trouble to have a look at them.

[Baroness Blake of Leeds (Lab)]

My Lords, earlier this month it was revealed that the UK has fallen behind when it comes to attracting investment in renewables, slipping to seventh behind the US, Germany and others. This was a direct result of what EY described as the “diminishing of green policies”. Can the Minister tell us whether the Government have made any assessment of the impact of this on jobs and investment in the UK? How do the Government expect to encourage investment in green industries when they are pursuing climate delaying tactics at home?

[Lord Callanan (Con)]

We are not pursuing climate delaying tactics. Our legally binding net-zero commitment and carbon budget remain exactly the same. I do not know whether the noble Baroness was listening to the answer I gave to the noble Lord, Lord Teverson, but we are attracting record amounts of inward investment. At the Global Investment Summit, a whole range of inward investors promised considerable new funding in the order of £30 billion to all these exciting new industries, in which the UK is a world and European leader.

Electricity Network Connection Action Plan

Debate between Lord Callanan and Baroness Blake of Leeds

Wednesday 22nd November 2023 Lords Chamber

[Lord Callanan (Con)]

Of course, there are still some onshore wind connections being built in both Scotland and Wales, and a few in England as well. We are committed to looking at the barriers that exist and overcoming them.

[Baroness Blake of Leeds (Lab)]

Ofgem’s new mandate to prioritise the UK’s net-zero target comes into force on Boxing Day—welcome progress secured by an amendment to the recent Energy Bill. Given that the review on reform of the electricity connections system began before this change, what discussion have the Government already had with Ofgem to make sure that decisions are made in line with the new mandate, thereby ensuring that every opportunity it presents is taken to ensure progress?

[Lord Callanan (Con)]

I think the noble Baroness will find that Ofgem’s view is that it was already fulfilling that mandate—and, of course, the vast majority of the new connections are because of new renewable electricity, which is to fulfil our net-zero obligations. Ofgem is fully in line with that.

Biomass Strategy 2023: Cross Sectoral Sustainability Framework

Debate between Lord Callanan and Baroness Blake of Leeds

Wednesday 15th November 2023 Lords Chamber

[Lord Callanan (Con)]

I did not quite hear the start of my noble friend’s question, but if she is asking whether we want to source more sustainable biofuels from UK sources, the answer is yes, absolutely.

[Baroness Blake of Leeds (Lab)]

The transition to clean power will require a massive expansion of alternative energy sources right across the board, whether biomass, onshore wind, solar or others, which will also deliver energy security and hundreds of thousands of good green jobs. This cannot be achieved without reviewing the sustainability and economic competitiveness of each energy source and accelerating carbon capture and storage. How are the Government working comprehensively towards these two vital functions?

[Lord Callanan (Con)]

I absolutely agree with the first part of the noble Baroness’s question. She is right that there needs to be a variety of sources of power: renewable sources, biomass linked to carbon capture and storage, and long-term hydrogen production. Of course, in the net zero strategy we look at all these things in the round, linked to a long-term analysis of how the power needs of the UK are best met going forward.

Carbon Capture and Storage Infrastructure Fund

Debate between Lord Callanan and Baroness Blake of Leeds

Monday 16th October 2023 Lords Chamber

[Lord Callanan (Con)]

It is not one or the other; we need to do both. Of course we need to push ahead with renewables, and I have set out many times in this House how well we are doing. Almost 60% of electricity in the last quarter was delivered by renewables, but CCUS is also essential. We have committed £20 billion-worth of funding to CCUS over the next few years because everybody thinks it essential to meeting our goals. It also offers a massive export opportunity for this country, as we have expertise in many of these technologies. The estimate is that capturing 20 million to 30 million tonnes of CO₂ by 2030 could deliver up to 50,000 jobs, many of them in our industrial heartlands.

[Baroness Blake of Leeds (Lab)]

My Lords, the Government have only recently entered negotiations with track 1 clusters, despite the climate investment fund being announced three years ago. They have earmarked £0.3 billion of the £1 billion fund for this financial year. This does not leave much time for negotiating. Are the Government concerned that this deadline, caused by their own delays, will impact on their negotiating position? Is the Government’s priority using this money well or simply using it?

[Lord Callanan (Con)]

My Lords, this makes me think that we cannot win on this. One part of the Opposition does not want to award these contracts at all and the Labour Party thinks we should have done it earlier. The reality is that we are proceeding with negotiations. It is our aim to have the contracts let for the first 10 projects by quarter 3 of next year. This is a really exciting technology, but we need to do the negotiations properly and get maximum value for money for the taxpayer from what is an emerging new industry.

Climate Change Policies

Debate between Lord Callanan and Baroness Blake of Leeds

Wednesday 20th September 2023 Lords Chamber

[Lord Callanan (Con)]

Yet again, the noble Lord is wrong in his statements. As he well knows, we have the largest offshore wind industry in Europe and the second largest in the world. Other European countries are racing to catch up with our record. We have over- achieved in meeting our carbon budgets, and I remind the House that these are legally binding commitments. We are on track to overachieve on carbon budgets 4 and 5. We are also on track to achieve carbon budget 6, which does not start until 2033, so I am afraid the noble Lord’s statements are wrong.

[Baroness Blake of Leeds (Lab)]

My Lords, it is worth emphasising the comments from Ford UK in its response to today’s news:

“Our business needs three things from the UK government: ambition, commitment and consistency. A relaxation of 2030 would undermine all three”.


These are not isolated comments; many businesses have made more. Why are the Government content to hurt working people by selling out British business and the long-term future of our economy in this way?

[Lord Callanan (Con)]

The noble Baroness makes a number of statements before she has even heard what the Prime Minister has to say later; perhaps she might want to read what the Prime Minister actually announces and revise her statements in light of that.

2030 Emissions Reduction Target: Heating

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 5th September 2023 Lords Chamber

[Lord Callanan (Con)]

The noble Baroness has been dogged in her pursuit of this. It is very difficult to give an estimate, as she asks me to do. It would depend on the number of applications and its acceptability for local communities.

[Baroness Blake of Leeds (Lab)]

My Lords, including industrial processes, heating accounts for about 37% of total UK carbon emissions. Of the 17% of carbon emissions from heating and cooling in buildings, the vast majority can be attributed to domestic homes. Analysis shows that a third of the money pledged for retrofitting and alternative systems has not yet been allocated. That is approximately £2.1 billion unspent. When and how will this be resolved, or do the Government believe that they are on track to reduce emissions as planned without it?

[Lord Callanan (Con)]

I will have to look very closely at the noble Baroness’s figures. I do not recognise £2.1 billion as being unspent; in many of the schemes we are oversubscribed in applications, but we will press on with the progress in many of these schemes. In fact, I went to visit a number of them in the noble Baroness’s home area of Leeds only a few weeks ago, and they are proving extremely successful.

Oil and Gas Windfall Tax

Debate between Lord Callanan and Baroness Blake of Leeds

Wednesday 19th July 2023 Lords Chamber

[Lord Callanan (Con)]

I thank my noble friend for the kind invitation to respond to that. He will understand that I cannot comment on licensing decisions.

[Baroness Blake of Leeds (Lab)]

My Lords, analysis of the Office for Budget Responsibility data in May this year showed the extent to which oil and gas firms were able to reduce their energy profits levy while still making record profits. Between this loophole, the decision against a 78% rate and the decision not to backdate to catch all the surging profits, it is estimated that over £10 billion of potential tax will be missed between 2022-23 and 2023-24. I ask the Minister: have the Government given any consideration to fixing the levy to deliver the full benefits proposed since these figures came out?

[Lord Callanan (Con)]

I do not know where the noble Baroness gets her figures. I responded in my previous answer to the question about investment allowances—policies that the Opposition have called for. The energy profits levy is expected to raise about £26 billion and is set at a rate of 75%, which is one of the highest in the world. I realise that the Labour Party’s policy is to tax firms into extinction, but we need to leave them with some profits. Much of the profits of oil and gas companies goes towards pension funds and other shareholders which many pensioners and others rely on for their income.

Drax Biomass Power Station

Debate between Lord Callanan and Baroness Blake of Leeds

Monday 3rd July 2023 Lords Chamber

[Lord Callanan (Con)]

The noble Lord was probably in the other place when the regulations and laws for Ofgem were passed. It is an independent regulator; that is the whole principle of it. Until I see any evidence that it is not carrying out its job satisfactorily, I will continue to have confidence in it.

[Baroness Blake of Leeds (Lab)]

My Lords, when Ofgem opened its investigation into Drax’s biomass sustainability reporting a month ago, it made clear it would act if it found breaches of the rules—the right approach, surely, to a single case. However, what assessment have the Government made of wider compliance with reporting requirements and what steps are they taking to improve monitoring, particularly with regard to the origin of fuel sources?

[Lord Callanan (Con)]

I refer the noble Baroness to the answers I have given to previous questions. There are other biomass operations that fulfil the sustainability criteria. If any evidence is produced and if the noble Baroness has any evidence, I would be delighted to pass it on, but until then we should trust what they say.

SMEs: Net-zero Targets

Debate between Lord Callanan and Baroness Blake of Leeds

Wednesday 7th June 2023 Lords Chamber

[Baroness Blake of Leeds]

To ask His Majesty’s Government what steps they are taking to support small and medium-sized enterprises in working towards net-zero targets.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, the Government have launched a campaign aimed at increasing the energy efficiency of businesses, charities and public sector bodies. We continue to support UK businesses to meet their net-zero commitments via the UK business climate hub. SMEs are encouraged to join the UN’s Race to Zero initiative; more than 4,200 UK small businesses have done so. We are also developing a dedicated energy advice service for SMEs, which is due by the end of the year.

[Baroness Blake of Leeds (Lab)]

I am sure that we all value the important contribution that SMEs make to our economy. One of the issues consistently facing them is their ability to employ and retain skilled workers in a highly competitive jobs market. This is especially prevalent where skills are lacking, such as in retrofitting buildings and in new green technologies. The scale of the challenge of achieving net-zero targets presents SMEs working in these areas with a great opportunity. However, barriers such as shortages of skills and available finance are preventing them making the progress that they seek to achieve. What steps are the Government taking to promote green jobs, skills training and competitive supply chains, particularly by working with industry, the education sector and the finance sector to create pathways into these jobs?

[Lord Callanan (Con)]

The noble Baroness makes an important point. The encouragement of green jobs and helping workers to go from the old fossil fuel economy to new jobs is a challenge. We are spending several billion pounds a year working with the DfE and across the various green homes grants. We have a number of highly skilled green jobs funds, which industry accessed. There is no one simple answer but she is right; it is a job that we are working on.

Climate Change Committee: Discussions

Debate between Lord Callanan and Baroness Blake of Leeds

Thursday 27th April 2023 Lords Chamber

[Lord Callanan (Con)]

I actually agree with him on that particular statement. Of course we need to move towards phasing out fossil fuel use; nobody disagrees with that. We have a legal commitment to do that and we are doing so through a transition. As I said in response to previous questions, the question is where we get those reserves from in future. Even with new licensing, UK production in the North Sea will continue to decline at a rate of about 7% per year. At the moment we are importing LNG to satisfy our domestic demand, which has about twice the carbon footprint of that produced in the North Sea. I really do not understand the point the noble Baroness is making.

[Baroness Blake of Leeds (Lab)]

My Lords, as we have heard, the CCC’s report last month emphasised the need for decarbonising and expanding the electricity system to rapidly reduce the UK’s demand for fossil fuels. As mentioned in the report, the Government still have not provided a coherent strategy or essential details on how they will achieve their goal of decarbonisation by 2035. When will these be provided? When will the Government accept that the quickest and cheapest way to offer the required supply of variable renewables to do so will involve onshore wind and solar?

[Lord Callanan (Con)]

Decarbonising our electricity system, which we are doing at the fastest rate of all G7 countries, will require much more electrification. Renewable generation capacity is currently six times greater than in 2010. We are expanding to deliver up to 50 gigawatts of offshore wind capacity by 2030. We have said that we will also consider onshore wind in future CfD rounds. We have one of the highest solar capacities in Europe as well—in fact, we have more solar capacity than even countries such as France.

Energy Bill [HL]

Debate between Lord Callanan and Baroness Blake of Leeds

Report stage
Monday 17th April 2023 Lords Chamber

[Baroness Blake of Leeds (Lab)]

My Lords, I will speak briefly to the amendments in this second group, starting with Amendment 65 from the noble Lord, Lord Teverson. All I can do is echo his clear requests for confirmation that the Government will be more flexible and for clarity around multipurpose interconnectors, particularly with regard to the relationships between Great Britain and other jurisdictions. Will the interconnectors operate in a similar way to the offshore electricity transmission regime? I hope that the Minister will be able to give the reassurance and clarification that the amendments in the name of the noble Lord, Lord Teverson, ask for.

I thank my noble friend Lord Whitty for tabling Amendment 68, on an issue that he feels passionately about and comments on whenever the opportunity arises. We know that, as the electricity network develops new facilities and new renewable sources of generation, there will be a need for more storage capacity. As we have said, there is a non-exhaustive list of technologies, and new ones coming on stream that we might not have considered so far, and so comments must extend beyond batteries. The important part of this amendment to consider is a commitment from the Government to give support to assist with developing the storage capacity that we need.

The further amendments, led by the noble Lord, Lord Teverson, look to remove legislative barriers to the electrification and decarbonisation of oil and gas facilities, and to work towards a green financing framework. We must be mindful of the uncertainty of costs, going forward. When considering these amendments, it is important to consider decarbonisation, which is critical to the Bill, but also affordability and ensuring that energy is within the reach of every person in the country.

We know that the zero-carbon electricity system is possibly 19% cheaper than gas-based facilities, and that UK gas power is currently estimated to be nine times the amount of renewable power. Driving down energy costs means that we need cheap, clean power. We must take this rare opportunity presented by the Bill to ensure that we use the legislative framework to drive measures that will, in the short-term, reach towards action to decarbonise the electricity system and bring down costs.

The passage of the Bill through the House has been quite lengthy, but we really must take the opportunity presented to us to ensure that we make the progress that is required.

[Lord Callanan (Con)]

My Lords, I thank all Members who have contributed to the debate.

I completely agree with the last point made by the noble Baroness, Lady Blake. It is very important that we use the powers to do exactly what she suggested: to drive the decarbonisation agenda. Despite some of the criticisms, we are making excellent progress in this country—much better than most other G7 countries. However, we must be very conscious of the cost to consumers.

Amendments 125 to 129 were tabled by the noble Lord, Lord Teverson. I was amused to see that he has incurred the wrath of the noble Baroness, Lady Bennett, in trying to come up with pragmatic, sensible solutions for the energy system of this country. All I can say is, “Welcome to the club”.

I will start with his comments on the North Sea Transition Authority. We are engaging with industry to ensure the delivery of the North Sea transition deal emissions reduction targets and the successful rollout of electrification, which we all want to see. We are also considering how to utilise the Secretary of State’s existing powers, if needed, to support electrification. We are confident that, in this area, additional primary legislation is not required. As the noble Lord mentioned, the North Sea transition deal commits the offshore oil and gas sector to reducing emissions from operations to 50% of 2018 levels by 2030. As I have said repeatedly in this House, during the transition there will be an ongoing need for existing oil and gas resources, but it makes sense to extract them with the minimum possible carbon emissions.

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[Baroness Blake of Leeds (Lab)]

My Lords, I declare my interest as a vice-president of the Local Government Association. It will come as no surprise to Members of the House that I support all these amendments, particularly Amendment 94 in the name of the noble Lord, Lord Ravensdale. Going by my personal experience, not giving a broader role to local authorities is such a missed opportunity and I cannot understand why these amendments would not be supported, particularly since it is, in all honesty, such a mild request: better definition of local authorities’ role; and asking for guidance, which is a perpetual demand from local authorities, I have to say, in trying to move things forward. As we know, other key reports and reviews have recognised just how important it is to get local buy-in and to get local stakeholders involved.

I turn to the amendments in the name of the noble Baroness, Lady Boycott, and signed by others. It is essential that we bring these elements together. What we are talking about, without repeating the technical issues that have been raised so powerfully today, is that we need to aim to have a framework that will support the growth of community and smaller-scale energy schemes and also provide regular reporting so that everyone knows how things are progressing. I have to say that all we are asking for is the following of an evidence-based approach. We can look at the success of other, related schemes in these areas that have been successfully led by local authorities. These include the rollout of electric vehicles, with local authorities leading by example in changing their fleets to electricity. District heating is another example where, when you have very strong local buy-in, the success moves forward. What we are asking for here is the ability to inform, shape and enable key aspects to deliver energy decarbonisation.

I believe very firmly in involving local stakeholders from the beginning; they are far more likely to come on board with schemes that might have aspects that they find work against their interests if they understand and are included in the bigger picture. Many people will make compromises when they understand the greater good, and the opportunity has been highlighted over the past year by the dramatic increase in energy prices and the risk of energy scarcity. I think the landscape has changed in this regard. Let us give confidence to local people and communities by developing the framework for the growth of communities and smaller-scale energy schemes. It is regrettable that more progress has not been made so far. The role of Ofgem in this, giving clear methodology and quality standards, is essential and will give the credibility that is needed, as the noble Baroness, Lady Boycott, so eloquently pointed out.

Through the involvement of local communities, we are asking for a more effective and better targeted delivery of national priorities; and we all know that we need more determination to deliver on the ground. I hope we will see some movement in this area and can only echo other comments: if we fail to make progress, this is such wasted potential, and I hope we will hear some positive comments with regard to these amendments.

[Lord Callanan (Con)]

I thank all Members who have contributed, particularly the noble Baronesses, Lady Boycott and Lady Bennett, for Amendments 134 and 135—the noble Lord, Lord Lucas, proposed them but sadly is not in his place. I am grateful to noble Lords who met me and officials recently to discuss this matter and give us a chance to talk through the departmental thinking.

As I said when we met, the Government recognise the role that community and local renewable energy schemes can play in supporting our net-zero targets. But we continue to believe that small-scale, low-carbon electricity generation should be brought forward through competitive, market-based solutions. A key feature of the smart export guarantee regime is to allow suppliers to set both the tariff level and the structure and for suppliers themselves to determine the value of the exported electricity alongside all the associated administrative costs. Any move to introduce a regulated price for exported electricity has the potential to limit the overall scope for innovation and export tariff packages. This would fundamentally undermine the principles of the supported export guarantee policy objective, which looks to encourage a market-driven approach.

Furthermore, the amendments as drafted are unlikely to result in better outcomes for consumers compared with other tariffs that would be available from suppliers. First, there would be initial set-up and ongoing delivery costs associated with the scheme for both Ofgem and the suppliers, which we expect would be material. These costs would be recovered via the service fee charged by suppliers and therefore probably reflected in the local tariff price.

Secondly, small-scale, low-carbon generation will, by its nature, be intermittent and unable to supply local consumers at all times. Suppliers would therefore need to buy additional wholesale energy from other sources—for example, during periods of peak demand—and incur all the associated network and system costs. The local tariff would also be required to have regard to the export price paid to the local generator. This would create a somewhat perverse outcome where higher export prices would benefit the generator but also increase the tariff price.

As a result, there is no guarantee that the local tariff would be lower than the current regulated standard variable tariff. In fact, there is some reason to believe that it would actually be higher.

--- Later in debate ---

[Baroness Blake of Leeds (Lab)]

My Lords, I thank all noble Lords for their very important contributions on the amendments in this group. It is an enormous privilege to follow the noble Lord, Lord Deben, with his experience and expertise in the subject matter before us today. I want to keep my comments brief as we have had a lot of opportunity in different discussions and debates, particularly during the passage of this Bill, to try to get across just how strong the feelings are around the House on these matters.

I pay tribute to the noble Baroness, Lady Sheehan, for her amendment on the burning of methane and other hydrocarbons produced during oil extraction. As we have heard, very distinguished bodies have come out against this. In particular, there is a real concern that not taking notice of the need to address this issue undermines the UK’s commitments made at COP 26 and COP 27 under the global methane pledge. We need to take this seriously. We have heard how important the contribution of methane is towards the UK’s net greenhouse gas emissions. Just to add to the statistics around this, during the last decade the UK has wasted £2.6 billion in lost gas sales due to flaring and venting, and released 45 million tonnes of carbon dioxide into the atmosphere. When you put that into the context—as the noble Baroness, Lady Sheehan, did—of what could have been done with that fuel, it is a lesson that needs to be learned.

I concentrate my comments this afternoon on Amendment 131 in the name of the noble Lord, Lord Teverson, and supported by the noble Baronesses, Lady Sheehan and Lady Boycott, and my noble friend Lord Lennie. As we have heard, this amendment is specifically to prevent the opening of new coal mines in England and is a response to the proposed opening of a new coal mine in Cumbria. I have said before that I am really concerned about the message this coal mine sends out. It undermines totally our claim to be an international leader on climate. One only had to look at the press reports from around the world after the announcement was made to understand just how damaging this is.

I fully support the comments from the noble Lord, Lord Deben, on the planning system. I hope that we can move forward on this, so that local authorities and anyone who has a role in making decisions through the planning system have the necessary tools to stand up and not be concerned about the extortionate costs that would come their way if, after having turned down an application, it was turned over on appeal.

The other area that we have not emphasised enough is this: we cannot even claim that the coal mine in Cumbria would provide secure, long-term jobs. That just is not part of the equation here. As we have heard, it will not benefit British Steel. We are already seeing a significant decline in the coal used by the UK steel industry, including a 19% drop in demand for coking coal to run UK blast furnaces. As the noble Lord, Lord Teverson, said, the future is not coking coal.

I am not sure if anyone has mentioned the rather fanciful claim that this mine would be the first carbon-neutral operation of its kind. How can we stand here and say this seriously and honestly, and with particular regard to the fact that, as we have heard, a high percentage of the coal would be exported and so we would have no control over its use.

I am very disappointed that part of the debate around opposing the mine has ignored the far greater opportunities of investing in new green technologies for the local area. It is a perfect area for so many of the possibilities that are coming our way with real, sustainable jobs.

I repeat that Alok Sharma, a former president of COP, said last December that opening

“a new coalmine would send completely the wrong message and be an own goal”.

Surely we should be doubling onshore wind capacity, tripling solar capacity and quadrupling offshore wind capacity. I hope I have made it clear that on our Benches we support the amendment in the name of the noble Lord, Lord Teverson.

[Lord Callanan (Con)]

I thank all noble Lords for their amendments and contributions.

I will just make an observation first, having listened with great interest to the noble Baroness, Lady Blake. I was actually hoping that the noble Lord, Lord Lennie, would reply to this debate, as a fellow politician from the north-east of England. He will know very well that, in virtually every election that I fought in the region, the Labour Party campaigned against the closing of coal mines. I will be gracious and accept that time moves on, but it was only fairly recently that some of their parliamentary colleagues in the other place were campaigning for the opening of new coal mines and against the closing of old ones. Time moves on in politics but, had you said to me 10 or 15 years ago that I would be standing up in the House of Lords opposite a Labour Party telling me it does not want to see the opening of any coal mines, I would not have believed you.

Energy Bill [HL]

Debate between Lord Callanan and Baroness Blake of Leeds

Report stage
Tuesday 28th March 2023 Lords Chamber

[Baroness Blake of Leeds (Lab)]

I make reference to the Minister’s amendments, particularly the issue he highlighted of including the new subsection that would allow regulations to make provisions requiring that energy consumers benefit. I want to ask just one question on that. While we welcome that provision, there is a concern. If we are allowing regulations to make this provision, what guarantee is there that they will actually be used? Are the Government committing to using them, if they use Clause 66 powers?

I support all of my noble friend Lady Liddell’s comments on her amendment. The main amendment for me is that just referenced by the noble Baroness, Lady Worthington. We spent a significant amount of time talking about this area in Committee, so I will not go through all the detail. However, as the noble Baroness mentioned, in the circumstances we are in, with the extra pressure on the cost of living from energy bills, why are we looking at a situation where we could be asking householders to pay more money? I acknowledge that there will be further consultation but I hope that, as well as it being done thoroughly, its conclusions will lead to the spirit of our amendment. As shown in our amendments, we believe that the Secretary of State could put a levy on gas shippers but not on gas and electricity suppliers, thus preventing responsibility for the levies falling on households.

We need to reflect on the spirit of the Bill—the whole idea is that, while reforming energy systems, we do everything we can to protect consumers and their ability to pay their bills. Every possible action should be taken to minimise the impact on consumers, focusing always on affordability. I am disappointed that the Minister has not gone further on this point. Unless he indicates a willingness to do so, due to the strong feelings surrounding the protection of consumers from inflated bills, I am minded to test the opinion of the House.

[Lord Callanan (Con)]

My Lords, I will start by addressing Amendments 18 and 19, which the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, have retabled from Committee. I thank the noble Baroness, Lady Worthington, for her contribution. She requested further detail; I will provide clarification in writing, if that is okay with her.

These amendments seek to ensure that funding for the hydrogen production business model can be provided through the Consolidated Fund. They also seek to restrict where a levy may be placed, removing the option for levying energy suppliers and requiring that a levy could be placed only on gas shippers. They are intended, I assume, to take responsibility for levies away from households.

The powers in the Bill already enable Exchequer funding of the hydrogen production business model, which will initially be Exchequer-funded. It is therefore unnecessary to include additional provisions that enable the business model to be funded through the Exchequer.

The proposal in these amendments to require that the levy could be placed only on gas shippers will limit options for the levy design, with possible implications for its costs and ultimate impact on consumers. There is no such thing as a free lunch. A gas shipper levy would be a completely novel scheme, with administration and set-up costs that could be considerably higher than those required to implement a supplier levy; this is well understood.

The Government have set out their intention not to levy gas shippers in the near term. Levies on energy suppliers have been used in the past to support the deployment of low-carbon electricity and increase the proportion of green gas in the gas grid. These levies are well understood by the private sector. By taking a similar approach with the hydrogen levy, we can help provide investors with the confidence they need to invest in low-carbon hydrogen production projects and support the delivery of our 10-gigawatt production capacity ambition.

By seeking to ensure that the levy could be placed only on gas shippers, these amendments appear to try to protect energy consumers from the costs of a levy. However, as I outlined when they were tabled previously, we anticipate that any costs associated with a levy on gas shippers would ultimately be passed on to energy consumers in a very similar way to levies on energy suppliers. As I say, there is no such thing as a free lunch. It is the opinion of all the policy analysts that it is unlikely that the amendments would have their intended effect.

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[Baroness Blake of Leeds (Lab)]

I will speak to Amendment 40 in the name of the noble Baroness, Lady Worthington. I acknowledge that this will be her last meeting for some time; I think I am allowed to say that. In my relatively short time here, I have come to value her passionate interjections and her incredible knowledge on the subjects on which she has spoken. I wish the noble Baroness well in her temporary visit overseas and look forward to when she is able to come back and join us. I hope that we can keep in contact in the meantime.

While we do not support new fossil fuel extraction licences, we have to be mindful of existing licences and renewals. We have to take these issues seriously.

It is fair to say that we do not want to turn off the taps, so there will be merit in reducing carbon emissions from those existing licences. To what extent are the Government considering geological storage as a solution? I am sure we have all received briefings giving us the background on how successfully CO₂ has been stored over many years. There is an opportunity, but how much can be stored, and can we make full potential of the opportunities that are presented to us off the shores of this island?

[Lord Callanan (Con)]

I also pay tribute to all the work that the noble Baroness, Lady Worthington, has done. It is indeed a great mystery to all of us why she seemingly wishes to swap the lovely, warm, calm weather of southern England for California, but I suppose that will become clearer over time. I thank her for the contribution she has made, and I am sure that we will hear a lot more from her in the future.

I am happy to contribute to this debate on Amendment 40 and the issue of the carbon take-back obligation for fossil fuel extraction. The concept of such an obligation is indeed worthy of debate, but the noble Baroness will understand when I say that its inclusion in the Bill is a little premature. Our primary instrument to decarbonise the UK economy is the emissions trading scheme, which provides a market price for emissions of carbon dioxide, incentivising investment in decarbonisation and ensuring that it happens wherever—and however—it is most cost effective to do so.

Introducing a carbon take-back obligation now, at such a pivotal time for the development of CCUS in the UK, could create uncertainty for industry and have a detrimental delaying effect on investment, resulting in investors looking to opportunities that exist in many other countries—perhaps even in California; one never knows. Such an obligation could also increase the costs of CCUS, making UK production of steel, chemicals, refinery products and other industrial products more expensive than that of their competitors, potentially impacting on our industrial competitiveness. All these issues need further detailed policy consideration before further legislation can be considered.

As I mentioned to the noble Baroness before the debate, the CCUS Council is the Government’s primary forum for engaging with representatives across the CCUS sector, and we have indeed asked the council to consider and provide advice on carbon take-back obligations. The concept indeed warrants further consideration, but I am sure the noble Baroness will accept that it is not for this Bill at this time. With that explanation, I hope she will feel able to withdraw her amendment.

Alternative Fuel Payment Pass-through Requirement (England and Wales and Scotland) Regulations 2023

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 14th March 2023 Grand Committee

[Lord Callanan (Con)]

My Lords, I was just moving on to the issue of enforcement. The approach in these instruments is consistent with other energy schemes. If an intermediary does not pass on the benefit to an end user who is entitled to it, that end user will be able to pursue recovery of the benefit debt through civil proceedings. Should a court rule in the end user’s favour, they would be entitled to the payment plus interest. The interest is set at 2% above the Bank of England’s base rate.

The Government have published guidance on the GOV.UK website to ensure that requirements are clear to all parties. The guidance includes template letters to support end users, such as tenants, which they can use to contact their landlord should they be concerned about their energy bills. We are of course mindful of the concerns that this House and the other place have raised with us about enforcement. The Government will continue to keep the scheme under review. We will continue to work with a wide range of stakeholders to ensure that these pass-through requirements work for everyone who is in scope, including vulnerable groups. We want them to receive what they are entitled to.

In conclusion, these instruments are vital to ensure that support reaches the people it is designed to help. They are essential to the effectiveness of the alternative fuel payment scheme in Great Britain and the non-domestic alternative fuel payment across the United Kingdom. They will ensure that intermediaries pass on the support to those who really need it: those households and non-domestic energy customers who are most vulnerable to high energy costs. It is for all these important reasons that I commend these regulations to the Committee.

[Baroness Blake of Leeds (Lab)]

My Lords, I thank the Minister for a very full explanation of the SIs before us. I am pleased that the Government have fully caught up with the need to support consumers; I slightly disagree with the suggestion that this was done in a timely manner, but we and many others out there know about that. There was concern over a rather difficult period for the Government over the summer months but, on the back of this, I can underline that we will not oppose these SIs. We welcome them and want to see the help and relief that we have been discussing passed on, through the pass-through arrangements, so that people get the relief when they do not get the upfront sums directly.

Carbon Budgets: Methane Flaring

Debate between Lord Callanan and Baroness Blake of Leeds

Thursday 9th March 2023 Lords Chamber

[Lord Callanan (Con)]

My noble friend makes a good point, and I touched on it in an earlier answer. We want to try to trap as much of this gas as possible because it is a valuable resource. As I mentioned, the green gas support scheme is a system that uses a gas levy to support anaerobic digesters across the country to take some of the waste food and organic matter that can be turned into useful gas that is fed into the gas main.

[Baroness Blake of Leeds (Lab)]

My Lords, methane flaring accounts for approximately 145 billion cubic metres of gas per year globally, contributing to the overall methane emissions that cause 25% of global heating today. We can dispute the studies; indeed, I shall reference the study in the journal Science that came out last week which found that methane flaring is responsible for five times more methane entering the atmosphere than previously thought. I am quite taken aback by the complacency here. Does it not at least warrant further consideration if studies are disputing the evidence that the Minister has cited today? Bearing that in mind, and given the worries about the recent surge that have been highlighted, what progress is being made on farming and landfill, as has been mentioned? I do not think we have had the detail. When can we expect the Government to produce the latest, much-promised plan to achieve all targets and net zero?

[Lord Callanan (Con)]

The noble Baroness asked a number of questions there. We can argue about the figures but we can all agree that it is something that we want to eliminate as quickly as possible. We have a target to get rid of all flaring emissions by 2030, as I mentioned in earlier answers, but let us not get this out of proportion. These are 1.6% of our emissions, which we should eliminate as quickly as possible, but, as the noble Baroness mentioned, the bigger sectors to tackle are agriculture and waste, as other noble Lords have mentioned.

Green Investment

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 7th March 2023 Lords Chamber

[Lord Callanan (Con)]

My noble friend makes an important point. I know how committed he is to and how hard he works for the principle of international free trade, which we totally support. We want to engage with the US on these matters but we need to convince it and, of course, the EU that free, fair and open trade benefits everyone. That is the key point that we need to put across to them.

[Baroness Blake of Leeds (Lab)]

My Lords, the scale of potential investment in both the US Inflation Reduction Act and the EU green deal shows a key recognition of just how much opportunity there is in investing in net-zero projects. The European Commission cites 35% to 40% of all jobs as potentially affected by the green transition, while analysis by Princeton University’s REPEAT project suggests that the policies in the US Act will create hundreds of thousands of jobs. Any leakage of investment away from the UK will also leak jobs, as the Question from the noble Lord, Lord Teverson, suggests. I ask the Minister to be specific about what steps the Government have taken to protect these opportunities for our communities to level up. For example, can we expect to see reference to this in next week’s Budget?

[Lord Callanan (Con)]

The noble Baroness would not expect me to go into detail but we will set out our plans shortly. However, it is important to recognise that the UK has made excellent progress in attracting private investment into low-carbon sectors. PwC’s 2023 annual global CEO survey found that the UK is now in the top three in the global investment market, second only to the US and China. Bloomberg New Energy Finance estimated that, in 2021 and 2022, the UK saw £48 billion of net-zero investment coming into the UK.

Nuclear Regulated Asset Base Model (Revenue Collection) Regulations 2023

Debate between Lord Callanan and Baroness Blake of Leeds

Wednesday 22nd February 2023 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

I beg to move that these draft regulations, which were laid before the House on 15 December 2022, be considered. The Government recently took the historic step of investing in the development of Sizewell C—our first investment in a nuclear project for 35 years—and have designated the project as the first to use a RAB model. In approving the instrument, we would be helping to fully establish the model for potential use on all new nuclear projects, which we need to ensure a low-carbon, low-cost and resilient electricity system, so that we can reach our emission reduction target and provide energy security.

The RAB model offers a chance to do this in a way that draws in new sources of finance at a lower cost of capital, thereby reducing the overall cost of a nuclear project for consumers compared to current funding models. A nuclear company that is designated under the Nuclear Energy (Financing) Act is entitled to receive a regulated revenue stream, overseen by the regulatory authority, Ofgem, which of course has a duty to protect the interests of all consumers. This would cover the cost of activities related to the design, construction, commissioning and operation of the relevant nuclear project, as well as activities related to an approved funded decommissioning programme. These regulations provide the framework to implement secure, long-term funding to nuclear projects.

In accordance with Section 18 of the Act, the Secretary of State may direct the designated revenue collection counterparty, the Low Carbon Contracts Company, to offer to contract with a designated nuclear company. Once the revenue collection contract is entered into, the regulations establish a mechanism for all licensed electricity suppliers in Great Britain to make payments to the counterparty so that it can pay the amounts owed to nuclear companies. The revenue collection counterparty may also return money to suppliers, hold sums in reserve and cover up its losses through requiring suppliers to post collateral and undergo a payment mutualisation process in case of supplier default. The regulations also set out the arrangements for a supplier levy to pay for the revenue collection counterparty’s operating costs.

The contracts for difference revenue stream was designed with similar considerations in mind to the nuclear RAB revenue stream, such as incentivising private sector investment in secure low-carbon electricity. The CfD revenue regime has been operating for a number of years and is familiar to suppliers, investors and generating companies. In developing these regulations we have therefore strived, where possible, to replicate the revenue regime set out in the CfD legislation, with differences to account for the specific features of a nuclear RAB model.

Two key features of this are, first, that the revenues which the nuclear company is entitled to receive from suppliers under these regulations would be regulated by Ofgem, whereas CfDs do not have this regulatory oversight. Secondly, these regulations will allow the revenue collection counterparty to collect revenues from suppliers during a project’s construction phase as agreed in its revenue collection contract, not simply during the operations phase, as with the CfD regime.

Throughout the project’s duration, the revenue stream from suppliers under these regulations will work in a similar fashion to the CfD regime. We anticipate that using a recognised and reliable revenue model will minimise the impact of introducing such measures on suppliers and their consumers.

We carried out a full public consultation last year and sought views on the general idea of these regulations replicating those which underpin the CfD revenue mechanics, and the differences needed to account for the specific features of a nuclear RAB. Overall, we received 40 responses from organisations and members of the public, who were mostly in support of the proposals. Accordingly, in our government response, published on 14 December 2022, we set out plans to proceed as proposed.

Following careful consideration, we consider it preferable not to exempt specified groups under these regulations, as costs could be shifted on to other vulnerable groups not included under such an exemption. Instead, we want to pursue measures which support wider protections for vulnerable groups, such as the cost of living payments for pensioners and those on means-tested benefits announced in November’s Autumn Statement. I assure the Committee that, as the Government set out during the Act’s passage, we will ensure that consumers’ interests are protected and steps taken to prevent consumers bearing unacceptable costs. We have estimated that a generic nuclear project approved in this Parliament would add approximately £1 a month to a typical household bill during the project’s construction phase.

In conclusion, this secondary legislation represents an essential step towards implementing the nuclear RAB model by ensuring a secure and consistent revenue stream. This model is a key enabler for the Sizewell C project, and the nuclear projects we need beyond that, to help ensure a secure, low-carbon and low-cost future electricity system. I commend these draft regulations to the Committee.

[Baroness Blake of Leeds (Lab)]

I will try to be brief in my questions; I am happy to take answers in writing if that is appropriate. I thank the Minister for his very thorough summary of the regulations we have before us today. I agree that this is an interesting way of securing funding for what I think we are all coming to realise is going to be an important contribution to the energy crisis we face at the moment.

The Minister tried to give reassurance about the customer and the role of Ofgem in that. One of our concerns is that this model is complex and long-term. Potentially, if things go well, it could be very successful, but our concern is about if things do not go so well, costs overrun and all those sorts of things. Some reassurance on how customers’ interests will be protected would be very helpful. The other factor in terms of costs is whether we are talking just about Sizewell C or about all the other nuclear projects. Where do we stop? If £1 becomes £10 or £20, perhaps those affected might have more to say about this.

The other concern is that, if things do not go so well, projects get cancelled or other things happen, we are talking potentially about a large sum of money that could be accrued through this model. Could I have a bit more explanation about how the mechanisms could ensure that money not used in the project or any future project would be returned to the customer? There is a concern that the Low Carbon Contracts Company would just sit on customers’ money rather than handing it back. What would the mechanism be to hand that money back?

Moving on, there was a question in the debate in the Commons about whether this will be reviewed or not. There was a suggestion that a review could cause a lack of confidence, and therefore that there should not be one, but the Minister then commented that there will be a review in 2025. It would be good to have some clarification about when a review is a review or not.

[Lord Callanan (Con)]

I thank the noble Baroness for her questions—and for being the only one to turn up and take an interest in this statutory instrument. Of course, I assure her that we will keep a close eye on the costs. Ensuring that we do not allow the costs to run out of control is probably the most crucial aspect of the project, so both Ofgem and my department will be closely monitoring this.

We can give her the reassurance she is looking for that consumer interests will be protected if there are any cost overruns. Proposals for the RAB model include multiple mechanisms for ensuring that consumers are protected from unacceptable costs. This includes: robust due diligence before a final investment decision to be confident that the project will be effectively managed; requiring a project to move through various staged approvals; and value-for-money tests fully in line with the Treasury’s Green Book. The noble Baroness also asked about how money is returned to consumers through beneficial payments. We will ensure to do that if it is at all possible.

With regard to a review, we have decided not to include a statutory review clause in order to retain stakeholder confidence in the stability of the revenue stream. I think that that is probably in line with the noble Baroness’s thinking. There are plans for the operational costs levy rates to be next reviewed in 2025, and we will then consult on the costs for the next three financial years—that is, from 2025-26 to 2027-28. This is in addition to the other plans that we have in order to monitor and evaluate the effectiveness of the RAB policy, which we will keep under review as necessary or appropriate. As she said, these are long-term schemes, over many years—if not decades—to provide secure funding for the next generation of nuclear reactors in this country.

I thank the noble Baroness for her support. We are grateful for the support the Opposition have provided both for the legislation in the first place and for this statutory instrument. I hope I have resolved her complaints; I am very happy to write to her if there are any additional points.

Methane Emissions

Debate between Lord Callanan and Baroness Blake of Leeds

Wednesday 22nd February 2023 Lords Chamber

[Lord Callanan (Con)]

I know that the farming sector has a good record, but of course ruminant livestock are one of the largest causes of farm emissions and one of the largest emitters in this country. We need to do more and we need to do better. I am straying into the territory of my noble friend Lord Benyon, but this is an area that we do need to improve our performance in.

[Baroness Blake of Leeds (Lab)]

The Minister rightly highlights the successes that the UK has shown in reducing methane emissions by 62% between 1990 and 2020. We welcome the UK signing up to the global methane pledge after COP 26. If the Government now say that UK emission reduction will have reached only 64% by 2030, where is the commitment to the pledge to reduce methane emissions by 30% from the 2020 levels? Where is the urgency? The memo calls us a global leader. Are we effectively saying that we have done our bit rather than continuing to lead the way?

[Lord Callanan (Con)]

No, we are not saying that we have done our bit; we are saying that we have an extremely good record that is, as I said, much better than many of our industrialised partners, principally because we have virtually eliminated coal from our energy mix. Because we have done much better, performative-wise, than other countries it makes it more difficult for us to reduce further going forward, but we are committed to doing that. We are committed to working with our partners. Many of these sectors, as has been indicated by the questions, are quite difficult to tackle but we will certainly take a lead in this.

Vulnerable Households: Energy Costs

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 31st January 2023 Lords Chamber

[Lord Callanan (Con)]

Ofgem tries really hard to connect the most vulnerable consumers, to make sure they get the support that they require. There are a number of different forms of payment: people can still pay their bills manually using cash if they wish to do so, and there are prepayment meters which are manually upgraded with tokens, as well as those that are available to update online. There is a variety of payment methods, but we stand ready to assist vulnerable consumers in every way we can.

[Baroness Blake of Leeds (Lab)]

My Lords, it is now well documented that prepayment customers, many of whom are the least well off in our society, are charged a higher rate for their energy. Do the Government fully recognise the injustice of thousands more families being forced on to prepayment meters and higher rates at a time when so many are facing severe cost of living pressures—for example, we saw the announcement that grocery price inflation has now gone up to 16.7%? Can the Minister assure us that this area is being treated with the urgency it deserves and that we will see some recommendations coming forward swiftly?

[Lord Callanan (Con)]

I can indeed reassure the noble Baroness that there are extensive regulatory protections in this area. Ofgem rules are clear that suppliers can install a prepayment meter to recover a debt only as a very last resort, and they require energy suppliers to offer a prepayment service only when it is safe to do so. The noble Baroness will have seen that my Secretary of State announced a five-point plan last week, and the Minister of State for Energy has had a meeting with the energy suppliers to discuss this matter. We are on top of it.

Prepayment Meters

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 24th January 2023 Lords Chamber

[Baroness Blake of Leeds (Lab)]

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

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

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

Hospitality Industry

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 24th January 2023 Lords Chamber

[Lord Callanan (Con)]

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

[Baroness Blake of Leeds (Lab)]

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

[Lord Callanan (Con)]

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

Business: Greenwashing

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 10th January 2023 Lords Chamber

[Lord Callanan (Con)]

My noble friend is right to point to this as an important issue. It does not fall within my purview as a BEIS Minister, but I will certainly find out the answer and write to her.

[Baroness Blake of Leeds (Lab)]

My Lords, green- washing is clearly a serious issue which, if not clamped down on, will seriously hinder progress towards net zero. We welcome the steps being taken to do this, such as green taxonomy, increased ESG reporting requirements and investment in product sustainability labels. All these measures should mean that communicating ESG credentials will become critical to companies, as well as compliance with legal requirements. All are steps in the right direction. Can the Minister outline the timeline for their implementation and what assessment the Government have made of the impact of the changes proposed?

[Lord Callanan (Con)]

There are a lot of questions in what the noble Baroness said, and there are a number of different aspects to this problem. The Advertising Standards Authority and the CMA are taking action, our net-zero strategy contained several commitments around eco-labelling, and we are working with the Financial Conduct Authority to introduce a sustainable investment label. Those are all proceeding at the moment.

Energy Bill [HL]

Debate between Lord Callanan and Baroness Blake of Leeds

Committee stage
Monday 19th December 2022 Grand Committee

[Baroness Blake of Leeds (Lab)]

My Lords, I rise to address the amendments in this group. My noble friend Lord Whitty outlined clearly the reasons for his amendments. I will speak to Amendment 161CA in my name and that of my noble friend Lord Lennie. At this stage, it is appropriate for me to declare my interest as a vice-president of the Local Government Association because it comes up in subsequent groups.

I want to refer to my experience when I was the leader of Leeds Council. Leeds PIPES is one of the most successful district heating schemes in the country and is expanding. It aims to take more than 16,000 tonnes of carbon out per year. It is already securing reductions in fuel bills of between 10% and 25%. The other element, which we have not addressed, is that, by working locally through these schemes, we have been able to bring training and employment to the local community. Indeed, 60% of the project spend is by local businesses in the community, making it a win-win scenario.

Social housing and council housing are not the only beneficiaries of the schemes, although they are an important aspect as there are more than 2,000 such homes already on the system. The system has started to be installed and expanded into the city centre, including in council buildings, ensuring that it is a sustainable project. I look forward with interest to the Minister’s response to the specific concerns raised by my noble friend Lord Whitty about consumer protection. The third amendment in his name, on the contribution to net zero, is valuable; it highlights how these networks need to be taken seriously. We need to make sure that they are sustainable and that their future is secure on behalf of the consumers that they supply.

Amendment 161CA in my name and that of my noble friend Lord Lennie refers specifically to ensuring

“that regulation covers systems that are operational but are operating inefficiently to the detriment of customers.”

As one of the heat network providers, Switch2, explains, a 2018 study by the CMA found that,

“although heat networks provide customers with a cost effective, efficient supply of heat compared to alternatives, some customers experience poorer outcomes in terms of price and service.”

That provider has contributed to the thinking on why heat network efficiency is so important. It says:

“The efficiency of your heat network is the crux of effective operation. Before the energy crisis and regulatory requirements, heat network efficiency was often seen by operators as a ‘nice to have’, rather than a necessity, despite significant cost saving benefits to both residents and operators.”


I think we have moved forward a great deal on that consideration.

Although we are focused on the incredibly high cost of gas at the moment, I hope that we can do everything in our power to improve efficiency and take this issue forward. It is clear that the Government are aware of this issue and are acting on it to a degree. Would it not be sensible to ensure that the regulatory remit also covers inefficiencies and that consumers are protected from the issue, rather than just requiring operators to apply for grants voluntarily?

[Lord Callanan (Con)]

I thank the noble Lord, Lord Whitty, and the noble Baroness, Lady Blake, for their comments and amendments. As I said on the previous group, the Government are committed to introducing protections for heat network consumers that ensure that they receive a fair price and a reliable supply of heat, and are not disadvantaged compared to other consumers. Ensuring that heat network consumers receive comparable protections to gas and electricity consumers is the primary reason for agreeing to the CMA’s recommendation to regulate heat networks.

We also recognise the vital contribution that heat networks will ultimately make in decarbonising heat in buildings. I highlight to the noble Lord that the Bill already provides for the heat networks regulator to prioritise protection of consumers and the decarbonisation of the sector. The Bill provides for Ofgem to be the heat networks regulator in Great Britain, with the Utility Regulator taking on the equivalent role in Northern Ireland.

Schedule 15 to the Bill provides for regulations making provision about the objectives of the regulator. This includes its principal objective to protect the interests of existing and future heat network consumers. This is equivalent to Ofgem’s principal objectives to protect the interests of existing and future gas and electricity consumers. We intend for this principal objective to be set out in the regulations.

Schedule 15 also provides for regulations specifying the interests of existing and future heat network consumers that are to be protected. This includes consumers’ interests in the reduction of greenhouse gas emissions generated by heat networks. Schedule 15 also provides for the introduction of carbon emissions limits on heat networks in England and Northern Ireland. We intend again for this to be provided for in the regulations.

The regulations will also give Ofgem powers to investigate and intervene on networks where prices for consumers appear to be disproportionate compared to systems with similar characteristics or if prices are significantly higher than those consumers would expect to pay if they were served by an alternative, comparable heating system. Ofgem will also be able to set rules and guidance on how heat networks recover their costs through their heat tariffs.

Amendment 161CA tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, is on ensuring the efficiency of existing heat networks. I thank them for highlighting the importance of ensuring that regulation facilitates the improvement of technical standards on heat networks. This will ensure efficient heat networks that provide fair prices and reliable heat to consumers at the same time.

I reassure noble Lords that the Bill, more specifically paragraph 14(3)(d) of Schedule 15, already provides measures for ensuring heat network efficiency. Schedule 15 provides for the introduction of technical standards, which will protect consumers from being supplied by inefficient networks. The regulator’s compliance activity in relation to new and existing heat networks will include work on any standards mandated in authorisation conditions under this power.

I therefore submit that the intentions behind the noble Lords’ amendments are already provided for in the Bill, so I hope that they do not press them.

--- Later in debate ---

[Baroness Blake of Leeds (Lab)]

I shall speak to the amendments in the names of my noble friend Lord Lennie and myself. Before I get to that point, though, I want to stress that the contributions made in this debate have been so strong that I cannot see how the Government can continue not to take this aspect of the debate with the seriousness it deserves, because at the end of the day we have very serious obligations and commitments to make. We are not going to achieve what we have set out to do if we do not focus on delivery, and the importance of how we take our communities and people with us on that journey. I really do not think that has been stressed enough.

The noble Lord, Lord Ravensdale, put it very well when he stressed the importance of involving local authorities in setting up local area energy plans, particularly something that has to be repeated again and again when we talk about this: the bringing-in of powers that need to go down to local authorities and then into the communities. The important aspect of this is that the resources must be there to accompany those powers. Frankly, we are in a situation where local authorities across the country have lost over 60% of their budgets. This needs to be taken into account when we consider how local areas can contribute to the important work that needs to be done in this space. The noble Baroness, Lady Boycott, expressed it exceptionally well by highlighting the current contradictions in government policies that are holding us back in so much of what we need to do.

Going through the debate, I commend the contributions that have been made from our partners coming in. They have brought such important evidence as to what we could be doing, and about the huge potential that could be unleashed if the Government were able to put the necessary measures in place.

In this group, we have focused specifically on setting up a community electricity export guarantee programme. Our amendments relate to community energy and would bring in new clauses between Parts 7 and 8 and Parts 12 and 13. We have done this because, as we have heard, community energy covers aspects of collective action to reduce, purchase, manage and generate electricity. Projects obviously have an emphasis on local engagement and local leadership and control. I firmly believe that that action can often tackle challenging issues around energy with communities, which are well placed to understand their local areas, and bring people together with common purpose. As we have heard, it often takes only a couple of experienced and committed people at a local level to unlock some of the issues we have faced that have been holding us back, and to advise government on what needs to be changed and done to bring this forward.

I do not know whether others picked up a significant amount of interest in the different media outlets over the weekend about community energy projects and initiatives that are being brought forward. We have heard that those projects are significant and cover a whole range of different aspects and ways of coming forward. I do not want to go over all the contributions that have been made, but I hope that we are all looking for some very specific measures and some movement from the Government that we can take forward to Report to examine how we can make the difference that we need.

Running all the way through this is the cruel impact of energy bills on our communities and local people. The response communitywide is because people have to work across so many different areas. That key element of behaviour change is absolutely essential if we are to bring the necessary partners together.

Our amendments would require the Secretary of State, within six months, to

“require licensed energy suppliers with more than 150,000 customers (‘eligible licensed suppliers’) to purchase electricity exports from sites generating low carbon electricity with a capacity below 5MW, including community energy groups … Licensed energy suppliers with fewer than 150,000 customers may also offer to purchase electricity exports from exporting sites … including community owned energy groups”.

Eligible licensed suppliers must

“offer a minimum export price set annually by OFGEM”,

offer a minimum five-year contract and allow

“the exporting site to end the contract after no more than 1 year.”

These steps are important to make sure that the benefits come to community energy projects and that they have a guaranteed stable market to operate in.

A community smart export guarantee is supported by Community Energy England. It would increase investor certainty, especially for larger-scale ground-mounted projects where most of the energy is exported. I am interested to hear what consideration the Government have given to such a scheme and whether we can look forward to progress to ensure that we can deliver.

[Lord Callanan (Con)]

I thank all noble Lords who contributed to this important debate. Let me start with Amendment 168, moved by the noble Lord, Lord Ravensdale. It seeks to ensure that guidance is published for local authorities regarding local area energy planning. Although the amendment is well-intentioned, in my view, it is not necessary. The Government already have work under way to consider the role of local area energy planning in delivering net zero and supporting efficient network planning, including heat network zoning policy. Through the Government’s Local Net Zero Forum, we are working with local authority representative bodies to discuss the roles and responsibilities of local government, and how we will work with local government to reach our targets.

I am sure the noble Lord agrees that local authorities are already well placed to undertake local area energy planning given their established relationships with many key stakeholders. Guidance to help develop local area energy plans was already published earlier this year and the Government directly supported this activity through the £104 million “prospering from the energy revolution” programme. This included co-funding for the development of guidance for local areas developing local energy plans and the subsequent delivery of those plans. This has so far seen plans produced for Peterborough, Pembrokeshire, Stafford, Cannock Chase and Lichfield. Given that this activity is already under way, I hope the noble Lord agrees that his amendment is unnecessary and will therefore feel able to withdraw it.

I thank the noble Baronesses, Lady Young, Lady Boycott and Lady Blake, and the noble Lords, Lord Teverson and Lord Lennie, for Amendments 238 and 242G, which seek to enable community renewable generation schemes to sell electricity generated to local consumers. I also thank the noble Baroness, Lady Meacher, for her contribution. The Government believe that community groups have a role to play in our efforts to eliminate our contribution to climate change. However, it is our view that encouraging or introducing obligations on licensed electricity suppliers to mandate them to offer local tariffs would be a disproportionate intervention in the market. Local tariffs are better left as commercial decisions for suppliers.

There are already examples of suppliers offering local tariffs through the market. Octopus Energy offers customers in Market Weighton, Caerphilly and Halifax a tariff with discounted prices at times when electricity is generated locally. Any new obligation in this area is likely to be complex and burdensome, particularly if it interferes with suppliers’ existing services and processes already used to serve their customers.

It is therefore more appropriate to allow market-led solutions to continue to develop, rather than us trying to make commercial decisions on behalf of suppliers. As we set out in the British energy security strategy, the Government are developing local partnerships in England that will enable supportive communities to host new onshore wind infrastructure, for example, in return for benefits including lower energy bills. The Government are separately considering wider retail market reforms that deliver a fair deal for consumers, ensuring that the energy market is resilient and investable over the long term.

As I am sure noble Lords are aware, the Government are undertaking a comprehensive review of electricity market arrangements in Great Britain, which considers options that encourage generation and demand to consider location. It also asks how markets can better value the role of small-scale, distributed, renewable electricity. The department is currently looking at the responses to the review of electricity markets consultation, which closed in October.

Amendments 237 and 242F would enable community renewable generation schemes to receive a guaranteed minimum price for the electricity that they export to the grid. Small-scale, low-carbon electricity generation should be brought forward through competitive, market-based solutions, which will help to encourage innovation and investment. We introduced the smart export guarantee in 2020 to provide exactly that: small-scale, low-carbon electricity generators with the right to be paid for the renewable electricity that they export to the grid.  It ensures that these generators, which would otherwise struggle to find a way to sell electricity, can have guaranteed access to the market and a choice of options following the closure of the feed-in tariffs scheme.

To enable the SEG to be truly market-based and encourage innovation, however, suppliers must be in a position to set both the tariff levels and structure for themselves. We should allow the small-scale export market to develop with minimum intervention and not introduce a support scheme that specifies minimum prices or contract lengths for generators.

I say without much optimism that I hope noble Lords are reassured that the Government recognise the role that community-owned and locally owned renewable energy schemes can play in supporting the UK’s national net-zero targets. I hope that noble Lords will feel able to withdraw or not press their amendments.

--- Later in debate ---

[Baroness Blake of Leeds (Lab)]

I shall be very brief. There are many aspects of this that are to be welcomed, but I am just intrigued. The Minister mentioned the section on finances. I am concerned about the capacity of the lead assessors and professional bodies to do this work, with particular reference to the intention to expand the scheme to, I think he said, small and medium-sized enterprises. I understood that it was medium-sized: I do not know quite where the definition lies, which would also be interesting. That is a major expansion, and I wonder whether an assessment has been made of how many additional businesses we could be talking about, and how the work is going to be done in those circumstances.

[Lord Callanan (Con)]

Let me respond first to the final point of the noble Lord, Lord Teverson. He and I know each other well; I have taken a number of Bills through this House, and I think that if he talks to the Official Opposition as well, he will find that I have a reasonable record of listening carefully throughout Committee on Bills and, where I can, within the confines of government policy—he will know how the process works within government—I try to take on board, where possible, the concerns of the Committee. On some Bills, that does mean accepting opposition or Back-Bench amendments directly, and I have done so on a number of occasions.

I am not giving any commitments on some of the amendments we have been debating in this Committee but, as always, I will take careful note of comments, discuss them with the Bill officials and other departments where it is required to do so and, if there are matters on which we can move, then of course we will do so. We will seek to discuss these matters before Report and, as always, I am listening to comments that noble Lords are making and trying to assess the will of the Committee.

ESOS is an important scheme that was originally implemented on the back of the energy efficiency directive, but there were specific parts of it that were UK legislation. We did not directly copy the energy efficiency directive and we will seek to do the same with the new scheme as well. The BEIS Select Committee made recommendations on energy efficiency, including that ESOS should require reports to be made public and should mandate participants to take action to reduce energy review. There was also a post-implementation review of ESOS in 2020, which found that it was largely achieving its original aims and that businesses were unlikely to carry out energy audits unless mandated to do so, but that the scheme could be helpful in producing that. I think that covers most of the points that were discussed and I thank noble Lords for their attention.

[Baroness Blake of Leeds (Lab)]

The Minister did not respond to my question about the capacity and extent of extending the scheme.

[Lord Callanan (Con)]

It is not our intention to extend it to small businesses at the moment. We are obviously always concerned about the impact on small businesses in particular but, if these amendments are accepted, we would have the regulation-making powers to extend it to businesses of different sizes. I think it is very unlikely that we would ever extend it to small businesses but that would be the subject of secondary legislation, which would, of course, be debated in the House.

[Baroness Blake of Leeds (Lab)]

I raised that because I may have misheard what the Minister said in referencing small businesses. I understood that this extended to medium-sized businesses but, even so, that is a significant increase. Have the Government taken on board the additional workload and whether the capacity will be there, assuming that the work is taken on?

[Lord Callanan (Con)]

We are not proposing to extend it to medium-sized businesses at this stage. We would want to work with stakeholders on the detail of any potential future implementation, which would be subject to a further consultation and, ultimately, a cost-benefit analysis. This is a complicated area and there are a number of different views. We have had a couple of consultations on this. With these amendments, we are taking the powers to implement the scheme. Of course, the regulations would be subject to further debate in the House.

Renewable Energy: Generation Licences

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 13th December 2022 Lords Chamber

[Lord Callanan (Con)]

The barrage schemes are potentially large-scale schemes. I meant that some of the bottom tidal schemes are on a relatively small scale. It all comes down to cost. The costs of these schemes fall on bill payers. The Government’s general approach is to support forms of renewable power that offer the best value for money for taxpayers—principally solar and wind, but we are starting to support some of the other tidal schemes as well. The barrage schemes are extremely expensive and very long term, and there are a lot of environmental implications.

[Baroness Blake of Leeds (Lab)]

My Lords, we note the increase in the frequency of contracts for difference allocation rounds every year. Can the Minister expand what impact this will have on deploying more energy regeneration? Why is the process so prescriptive? It has “lack of ambition” written all over it. Surely more flexibility is the key to encouraging more investment in zero-carbon technologies. Are any plans coming forward to make Britain the clean energy superpower it deserves to be?

[Lord Callanan (Con)]

I disagree with the premise of the noble Baroness’s question. We are already a renewable energy superpower. She talks about lack of ambition. In the last auction, round 4, we delivered more than 11 gigawatts and 93 renewable power projects—enough to power 12 million homes. We have the largest offshore wind capacity in the whole of Europe and the second largest in the world. We want to scale-up that ambition and deliver more, but I think the noble Baroness should give us some credit for what we have already achieved.

COP 27: Outcome

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 6th December 2022 Lords Chamber

[Lord Callanan (Con)]

My noble friend makes a very good point of course. Our 1% is not going to make a massive difference, but there are also opportunities attached to it. Our rollout of renewables is going extremely well. We have one of the largest selections of offshore renewables in the world, which has enabled the cost to come down. It is an example we have set through our contracts for difference scheme, and now renewables—particularly offshore wind renewables—are coming in at a fraction of the cost of fossil-fuel generation, so the market is also helping to drive these matters, and of course provides excellent export potential for our industries.

[Baroness Blake of Leeds (Lab)]

My Lords, as well as the net-zero priorities highlighted at COP 27, the Russian invasion of Ukraine has of course underlined the need to move away from oil and gas and on to homegrown, cheap, clean energy sources that guarantee our energy security. Why have the Government been doubling down on this in regard to fossil fuels, including the loophole to save generators’ profits, while continuing to block the cheapest, cleanest, quickest forms of power —onshore wind and solar?

[Lord Callanan (Con)]

As I said in response to the previous question, we have one of the fastest rollouts of renewables in the developed world. We have the second largest share of offshore wind after China, but there is undoubtedly still a need for gas as a transition fuel. It makes sense therefore to use that transition fuel from our own North Sea resources, rather than importing it, in a very carbon-heavy manner, in LNG.

Climate and Ecology Bill [HL]

Debate between Lord Callanan and Baroness Blake of Leeds

Committee stage
Friday 18th November 2022 Lords Chamber

[Baroness Blake of Leeds (Lab)]

My Lords, it is extremely welcome to have the Bill return for Committee, and I appreciate the opportunity to take part and to continue to raise issues that we feel are not being met by this Government and are within our grasp to make a real difference on.

Again, I commend the leadership shown in this area by the noble Lord, Lord Redesdale, in bringing the Bill forward. I also commend Zero Hour for providing us with all the important briefings to support and improve the quality of our debates, and of course I commend all the campaigners across the country who have worked hard to raise the issues concerned and to push them to the forefront of the political agenda. In today’s debate, I thank the noble Lord, Lord Green, in particular, for sharing his expertise, which added a richness to the discussions at hand.

I turn to the Bill and note all of the comments about the impact of the amendments tabled by the noble Lord, Lord Redesdale, and what they actually mean. I welcome the decision to give the Bill a more concise focus. I believe that steps to make it more amenable to the Government of course mean that it is more likely to see actual action, which is the reason that we are all here. So I am pleased to support these amendments.

As we heard, the Bill as published had various joined-up objectives: imposing a duty on the Government to introduce a strategy for reducing the UK’s

“overall contribution to global greenhouse gas emissions to net zero”;

establishing a “Climate and Nature Assembly” to advise the Government; and giving additional duties to the Climate Change Committee and the Joint Nature Conservation Committee. These all remain important aspects, but this group of amendments will leave us with a five-clause Bill with just one major objective for the Secretary of State: a duty to ensure that the UK

“halts and reverses its overall contribution to the degradation and loss of nature in the United Kingdom ... by ... increasing the health, abundance, diversity and resilience of species, populations, habitats and ecosystems”

and by

“fulfilling its obligations under the UNCBD and … the Leaders’ Pledge for Nature”.

The case for tackling biodiversity loss, climate change and environmental risks to public health is clear. Research from the Natural History Museum—I am pleased that we have had its input—found that the UK is last among G7 countries in terms of how much diversity survives, and it sits in the bottom 10% of all countries globally. It is worth us all repeating these statistics.

As we have heard, we are one of the most nature-depleted nations on earth. Much damage has already been done, and letting it continue would be even more alarming. Some of our most iconic and much-loved British animals could soon be extinct, including the red squirrel, the wildcat, the water vole, the dormouse and even the hedgehog. We have already seen a two-thirds decline in flying insect numbers in England in just the last 16 years. Thousands of badgers continue to be killed, authorised by this Government—in my view unnecessarily—and there are also bee-killing neonic pesticides. The Government have also failed to act to stop illegal hunting or effectively limit peat extraction and moorland burning.

If the Government fail to deliver on their environmental targets, their promise to protect at least 30% of our land, waters and ocean by 2030 is in serious doubt. It is no surprise that environmental groups, including the RSPB, the Wildlife Trusts and the National Trust, have accused the Government of an attack on nature by their policies, such as weakening environmental protections in investment zones, the retained EU law Bill and threatening to downgrade new environment-friendly farming subsidies.

The Government have cut funding for national parks by 40% in real terms over the last decade, leaving our most precious nature sites in crisis. Their plan to make up the shortfall is “through private investment”, without giving any further detail on what that will look like. They also failed to set new 2030 biodiversity targets in line with their legal requirements under the Environment Act 2021, and there is no current suggestion of when these will be set. Perhaps the Minister can comment on this in his remarks.

The Labour Party has committed to putting the environment and climate at the heart of its agenda and delivering nature-positive action which halts and reverses the loss of biodiversity by 2030, for the benefit of all people on the planet, as is the ask of the Bill. That element of reversing will make the real difference between the Government’s position and what is necessary. The Environment Act commits to halt species decline but fails to reverse decline and does not tackle broader biodiversity loss.

Without revisiting all the discussion at Second Reading, again I ask the Minister to tell us about progress towards a plan to tackle these messages. Also, where is the positive engagement strategy? Taking the public with us is so important in this agenda and, as we have discussed previously, a wider communication and education strategy is so important as we go forward.

The Government should back the Bill and commit fully to what is necessary to save our natural environment.

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

My Lords, I join all other speakers in congratulating the noble Lord, Lord Redesdale, on securing this Committee for his Private Member’s Bill today and on continuing to highlight this vitally important issue. I particularly welcomed his comments on red squirrels. When I was a Member of the European Parliament for the north-east, I was a proud member of the European Squirrel Initiative—that major NGO at the forefront of the debate—and of course, Northumberland is on the front line of the battle to preserve red squirrels, which persist primarily in Scotland; the greys have managed to eradicate them for most of England. In my view, we need to pursue an eradication policy of the greys—my noble friend Lord Randall also mentioned that important issue.

We do not have to shy away from the fact that nature is in decline around the world. That is exactly why we are setting a legally binding target in England to halt the decline in species abundance by 2030. This ecology Bill deems “species abundance” too limited and seeks to widen this to include habitats and ecosystems. However, in our view, species abundance is a good proxy for the health of the wider ecosystem. The indicator we will use to track progress includes over 1,000 representative species for which we have robust data. Between them, these species depend on the majority of habitats found in England. Action to achieve the species abundance target will necessarily require the creation and restoration of wider habitats and ecosystems.

This target is an ambitious one—indeed, it is world-leading. We will take determined actions to halt the decline of nature, but those actions will not stop once we meet that target. We know that halting the decline in nature is not enough and we will continue to take action naturally leading to a reversal of that decline. That is why we have consulted on long-term targets to increase species abundance, improve the red list index for species extinction risk, and create or restore more habitat—all by 2042. Five-yearly interim targets will help the Government to stay on track.

Furthermore, the overall suite of targets, including on water and air quality, will put nature at the centre of all government policy-making for generations to come. We will confirm all our long-term environmental targets as soon as practicable and will set out our approach to meeting them in our revised environmental improvement plan in 2023.

Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 3) Order 2022

Debate between Lord Callanan and Baroness Blake of Leeds

Thursday 3rd November 2022 Grand Committee

[Baroness Blake of Leeds (Lab)]

My Lords, I, too, thank the Minister for his full explanation of the SI before us today. I have a feeling that we will have many opportunities in future to discuss the success and progress of emissions trading schemes in general, and I am fairly certain that there will be a focus on this at COP 27 next week. I look forward with interest to seeing progress generally.

Obviously, the situation with Switzerland had to be resolved. I am pleased that this instrument has come before us today. I thank the Minister for his explanation about Northern Ireland and the impact of the impasse in the Assembly, including what effect that is having in this area. I have a couple of questions. What assessment has been made of the impact of flights to Switzerland not being included in the UK ETS during the period between leaving the EU and the start of next year, when this instrument comes into force? Is there any way that this could have been avoided? Hindsight is a wonderful thing, of course.

The impact on the public sector will be mainly in the form of additional revenues from the auctioning of land for these flights. Have the Government made an estimate of the value of that? Generally, are there any other, similar gaps that the Government are looking to close? Are they looking to develop the ETS by extending elsewhere in a similar manner? Obviously, this is a complex area for operators working in this space. Do the Government think that aircraft providers will need any additional guidance to make changes as a result of this instrument? If so, what steps are the Government taking to provide this?

In spite of those questions, I am pleased to see this measure in front of us today; I look forward to seeing it move forwards.

[Lord Callanan (Con)]

I thank noble Lords for their contributions. I am particularly grateful to the noble Lord, Lord Teverson, for sharing his holiday experiences with us all. I expect he will bring his photograph album next time. I was going to say that it would show him lying on the beach but, of course, there are no beaches in Switzerland; perhaps he will be lying on the lakeside in Switzerland. I am grateful to both noble Lords for their support for these proposals and their questions.

This Order in Council, as it will be, will enable the inclusion of flights from Great Britain to Switzerland within the definition of aviation activity and bring them within the scope of the UK ETS for the start of the 2022-23 scheme year. As I said, we will seek to include flights from Northern Ireland as soon as the Northern Ireland Assembly is functioning.

In response to the noble Baroness, Lady Blake, although UK-Switzerland flights amount to approximately a quarter of a megaton of CO₂, which is less than 0.2% of the UK ETS cap for the 2023 scheme year, this legislation will enable us to uphold our agreements with Switzerland and the UK Government’s commitment to the 2020 government response. Clearly the proposals will ] not have a significant impact on the costs of participating in the UK ETS for the vast majority of participants, although aircraft operators running flights between Switzerland and Great Britain will of course see a slight increase in their obligations as a result of the expanded scope.

As the noble Lord, Lord Teverson, correctly stated, to reduce the risk of carbon leakage, a proportion of UK ETS allowances are allocated to aircraft operators for free, which they can use towards their scheme obligations, and flights from Great Britain to Switzerland will be able to apply for a free allocation entitlement. In the Government’s response to the Future of UK Carbon Pricing consultation, we committed to reviewing the UK’s approach to free allocations to ensure that carbon leakage is appropriately mitigated. It supports the UK’s high climate objectives and preserves the incentive to decarbonise, which is what we want. The commissioned economic research on aviation carbon pricing found minimal risks of carbon leakage for the aviation sector under the current scope of the UK ETS, and the consultation proposed three potential phase-out trajectories of aviation-free allocation. The consultation also explored potential updates to the UK ETS free allocation methodology, including benchmarking and updating activity data and how we account for new operators.

Furthermore, as set out in the energy White Paper, the UK net-zero review and, most recently, the Developing the UK’s Emissions Trading Scheme consultation, which was published in March this year, the Government remain open to the possibility of linking the UK ETS internationally. Under the terms of the TCA, the UK and the EU agreed to co-operate on carbon pricing, including through giving consideration to linking our respective carbon-pricing schemes.

The noble Baroness, Lady Blake, asked what assessment has been made on flights to Switzerland not being included since leaving the EU and the instrument coming into force, and whether or not that could have been avoided. When establishing the UK ETS, our priority was to ensure, as far as possible, continuity of coverage. That included an agreement with the EU to cover flights between the UK and the EEA in the UK ETS and the EU ETS. The EU-UK Trade and Cooperation Agreement provided for coverage of the EU ETS for flights from the EEA into the UK and set a precedent for including departing flights without, at the time, a full linking agreement. We will follow this precedent for flights between the UK and Switzerland. Flights from the UK to Switzerland will indeed represent a very small proportion of the total flights and emissions within the UK ETS.

In addition, the noble Baroness, Lady Blake, asked whether the Government think that the aircraft provider will need additional guidance and what steps we are taking. In total, UK ETS auction revenue in 2021 added up to £4.3 billion. We estimate that the UK ETS will raise over £6 billion in 2022 if prices remain at or around the current level, which is an average of £80 a tonne for the first six months of 2022. Once the legislation is laid, the Environment Agency will get in touch with aircraft operators to clarify exactly what their new obligations are.

I think I have dealt with the questions noble Lords asked. I therefore commend this draft order to the Committee.

Climate Change: Behaviour Change

Debate between Lord Callanan and Baroness Blake of Leeds

Thursday 3rd November 2022 Lords Chamber

[Lord Callanan (Con)]

The noble Lord has made the point and I am sure the watching millions will be fascinated to know of his support for the game industry.

[Baroness Blake of Leeds (Lab)]

The importance of behaviour change to deliver reductions in climate emissions is significant and acknowledged. To achieve the necessary change in behaviour, we know that alternatives need to be in place: for example, to achieve a modal shift in travel by increasing the use of public transport. Against the backdrop of chaos and a major loss of confidence caused by frequent cancellations and delays to rail services, especially across the north, can the Minister update us on progress towards setting up the new Great British Railways body intended to improve performance and thereby contribute to reduced emissions from the transport sector?

[Lord Callanan (Con)]

I will certainly ask my DfT colleagues to update the noble Baroness on where we are with the new Great British Railways body, but much of the chaos and cancellations we have seen in train services have been caused by the trade unions, which she is close to.

Warm Home Discount (Scotland) Regulations 2022

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 11th October 2022 Grand Committee

[Baroness Blake of Leeds (Lab)]

I thank the Minister for his very full explanation. I start by expressing regret that this scheme is necessary in the first place. I think all of us recognise that while fuel poverty is really high profile at the moment, it is a scourge that has been with us for a long time, as reflected by the fact that the original scheme came in in 2011. Many people and families have struggled to pay their bills for a very long time. Of course, as outlined by the Minister, we recognise the support that has been given for the extreme circumstances we have found ourselves in recently.

I do not want to spend too much time going through the detail. I recognise that there has been extensive debate on the England and Wales scheme in the Commons and in this place, and that these regulations are bringing in the necessary additions to meet the requirement to have a separate scheme for Scotland, as has been outlined. We recognise that point, but I would like further clarification and reassurance that the Scottish Government are happy with the outcome of the debate and consultation as it has gone forward. That is very important; obviously, there are peculiar circumstances in terms of the responsibilities of the Scottish Government and the role that the UK Government have to play.

As we have heard, most respondents to the second consultation agreed with the proposed extension of the current scheme until 2026, but the other question that came up was whether it was possible to have an earlier review of the scheme given the circumstances people are facing at the moment. There is concern generally about the higher fuel poverty rates in Scotland that the evidence suggests. Obviously, concerns were raised about the method for apportioning spending to Scotland, and some asked for higher apportionment to reflect those higher rates. I think it is fair to say that some energy suppliers also expressed concern about the additional costs of running two separate schemes, in England and Wales and in Scotland, and I do not know whether there is any assessment of what that additional spend will be.

Of course, it was probably inevitable that there were many requests for the value of the rebates to be increased. I understand that the rebate is fixed at the level proposed for consistency with the England and Wales scheme, but I will leave that issue there as something that will probably come up in the Minister’s response. I wonder if there are any comments to be made on how we will assess the situation as we go forward into continuing uncertain times.

The way the scheme is structured means that the cost of the rebates will be passed on to consumers in Scotland. My understanding is that the suppliers will pass on the cost of the scheme to their customers. This is estimated to come out at about £19 per dual fuel account, which is an increase from £14 under the current scheme. The Minister is shaking his head; I take from his response that he has a comment to make on this. I look forward to hearing that this is not the case. The reason I raise it, of course, is because we are seeing across the whole of the UK more and more people starting to struggle to pay their energy bills—and an additional cost for some who might not be eligible for this rebate scheme is probably not sustainable and could end up forcing more people into needing to take part.

I shall leave my comments there. It is very important that we approve the regulations so that we can get them into place, so families can benefit as quickly as possible. I end my comments with the general view that I hope we are not losing sight of the wider imperative of moving forward with schemes that will actually reduce the need to use fuel. I am thinking of home insulation, for example. There is some uncertainty at the moment, and I would welcome reassurance that the work that has started will be continued and, indeed, increased.

[Lord Callanan (Con)]

I thank the noble Baroness very much indeed for her questions. She deserves admiration for being the only Member to turn up to discuss this important issue, so I am grateful to her for that. I am happy to confirm that the Scottish Government are very satisfied with the scheme before us today; in fact, they asked us to implement it on their behalf. They originally talked about doing a separate scheme for ECO and the warm home discount for Scotland, then they decided that they could not and therefore requested us to launch the process and implement it for Scotland. That is why we are debating these regulations separately from the England and Wales regulations. So not only are they satisfied with it but it is at their request that we do this.

On the noble Baroness’s question about a review, it would be possible for the Scottish and UK Governments to carry out a review and consult on amendments to the scheme, should they consider it appropriate. We are apportioning a fair amount to Scotland; it is equivalent to 9.4% of the overall spending, which is proportionate to the number of domestic gas and electricity meters in Scotland compared to the rest of Great Britain. This is higher than Scotland’s proportion of the population in Great Britain, which was 8.4% in mid-2020, and it will also exceed its share of means-tested benefits recipients. This approach makes it fairer for consumers across England, Wales and Scotland, ensuring similar levels of cost and benefit across consumers.

On the administration costs of the schemes, the scheme in Scotland is a continuation of the current scheme, so there would be limited additional burdens in implementing it, and there would be continuity for suppliers. The reform of the scheme in England and Wales will reduce the administrative burden of running the scheme compared to the current one, and flexibility to transfer the broader group into industry initiatives will reduce the burdens for suppliers with low or zero broader groups in Scotland.

On the noble Baroness’s point about the cost of the scheme on energy bills—I think that she cited the figure of £19—the ECO scheme and warm home discount form part of the so-called green levies, which the noble Baroness will recall the Chancellor announcing, rather than being funded through bills. The scheme will be funded, at least for the next two years, by the Exchequer directly under the energy price guarantee scheme. So we are continuing with the scheme as previously, but the suppliers will be refunded by the Exchequer from that.

The noble Baroness also asked a very important question about our insulation schemes. As she will know, we have insulation and energy efficiency schemes of about £6.6 billion through a number of different initiatives. I am thinking of the home upgrade grant, the social housing decarbonisation fund, the public sector decarbonisation scheme, the local authority delivery scheme, and so on. I am happy to confirm that they are continuing, as well as the ECO scheme, which is also part of the obligations on suppliers. Indeed, I am happy also to confirm that we are extending it. As part of his recent Statement, the Chancellor announced an ECO plus scheme, which will be worth about £1 billion over three years. We are currently working on implementing it, and we will bring a regulation back to this House to discuss its further implementation in future.

I hope that has dealt with all the noble Baroness’s queries. Again, I commend the draft regulations to the Committee.

Horizon Europe

Debate between Lord Callanan and Baroness Blake of Leeds

Thursday 8th September 2022 Lords Chamber

[Lord Callanan (Con)]

I am sure that the Prime Minister will be having many conversations with EU leaders and the European Commission. I am not sure that another letter would make a tremendous difference to the EU’s position on this; in my view, it is being incredibly unreasonable. We will continue to work with the EU. We have co-operation in a number of areas, so it is a win-win situation in which both sides benefit, and we want it to continue.

[Baroness Blake of Leeds (Lab)]

My Lords, innovation thrives on collaboration, as we have heard. Delaying resolving the relationship shows that the UK is not stepping up to face the challenges of the future. We must accept our responsibility in this relationship. We have heard that organisations such as the UK Dementia Research Institute are on course to become world leaders in the field, but they need the collaboration of the brightest and the best of Europe. What assessment has the Minister made of the impact that the uncertainty around the UK’s association with Horizon Europe is having on the UK’s research field?

[Lord Callanan (Con)]

There are some negative impacts: the current uncertainty is damaging for scientific co-operation. There are many researchers who want to get on with the job, and we have put in place transitional arrangements to help them in the meantime. We want all that co-operation to continue. The noble Baroness cites some good examples, and this is exactly why we want to associate to Horizon Europe. We call on the EU to do that and to finalise the agreements that it freely entered into and signed. I am sure that the House is united in wanting that to continue.

Energy Bill [HL]

Debate between Lord Callanan and Baroness Blake of Leeds

Committee stage
Wednesday 7th September 2022 Lords Chamber

[Lord Callanan (Con)]

I understand the point made by the noble Baroness. I have also seen the models of where it is most likely that hydrogen would be used, and I have considerable sympathy for many of the points that she made. As to the where it will be used, it will clearly be in industrial processes and heavy-goods transportation. These would be more likely uses than home heating or decarbonisation, but it would possibly play a role. Nevertheless, as I said, I have taken note of what has been said in the Committee and understand the points that have been made. If the noble Baroness allows me, I will take them away to look at, and possibly revisit them at Report.

Amendment 56 seeks to impose restrictions on when the hydrogen levy can be introduced to fund the hydrogen business model. This will help to unlock potentially billions of pounds worth of investment in hydrogen that we need across the UK. The Government are committed to ensuring that long-term funding is provided through the hydrogen business model, and the provisions in the Bill do not require the Government to introduce the levy by a particular date. We do not expect the levy to be introduced any time before 2025, and so we do not expect it to have any impact on consumer bills before then, at the earliest. Decisions regarding when to introduce the levy will take into account wider government policies and priorities, including considerations related to energy bill affordability, which is always at the forefront of our considerations.

The first set of regulations under Clause 66, establishing the levy, will also be subject to the affirmative resolution procedure, so we would fully expect Parliament to exercise its role, and particularly your Lordships’ House to scrutinise how the Government intend to exercise those powers.

Amendment 56 would, in my view, introduce restrictions that are unnecessary, given the Government’s approach to decisions related to when to introduce the levy and the parliamentary scrutiny requirements that would be associated with any relevant secondary legislation.

Amendment 57 seeks to protect consumers by introducing a requirement for the Secretary of State to publish a specific consumer impact report before making regulations under Clause 66, establishing a hydrogen levy. As I mentioned, the parliamentary procedure for the first set of regulations that establish the levy will help ensure that the levy receives sufficient scrutiny from Parliament. Crucially, I can tell the Committee that it is already the Government’s intention to publish an impact assessment alongside the draft regulations made under Clause 66. I hope noble Lords will recognise that the amendment is unnecessary and feel able to not press their amendments.

[Baroness Blake of Leeds (Lab)]

I thank the noble Lord for his comments and welcome, as we all do, the commitment to revisit one of the amendments from the noble Baroness, Lady Worthington. We look forward with interest to that. However, on some of the other aspects, there will be conversations between now and Report, and I am fairly confident that we will come back to discuss what is, in our view, a really important area. With those comments, I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Callanan (Con)]

My Lords, in moving Amendment 65 I shall speak also to Amendments 66, 147, 149 and 190 standing in my name. These amendments will allow the Secretary of State to modify the licences of certain gas and electricity market participants in Great Britain and Northern Ireland. They will also allow the Secretary of State to modify documents maintained in accordance with these licences, such as industry codes, or agreements that give effect to such documents. The Secretary of State will be able to make such modifications only for the purpose of facilitating or supporting enforcement of, and administration in connection with, hydrogen levy obligations.

As I have said, decisions on the detailed design of the levy are pending. However, it is likely that persons other than the levy administrator will need to perform functions, provide services, and/or provide information and advice that support and facilitate the administration and enforcement of the levy. This power is required in order that the Secretary of State can modify relevant licences and codes to support and facilitate the administration and enforcement of the levy. In particular, it is required so that the Secretary of State may make modifications to support or facilitate persons who are parties to relevant industry codes to take on roles related to the levy’s administration and enforcement.

I can tell the Committee that there is precedent for this type of provision, with similar powers contained in the Energy Act 2013 and the recent Nuclear Energy (Financing) Act 2022. Provisions in the Energy Act 2013 were used to make licence and code modifications in relation to the contracts for difference regime. This power will help future-proof the levy, enabling the Secretary of State to implement licence or code modifications in order to accommodate any future changes to the levy design.

I can reassure your Lordships that these amendments of course include a requirement for the Secretary of State to consult the holder of any licence being modified and such other persons as the Secretary of State considers it appropriate to consult before making any modification. This will help ensure that relevant bodies are engaged in any potential modifications.

In addition, before making modifications under this power, the Secretary of State must lay a draft of the modifications before Parliament, where they will be subject to a procedure analogous to the draft negative resolution procedure used for statutory instruments. This also allows for additional scrutiny for any proposed modifications under this power. I beg to move.

[Baroness Blake of Leeds (Lab)]

Briefly, I thank the Minister for that explanation. I am sure, looking back at comments made earlier this afternoon, that the team opposite cannot be happy with the number of government amendments that are coming through on the Bill at this stage—I hope that will be taken up on a serious note on this and other Bills that have come forward.

The only slight question I have is that we talk about consultation as though everyone understands exactly how it happens and everyone is happy with the way it is done. Is it possible to be slightly more specific about who else might be consulted apart from the owner of the licence? I would also like some reassurance around the openness and transparency of a process to make sure that all parties are aware of any changes made in the future.

[Lord Callanan (Con)]

I am happy to reassure the noble Baroness that the relevant consultations will of course take place on any changes made.

Energy Bill [HL]

Debate between Lord Callanan and Baroness Blake of Leeds

Committee stage
Monday 5th September 2022 Lords Chamber

[Baroness Blake of Leeds (Lab)]

My Lords, it gives me great pleasure to contribute on this set of amendments. I add my admiration and support for my noble friend Lord Foulkes, who has stepped into the breach admirably in the unfortunate absence of my noble friend Lady Liddell. I very much look forward to her return. I also add my thanks to the Minister for giving us time today to discuss this very important Bill; I think all of us recognise its significance at this time. Without reopening the debate from Second Reading, it is clear to us all that there are gaps. We need to take the opportunity to fill those gaps, given the state of crisis that the country is entering.

I want to speak to the amendments in the name of my noble friend Lord Lennie, starting with Amendments 21 and 22. They seek to make it clear that a licence can be granted for transportation or storage, or both if wanted, but that a licence need not be granted for everything. The activities that Clause 7 relates to are

“(a) operating a site for the disposal of carbon dioxide by way of geological storage; (b) providing a service of transporting carbon dioxide by a licensable means of transportation”.

We have to acknowledge the importance of this section of the Bill. Indeed, the Climate Change Committee has referred to all of this area as a necessity, not an option, particularly as we move forward and technologies improve. As drafted, the Bill provides a single licence for both but, given that they are separate activities, we see no reason why individual licences could not be provided for each activity—even if it may be the case that most of the persons carrying out these activities carry out both.

A broad portfolio of technologies is needed to achieve deep emissions reductions, practically and cost effectively; carbon capture and storage is just one of them. In the International Energy Agency’s sustainable development scenario, in which

“global CO₂ emissions from the energy sector fall to zero on a net basis by 2070”

carbon capture and storage

“accounts for nearly 15% of the cumulative reduction in emissions, compared with the Stated Policies Scenario. The contribution grows over time as the technology improves, costs fall and cheaper abatement options in some sectors are exhausted. In 2070, 10.4 Gt of CO2 is captured from across the energy sector”.

This would provide more flexibility for a developing market, with the intention of driving down price within it.

We have already heard just how expensive carbon capture is and how, despite its importance for achieving clean energy, it has been rather slow to take off. According to the IEA, there were only around 20 commercial operations worldwide midway through last year. Commentators often cite carbon capture as being too expensive and unable to compete with wind and solar, given their falling costs over the last decade, but to dismiss the technology on cost grounds would be to ignore its unique strengths, its competitiveness in key sectors and its potential to enter the mainstream of low-carbon solutions. I am pleased that the Government have not done this. However, as we have made clear, we feel that not enough attention has been given to solar and onshore wind, in particular. It is important that we take whatever steps we can to make the market as attractive as possible and encourage licensing from fit and proper persons.

The noble Baroness, Lady Bennett, has already spoken to the next set of amendments, particularly Amendment 23. We feel that the phrase “fit and proper”, having already had a usage in the National Security and Investment Act, is something that we should take very seriously. The aim of these amendments is to put the responsibility on the Secretary of State to personally deem the individual fit and proper.

Perhaps the greatest concern that we have to acknowledge is the environmental risk associated with long-term storage of captured CO_2, as any gradual or catastrophic leakage would likely negate the initial environmental benefits of capturing and storing CO₂ emissions. It is worth itemising those key risks, just so that we have them on record. First, there are technical hazards: we know that the construction of plants needed to capture and process CO₂ can be complex. Whether for new facilities or retrofitting and enabling the separation of CO₂ from other gases, there are inherent technical exposures in the CO₂ separation process relating to the compression and cooling of gases flying through pipes and the use of chemical solvents, for instance.

Secondly, on fire and explosion, as we know, there are lifting, handling and accidental damage risks at carbon capture plants, as is the case at any construction site. When carbon-capture technology is retrofitted to operate in industrial plants or facilities in typically high-hazard locations such as power stations, the risk of accidental damage and subsequent fire and explosion risks to existing assets might be enhanced. As I have stated, the risk of leakage must clearly be the subject of much consideration as we go forward.

Business interruption is another risk that we have to acknowledge in the failure to meet the carbon goals as they are laid out. Pure carbon dioxide gas can be compressed so that it reaches its dense and supercritical phase. In some cases, it can instead be cooled, which transforms it into a liquid state. Mechanical failures or breakdowns affecting this stage of the process could lead to lengthy business interruptions for clients. If the captured CO₂ cannot be transported, this may affect the emissions targets and carbon credits committed to by clients. Therefore, the need to look at all proper precautions is absolutely vital, and the persons tasked with doing this need to have the confidence of the whole sector.

Amendment 24, in the name of my noble friend Lord Lennie, would make regulations related to carbon dioxide transport and storage licence applications subject to the affirmative procedure. Surely it is sensible that Parliament has a full say in any regulations to ensure that licensing is done both to encourage carbon capture and storage and to ensure that it is properly safeguarded.

We have to see this in the context of an enormous possibility to create significant numbers of jobs—the estimate is 50,000 by as soon as 2030—across industry, power, transport and storage networks. It is absolutely essential that the confidence is there and that all the people who will be engaged in the work we intend to do are properly protected wherever possible.

[Lord Callanan (Con)]

My Lords, this group of amendments considers the licensing of carbon dioxide transport and storage, and I thank everyone for their contributions. I will speak to Amendment 25, in my name, which relates to the definition of “decommissioning costs”. Carbon dioxide transport and storage licence holders will be expected to establish decommissioning funds for each of their transport and storage networks. These funds will accrue money over the operational life of the network to pay for the expected offshore decommissioning and post-closure costs associated with the network.

As originally drafted, the Bill enables the Secretary of State to make regulations about the provision of security for decommissioning in relation to carbon storage installations. This is to ensure that regulations could require relevant persons to provide security for costs that reflect the full range of decommissioning obligations that arise in relation to carbon transportation and storage activities.

Regulations will provide the framework for how the decommissioning funds are to ensure that the funding is secure and available when it is required to pay for the decommissioning and post-closure obligations. The costs are likely to be those associated with the obligations that the licence holder will have under the permit, which could include costs associated with preparatory works between closure and the commencement of decommissioning activities and post-closure monitoring.

As noble Lords will be aware, a series of amendments has been tabled relating to the financing of the decommissioning of carbon storage assets, and I look forward to the forthcoming debate on those amendments. Should our amendments be accepted to apply these decommissioning fund powers to the new defined term “decommissioning costs”, explained in Amendment 70, the previous definition of “decommissioning and legacy costs” becomes redundant and should therefore be omitted from Clause 11.

I will move on to the amendments tabled by noble Lords in this group. Amendment 17, tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, seeks to amend the scope of the prohibition on operating a CO₂ transport and storage network without an economically regulated licence. Although there is an existing framework for the licensing of carbon dioxide storage activities, established under the Energy Act 2008, that Act provides for technical regulation to ensure the secure geological storage of carbon dioxide. It therefore does not provide any powers in relation to economic regulation.

--- Later in debate ---

[Baroness Blake of Leeds (Lab)]

I do not have an enormous amount to add to the comments of the noble Lord, Lord Teverson. I highlight again the significance of linking strategy and policy: that is crucial. We will discuss in future debates the issues around the role of the ISOP and its independence, and, particularly in the context of this afternoon’s debate, look at long-term thinking, making sure that we get all the checks and balances in place. We are in a very fast-moving environment and need to make sure that we are absolutely on top of all the changes that are taking place. The noble Lord, Lord Teverson, highlighted the risk of lack of coherence: we need to make sure that everything is nailed down, line by line, and I am sure we will have further discussion on these areas as we go through different aspects of the Bill. I look forward to the Minister’s conclusions on this group of amendments.

[Lord Callanan (Con)]

I thank the noble Lord, Lord Teverson, for his amendments, beginning with Amendments 38 and 112. The Bill provides that the Secretary of State may designate a CCUS strategy and policy statement to set out the strategic priorities of the Government in formulating their CCUS policy. This would also need to take account of any statement designated under Section 131 of the Energy Act 2013. The Secretary of State must carry out their functions under this part in the manner they consider is best to further deliver the policy outcomes set out in the statement. In addition, parliamentarians will have the opportunity to consider any draft CCUS strategy and policy statement before it can be designated, as is provided for by Clause 91(10). Setting out in a strategic policy statement possible scenarios for policy change would start to introduce considerable uncertainty for both investors and the regulator which would, in my view, hamper the stability of the sector.

Amendment 120 to Clause 98 would require that, when making regulations establishing or adjusting a low-carbon heat scheme, the Secretary of State must publish a statement demonstrating how the scheme would deliver in line with both the carbon capture usage and storage strategy and policy statement and any overall strategy and policy statement provided for by the Energy Act 2013. Of course, I agree with the noble Lord in his principle that policy-making should be aligned with the broader strategy and the latest science: that is why all policy on heat and building decarbonisation is and will continue to be developed in line with wider government energy and decarbonisation strategy. As we said in a recent government response to a consultation, the plan to introduce, for instance, the market-based low-carbon heat scheme is aligned with the aim to expand the deployment of heat pumps towards 600,000 installations per year by 2028. I am afraid I do not agree with the noble Lord, and therefore do not believe that requiring another series of publications each time new regulations are made is ultimately necessary. I therefore hope he will feel able to withdraw his amendment.

Turning to Amendment 128, Clauses 108 and 109 will enable the safe and effective delivery of a village-scale hydrogen heating trial to gather vital evidence to help make decisions on the potential role of hydrogen in heat decarbonisation. I reassure the noble Lord that trial development is already following the latest science. This amendment would delay the introduction of new regulations which are focused on the protection of consumers until two strategy and policy statements are published. The exact contents of these documents would also need to be properly consulted on before they are issued.

Energy: Prices and Supply

Debate between Lord Callanan and Baroness Blake of Leeds

Thursday 14th July 2022 Lords Chamber

[Lord Callanan (Con)]

My noble friend will understand that I am not going to get into discussing emergency situations. Anything as drastic as that is extremely unlikely. All parts of Europe benefit from interconnected supplies of electricity and gas. It helps to secure both our energy supplies and resilience for our future, and that of other European countries.

[Baroness Blake of Leeds (Lab)]

My Lords, I declare an interest as vice-president of the Local Government Association.

The Government’s failures in energy policy go back over a decade, including on energy efficiency. Homes are still being built that do not meet minimum standards of efficiency and will require significant retrofitting in the near future to meet legal standards. As mentioned in the recent Climate Change Committee report to Parliament, the promised future homes standard and changes to the planning system have not yet been delivered. Can the Minister inform us, either now or in writing, how many homes not meeting minimum standards of efficiency have been built since the close of consultation in January 2021? Also, how many planning permissions are in place to allow the building of such substandard homes before June 2023? How many housing units does that amount to?

[Lord Callanan (Con)]

The noble Baroness is asking for some detailed statistics which I do not have to hand, but I will certainly write to her about that. There is a considerable uplift in the building regulations coming next year. The future homes standard is coming in 2025 and when it is introduced, the carbon efficiency of homes will be increased by about 75%.

Horizon Europe

Debate between Lord Callanan and Baroness Blake of Leeds

Thursday 7th July 2022 Lords Chamber

[Lord Callanan (Con)]

Indeed, the Northern Ireland protocol is the excuse that the EU gives for refusing to live up to its commitment. These are separate agreements and issues. We would prefer them to be completely separate. We want to associate with Horizon Europe because it is in both our interests. There should be international science collaboration, as I said in response to previous questions, and we remain willing to sit down and implement the agreement that was entered into, just as soon as the EU is prepared to talk about it.

[Baroness Blake of Leeds (Lab)]

As we have heard, the Minister who floated the plan B to replace Horizon Europe is no longer in place. But even before the Government fell apart, neither the Cabinet nor the Treasury had signed it off, anyway. Can the Government now confirm whether these plans are dead in the water and explain how they will take responsibility to protect the British academic sector from further damage before the UK’s associate membership ends?

[Lord Callanan (Con)]

I do not know if the noble Baroness was listening to the replies that I gave but the Treasury is fully committed to the £6.8 billion announced in the spending review. The Government remain keen to get on with this and associate to Horizon Europe if we can, but we are putting in place alternatives that will be just as effective in terms of international co-operation. We will spend similar amounts of money.

Winter Heating Initiatives

Debate between Lord Callanan and Baroness Blake of Leeds

Thursday 7th July 2022 Lords Chamber

[Lord Callanan (Con)]

That is a complicated subject but, irrespective of the impact, we can all agree that energy efficiency is a good thing. Using less energy and spending less money on it is an all-round good societal benefit.

[Baroness Blake of Leeds (Lab)]

My Lords, the previous Chancellor—forgive me if I do not have the appropriate way of expressing that—introduced additional payments for the cost of living crisis and they were welcomed across both Houses, but I think we can all agree that they came far too late. At every step the Government have been playing catch-up, which is why an emergency package was needed. Many thousands of households are still struggling, and when winter comes round again energy prices in particular will hit hard, and that is before any mass rollout of energy-efficiency schemes—if they come along—can possibly be in place. Will the Government learn lessons and put support in place in time to avert even more misery next winter?

[Lord Callanan (Con)]

I am slightly confused by the noble Baroness’s question. Yes, of course, we are rolling out the energy bills support scheme, which is a £400 payment that will be delivered through energy bills directly to all consumers. There is a considerable package of support. I could list all the other measures if the noble Baroness had time but there is a £37 billion package of cost of living support across the economy.

Small Modular Nuclear Reactors

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 28th June 2022 Lords Chamber

[Lord Callanan (Con)]

The noble Lord makes an important point. There are a lot of very skilled engineering jobs. We have made some errors in the past on our nuclear strategy, which resulted in a lot of very skilled employees leaving the country and the industry effectively closing down. We are resurrecting the industry now and it will be a longer-term process to build up the skills base, but the noble Lord is right.

[Baroness Blake of Leeds (Lab)]

My Lords, although we on these Benches welcome an increased rollout of small modular nuclear reactors, given that they offer savings in cost and construction time and more flexibility related to energy demand, it will likely take until 2024 for the first project to reach a final investment decision. Furthermore, Rolls-Royce does not expect to turn on its first SMR until 2029. This is a positive long-term strategy but it does not address the short-term and immediate need for action. Can the Minister inform us of what solutions the energy security Bill offers to reduce our dependency on oil, coal and gas in the short term?

[Lord Callanan (Con)]

The noble Baroness makes an important point; these are long-term decisions. Most energy policy decisions are longer term, as it takes many years to bring on stream new energy infrastructure projects in whatever field we are looking at. In the short term, however, the answer to the noble Baroness’s question relies principally on renewables: we are advancing the hydrogen strategy and accelerating the rollout of offshore wind, which has proved immensely successful. In this country, we have the second-largest offshore wind capacity in the world and it is a world-beating industry.

Vaccine Manufacturing and Innovation Centre

Debate between Lord Callanan and Baroness Blake of Leeds

Monday 25th April 2022 Lords Chamber

[Lord Callanan (Con)]

The centre has not been completed —it is still under construction—so it has not produced any vaccines yet. Obviously whether it does so will be a matter for its new owners. But the Government have a wide range of emergency powers that we may need to deploy in the event of any future pandemic.

[Baroness Blake of Leeds (Lab)]

My Lords, the sale of the Vaccine Manufacturing and Innovation Centre has been described as akin to defunding fire brigades after they have extinguished a major blaze. Can the Minister tell us in detail what steps the Government have taken with the sale to ensure that this is not the case and that the UK remains well prepared for any future pandemics?

[Lord Callanan (Con)]

I assure the noble Baroness that this is indeed not the case. Her question is fundamentally misconstrued. The centre was originally set up a number of years ago to look at the development of vaccines for Ebola; it was a private company then and remains a private company now. It was grant-aided during the pandemic as a precautionary measure in case we needed additional facilities. All the facilities which delivered vaccines were also all delivered by private companies. I am not sure where the Opposition are going with this question. Of course, the facility remains in the UK. It will expand its production and another £120 million will be invested in the facility; it will be able to contribute to vaccine production in the future if we need it.

Newport Wafer Fab

Debate between Lord Callanan and Baroness Blake of Leeds

Thursday 7th April 2022 Lords Chamber

[Lord Callanan (Con)]

I totally share the noble Lord’s frustration about this, and totally align with his remarks about the People’s Republic of China. On the awful human rights abuses going on there, particularly the treatment of the Uighur people, there is no difference between us. Unfortunately, this is a quasi-judicial decision that will be taken by the Business Secretary under the powers granted to him by the National Security and Investment Act, which many of us debated at great length in this House. I cannot comment on the details of a quasi-judicial decision, or on national security assessments. I apologise to the noble Lord, but that is the position.

[Baroness Blake of Leeds (Lab)]

My Lords, the House of Commons Foreign Affairs Committee found no evidence to suggest that a review into the acquisition of Newport Wafer Fab had taken place, yet Politico reports that the Government’s National Security Adviser concluded that there were not enough security concerns to block it. Can the Government confirm, on record, whether the review that was promised by the Prime Minister took place or not?

[Lord Callanan (Con)]

I can confirm that the review is taking place.

Employment Bill

Debate between Lord Callanan and Baroness Blake of Leeds

Wednesday 6th April 2022 Lords Chamber

[Lord Callanan (Con)]

I am afraid that I cannot commit to any specific measures that might be in any future legislation that the right reverend Prelate will be aware of. I recognise the concerns he addressed; it is very important for employers to consult their workforce fully before introducing measures such as this.

[Baroness Blake of Leeds (Lab)]

My Lords, the 2019 Conservative manifesto stated that it would

“encourage flexible working and consult on making it the default unless employers have good reasons not to.”

On 9 February 2022, BEIS Minister Paul Scully reasserted the Government’s commitment

“to introducing new employment measures”—[Official Report, Commons, 9/2/22; col. 1059.]

covering a range of matters. It is now being reported in the Financial Times that the long-awaited employment Bill is not expected in the Queen’s Speech in May. I am sure that the Minister is aware of the excellent debate led by the noble Baroness, Lady Altmann, exposing the urgent need for flexibility to stem the rapidly increasing loss of older workers from the workplace, especially due to health reasons and caring responsibilities. If there is no employment Bill in the Queen’s Speech, does this mean that the Government no longer believe that employees deserve this right to request flexible working?

[Lord Callanan (Con)]

I cannot commit to any particular measures, as I said in response to an earlier question. However, we have a very good employment law framework in this country, as evidenced by our unemployment rate, which is less than half that of France—which has a much more rigid employment framework. Therefore, flexible working is a good thing in this country because we have lower unemployment. The best right anyone can have is to have a job. It is right that we do not change the employment law framework until we are sure that any changes will address the needs of businesses and workers in the post-Covid economy.

COP 26

Debate between Lord Callanan and Baroness Blake of Leeds

Monday 28th March 2022 Lords Chamber

[Lord Callanan (Con)]

My noble friend makes a powerful point. We are seeing unprecedented turbulence in the energy markets, with massive rises in the prices of fossil fuels in particular. Ultimately, the best solution to high prices in fossil fuels is to use less of them, which is what we are trying to do.

[Baroness Blake of Leeds (Lab)]

My Lords, despite being a signatory to the Glasgow declaration on forests, Brazil shows no sign of respecting its Glasgow commitments. It recorded the most deforestation ever in the Amazon rainforest in the month of January 2022, with 430 square kilometres of forest destroyed. What actions do the Government think will be effective for signatories that fail to make progress, and what reporting is required?

[Lord Callanan (Con)]

Clearly, Brazil signed up to the declaration at COP 26 along with 140 other countries covering over 90% of the world’s forest. It is important for us to continue working with Brazil and countries representing some 75% of trade in agricultural commodities to try to move those countries’ trade towards more sustainable means.

Subsidy Control Bill

Debate between Lord Callanan and Baroness Blake of Leeds

Lords Hansard - Part 1 & Report stage
Tuesday 22nd March 2022 Lords Chamber

[Baroness Blake of Leeds (Lab)]

My Lords, I declare an interest as a vice-president of the LGA. I also express—I like the term—a personal “modicum of delight” at having been released from the Covid nightmare and enforced isolation which has unfortunately hit too many of us in this group.

I sincerely recognise the movement from the Government in the amendments tabled. I thank the Minister for taking our comments on board. We have all expressed our reservations and commented from wide experience and knowledge from the front line of how significant these subsidies are—particularly, as has been said, in the context of driving investment, regeneration and putting some substance behind the rhetoric around levelling up. We have given examples of discrepancies in investment and funding, and the real disadvantage that that has caused too many communities across the United Kingdom.

I express my gratitude for the quality of the discussion on the amendments in this group, particularly for several conversations my noble friend Lord McNicol and I have had with the noble Lord, Lord Ravensdale, about what it is like being part of a body with the responsibility for delivering on the ground. The issue here is bridging that gap between the words in the Bill and the reality of how you make this happen on the ground.

My noble friend Lord Chandos has, as ever, expressed his views eloquently. I cannot add to what he has said, other than to thank him for his reasonable and measured approach, which highlights the significance of his comments around the investment in equity securities and how we must ensure that the discrepancies between the contents and the supporting documentation are resolved. We hope that the Minister can offer helpful clarifications on this subject.

Like other noble Lords, we on these Benches are very pleased that the Government have been persuaded of the case for strengthening the Bill’s focus on local and regional economic disadvantage. These points have been raised consistently both in another place and in your Lordships’ House. Without wishing to sound churlish, we feel it is a case of “better late than never”. It seems obvious to use whatever instruments are to hand to bring advantage to all parts of the country.

It may be that the Bill never prevented subsidies from being used to level up deprived areas, but the clarification in Amendment 2 will be helpful for public authorities at all levels. The exemption for relocation subsidies, introduced via Amendment 14, is also a hugely significant step. As we will all recall, we had a very interesting debate on relocation in Grand Committee and how, perversely, not addressing this matter could have caused real damage, inadvertently perhaps. I am glad that we have some movement and some common sense in this area.

I understand the intention behind Amendment 9, in the name of the noble and learned Lord, Lord Thomas of Cwmgiedd. In an ideal world, the Bill would indeed contain further detail on how the equity rationale will work in practice. As has been said several times, the amendment is looking for that clarification—the standards and principles—for how we can ensure that there are no grounds for misinterpretation and confusion. I am fairly confident that the Minister will say that this is exactly the kind of information that will be contained in future guidance, but, again, we must bear in mind the recipients of that guidance and how it will be interpreted. The subsidies must be a force for good. They must clearly demonstrate purpose and benefit to the communities where they are applied. I emphasise the clarity that will be needed around this. Talking to various stakeholders in the field, it is about the level of advice and clarification, and about ensuring that everyone feels that there is a level playing field and that interpretation in different areas is not bringing disadvantage as a knock-on effect.

It is fair to say that the Welsh Government have consistently voiced concerns that the original Bill treated Mayfair and Merthyr in the same manner, and with these changes we are definitely making progress. However, as regards other elements of the Bill and the changes that have been made, we must emphasise the significance and importance of the review process, making sure that that is done in a transparent way at every stage of the game. We are talking about value for money, delivery, the spend of the public pound, making sure that all the concerns around the decisions that have led to investment decisions—which have been fairly, from our point of view, criticised—must be addressed. This is a powerful opportunity and I hope that through the changes that we are seeing, the opportunities are not missed.

As we speak, there is discussion about the spend of the shared prosperity fund, the delay in the skills element of that and the fact that ESIF will fall out next year, and there will be a gap if we do not pick up these issues. All those matters need to be brought together so that the spirit behind the gain-share agreements with all the devolved areas can be delivered with local determination, bringing benefit to all. This is a current and very important debate and I look forward with interest to the Minister’s response.

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

I start by welcoming the noble Baroness back to her rightful place on the Front Bench, fully recovered. In fact, I say that with more than a modicum of delight—to use my favourite phrase of the week so far. For the noble Lord, Lord Fox, that is the equivalent of being damned with faint praise. So as not to be sexist about this, it is good to see the noble Lord, Lord McNicol, back as well.

The interaction of the subsidy control regime with the Government’s levelling-up agenda has rightly occupied many noble Lords during their consideration of the Bill, both in Committee and on Report. I hope that so far I have been able to provide sufficient reassurance that public authorities are no less able to give subsidies to address regional disadvantage under the Bill than they were under the previous EU state aid regime. Indeed, moving away from the EU’s default prohibition on subsidies and the resulting exemption for certain categories of subsidy in specified areas will allow public authorities greater ability to design measures that address not only regional disadvantage but the stark differences in social and economic opportunity that exist at a much more granular local level.

It is important that public authorities understand the way that they are empowered by this regime to give levelling-up subsidies, so I recognise the value of noble Lords’ suggestions that this would benefit from being made clear in the subsidy control principles. Amendment 2 to Schedule 1 therefore makes it clear that addressing local or regional disadvantage is considered to be an equity rationale for the purpose of assessing compliance with principle A. That was urged on me by many noble Lords in Committee and I am delighted to be able to put that forward—with more than a modicum of delight —on behalf of the Government. This puts it beyond any doubt or confusion that a subsidy to address local or regional disadvantage can be given, provided, of course, that the other principles and requirements of the regime are met.

I am grateful to the noble Baroness, Lady Blake, and the noble Lord, Lord Ravensdale, for supporting this amendment—I am not sure that there are many occasions when people put their name to my amendments but I am more than delighted when they do so. I am also happy to reassure noble Lords, the noble Lord, Lord Ravensdale, in particular, that beyond this change to the Bill, the Government will be exploring the creation of streamlined routes to support levelling up. I reassure the noble Lord that these streamlined routes may have deprivation-related eligibility criteria, although it is important to note that levelling up is about improving opportunities in the whole of the UK.

A streamlined route could therefore facilitate interventions—high street regeneration is one example—that could be used by a range of public authorities, but particularly those who wish to address deprived areas. Although streamlined routes will be produced by the Secretary of State, none of this prevents local authorities or other public authorities making subsidy schemes that have deprivation-related eligibility criteria.

--- Later in debate ---

[Baroness Blake of Leeds (Lab)]

My Lords, I am grateful to the noble Baroness, Lady Boycott, for tabling her amendments and sorry that she cannot be here to move them today; I am grateful that my noble friend Lord Whitty stepped into the breach much more than adequately. I want also to recognise the contribution of the debate and the importance of getting on to the front foot with its urgency on such a range of different issues. Obviously we have the climate emergency, but we have to mention Russia’s illegal invasion of Ukraine and the West’s urgent discussions about how to lower its dependence on Russian oil and gas.

These discussions are happening at the highest possible level. For some, I fear that they will give a convenient excuse to promote activities that will cause significant environmental damage if unchecked, whether that is firing up coal-fired power stations, resuming fracking, or indeed Shell’s announcement just this morning that it will look again at the Cambo field. For many, the focus is on the acuteness of the energy security issues that we are facing, which have come to the forefront, and the ever greater need to develop energy self-sufficiency; that means focusing on the climate imperative together with security issues, regeneration and the new green jobs that will come along.

Following COP 26, the UK remains a key player in driving implementation of the various agreements reached. What hope do we have of ensuring that other countries follow through on their commitments if we do not play our leading role in this global fight? Another aspect is that we know the Government want a degree of flexibility for public authorities at every level, but we do not see anything in Amendment 3 that takes that flexibility away. The Minister has been keen to use the example of Welsh steel during our discussions on this matter. If, when conducting the so-called balance test, the Welsh Government decide that the short-term economic benefits outweigh the costs of emissions, they will be able to award the subsidy. However, as a general principle, public money should be used for public good, and what greater public good can there be than preserving our planet for future generations?

Now is the time for us to double down on our commitments to renewables and nuclear rather than being swayed by those who are seeking to turn back the clock. I finish by picking up on the comments of my noble friend Lord Whitty about pressing Amendment 3 to a vote. If he does indeed decide to do so, we will support him.

[Lord Callanan (Con)]

My Lords, first, I thank all noble Lords who have spoken on these amendments, which were introduced so ably, as always, by the noble Lord, Lord Whitty. I will respond to them all together since they all relate to climate change and energy matters.

Amendment 3, tabled by the noble Baroness, Lady Boycott, and the noble Lord, Lord Whitty, seeks to include specific mention of our “net zero emissions target” and “environmental targets”. It would require public authorities to consider the negative impacts, with respect to our Climate Change Act and Environment Act targets, when making a balancing test under principle G of Schedule 1. Amendment 61 would allow the Secretary of State to issue guidance to support public authorities with this assessment.

I understand noble Lords’ keen interest in ensuring that subsidies and schemes granted within the UK further our climate change and environmental targets, wherever practical, and that public authorities should be supported by the Government in making robust assessments of the impacts that their subsidies or schemes may have on these targets. The Government share this objective, and our record in office demonstrates that. I make it clear that this applies to some of the other amendments to which I will be coming later: the UK’s net zero target is, and remains, the law of the land. Nothing in this Bill changes or undermines that fact. The Government remain resolutely committed to net zero by 2050. At this point, I welcome the addition of the noble Lord, Lord Fox, to my speechwriting team. However, it is right and proper, particularly in the current crisis, that we keep in mind that our energy transition to net zero is an issue not only of decarbonisation but of national security and—especially at the moment—national importance.

In response to the noble Lord, Lord Whitty, I make it clear that the balancing test in principle G already requires public authorities to take into account all relevant “negative effects”, which would include negative effects in relation to climate change and the environment. Similarly, subsidies that support our net zero and environmental targets should also take those positive impacts into account in the balancing tests. Principle G emphasises particularly “competition”, “trade” and “investment” effects because minimising harmful distortions in these areas is the primary purpose of a system of subsidy control. However, it is not intended to suggest that these factors should override all other policy-making considerations. There is no implication that public authorities should set their climate and environmental obligations—or, indeed, any other duties or objectives—to one side.

I reassure the noble Baronesses, Lady Sheehan and Lady Hayman, and others, that the Secretary of State will issue guidance on the practical application of the subsidy control principles, and regarding the energy and environment principles. This guidance will include instructions on how to take into account, where relevant, any impacts the subsidy or scheme may have on targets under the Climate Change Act or the Environment Act—or, indeed, signpost the public authority to existing guidance to this effect.

It is also worth pointing out that environmental policy is a devolved matter. This regime is designed to empower public authorities with democratic mandates to use subsidies in pursuit of their own policy objectives—within certain bounds which merely protect UK competition and investment—and safeguard our international obligations. It is not seeking to direct the devolved Administrations, or any other public authority, to spend on one specific policy objective, however important and worthwhile that policy objective may be. For that reason, I am highly reluctant to impose any additional constraints on other public authorities which are fundamental neither to subsidy control policy nor to implementing our international obligations. There are later amendments in which noble Lords will seek to persuade me to do the opposite in respect of the devolved Administrations, so I hope that noble Lords will not be so hypocritical as to repeat those arguments back to me then. I believe that these amendments are therefore unnecessary, and I ask the noble Lord, Lord Whitty, to withdraw Amendment 3.

Subsidy Control Bill

Debate between Lord Callanan and Baroness Blake of Leeds

Committee stage
Wednesday 9th February 2022 Grand Committee

[Lord Callanan (Con)]

I think that is the first time the Liberal Democrats have proposed giving the Government more secondary legislation powers, but I understand the noble Lord’s point. As I said, I have heard the strength of opinion on both sides of the Committee and will reflect further on this matter.

[Baroness Blake of Leeds (Lab)]

I thank the Minister for those final comments, which I think are a measure of the contributions we have heard tonight and the strength of feeling on this issue around the Room. My noble friend Lord Chandos really put his finger on it. He is absolutely right that the unreasonableness of this time limit will lead to people putting in appeals just in case more information comes to light. That is a very real proposition.

The case against the one-month limit has been very well made. I thank the noble Baroness, Lady Randerson, for her insight into rural areas and the aspect of holidays, and the noble Baroness, Lady Altmann, for highlighting the real aspect of it being challenging and unachievable. There are so many elements in this that need to be taken away. I thank noble Lords for listening to the arguments that have been made with this amendment today and over a period of time. With those comments, I beg leave to withdraw the amendment.

Subsidy Control Bill

Debate between Lord Callanan and Baroness Blake of Leeds

Committee stage
Monday 7th February 2022 Grand Committee

[Baroness Blake of Leeds (Lab)]

I thank the Minister for his very full response, as always. The level of detail means that we will indeed require letters. Maybe the simplest way forward is for us all to receive the same response on the issues that we have all raised in Committee, so we are all on the same page.

I do not want to prolong this debate too much. I note that the Minister in the other place, Mr Scully, undertook to review the consultation, including the debates that we have had in this House. I go back to the spirit of hopefulness that I mentioned earlier—or maybe naivety perhaps, but we are all allowed to be naive for a little while, I hope—because this is a serious issue, and it is fairly unusual for such issues to get such cross-party and cross-sector support.

I have a question. When we talk about burdens and costs, I am always intrigued. Could the Minister perhaps write to us with an estimate of the costs if things go wrong—that is, when there is a challenge and it ends up in court in arbitration? That sort of thing happens regularly if you do not have a robust system that is clear and transparent. Burdens work both ways.

There is already a system in place that is tried and tested. Public authorities, whether local authorities, combined authorities, LEPs or devolved Governments, have been working on these matters for a long time, and there is established good practice out there. It troubles me that some of the provisions in the Bill could undermine an enormous amount of work.

Going back to the principles, we are talking about the need for consistency and clarity and, most of all, the fact that we should do everything we can to ensure that every pound of public money is accounted for and accountable and can be followed as it goes through.

[Lord Callanan (Con)]

If I may interrupt the noble Baroness, I am trying to save my letter writing to the noble Lord, Lord Fox, who was concerned that my workload would be unduly increased: for his information, apparently the £14.5 million figure comes from the TCA.

[Baroness Blake of Leeds (Lab)]

It only remains for me to beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Callanan (Con)]

We are not denying the right to request, which is why we are currently in discussions with the devolved Administrations to try to codify the system, but we have to accept the reality that they have a fundamental objection to subsidy control being reserved to the UK Government. They do not believe that it should be a UK-wide function. While we can agree and discuss many of the details, it is a black or white situation whether it is reserved to the UK Government. We feel it should be. That was Parliament’s decision in the United Kingdom Internal Market Act. The devolved Administrations do not agree with that, but it is a fact, so while it is possible to agree with them on many of the details, and we have engaged extensively at ministerial and official levels, we cannot resolve the fundamental difference of opinion on the overall principle.

There is a risk that this amendment would overburden the subsidy advice unit with numerous and unnecessary directions for referrals. The noble Lord, Lord Bruce, talked about the ability of the current Scottish Administration to put friction in the relationship and to seek to cause division where there is perhaps no division at the moment, and that would require substantial and unpredictable additional resources. In contrast, given my department’s responsibility for and its relationship with the Competition and Markets Authority, the Secretary of State will be able to take referral decisions that factor in the overall workload and capacity of the subsidy advice unit and will work with others in government to ensure the unit is appropriately resourced to deliver its functions over the medium and long term.

We appreciate that the new regime represents a significant shift from the requirements of the previous EU state aid regime and that public authorities will need to familiarise themselves with the new requirements and processes. Public authorities will already be used to the interim arrangements under our international obligations, including in the trade and co-operation agreement, which require an assessment of a prospective subsidy or scheme against six principles. As always, my department stands ready to support further through guidance and advice to help to ensure that public authorities in all parts of the United Kingdom are prepared and feel comfortable making their own assessments and giving out subsidies, hopefully without the need to seek advice from the subsidy advice unit. Therefore, for the reasons I have stated, I am unable to accept the amendment and hope that, given the explanations I have provided, the noble Baroness will feel able to withdraw the amendment.

[Baroness Blake of Leeds (Lab)]

I am sure that it does not fall to me to remind the Minister that the Secretary of State might be a woman as well as a man.

I would be grateful if the clarification that the Minister gave to the noble Lord, Lord Purvis, could be given to all of us in writing, as it would be really helpful in trying to move this forward. I am slightly concerned that there is a bit of a patronising element creeping into this, and I think that we need to be very careful about that in terms of how we build the relationships going forward.

It really remains to be said now that we perhaps need to reserve our position on this as we move to the next stage, in the light of ongoing discussions and consultation as the Minister has outlined. I think that we would all like the opportunity to go back to base and to understand how these discussions are continuing. I am sure that we will then come together to make decisions on how to move this forward at the next stage. With those comments, I beg leave to withdraw the amendment.

Subsidy Control Bill

Debate between Lord Callanan and Baroness Blake of Leeds

Committee stage
Wednesday 2nd February 2022 Grand Committee

[Lord Callanan (Con)]

It would be the area of the particular authority that is offering the subsidy. Earlier, I offered a more precise definition of what the area would be, whether it is the Scottish Government for Scotland or the council area that the noble Lord, Lord Bruce, referred to in north-east Scotland. They would be the areas of the authority combined. If the Scottish Government, for instance, wanted to offer a direct subsidy for a company to move, or the British Government offered a subsidy for a company to relocate, even within their own area, it would not be permitted.

As I said, indirect attractiveness in enhancing training provisions, for example, would be permitted. This is to prohibit a particular small class of actions. The example that we used was in the United States. We have all seen examples of companies moving from one state to another. They literally close down one operation and move to another because of the enormous subsidies offered. That is what we want to prohibit. We certainly do not want to prohibit areas—indeed, it would be contrary to our policy aims—from making themselves more attractive by offering indirect subsidies, as this would help the levelling-up agenda. I hope I have clarified that.

Amendment 34 was tabled by the noble Lord, Lord McNicol. First, I will say a few words about the purpose and effect of Clause 29, which this amendment seeks to change. The clause sets out the specific provisions for giving subsidies for services of public economic interest, which are services provided to carry out particular tasks in the public interest. These are services where, without a public subsidy, a vital public service would not be supplied in an appropriate way by the market—or, in some cases, would not be supplied at all. These could include, for example, ferry links between Scottish islands—no doubt the noble Lord, Lord Berkeley, would want to quote the example of the Scilly Isles—and a rural bus service.

The provisions in Clause 29 facilitate the subsidies being given while ensuring that this is done transparently, that they are reviewed regularly by the public authority, and that they avoid overcompensating the beneficiary. The Government’s aim in drafting Clause 29 was to provide a simple yet effective framework within which public authorities could confidently provide SPEI subsidies that would allow the continued provision of important services and, in doing so, ensure that the subsidy is limited to what is necessary to deliver that service.

In response to the question from the noble Lord, Lord German, about whether a leisure centre would be considered an SPEI, I do not want to comment on that specific scenario. There is no reason in principle why it should not be, but the Bill would absolutely allow a subsidy to a leisure centre, whether it is an SPEI or not—we could probably have lots of debates about the degree to which leisure centres are SPEIs—if the public authority was assured that there was a market failure or equity rationale and the other relevant requirements were met. I will purposefully not comment on his proposition that the residents of London should not benefit from public leisure centres. I am sure that is not what he was trying to imply.

The amendment tabled by the noble Lord, Lord McNicol, seeks to add a further requirement on public authorities when considering the cost of delivering the SPEI. They would need to consider the social and economic welfare of users of the service and of those engaged in its delivery. These will be important factors for many, if not all, SPEIs, and I expect that public authorities would regularly take account of these considerations when reviewing these types of services on a case-by-case basis. For example, service providers of rural transport services may be required, by the terms of their contract, to consult service users through annual customer surveys or regular engagement with local stakeholders to show that the service in fact meets local needs.

However, the inclusion of this amendment in the Bill would introduce additional complication and a degree of uncertainty for public authorities in how they undertake this assessment. The defining factor for SPEIs must be the type of service that is provided and the fact that it would not be adequately provided by the market. The provisions in Clause 29 are designed to ensure that those services are designed appropriately and with minimal market distortion. As important as the social and economic welfare of service users and providers is, I do not believe it is at the core of this assessment and of the subsidy control provisions.

More broadly, it is important to emphasise that the subsidy control regime does not sit in isolation, nor should it determine every element of spending decisions taken by public authorities in the UK. They must continue to take into account spending rules and to ensure value for taxpayers’ money. They must also make evidence-based, democratically accountable policy decisions about how and where to intervene, in a way that takes into account the specific characteristics and needs of the geographical area and the subject matter for which they are responsible. It may therefore be appropriate for public authorities to include reference to the social and economic welfare of service users and providers in their own guidance on specific SPEIs.

With respect to the social and economic welfare of those engaged in delivering the services, I remind the noble Lord that the UK has one of the best employment rights records in the world. We continue to build on this record, ensuring that our workers have access to the rights and protections they deserve. I therefore do not believe that it is desirable for the subsidy control regime that we are debating to prescribe how public authorities must account for the social and economic welfare of service users and those engaged in delivering the service.

Finally, I will comment on Amendment 36. I am also grateful to the noble Lord, Lord McNicol, for tabling this especially thought-provoking amendment. I understand that the noble Lord intends it to be a probing amendment and I will treat it as such. It raises some interesting questions about subsidies and the nature of the relationship they create between a public authority and a subsidy beneficiary.

The social value Act, from which I assume his amendment takes its inspiration, requires a public authority that is procuring the provision of services, goods or works to give weight to social value factors in what would otherwise have to be a strict value-for-money calculation. Authorities within the scope of that Act should consider whether it applies where a subsidised contract is awarded. In contrast, and perhaps paradoxically, the giving of public money in the form of a subsidy is not primarily a market-based or economic calculation. Of course there are economic duties, within this regime and in public spending controls, to ensure that a subsidy is efficient and effective.

However, the first requirement of this regime—the first condition that a public authority must satisfy before giving a subsidy—is, in essence, one of social value: what is the equity rationale? Is there a market failure and what is the benefit to wider society in providing this subsidy? I hope this answers the question of the noble Baroness, Lady Jones, on the same subject. Moreover, public authorities must conclude their assessment against the principles with the balancing test in principle G: that the beneficial effects of the subsidy should outweigh any negative effects. Of course, these duties fall on the public authority and not the beneficiary directly but, in considering the first and last principles, the public authority must consider the effect of the subsidy in the round.

If it were reasonably foreseeable that, in the actual purchasing of a good or service funded by subsidy, the beneficiary would be undermining the equity rationale for giving the subsidy or that it would somehow worsen another equity objective, then it is hard to see that the subsidy could satisfy either principle A or G. None of this is to say that a public authority cannot impose secondary requirements on a beneficiary, where the size and nature of a subsidy might lead it to do so. Many public authorities award subsidies through a written contractual arrangement that sets out the terms and conditions under which the financial assistance is given, and this would be the way to impose such conditions. But it would be disproportionate to require public authorities to impose social value conditions in all cases, particularly as the questions of equity are already built into the fabric of the regime.

As an aside, the noble Lord has also proposed that public authorities should be able to impose penalties if the use of the subsidy does not deliver the chosen social value purposes. As I have explained, it is not proportionate to require public authorities to impose these secondary requirements. However, let me reassure him that Clause 77 provides that if a subsidy is not used for its intended purpose, it can of course be recovered.

I am grateful to all noble Lords for putting forward their amendments and for the long subsequent discussion that has taken place, but I hope I have set out the reasons why I am unable to accept these amendments on behalf of the Government. In the light of the fulsome explanations I have provided, I hope that noble Lords will feel able to withdraw or not press their amendments.

[Baroness Blake of Leeds (Lab)]

I thank everyone. Given the nature of the earlier discussion, particularly about the cultural venues, perhaps I should declare my interest as a vice-president of the LGA at this point, with apologies for not doing so earlier. I wonder if noble Lords are all sitting feeling relieved that they are not standing here trying to pull all this together. On behalf of the Committee, I thank everyone who has contributed; it has been a very helpful debate. I also thank the Minister for his fulsome response.

However, the nature of the amendments we are considering in this group and their probing nature is such that noble Lords have been seeking reassurance. Although the Minister has attempted to give us reassurance, without looking through the detailed responses that the Committee has given this afternoon I am not convinced that on the matters raised we can all put our hands up and say that that reassurance has been received on all points. I hope there will be opportunities to come back and look at the continuing areas of concern.

I am also struck by the fact that we have not had the opportunity to discuss in detail the evidence submitted by experts during the House of Commons proceedings, including the very serious arguments by Professor Fothergill and Dr Pazos-Vidal about the benefit of defining areas. I confess that I am at a loss as to how the Government can bring this down to the point where the interested parties can make sense of the opportunities available to them, and how we can move this forward in a simple way that would enable areas and businesses to benefit, without the excess bureaucracy that the Minister assured us would not get in the way. I remain to be convinced on some of these points.

Subsidy Control Bill

Debate between Lord Callanan and Baroness Blake of Leeds

Committee stage
Monday 31st January 2022 Grand Committee

[Lord Callanan (Con)]

It is for the CMA to provide guidance on those matters but for the authorities themselves to determine whether the subsidy in question is justified. Then, but only if it is challenged against the principles in the Act, will the CAT be empowered to make a judgment on whether it is in compliance with the specific provisions in the Act.

[Baroness Blake of Leeds (Lab)]

My Lords, I express my gratitude for all the contributions to this increasingly important debate. Judging by the response from the Minister, there are still many areas that I am sure we will want to pursue and explore and to which we will come back at later stages of our proceedings. I echo the comment by the noble Lord, Lord Ravensdale, that there is a clear question here: is there a clear strategy? That is something that we can all question as we go forward.

Many of us in the Room today have been involved with the vexed issue of distributing regional funding, which is extraordinarily complex. I come back to the very clear comments by the noble and learned Lord, Lord Thomas, about the nature of the political decision in this. I have enormous concerns about how the whole process will be taken forward if it is allowed to stay in its current form, and real concern about the lack of focus on what it is going to mean in terms of benefit for communities and for people. As the noble Baroness, Lady Sheehan, emphasised, a lack of clarity, very little in the way of guidance and too many gaps have been the theme that has run through this debate.

I have to pick up one of the comments that the noble Baroness, Lady Jones, made concerning tension within the Government. I think that helps to explain where the lack of clarity has come from.

I think we would all welcome improvements. No one is trying to suggest that what we had before was perfect. I myself go back to the time of SRB funding, for example, when local authorities were put by a national directive in the position where communities were split down the middle, with funding going into an area on one side of a street but not the other. We do not want to move away from local determination, and that is very much the spirit in which we are taking this up.

With those comments, and with a clear understanding that we will be coming back to discuss these important matters, I beg leave to withdraw the amendment.

Homes: Environmental Standards

Debate between Lord Callanan and Baroness Blake of Leeds

Thursday 2nd December 2021 Lords Chamber

[Baroness Blake of Leeds (Lab)]

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

[Lord Callanan (Con)]

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

Oil and Gas Authority: Remit

Debate between Lord Callanan and Baroness Blake of Leeds

Thursday 2nd December 2021 Lords Chamber

[Lord Callanan (Con)]

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

[Baroness Blake of Leeds (Lab)]

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

[Lord Callanan (Con)]

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

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

Debate between Lord Callanan and Baroness Blake of Leeds

Report stage
Wednesday 1st December 2021 Lords Chamber

[Lord Callanan (Con)]

Yes, it is my understanding that the Bill, if passed, will enable compensation to be pursued, and there is no need for the restoration of companies to the register for that to take place.

[Baroness Blake of Leeds (Lab)]

I start by thanking the Minister for a very full response. Sometimes when I get a very full response, I wonder whether it is an attempt to overload the system, but actually it was very technical. I also thank him—I think on behalf of us all—for taking time to bring his officials together to talk us through it.

We established in Committee that the Bill does not have the capacity to deal with some of the serious concerns raised in our discussions. We will need to revisit some of the worst excesses and infringements of current legislation. Some of the personal testimonies to the levels of fraud and the fact that some directors were re-emerging and getting away with some unspeakable behaviour is still of huge concern to us all.

On reporting, would it be possible to have a conversation on how we can pull out the relevant information from the various reports to which the Minister referred? With the best will in the world, we will not all be able to sit down to go through a whole set of annual accounts. With the particular experience with Covid and the extent of concern about it, there is a real need for transparency. I hope that we can pick this up and take it forward.

My concern about resourcing is still very live, and I hope that after the reassurance on the spending review and the need to focus on this, the debate in this Chamber will help to inform the decisions that are made. Noble Lords will have heard several in-depth media reports on the concern about the levels of fraud that have been perpetrated over the past 18 months, and I think there is a lot more to come to light.

I thank the Minister for his reassurances, and we will keep scrutinising progress in this important area. I look forward to opportunities—perhaps through further legislation—to deal with some of the real problems that continue.

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

Debate between Lord Callanan and Baroness Blake of Leeds

Wednesday 10th November 2021 Grand Committee

[Baroness Blake of Leeds (Lab)]

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

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

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

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

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

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

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

Non-UK Residents: Property Ownership Register

Debate between Lord Callanan and Baroness Blake of Leeds

Tuesday 2nd November 2021 Lords Chamber

[Lord Callanan (Con)]

I totally agree with my noble friend. Just last week in the spending review we committed to new investments of £63 million for Companies House reform and £42 million for tackling money laundering and fraud. This is alongside the economic crime anti-money laundering levy which will provide an additional £100 million funding per year from 2023-24. We are committed to cracking down on money laundering and we will implement this legislation when time allows.

[Baroness Blake of Leeds (Lab)]

My Lords, the UK published a draft Order in Council under the Sanctions and Anti-Money Laundering Act 2018 that required British Overseas Territories to establish a public register of companies’ beneficial owners by 2021. Can the Minister confirm reports that this will not now be required until 2023? If so, can he explain why it has been postponed?

Emissions Trading Scheme: Transport

Debate between Lord Callanan and Baroness Blake of Leeds

Monday 11th October 2021 Lords Chamber

[Baroness Blake of Leeds (Lab)]

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

[Lord Callanan (Con)]

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