Renewable Energy: Costs
Lord Frost Excerpts(1 week, 1 day ago)
Lords ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Lord Frost
That this House takes note of the cost of renewable energy and its effect on energy costs in the United Kingdom.
Lord Frost (Con)
My Lords, I draw attention to my entries in the register of interests. I thank all those Members of your Lordships’ House who have agreed to speak today; I am very grateful to them all.
With COP 29 well under way in Baku, it is a timely moment to have this debate, even if that conference is perhaps attracting rather less interest than in previous years. That is certainly not because of lack of interest in the climate and energy issue. President Trump’s election is likely to open up debate once again at a global level. In the EU, we see increasing levels of doubt about the policy consequences of the climate commitments already made. Here in the UK, we have the new Government’s plan to decarbonise the energy grid by 2030, with the report last week from NESO, the newly formed National Energy System Operator, constituting the first detailed commentary on that plan.
Central to that plan is delivery of large-scale renewable capacity for our energy grid, both wind—onshore and offshore—and solar, together with a revamp of the transmission system to handle that. The NESO report provides us with costings for all this and much else besides. Like most other official and quasi-official studies on the costs of net zero, the NESO report uses figures already produced by the Government for this purpose. That is why it is such a matter of regret that there appears to be a large measure of disagreement about many of those underlying figures. We would have a much higher quality debate about the costs of net zero overall if there were at least consensus on the underlying figures. There is not, and that is why I felt it right to try to secure today’s debate on this matter. I do not expect we will find consensus today either, I fear, but perhaps we can hope to shed some light on why the differences exist.
The difficulty arises for two broad reasons. First, there are starkly different views of the levelised costs of renewables, particularly onshore and offshore wind, and these are relevant to the closely connected question of subsidies to this sector. Secondly, it is an inevitable consequence of the intermittent nature of renewables that this imposes costs elsewhere on the energy system: back-up, interconnectors, other non-renewable generation, and measures to ensure grid stability, together with the costs of rebuilding and reconfiguring the transmission system—and all this seemingly on a highly ambitious scale. I want to look at these areas in turn.
First, on the levelised costs of renewables—that is, the cost of building and operating wind and solar, discounted over time—the latest figures were published in 2023 by the Department for Energy Security and Net Zero and, as I said, the NESO report is based on them. Those figures claim that offshore wind can generate power at £44 per megawatt hour in current prices. Yet AR6, the recent round of capacity auctions, awarded contracts for offshore wind at £82 per megawatt hour in current prices. It is difficult to understand why there should be such a significant difference between these figures, if the £44 figure is in any way correct. One becomes even more baffled if one looks at the actual accounts of recently commissioned offshore wind farms, which suggest a production cost of around £100 per megawatt hour, or, indeed, if one looks at the recent payments, published yesterday, to offshore wind farms under contracts for difference, which suggest a production cost of around £150 per megawatt hour.
There are similar huge gaps in other areas of the costings. DESNZ assumes a capital cost for offshore wind of £1.5 million per megawatt of capacity. Yet, once again, looking at the accounts of wind companies, the figure appears to be about £3 million per megawatt, which is twice as much. Indeed, at the end of 2023, the developers of Moray West wind farm were still installing the foundations of the wind farm yet had already, at that point, spent the equivalent of £1.6 million per megawatt hour. It bears noting that if the seemingly correct higher offshore wind capital spending figure were used, the NESO estimate for capex from now to 2030 would go up by about £15 billion every year, taking the total capex from a total of £31 billion to £34 billion to a total of £45 billion to £50 billion annually.
To take just one further difference, the DESNZ figures assume a 61% capacity factor for offshore wind—that is, they assume that over a year, wind farms generate about three-fifths of their notional installed capacity. But once again, recent wind farms are opening at a capacity of 45% when new, and that figure is falling over time. The real capacity factor over the whole of the life of a wind farm may well be under 40%. If that is correct, it means that we will need to build 50% more offshore wind farms to get to the actual power that DESNZ estimates—and, of course, costs will go up by the same amount.
I note that Professor Gordon Hughes from Edinburgh University and Andrew Montford, director of Net Zero Watch, wrote to the Permanent Secretary at DESNZ on 16 September asking for further detail on some of these discrepancies. They have not yet received a reply.
Those figures are just the actual costs of operating offshore wind. The gap between assumptions, auctions and actual real-world costs explains why there has been such a need for subsidies ever since the shift to renewables began in the mid-2000s. The OBR says that “environmental levies”—a catch-all category which covers the renewables obligation, the contracts for difference and the feed-in tariffs—currently stand at about £12 billion a year. That is over £400 for every UK household. Yet one has to ask again: if the real cost of offshore wind really is £44 per megawatt hour, well below current market prices and the prices agreed in auction rounds, why do we need these subsidies at all?
I turn now to my second category: the costs elsewhere in the energy system. I think everybody agrees that there are some such costs; the question is: how high are they and what are the consequentials? The costs are principally those of intermittency, of which there are two kinds. The better-known one is the fact that little power is generated by renewables when the wind does not blow and the sun does not shine—periods like the one we saw in this country for most of last week. This requires back-up, currently mainly gas, and there is obviously a capital cost in maintaining a dual system of any kind. Moreover, the fact that the gas-fired stations cannot be used at close to full capacity but must be turned on and off at short notice brings a cost in reduced efficiency and revenue. The cost of paying operators not to shut their power down as a result of this lack of efficiency—the so-called capacity market—is currently £1 billion a year. The OBR says it will rise to £4 billion in three years’ time.
The other kind of intermittency, which is less well known, is the reverse: what happens when the wind blows and the sun shines when we do not need the power generated. Under current arrangements, that involves us paying the renewables producers not to produce and to turn their kit off to avoid grid instability. That costs £2.5 billion per year, which is expected to rise to £3.5 billion in three years’ time.
It bears noting that the more renewables we produce and build, the bigger these figures will get. The more we rely on renewables, the bigger the problem when we have the wrong kind of weather, and the bigger the concomitant costs are going to be. That is why it is a simple fallacy, though a seemingly widely believed one, that building more renewables reduces costs and brings more security. It is surely clear that the reverse must be true.
Finally, there are the wider knock-on costs, most notably in the plans for what NESO calls “demand management”: rationing of energy if the grid cannot supply enough energy to meet demand. This will come either by compulsion—for example, in plans to reduce supply to industry in such circumstances—or by price rationing to consumers, or both. The NESO plan for demand management is slated to cover, by 2030, five times as much potential demand as now—that is, about 10 gigawatts.
Now noble Lords may say, as people do, there have always been differential energy tariffs. Indeed, some of us are old enough to remember things like Economy 7, from the 1980s. But that was differential pricing to stimulate demand in the night-time, when supply was high but demand was low. This is the reverse; this is a plan for us to put up with differential pricing to reduce demand, when it is demand that is high and supply that is low. That is quite different, and it necessarily imposes an economic cost on industry and the consumer, for they cannot use energy when they want to use it and may have no warning of the fact, either. It is hard to quantify that cost, but it is clearly potentially significant. It should be factored in to the cost of running an intermittent renewables system, but it is not.
The only attempt that I am aware of by government to quantify some of those wider costs—though not all of them, for some are still excluded—was made by the then BEIS in 2020, in its document entitled Energy Generation Costs 2020. This showed, even on the imperfect measures being used, that both offshore and onshore wind were on average likely to be more expensive than modern gas power stations, even allowing for some of the implausible assumptions that I discussed earlier.
Let us try to bring all this together. We have a significant discrepancy—disagreement, call it what you will—in assessments of the levelised costs of renewables. In the case of offshore wind, it is a discrepancy amounting, potentially, to up to £100 per megawatt hour. The high levels of subsidy we are paying in various forms suggest that production costs are in fact quite a lot higher than acknowledged. There are also wider costs to the grid—£3 billion to £5 billion in the current year, growing in future—and to the economy, hard to quantify but definitely present in the various kinds of inefficiencies created by an inefficiently working electricity supply system. In short, one side of the argument sees low levelised costs and believes that they will fall further; the other, with which obviously I associate myself, sees costs that are not falling and that require high and growing levels of subsidy and complexity to make the whole system work properly.
This situation is deeply unsatisfactory. The Government are about to embark on a dash to decarbonise the electricity grid according to an assessment that is based on certainly disputable direct costings, and which will be heavily contested and simply fails to take into account many of the wider costs and consequentials. This really is not good enough; the country is owed better.
I recognise, of course, that when the Minister responds he may not have the information he needs to reply fully to some of these detailed points, but I hope he might do so in writing, and perhaps at the same time encourage his Permanent Secretary to reply to Professor Hughes’ letter, which I mentioned earlier.
I say all this not to make a political point. We really need to understand better the real cost of renewables to the consumer, the Government and the economy. If it turns out that I am wrong and the costs really are low and falling, that will be excellent news for us all. I am doubtful about renewables not on some ideological grounds, but because they seem to me extremely expensive in their own right and to come with many additional costs and security risks too. I have not yet seen the evidence that would persuade me otherwise.
I finish on this point. With this in mind—and I am not sure the Minister will leap with alacrity on what I am about to say, but I hope he might respond anyway—the Government should consider establishing some form of expert committee on this subject, made up of officials and experts from the department and bodies such as NESO and the Climate Change Committee, with a red team of outside experts to provide challenge, to look on a totally transparent basis at the evidence and the costings, and to see how close it could get to a common view. This would seem to me the best way of getting at the reality and an assessment that might command a bit more consensus than the current situation does. Whatever this country’s future energy policy may be, we surely all want it to be established on the best possible analysis and the best possible knowledge. I look forward to the debate today and to the Minister’s response.
Lord Frost (Con)
My Lords, I do not want to detain your Lordships’ House for long. I thank every contributor today for the care with which they have presented their case, and I am grateful to the Minister for his thorough winding up. I did not really expect him to pick up my suggestion, and indeed he did not. I look forward to his full response to some of the points that I raised.
We have heard an extremely interesting set of speeches. If I might be allowed just one reflection, on those that we have heard from proponents of the transition, it is that I detected perhaps a reluctance to tackle some of the specific details of costs and numbers that I mentioned but rather appeals to authority and nebulous assertions about the costs of not acting in relation to our global responsibility and credibility in this regard. I feel that is a little unsatisfactory as a basis for transforming our entire energy system, which is why I suspect we will need to come back to this and related subjects before long in the future. Meanwhile, I commend the Motion to the House.
Climate Agenda
Lord Frost Excerpts(4 weeks, 1 day ago)
Lords ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Lord Frost (Con)
My Lords, I thank my noble friend Lord Lilley for securing today’s debate and for his strong support for economic rationality in this area over the years since he voted against the Climate Change Act in 2008.
I draw noble Lords’ attention to my statement of interests in the register: I am a trustee of the Global Warming Policy Foundation. It is one of the few organisations that tries to keep the debate alive on this issue, so it is very good that we have today’s debate.
Today’s debate is a very good sign; I think the net zero consensus is beginning to crumble. In my view, we are not in a climate emergency. Climate change is a challenge we can meet; it is not one that requires us to upend our entire economy and way of life.
This debate is supposed to be about the economy and I want to focus on that. For too long, many people have claimed that net zero is good for growth and prosperity, and we have heard that today. I am sorry, but I believe this is nonsense and I am going to show why.
One reason why I am confident that our current approach is harmful is that it requires many normally sensible people, and perhaps some who are not quite so sensible, to believe in a whole series of economic fallacies for the policy to work. I shall briefly set out some of them. The first is the broken window fallacy. We are supposed to believe the Skidmore report that net zero will make us richer. Of course, spending trillions of pounds on a new energy system has some economic spin-offs and it does get you an asset, just like repairing a broken window funds the glazier and gets you a window back—but your wealth is just the same. In fact, what we are doing today is creating a reduction in wealth: the new asset is worse than the old one. The replacement of the current grid with rickety and expensive renewables is not an improvement; it is a massive reduction in productive capacity—malinvestment of the worst kind. Just think of all the genuinely productive projects that could be funded with the trillions that we are going to spend over the years and how much real wealth could have been created.
The second fallacy is that it is all going to be all right on the night. This is a belief that one day we will just solve the problems—that we will solve the storage problem with hydrogen, hydro, batteries or whatever. It is the view that interconnectors will always work well, that they will never export when they are supposed to import, and that those to whom we are connected will never think their interests come first. I learned from the vaccines saga and France’s threats to Jersey in 2021 that we cannot rely even on our closest friends when the chips are down. This policy is making us deeply insecure.
The third fallacy is that of self-deception, most obviously on prices and costs. In the real world, renewables are simply not getting cheaper and some are eye-wateringly expensive. The existing CfD-funded offshore wind farms have cost over £150 per megawatt hour in current prices this financial year so far. The new projects awarded in AR6 will cost more than £80 per megawatt hour, when, as my noble friend Lord Lilley pointed out, the market price is around £60. And those figures for renewables ignore the subsidy; they ignore the need for back-up and storage. A child can see, surely, that it is not cheaper to build a renewables grid, plus all the back-up, than just to build effective back-up and forget about the renewables.
The fourth fallacy is that jobs are a benefit, not a cost. Net zero proponents paint this glowing picture of hundreds of thousands of new, green jobs. But, if the energy system requires many more people than now, how is that making the country more productive? If you believe that, you must think that we could make ourselves wealthier by sending everyone back into the fields to work the land. We want the fewest and most highly productive jobs possible, like those we already have in the oil and gas industry—jobs which this Government are gradually extinguishing.
The fifth fallacy is that of the infinite availability of resources. In this world, in the net zero world, there is always lots of capital waiting to be used; we always have enough workers; there are no linkages or timing problems for proper sequencing; foreigners are always willing to lend to the UK; and UK consumers are always happy to save instead of consuming. Massive projects, such as insulating every home in the UK or doubling the capacity of the energy grid, can be undertaken apparently without any resource constraints or knock-on effects in the wider economy. To put it charitably, that is not a realistic depiction of the world in which we live.
Finally, there is the industrial policy fallacy. It is the view that the Government know best and that they can pick the technologies, the subsidies and the targets to get us to net zero: the ineffective boilers and heat pumps, the expensive EVs, the windmills—the technology that was last cutting edge in this country under Henry II. I think we can be confident that any project pursued in this way is going to be a drag on the economy; all economic theory tells us so.
I believe in the long-standing Conservative principles—seemingly so uncertainly held in much of my party nowadays—of economic freedom, decentralised decision-taking, incentives for entrepreneurs, and economic experimentation. Yet the net-zero approach that we have chosen is requiring us to junk all that in favour of greater control and restrictions, with Soviet-style production targets—policies that we believe are wrong in any area, except when it comes to net zero. I urge my colleagues on these Benches who support net zero to reflect that, if you are a Conservative and your policy forces you to implement socialism, just maybe it is a bad policy.
The truth is that all this can have only one consequence for the economy, which is to make it less productive and slower growing, as it increasingly is. The only way out is to unwind, invest in productive energy—gas and nuclear, and lots of it—stop picking winners and roll back the subsidies, letting the market decide. I would have more sympathy with net-zero proponents if, as some have been today, they were honest about this. If they said, “This is going to cost you, but we have to do it anyway”, at least it would focus minds and we could have a real debate about whether the ends justify the means and not the fantasy debate that we are currently in, where everything is for the best and everything will turn out right. On net zero, we need a bit more Hayek and a bit less Candide.
Windsor Framework (Retail Movement Scheme: Plant and Animal Health) (Amendment etc.) Regulations 2024
Lord Frost Excerpts(1 month ago)
Lords ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Baroness Foster of Aghadrumsee (Non-Afl)
My Lords, I will be brief—I know that most people say that, but I genuinely do want to be. I refer to my registered interests, particularly my recent appointment as chair of InterTrade UK.
Paragraph 107 of the Safeguarding the Union Command Paper states:
“We have therefore already taken forward the steps necessary to enable the expansion of the arrangements permanently to allow at least an additional 26 Rest of World meat and plant products to be covered by the Northern Ireland Retail Movement Scheme. This will include the critical retailer proposal for Thai poultry, as well as Chinese poultry, and a range of cut flowers and herbs, and we will provide the same commitments on safeguards as we have for all existing Rest of World goods covered in the scheme”.
Part 3 of this statutory instrument gives statutory power for the EU-approved poultry meat plants in China and Thailand to be exempted from provisions of animal health law, but EU-approved meat plants in Brazil are not included. This is an important point, although I accept that it is niche. It is especially important for a company that raised the issue with the Secondary Legislation Scrutiny Committee—namely, Universal Meat Company from Northern Ireland. It imports a significant amount of tonnage from Brazil.
In response to concerns raised, Defra has said that the list of products included in the scope of this legislation was developed with industry stakeholders in the United Kingdom on the basis of factors such as the volumes of trade and the impact on supply chains, as the noble Baroness, Lady Ritchie, said. The department went on to list other ways to deal with Brazilian goods. But it would be so much more straightforward if this exemption included those Brazilian plants. In its conclusion, the Secondary Legislation Scrutiny Committee indicated the “importance of consulting widely”, which is an important point—I hope the Minister will reflect on that. It is about not just volumes in a UK context but what matters in a Northern Ireland context. That is important.
Given the specific concerns about Brazil and the fact that the factories concerned there are EU approved—it is important to say that—can the Minister proactively look again at this specific issue? The volumes may not be as large as the two countries listed—China and Thailand —in respect of poultry meat in UK terms, but, for Northern Ireland, Brazil is a significant supplier and its absence from this list will impact on the supply chain, consumer choice and customer cost. That is an important point.
Noble Lords are aware that I have been appointed chair of Intertrade UK and, while I await terms of reference from the Government, I intend to closely monitor the impact of statutory instruments. It is important that we have these debates and find out where there are difficulties, such as the one before the House today. I thank the noble Baroness, Lady Hoey, for bringing this Motion to the Floor of the House; otherwise, we would not have had the opportunity to raise what are important issues for suppliers, businesses and consumers in Northern Ireland. It has given me the opportunity to raise this specific concern and I hope the Minister can address it.
Lord Frost (Con)
My Lords, I too can be quite brief, but there are a few points I want to register. I thank the noble Baroness, Lady Hoey, for the Motion and for her helpful remarks.
These regulations testify to something we always feared: that differential arrangements for Northern Island, in which it remains closer to EU laws and rules, would end up being exploited to restrict our freedom and keep the UK-EU relationship one of high alignment, and that is what has happened. It has become harder to get the gains of setting our own laws in our own interests, and there is a risk that we remain in the political and psychological tractor beam of the EU. And so it has proved.
Ever since the original sin, as I regard it, of the joint reports in December 2017, it has been impossible to entirely undo the agreement about the imposition of EU law in Northern Ireland. The Johnson Government, both when I was responsible and under my successors, tried to water down commitments and made it clear they could not be durable, and eventually did their best to unpick it, culminating in the Northern Ireland Protocol Bill, which was so intensely disliked in this House. But that Bill fell, with Prime Ministers Johnson and Truss, and the Sunak Government, having promised one thing, then did another and agreed the Windsor Framework. This did little to improve the situation in practice, but the big change it did make was that the British Government were now actively committed to defending protocol-like arrangements, and that meant defending EU interests in areas covered by the protocol in Northern Ireland.
What we are seeing happen with the regulations today is what we always said would happen: the easy way out would always be taken, and we would increasingly choose to align ourselves with EU laws rather than go our own way. These regulations mark a new stage in that process. Hitherto, the Windsor Framework arrangements were confined to the GB-Northern Ireland “border”, but now we are also aligning a GB external border with EU laws—admittedly for a limited category of third-country goods. As others have said, including my noble friend Lady Lawlor, it will not end there. The Product Regulation and Metrology Bill, which is also being considered by your Lordships’ House, has exactly this purpose in mind, and is much more sweeping in what it can do. As the noble Baroness, Lady Hoey, pointed out, this pre-emptive legislative cringing to the EU hardly even brings us any benefits. It still does not improve the “border processes” between GB and Northern Ireland, and the same will be true of the product regulation Bill.
As I have said before, these arrangements make little sense unless they are the first stage in a process in which the second stage will be formal adoption of EU laws enforced by EU methods. That is, of course, how you get the paperwork to be eliminated, but at what price? We have the gradual watering down of this country’s democracy still further in favour of laws set elsewhere.
To conclude, there are only three possible destinations from where we are. I have just described one, which is the gradual, further dissolution of UK sovereignty in important areas of the economy. The second is an attempt to make the unworkable work, to constantly offset the complexities and the nonsensicalities of the Windsor Framework by more and more complex legislation, with more and more exemptions and special treatment, creating a bigger regulatory burden and, in practice, separating out Northern Ireland still further. If we go down this road, we will be dealing with more and more unsatisfactory pieces of legislation like this one.
The third route is the one that, one day, must be taken and has been referred to already, and that is the route of mutual enforcement, for the Windsor Framework to be ditched and for UK laws to apply in Northern Ireland, as they do anywhere else in this country. In my view, that is the right way forward. I do not think the current arrangements can or will stand. They are overcomplex, create too many political anomalies and simply will not work over time, and it is only a matter of time before that becomes clear. One day, we will sweep away the Windsor Framework and make this a properly United Kingdom once again.
Can the Minister say which of these three paths she believes the Government are on? What is their approach to the Windsor Framework, and what is the direction of travel?
Lord Bew (CB)
My Lords, I thank the noble Baroness, Lady Hoey, for giving us a chance to have this debate. I find myself in a slightly confused frame of mind, in that I agree with much of what the noble Lord, Lord Frost, has just said about the 2017 agreement and its consequences. However, we are where we are. There is as much chance of mutual enforcement becoming an acceptable solution to this crisis as there is of all the European countries and the United Kingdom deciding that the dictatorship of the proletariat is the best way forward for governance—in fact, there is rather more chance for the dictatorship of the proletariat. To tell the people of Northern Ireland to keep on going, that mutual enforcement is somehow a realistic option, is misleading.
On the disfranchisement of the people of Northern Ireland, the truth is that the Assembly will vote on this matter. I know there are those who dislike that. The major change between the Johnson agreement and the May agreement was putting in that there should be a vote in the Assembly on any new arrangements, giving the Northern Ireland Assembly a chance to vote. As for the talk about 1.9 million people being disfranchised, they are not being disfranchised—they are going to get a chance to vote. I understand the objection to the form of the vote, which is by a majority vote, although that is so because trade matters are actually the responsibility of the United Kingdom Parliament. It was a special concession to give a vote to the Assembly on this occasion. In 1938, at the time of the very controversial Anglo-Irish trade agreement, the unionist MPs all accepted it was nothing to do with Stormont; it was a matter for the Westminster Parliament even though they were concerned it was unfair to Northern Irish businesses. A special case has been made for this vote.
In 2017, there was a general election in Northern Ireland. The DUP got 36% of the vote—it is closer to 20% now. The total unionist vote is little short of 50%. When it was agreed in 2019 that the Assembly would have a majority vote on this matter, it was not so obvious what the outcome would be. Today it is, but when that was agreed to in 2019, it was not at all obvious that a majority vote would be acceptance of the Windsor Framework arrangements, as we are all sure it will be now. It was not at all sure, and it was not inevitable.
There is an argument that one reason why the unionist vote has collapsed is the constant putting forward of solutions which are not solutions, like the mutual enforcement scheme. There is nothing at all wrong with it, had it been serious five years ago. We are now three international treaties down the road, and the European Union is not going to change its mind, and Parliament voted by a huge majority for the Windsor Framework. There is more chance of the dictatorship of the proletariat being decided as the way forward for Europe and the United Kingdom than the idea that suddenly people are going to turn round and say, “Let’s try something else completely different”—considerably more chance.
I have made general observations of where we are, and it is with regret that I say some of this because I think mutual enforcement should have been more properly discussed. The 2017 agreement is deeply flawed and set a framework which leaves us with many remaining difficulties which we have to talk about. None the less, this is where we are. I hate to be so simple about it, but it is the case.
Product Regulation and Metrology Bill [HL]
Lord Frost ExcerptsTuesday 8th October 2024
(1 month, 2 weeks ago)
Lords ChamberRead Full debate Product Regulation and Metrology Bill [HL] 2024-26 View all Product Regulation and Metrology Bill [HL] 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Lord Frost (Con)
My Lords, it is a pleasure to follow the noble Baroness, Lady Crawley, and a particular pleasure to hear the maiden speech of the noble Baroness, Lady Winterton. She has a distinguished career in government and in the service of her party. I am sure we all look forward to hearing her future contributions to your Lordships’ House.
I read the Product Regulation and Metrology Bill with great interest when it was published earlier this summer, and with not a little surprise because it was not foreshadowed in the manifesto of the party opposite. The Minister sought to present the Bill as a technical one, to downplay concerns and to suggest that there is nothing to see here. I agree, of course, that there are technical elements in the Bill, but the technical in this area is often highly political and there is a long history, I am afraid, from those involved in managing the relationship with the EU of obfuscation and lack of clarity about the obligations that are really being undertaken, so it is right that we look under the surface of what the Bill implies.
My basic concern is that the Bill goes further than a purely technical Bill really needs to. It goes further because part of the motivation behind it is indeed to revive a process of alignment of goods with EU single market laws. That is not just my interpretation; it is said in the quite frank briefing prepared for the King’s Speech before the summer break. I will refer to that from time to time. The core of the case for the Bill is that the Government need to be able to regulate new products and continue to give status to the CE marking in the UK. I agree with that in principle, but I do not think that aim requires this Bill in this form. I want to explain why and what my concerns are.
I accept that the Government need a power to regulate in this area. Of course, the Government always have that power. I think the Minister said that the UK simply did not have the powers. With the greatest respect, that is not correct. This Parliament has the powers to do anything it wishes. Of course, it has to do it by primary legislation if there is no other route, and in some areas it will probably be better so done, especially for genuinely new products breaking genuinely new ground. But let us accept that a regulatory power is needed.
The current power to update regulations and recognise the CE marking is the retained EU law Act, which we debated with such pain about a year ago. In fact, that power has been used very recently in the Product Safety and Metrology (Amendment) Regulations 2024, which came into force just a few days ago. Therefore, my first question to the Minister is: can he explain why it is not possible simply to extend the deadlines that do expire for those powers in the retained EU law Act? Why can they simply not be extended, and we proceed as we have done in the last year or so?
I think I know the answer to that: the Government want to do more than that. Specifically, I suspect they want a new set of provisions enabling dynamic alignment with EU law. As the briefing for the King’s Speech said, it will
“enable us to make the sovereign choice to mirror or diverge from updated EU rules”—
that is, to create a power to make sure that our law can automatically follow changes in EU law. Indeed, that is what we find in Clause 2(7):
“Product regulations may provide that a product requirement is to be treated as met if … a requirement of relevant EU law specified in product regulations is met”.
In other words, this is a power to reimport EU law concepts back into our system. It allows UK product standards to be described not in UK law terms but simply by a cross-reference to EU law. When that EU law changes, so ours will change. So my second question to the Minister is: can he confirm or deny that the intention is indeed to make simple cross-references to EU law in that way? Does he agree that such cross-references amount to dynamic alignment with EU law?
Similarly, Clause 1(2) enables the Secretary of State, by regulations, to make provision
“which corresponds, or is similar, to a provision of relevant EU law for the purpose of reducing or mitigating the environmental impact of products”.
Again, it is not clear exactly why this separate provision is needed, but EU rules on traceability are certainly increasingly complex and intrusive.
Lord Falconer of Thoroton (Lab)
Is it the noble Lord’s case that the Government should be prevented in any case from having the same regulations as the EU?
Lord Frost (Con)
I will come on to that. I am trying to get clarity about the purpose of this Bill and why it needs to go further than the powers we already have.
My third question is: can the Minister explain the purpose of the separate provision in Clause 1(2) and the situation it is designed to deal with? I will table amendments to this and other clauses.
Why are any of these provisions necessary beyond simple administrative convenience? The answer is that this Bill is entirely in tune with the lack of clarity that so often surrounded the detail of our relationship with the EU. It is simply the beginning of a path on which, without voters noticing—this is my point: we need clarity—we slip back, closer to single market-like trade arrangements.
Obviously, it is already true that, if a British company wants to export to the EU, its products must comply with EU law. What these provisions would do over time is require producers covered by them to produce in the UK, for the UK, to those EU standards, and make those EU standards the only legal standards on the British market, even when they are not good standards, or are complex or costly. This set-up is a core element of the way the single market works.
Simply mirroring those EU laws does not itself improve trade with the EU. There will still be customs and regulatory paperwork in those circumstances. The only way of eliminating that is to satisfy the EU authorities that our laws are in fact the same as theirs, and I suggest that they are very unlikely to be satisfied without the usual panoply of Commission and court enforcement—subordination once again to the EU authorities. After all, what other way is there for the EU to decide whether our laws genuinely mirror its laws, or to settle any disputes arising?
My further question to the Minister is this. Can he explain how he sees these clauses working in practice? What actual trade frictions does he see being removed as a result of using them? Will he give a commitment that, in conformity with Labour’s policy not to rejoin the single market, the Government will not agree to subordination to EU law or EU-style enforcement?
The Bill also constitutes another step—and this is rather unfortunate—in using the Northern Ireland arrangements to keep this whole country in line with EU rules in certain areas, as we had always feared. Once the previous Government had given up trying to dismantle or override the Northern Ireland protocol and instead agreed to support and enshrine it as the Windsor Framework, something like this Bill became extremely probable. The previous Government were at least discreet in discouraging officials from proposing reforms to goods standards for fear of complicating the Windsor Framework arrangements. The new Government are quite open about it. Their own briefing prepared for the King’s Speech says:
“EU changes to product regulation only apply in Northern Ireland, resulting in divergence within the UK internal market as EU laws are updated. This Bill gives the Government specific powers to make changes to GB legislation to manage divergence and take a UK-wide approach”.
The aim is absolutely explicit. So as we always feared, the Windsor Framework is being used as a tool to inhibit reform and change within GB—not that I think this Government plan to do much of that anyway—and to keep this country in the tractor beam pull of EU laws and rules without having any say in them. Does the Minister agree with his own briefing?
Baroness Ritchie of Downpatrick (Lab)
Would the noble Lord, Lord Frost, not accept that the Windsor Framework was a necessary instrument to ensure that trade could flow easily on the island of Ireland and to prevent a border being recreated there that would have been an encumbrance to trade, society, the economy and business development?
Lord Frost (Con)
The noble Baroness is probably familiar with my view on the subject: I do not agree with that. I think that it would have been much preferable to proceed with the Northern Ireland Protocol Bill that was then proceeded with in 2022, but that is really not to the point now. We have the situation that we have, and the effect of the Windsor Framework, whatever view one takes of it, is to create a massive incentive to push for GB rules to be kept in sync with those of the EU and in Northern Ireland. That is one of the effects that I think this Bill will create.
To finish up, I have a couple of technical questions. The internal market Act has already been raised.
Lord Falconer of Thoroton (Lab)
The noble Lord led me to believe by the way he answered my question that he would tell us whether he took the view that the Bill should positively prevent alignment in any area. Is he willing to answer the question now?
Lord Frost (Con)
I have not finished my remarks yet. Under the internal market Act, goods that are legally on sale in Northern Ireland—those meeting EU standards—may be sold anywhere in the UK already. That is one of the provisions of that Act. One might wonder about the point of this panoply of rules when we already have the internal market Act. It would seem unnecessary, unless perhaps the Government are concerned that the Windsor Framework might require them to bring in elements of Northern Ireland to Great Britain’s border at some point. Again, I wonder whether the Minister could answer that question.
The Government clearly want to go down this road because, whatever they say now, they want to make eventually rejoining the single market and customs union easier. I know from reactions to what I have been saying that many noble Lords regard this direction of travel as a good thing; they doubt this country’s ability to prosper as an independent country with its own rules and laws. I am afraid there is nothing to be done about those who have that opinion. To others who want this country to be a global trader, but without necessarily having our own rules for every single area, I say there is an alternative. It is one more consistent with our global aspirations and membership of the CPTPP, which the Government want to support.
The alternative is to make this country open to the best standards globally—that is my answer to the question that has been raised a couple of times—and to recognise that any goods produced in high-standard, well-regulated economies, such as the US, Canada, Australia, Japan and the EU, would be safe to put on our market. I accept not just the CE standard but similar conformity and standards from other developed economies, and where necessary we can develop our own. This is not just a fantasy; it is what the MHRA is already doing with its new international recognition procedure for medical products. Can the Minister explain why it is not possible to proceed in this way instead?
My speech has been quite long and I will wind up now, but there are important points about the purpose of this Bill that will shape the statutory instruments that will come before us at some point that need to be properly understood. We will put forward amendments in Committee to test the thinking behind some of these provisions and their purpose, and to perhaps reshape some of the more unsatisfactory elements of this Bill. To conclude, I have deep concern about the direction of travel and the direction in which this will take our regulatory framework. I look forward to hearing the Minister’s answers to my questions.