Airbus

Lord Henley Excerpts

Tuesday 26th June 2018 Lords Chamber

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

My Lords, Airbus is important to the United Kingdom and we want continued investment in the UK industry from Airbus in the long term. The analysis that Airbus has published is based on a no-deal scenario, which we neither want nor expect. The Government remain committed to a trading environment with the EU that is as free and as frictionless as possible. We are confident that a Brexit agreement will be reached to our mutual benefit.

[Lord Haskel (Lab)]

My Lords, the Minister’s reply does not actually get us any further. Indeed, Airbus is not alone. Is he not aware that it is these pious hopes and lack of clarity that force all responsible businesses to make contingency plans, to plan for the extra cost of disruption to the flow of goods and people, to plan for the absence of agreed standards on safety, certification and dispute resolution, and even to plan for possible tariffs? Will he take these concerns more seriously and respond in much clearer terms?

[Lord Henley]

My Lords, I and other Ministers take these concerns seriously. That is why my right honourable friend the Secretary of State responded to this point yesterday in another place and made it quite clear that he was listening to the concerns of Airbus, just as I made it clear that we were. The important point to remember is that the analysis put forward by Airbus was based on a no-deal scenario. As the noble Lord is aware, we will continue to negotiate, and we hope that those negotiations will achieve a result that will be good for British business.

[Lord Fox (LD)]

My Lords, the Minister is right to say that, in future, we need the investment of Airbus and companies like it with or without Brexit. However, the tone of the rebuke that came from his government colleagues over the weekend was inappropriate. The Foreign Secretary and the Health Secretary took a tone with Airbus that was absolutely counterproductive to future investment in this country. Will he join his Secretary of State, Greg Clark, in rebuking his colleagues and admit that it was not appropriate language?

[Lord Henley]

My Lords, I do not think that it is for me to rebuke my colleagues somewhat higher up in the pecking order than I am. I am glad, however, that the noble Lord noted the tone used by my right honourable friend in response to a Question in another place yesterday on this subject. He made it absolutely clear that he and other Ministers in the department for business are prepared to listen to the concerns of business; we will continue to make sure that those concerns are taken into account in our negotiations.

[Lord Stevenson of Balmacara (Lab)]

My Lords, can the Minister go a little further and confirm to the House and more generally that there is not a two-stage policy here? Can he confirm that there is no sense in which the Government are supporting those companies that do not rock the boat over Brexit, as it were, and that they are not disparaging those British companies— responsible for many British jobs and for support of the British economy—that point out the inconsistencies and confusion at the heart of the Government’s negotiating position?

[Lord Henley]

My Lords, I reject the last part of the noble Lord’s statement. I make it absolutely clear that we support all business, and we want a prosperous Britain, as my right honourable friend made clear when launching the industrial strategy and on other occasions. We will go on listening to the concerns of business that it brings to us, and make sure that they are taken into account in negotiations.

[Lord Dykes (CB)]

My Lords, should not the Minister worry about the pecking order? Leaving the EU is actually getting harder and harder to achieve on any sensible and non-hysterical basis and, indeed, is probably becoming impossible the way things are going, although the Government will not admit it. Bearing that in mind, is it not preposterous for Ministers and senior spokesmen for the Government to rubbish legitimate complaints by businesses? There will be more in future, and they should pay heed to them, bearing in mind that there will be a heavy consequence for the fate of this country.

[Lord Henley]

My Lords, as the noble Lord would expect, I reject virtually all of what he had to say. I agree that it is important that we make it clear to business that we listen to its voices and concerns.

[Lord Skelmersdale (Con)]

My Lords, noble Lords and business are demanding clarity, as my noble friend well knows. Will he accept that there will be no clarity until there is a positive interaction with the European Council and other European authorities?

[Lord Henley]

My Lords, my noble friend is right to point out that we are in the middle of negotiations with the Commission, and it is important that we get those right. Obviously, there will not be clarity until negotiations are completed.

[Lord Jones (Lab)]

My Lords, will the Minister accept that the north-east Wales Airbus factory—6,000 strong—makes a magnificent contribution to Britain’s skills? It does training, high-tech and apprenticeships, directly in the line of Mr Chamberlain’s pre-war factory programme, which was Vickers, Hawker, BAE and now Airbus, which as a factory keeps the global fleet of Airbus aloft. If Britain is to retain her greatness, must not blue-chip companies such as Airbus be assured that their supply chains will be secure after Brexit? I declare my interest in the register.

[Lord Henley]

My Lords, I am very grateful to the noble Lord for emphasising just what skills and talents we have in north Wales; for that matter, we have them in other parts of the country. He was right to bring that to the attention of the House. As I said in earlier answers, we want to make sure that we continue to benefit from those skills, and I think Europe and the rest of the world will want to. That is why we will continue to negotiate as we are.

[Lord Roberts of Llandudno (LD)]

Is the Minister aware that Brexit could destroy the future of many young people? Four thousand youngsters have gone through the training programme in Airbus. At the moment, 400 apprentices are employed and trained at Broughton, and another 130 will join them. Brexit would destroy the future of these people. Is not it time that the Government really thought again about this insane proposal that they are supporting?

[Lord Henley]

My Lords, the noble Lord will not be surprised that I do not agree with him, and he is wrong to pose such threats to the young people who are working for Airbus, for example, and being trained and making progress. We have skills and talents and want to make sure that they can continue to be used in the world that we are moving into post Brexit.

[Lord Lea of Crondall (Lab)]

My Lords—

Energy Policy

Lord Henley Excerpts

Monday 25th June 2018 Lords Chamber

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

My Lords, with the leave of the House, I shall repeat a Statement made in another place by my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy. The Statement is as follows:

“Mr Speaker, I would like to make a Statement about the proposed Swansea Bay tidal lagoon. Britain’s energy policy towards electricity generation is based on meeting three needs: ensuring that we can count on secure and dependable supplies of electricity at all times, minimising the cost of supplies to consumers and taxpayers, and meeting our greenhouse gas emission reduction obligations. To these three requirements we have added, through our industrial strategy, a further ambition to secure long-term economic benefits in terms of jobs and prosperity from the decisions we make.

Our policy has been successful. Britain has one of the most secure and reliable electricity supply sectors in the world. Last winter, one of the coldest in recent years, the margin of capacity in our electricity generating system was more than 10%, around twice what it was in 2016-17. We have the strongest record in the G7 of reducing our greenhouse gas emissions. Between 1990 and 2016, the UK reduced its emissions by more than 40%. We have massively increased our deployment of renewable generation. Renewable electricity now makes up almost 30% of our generation. Our renewable capacity has quadrupled since 2010 and the auction prices of offshore wind have fallen from £114 per megawatt hour to £57.50 per megawatt hour within two years.

Coal, the most polluting fuel, last year contributed less to generation in Britain than in any year since the Industrial Revolution. This has been achieved while the UK has maintained a position in the overall cost to households of electricity well below the average for major European countries. But the cost of electricity is nevertheless a significant one for households and for businesses, and the policy-related costs have been growing. We have made a clear commitment to bear down on these costs. It is in this context that the Government have assessed whether they should commit consumer or taxpayer funds to the programme of six tidal lagoons proposed by Tidal Lagoon Power Ltd, the first being the proposed project at Swansea. We believe in renewable energy and we believe in the benefits of innovation. The conclusion of this analysis, which has been shared with the Welsh Government, is that the project and proposed programme of lagoons do not meet the requirements for value for money and so it would not be appropriate to lead the company to believe that public funds can be justified.

The proposal for the Swansea tidal lagoon would cost £1.3 billion to build. If successful to its maximum ambition, it would provide around 0.15% of the electricity we use each year. The same power, generated by the lagoon over 60 years for £1.3 billion, would cost around £400 million for offshore wind even at today’s prices, which have fallen rapidly and we expect to be cheaper still in the future. At £1.3 billion, the capital cost per unit of electricity generated each year would be three times that of the Hinkley Point C nuclear power station. If a full programme of six lagoons were constructed, the Hendry review found that the cost would be more than £50 billion and would be two and a half times the cost of Hinkley to generate a similar output of electricity. Enough offshore wind to provide the same generation as a programme of lagoons is estimated to cost at least £31.5 billion less to build.

Taking all the costs together, I have been advised by analysts that by 2050, the proposal that has been made, which would generate around 30 terawatt hours per year of electricity, could cost up to £20 billion more to produce compared with generating that same electricity through a mix of offshore wind and nuclear once financing, operating and system costs have been taken into account. That could cost the average British household consumer up to an additional £700 between 2031 and 2050 or the equivalent of £15,000 for every household in Wales.

However, in recognition of the potential local economic benefits that might result from a lagoon in Swansea, I asked officials to go back and consider what additional benefit could be ascribed to a number of other factors, including a beneficial impact on the local economy. For £1.3 billion, a Swansea lagoon would support, according to the Hendry review, only 28 jobs directly associated with operating and maintaining the lagoon over the long term. Officials were also asked to make an assessment of the potential for valuable innovation and cost reductions for later lagoons that might come from embarking on a programme of construction. Independent advice concluded that the civil engineering used in Swansea Bay offers limited scope for innovation and capital cost reduction, estimated at 5%, in the construction of subsequent facilities. I asked for an assessment of the export potential of embarking on a programme of implementing the technology, but the Hendry review concluded that it would take a,

‘leap of faith to believe that the UK would be the main industrial beneficiary’,

of any such programme.

In terms of energy reliability, the generation of electricity would be variable rather than constant with a load factor of 19% compared with around 50% for offshore wind and 90% for nuclear. The inescapable conclusion of an extensive analysis is that however novel and appealing the proposal that has been made is, even with these factors taken into account, the costs that would be incurred by consumers and taxpayers would be so much higher than alternative sources of low carbon power that it would be irresponsible to enter into a contract with the promoter. Securing our energy needs into the future has to be done seriously and, when much cheaper alternatives exist, no individual project and no particular technology can proceed at any price. That is true for all technologies. The fact that this proposal has not demonstrated that it could be value for money does not mean that its potential is not recognised. My department is also in receipt of proposals from other promoters of tidal energy schemes which are said to have lower costs than the Swansea proposal, although these are at an earlier stage of development. Any proposals must be able credibly to demonstrate value for money for consumers and public funds, but I am sure that many people in the House and beyond would wish that we were in a position to say yes to the Swansea proposals.

I appreciate the contribution of Charles Hendry, whose constructive report led to this further analysis being made, and to the engagement of the Secretary of State for Wales and Members of the Welsh Assembly, including the First Minister, and the leader of the Welsh Conservatives, Andrew RT Davies. But all of us have a requirement to be responsible stewards of taxpayers’ and consumers’ money and to act at all times in their interests. It is in discharging that responsibility rigorously that I make this Statement today, and I commend it to the House”.

My Lords, that concludes the Statement.

--- Later in debate ---

[Lord Teverson (LD)]

My Lords, we on these Benches believe very much that this is the wrong decision. I will very quickly give the reasons why. First, in order to meet our climate targets, we need all technologies to contribute. We believe very strongly—as was shown in a number of studies—that there would be a reducing price in terms of scale as the technology rolled out. We have seen this very strongly with other renewable technologies.

There are other elements to the project. It is also partly an energy-storage project—an area that is particularly needed in terms of the variability of other renewables. And of course, perhaps not in Swansea but in other lagoons where something similar could have happened if this had gone ahead, there is the whole area of flood management that would also save considerable costs in terms of a holistic management approach to the coast.

Of course, the irony is that 2018, the year we are in at the moment, is 10 years after the Climate Change Act, yet between 2016 and 2017 we saw a 56% reduction in renewables investment. So the curve the Minister talked about in terms of our improved performance will go down because of lack of investment. In fact, renewables investment last year was at its lowest since 2008, when the Climate Change Act came in. We are not heading to meet our fourth or fifth carbon budget and we need to reduce our carbon emissions by 3% per annum to get to our target in 2050. So we have an investment crisis at the moment.

The noble Lord, Lord Stevenson, mentioned the time taken over this. The Hendry report came out 18 months ago. I remember that the original discussions were during the coalition Government period. What message is this to investors in renewable technologies? The way that it has been dealt with, the timescales and the opaqueness of the decision taking are difficult to understand, particularly when it was obvious that the Government were going to say no several months ago and have only just got round to giving that reaction and decision.

I come back for a moment to costs and refer to the Hendry review. Charles Hendry was a Conservative politician and Minister of State. He was highly respected across the whole of Parliament when he was an MP. He said about the project:

“I believe that the evidence is clear that tidal lagoons can play a cost effective role in the UK’s energy mix and there is considerable value in a small … pathfinder project … Most importantly, it is clear that tidal lagoons at scale could deliver low carbon power in a way that is very competitive with other low carbon sources”.


That is something that cannot be written off in the way the Minister did.

I have the following questions. Why has it taken so long to take the decision, which was clearly going to be taken some time ago? How are we going to meet the fourth and fifth carbon budgets? Given the regular quote in that Statement about the costs of technologies, when are the Government going to bring back onshore wind, which is the cheapest of those technologies and the one that would help to bring down energy bills tomorrow and in the years to come?

[Lord Henley]

My Lords, I thank both noble Lords for their contributions and for their questions. I hope that I can deal with the points they made.

I will start with the point made by both noble Lords about the delay in getting the decision right. I have to say that the noble Lord, Lord Stevenson, in a sense answered that point. The important thing was that we wanted to get the decision right and wanted to look at it as a whole, not just in relation to the cost of energy but also taking into account all the other factors that the noble Lord mentioned, including, for example, the amenity advantages and—this was raised in another place—the use of steel and the effect that that might have on the Port Talbot steelworks. Of course we did. We looked at those issues, which made the sums much more complicated. At the same time, we were also seeing quite a reduction in the cost of offshore wind, as the Statement made clear. I quoted those figures; the reduction complicates matters further. It also makes clearer the case put forward by my right honourable friend about making this decision. That is why—at the right point, I would say—my right honourable friend came to another place and made decisions. It is my privilege to repeat them today.

The noble Lord, Lord Stevenson, asked about other potential benefits. There are some, which we looked at. In the end, one has to come back to them, whether they are amenity advantages or jobs in the construction phase, as mentioned by the noble Lord, Lord Teverson —or perhaps it was the noble Lord, Lord Stevenson. The benefits are necessarily limited and the jobs are limited to the construction phase. Though great, the amenity benefits are not enough to deal with the fact that, over the period of this project’s existence, we will still pay three times as much for electricity as for electricity that could be obtained from offshore wind, because the cost of that wind has reduced so much.

The noble Lord, Lord Stevenson, also talked about the need for diversity of supply. Again, I have discussed that at some length in this House a number of times. Occasionally, I put to noble Lords on the Liberal Benches the need to look at the advantages that might come from the extraction of shale gas. I know that the noble Lord, Lord Teverson, does not like to comment on that, but his noble friend Lord Bruce offered praise for shale gas, whereas his noble friend Lady Featherstone is not so keen. The noble Lord, Lord Teverson, looked as though he did not want to comment on this when we discussed it last week. We want diversity of supply because, as made clear by the noble Lord, Lord Stevenson, it brings us security. We want security, but not at excessive cost. I will not rehearse the figures in the Statement about the potential cost, but it is too great on this occasion.

The noble Lord, Lord Stevenson, also talked about new technology and the possibility of costs coming down. On this occasion, I do not think that the technology is particularly new. We are talking about boring earth, concrete and other things with steel into the ground or the sea to make barriers. That is the major cost. I do not think there is the scope for cost reduction that came with the development of offshore wind, where we saw installations getting bigger and blades getting more efficient. As a result, we saw the great advantages of technology moving forward. Here, we are dealing with what one might call relatively old technology that will not come down in cost.

The noble Lord, Lord Stevenson, asked what the acceptable cost was. As my right honourable friend the Secretary of State made clear in another place, he was not prepared to put a figure on the cost because other factors would be taken into account for each project, which we would look at in the context of other possible benefits and the cost of the electricity. We are not ruling out the prospect of tidal lagoons in the future but this particular one looked expensive. Other tidal lagoons might be cheaper if they are bigger. There are economies of scale in electricity costs. Each project would have to be looked at individually.

Both noble Lords talked about the reduction of carbon emissions. We accept that there would be such a reduction in this case. We want to go on doing what we can to reduce our emissions as much as possible. But again, as I want to make clear, we can do that only when taking costs into account.

I want to comment briefly on the alleged reduction in investment. There has been a reduction but a great deal of investment was made. We have seen rapid growth in renewables since 2010. We have seen the use of renewables go up from 6.9% in 2010, at the beginning of the coalition, to around 30% today.

I think I have dealt with most of the points made by noble Lords. I hope they will accept that, in the end, the case is pretty clear. The scheme was imaginative and good, and it was right that we looked at it in some detail, but the cost of the electricity is just too great.

[Baroness Vere of Norbiton (Con)]

My Lords, I respectfully remind noble Lords that this is an opportunity to question the Minister. Therefore, short questions rather than long comments would be much appreciated.

[Baroness Finn (Con)]

My Lords, I am deeply disappointed by the Government’s decision. It is short-sighted and a huge missed opportunity. The Government rightly insist that the Swansea Bay tidal lagoon should represent value for money, but the Government have consistently failed to name the price. Therefore, will the Minister agree to publish the Treasury Green Book business case, including all the supporting value-for-money calculations and evidence that were used to arrive at today’s decision?

[Lord Henley]

My Lords, as I made clear, this electricity was going to come in at some three times the price of electricity produced by Hinkley Point. I think that many noble Lords would feel that Hinkley Point is expensive enough as it is. I will certainly make whatever documents are appropriate available to my noble friend, and to the House more generally, with the obvious caveat that any commercially sensitive information cannot be released. However, considerable information can be released.

[Baroness Humphreys (LD)]

My Lords, the rejection of the Swansea tidal lagoon is a bitter pill to swallow. It feels like yet another betrayal of the people and economy of Wales. The Government have cancelled rail electrification to Swansea and now reject the Swansea tidal lagoon, in contrast to their seeming ability to find money for projects in south-east England. As other noble Lords have said, the lagoon would have acted as a pathfinder project, particularly for other lagoons across Wales, including Newport, Cardiff and Colwyn Bay. It would have been a vital first step in making Wales a world leader in green energy, bringing untold environmental and economic benefits to the community, Wales and the UK. More in sorrow than in anger, I ask the Minister this: how is today’s news any more than another slap in the face for the people of Wales?

[Lord Henley]

My Lords, I totally reject what the noble Baroness, Lady Humphreys, says. It would be a slap in the face to go ahead with this project and impose costs on the Welsh consumer, in terms of the extra amount that they would have to pay for their electricity, and Welsh business. I think in particular of the Port Talbot steelworks and how much more it would have to pay for the vast amount of electricity that it uses. Having looked at the figures in front of them, it would be irresponsible of a Government to go ahead with this project.

[Lord Marlesford (Con)]

My Lords, I congratulate the Government on increasing the generating margin from 5% to 10% for cold winters. That genuinely makes us feel a lot safer. My noble friend the Minister mentioned Hinkley Point several times. It is interesting that, with the remarkable fall, the price of offshore wind is now 5.75p per kilowatt hour—a figure quoted by the Minister—compared with the strike price of nuclear energy from Hinkley Point, which is 9.4p per kilowatt hour, index linked for 35 years. Does he agree that it is very difficult to justify that 63% extra cost for nuclear power? Can I ask—I declare my interest because I live near it—when the Government are expecting to announce whether Sizewell C is going ahead?

[Lord Henley]

My Lords, I cannot assist my noble friend with announcements about Sizewell C—but, as always, I shall say “in due course”. My noble friend is right to point out the costs of nuclear; that decision has been made. What we are talking about here is a potential decision to generate electricity at three times that price at a time when the cost of, for example, offshore wind had come down so dramatically. That is why we had to make that decision, and why we have made it. It is possible that for other nuclear power, in due course, if more work is done in the world of modular nuclear power stations, the cost could come down. But we have made the decision on Hinkley, and have now made the decision not to go ahead with Swansea—but we will continue to look at all possible sources of energy to make sure that we have green energy and secure energy.

[Lord Whitty (Lab)]

My Lords, like others, I find this decision depressing. On the other hand, I recognise the Minister’s dilemma. The figures that he quotes at us appear irrefutable, even though they are somewhat at odds with those from Charles Hendry’s report and any long-term view. This seems a similar decision to the closure of the carbon and capture elements in Peterhead. In effect, we are not looking over a long enough timescale.

I have two quick technical questions and two strategic ones. First, were the costs clearly incorporating the benefit of having attached to this not only tidal power but some offshore wind power, which was part of the project, and—as the noble Lord, Lord Teverson, said—a significant amount of storage of electricity, which would be of great benefit to future lagoon technology, were this to be proven?

Secondly, can the Minister really envisage a situation whereby, in 50 years’ time, these islands will not in part be powered by wave and tidal energy? We have a huge natural advantage and a huge relative benefit around our shores of having power that is predictable, not intermittent, as other technologies are not. We would be a world leader in this, and abandoning this project makes it more difficult. However, I take some comfort from the Minister’s reference to other projects. Which other projects does he have in mind and how soon, given the delay on this decision, can we get a decision on some of those? Are the Government still committed to looking at wave and tidal technology as part of our long-term future?

[Lord Henley]

I correct the noble Lord on just one thing. He said that tidal power was predictable—and I agree with him that it is predictable—but it is also intermittent because, as he knows, tides go up and down and there are slack periods as well. The intermittency is variable, so it is predictably intermittent, which makes for complications—but it also leads on to the noble Lord’s point about storage.

Obviously, with all these sorts of renewables, storage becomes very important, and developments on that front will change over the coming years. The noble Lord asked us all to look 50 years in the future. First, most of us will not be around in 50 years—but we can all remember 50 years back, and we all know just how much things have changed over those past 50 years. The point that I am making is that it would be wrong for me to predict what might happen over the next 50 years.

I want to make it clear that we have not ruled out tidal power. As the noble Lord says, we have some of the best tides in the world. I am reminded of those lines that noble Lords will remember from “Lochinvar”:

“Love swells like the Solway, but ebbs like its tide”.


It comes in very fast in those areas and goes out very fast. The variation in the Bristol channel is as good as anything that you will get anywhere else in the world, except I think in the St Lawrence estuary.

Much can be done, and we should certainly look at those in future. I cannot say which might then turn out to be suitable. Some of the other tidal power projects being looked at here could offer electricity somewhat cheaper—but only somewhat—than the Swansea bay, because the Swansea bay one is relatively small. We should look at any project on its merits. But I think that the noble Lord, who is as diligent as I am about the view that we must preserve taxpayers’ and consumers’ money, would not want to go ahead with a project that was going to cost three times as much as electricity from, say, Hinkley Point.

[Lord Birt (CB)]

My Lords, the ministerial Statement makes a compelling economic case—at its heart, the notion that the unit cost of electricity from the Swansea barrage would be three times as expensive as not only Hinkley C but the current price of offshore wind. In the circumstances, would it not have made sense to publish the supporting financial analysis at the same time as this obviously controversial and difficult decision?

[Lord Henley]

My Lords, as I think I made clear to my noble friend Lady Finn, we are going to publish as much as possible of the financial detail to make it clear just how strong the case is.

[Lord Thomas of Gresford (LD)]

I thought the strike price was 8.9p per kilowatt hour, as opposed to Hinkley’s 9.3p or 9.4p per kilowatt hour. Am I wrong in that? That is what my study of the proposals said.

The Minister refers to the production of energy as being intermittent. As I understood the scheme, the tide coming in moved the turbines in one direction, so there was electricity generated and, as the lagoon emptied, the emptying caused the turbines to go the other way. What is intermittent about that?

There is more to it than that. It is the lack of vision in this Government that is so distressing. “The Life Scientific” last week mentioned the fact that in Wrexham, where I come from, back in the mid-18th century, John Wilkinson invented precision engineering by boring cylinders which Watt took over. That led to steam engines and the pumping of mines, so that coal could be produced, and eventually to locomotives. As was said last week, it was the start of the Industrial Revolution in Wrexham. Of course, Wilkinson went to other places—he went to Swansea, among other places. He had vision and could see the future. This Government simply cannot grasp that, and it is highly disappointing that this decision has been made.

[Lord Henley]

My Lords, I do not think that I can take the noble Lord much further in his accusations of lack of vision. I think that he would be one of the first to say that it would show a lack of straightforward common sense and financial honesty to go ahead with a scheme that was going to cost quite so much, and quite so much to the Welsh consumer and Welsh businesses in terms of their costs for electricity.

[Baroness Neville-Rolfe (Con)]

My Lords, I declare an interest as the Energy Minister at the time when the Hendry report was under way. The truth is that this is the most attractive of projects. However, sadly, it is dreadful value for money—so I agree reluctantly with the Government’s conclusion. What progress are the Government making with nuclear renewal, not only at Hinkley Point C—which has been mentioned and which is creating jobs and apprenticeships and helping us to fill the decline in the nuclear baseload—but with the new nuclear fleet, notably in Wales and Cumbria?

[Lord Henley]

My Lords, my noble friend will be aware of the announcement that my right honourable friend made about Wylfa the other day and of the work that is being done in Anglesey on the prospect of having a nuclear power station there. She will also be aware that work has started at Hinkley. We therefore hope in due course—in about 2025, I think—to see further nuclear energy coming on as baseload to assist with our energy security. I also hope that in due course we will see more nuclear energy at Moorside in Cumbria, which my noble friend is well aware of. As a Cumbrian, I too am aware of it. As I said earlier, I hope that we will hear more about the prospects of other work in due course.

Offshore Environmental Civil Sanctions Regulations 2018

Lord Henley Excerpts

Thursday 21st June 2018 Lords Chamber

Moved by

[Lord Henley]

That the draft Regulations laid before the House on 23 April be approved.

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

My Lords, the regulations will provide BEIS’s Offshore Petroleum Regulator for Environment and Decommissioning—OPRED—with powers to impose financial civil sanctions as an enforcement option for contraventions of offshore environmental legislation. The regulations do not create new offences; they allow OPRED to impose financial civil sanctions for breaches of a suite of existing regulations.

The current enforcement options available to OPRED are not consistent with those held by onshore regulators and do not provide for sufficient deterrence against non-compliance with environmental legislation. This is because, in the majority of cases, the only enforcement options available are criminal prosecution, or to take no action at all. As prosecutions are disproportionate in the majority of cases, no action can be taken. Expanding OPRED’s powers to allow for the imposition of civil sanctions would bridge this enforcement gap.

OPRED investigates breaches of environmental legislation in respect of offshore oil and gas platforms operating on the United Kingdom continental shelf. Unlike onshore regulators, OPRED does not have the powers to impose financial civil sanctions in respect of the majority of those breaches. Current enforcement options for OPRED include: serving an enforcement or prohibition notice, revocation of a permit, and referral for consideration of prosecution. OPRED can issue civil sanctions in relation to breaches of the European Union Emissions Trading Scheme but has no power to do so in relation to its remaining regulatory regime.

Since 2016, OPRED has been made aware of 4,178 potential breaches of environmental legislation by offshore operators and has undertaken 78 formal investigations. Seven resulted in the issue of enforcement notices and two were referred for criminal prosecution. Although the remaining 69 were judged to meet the required standard of proof and involved significant non-compliance with legislation, most involving spills of over 1 tonne of oil or chemicals, OPRED could take no formal enforcement action due to the lack of an appropriate and proportionate response. This has had the consequence of undermining the deterrent effect of the existing environmental regulation. The introduction of civil sanctions would allow for fines to be awarded in the more serious of these cases.

The regulations provide for a more appropriate and proportionate enforcement response, allowing OPRED to maintain a consistent approach with onshore regulators and encourage greater compliance by operators. Enforcement or prohibition notices are not appropriate in all cases and the revocation of a permit, with the result that a holder could no longer operate, would not be a proportionate response to the majority of regulatory breaches. Prosecutions are reserved for only the most serious of cases. They are costly and time-consuming, with cases frequently taking more than a year to reach resolution. In addition, the decision whether to proceed with a prosecution is taken by bodies other than OPRED. Expanding OPRED’s existing powers to enable the imposition of civil sanctions would allow for a more timely, cost-effective and proportionate response that would not unnecessarily criminalise oil and gas operators.

The civil penalties currently available to OPRED may be awarded only in respect of CO₂ emissions and cannot be utilised for any other regulatory breaches such as oil or chemical spills. As such, the vast majority of contraventions of environmental legislation currently result in no enforcement action being taken. The regulations will allow OPRED to take swift action where previously it could not, thereby providing greater deterrence against non-compliance and tackling the behaviour of those who perform poorly or ignore their environmental responsibilities. Civil sanctions will be applied instead of, not in addition to, criminal prosecution in cases where the criminal standard of proof is met. The fact that breaches must be proved to the criminal standard before a sanction can be issued is required by the parent legislation. The fixed and variable civil sanctions that OPRED will have will give it the ability to impose fines ranging from £500 to £50,000. This range has been chosen to maintain a consistent approach with onshore regulators and reflects the statutory minimum and maximum fines available to the courts through criminal prosecution.

The objective of the regulations is to provide OPRED with the powers to impose financial civil sanctions on offshore oil and gas operators who contravene specified environmental legislation. To this end, the regulations will provide a more proportionate enforcement response than criminal prosecution alone while retaining this option for the most serious breaches. They will maintain a consistent approach with onshore regulators and encourage greater compliance by offshore operators by allowing for enforcement action to be taken more swiftly in more cases. The regulations will come into effect on 1 October 2018 and I commend them to the House.

[Lord Bruce of Bennachie (LD)]

My Lords, I thank the Minister for that explanatory introduction, and I have just a couple of points to raise with him. I welcome the purpose behind this change in the law, which I assume is to reduce the number of incidents. Has the regulator made an assessment of the impact it will have? The figures the Minister gave are for the number of breaches, most of which were not serious. However, those that were serious cause a little concern, and obviously the point that prosecutions are not effective under the present law has to make it a consideration as to whether civil sanctions will make a significant difference.

My second point is whether the criminal burden of proof will have a difficult impact in the sense that it is quite a high standard of proof, although that is right and proper given that these are new regulations. Nevertheless, is the regulator satisfied that it will be able not only to prosecute effectively but, more importantly, that it will be able to create a climate in which there will be a significant reduction in the number of incidents? That is really what I am seeking. Has there been any assessment by the regulator of that?

--- Later in debate ---

[Lord Teverson]

My Lords, before the Minister gets up, I declare an interest as a board member of the Marine Management Organisation, which has certain responsibilities relating to marine pollution in the English seas.

[Lord Henley]

My Lords, I note the declaration of interest from the noble Lord, Lord Teverson. I am more than happy to share the table that the noble Lord, Lord Grantchester, referred to, which my right honourable friend Claire Perry shared with colleagues in another place. I will write to the noble Lord and the other noble Lords who took part in the debate.

In response to the noble Lord, Lord Teverson, let me make it absolutely clear that the regulations apply only to breaches of legislation by offshore oil and gas companies in this field and that they do not cover other marine activities. Obviously they are, as the noble Lord, Lord Bruce, put it, designed to reduce the number of incidents. I quoted figures of a little over 4,000 since 2016. That figure sounds rather alarming, but it includes, as far as we know, spillages of the most minor sort, just as any petrol station will report even very minor spillages if it is operating properly. We want to make sure that we can deal with the more serious matters. By extending this to civil sanctions, we are trying to offer OPRED a more proportionate response in how it deals with these matters. I can assure the noble Lord, Lord Teverson, that OPRED is perfectly content with the resources that it has—it has some 20 offshore inspectors, no doubt speeding around in their boats waiting to put their parking tickets on the various rigs, as the noble Lord put it.

However, as we said, we want to make sure that we can make an appropriate response in the right case. The noble Lord, Lord Teverson, said, “But, hold on, you’ve got exactly the same standard of proof, and since they can appeal against this, wouldn’t it be just as easy to use the criminal sanctions, as they are already available?” The point of being able to use civil sanctions is that one can operate much more speedily, whereas with criminal sanctions, OPRED, not being a prosecuting authority, would have to hand this over to other bodies. Not understanding much about criminal law in Scotland—I am sure that the noble Lord, Lord Bruce, will correct me if I am wrong—I imagine that would be to the procurator fiscal, whereas by using civil sanctions, one can be more nimble-footed.

The imposition of civil penalties will be published. Although, as the noble Lord, Lord Teverson, put it, we are talking about small change for some of the big boys, it is our considered view that, because we can publish this information, offshore operating companies would be very keen to avoid the negative publicity. In addition, criminal prosecutions have to be retained in the relevant regulations for the most serious breaches. The noble Lord, Lord Bruce, suggested reducing the burden of proof for the civil prosecutions. I do not think that is possible under the parent legislation in terms of the powers we have to make this regulation—if I am wrong, I will certainly write to the noble Lord to correct it. Therefore, we will be looking at the same standard of proof.

I am grateful for the words of support from the noble Lord, Lord Grantchester. I commend the Motion.

Motion agreed.

Offshore Combustion Installations (Pollution Prevention and Control) (Amendment) Regulations 2018

Lord Henley Excerpts

Thursday 21st June 2018 Lords Chamber

Moved by

[Lord Henley]

That the draft Regulations laid before the House on 24 April be approved.

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

My Lords, the regulations will provide BEIS’s offshore petroleum regulator—that is, OPRED, as referred to earlier—with powers to impose emission limits on atmospheric pollutants from certain types of combustion plant and monitoring requirements for those pollutants.

The regulations transpose two European Union directives and will allow OPRED to impose emission, monitoring and reporting controls on specific atmospheric pollutants from certain types of combustion plant, such as gas turbines and engines, on offshore installations. Obligations from these directives are transposed by amending the existing Offshore Combustion Installations (Pollution Prevention and Control) Regulations 2013.

The 2013 regulations implement provisions of chapters I, II and VII of the industrial emissions directive. The controls are enforced through permits for combustion plant, such as gas turbines and engines, on offshore installations that, alone or when aggregated, have a thermal rated input equal to or greater than 50 megawatts. When the industrial emissions directive was being implemented, there were no offshore facilities with qualifying large combustion plant such as boilers, heaters and diesel engines and none was foreseen. Consequently, those obligations relating to large combustion plant in chapter III of the directive were not transposed. However, there are now two offshore installations with plant that fall within the scope of chapter III of that directive, and relevant provisions in that chapter will now apply. The medium combustion plant directive obligations mean that we now also need to extend our regime to medium combustion plant to include boilers, heaters and dual-fuel engines with thermal capacities in the range of 1 to 50 megawatts.

Twelve offshore installations will be subject to the new requirements. There will be new requirements to control, monitor and annually report data on specified atmospheric emissions from large and medium-sized combustion plant, in line with the directives. Relevant existing permits issued under the 2013 regulations will be revised to incorporate the new obligations. Where necessary, new permits will be issued. The regulations will also ensure that inspection reports relating to large combustion plant are made publicly available. This is not required for medium combustion plant. The Offshore Environmental Civil Sanctions Regulations 2018 will apply to the regulations and will act as a deterrent against non-compliance.

In September 2017, a four-week public consultation on these draft regulations was undertaken. Eight responses were received seeking additional clarifications and concerns were raised regarding combustion plant which would be unlikely to meet the emission limits. The Government’s response addressed the consultation comments and we agreed to publish an updated guidance note to support operators’ compliance with the regulations.

One substantive issue arose from the consultation regarding the provisions in Regulation 15, under which emission limits will be included in permits to control the level of pollutants emitted into the atmosphere. The concern is that, in some cases, those limits may not be achievable because replacement or retrofitted abatement of existing plant will not be possible due to space limitations and technical configuration on offshore installations which were designed many years ago. We took account of industry concerns by making clear that we will work with operators on a case-by-case basis to manage the situation in line with the regulations. We understand the importance of maintaining the security of energy supplies and maximising economic recovery of hydrocarbons and do not want to see offshore installations entering early cessation of production.

The regulations are needed to control and reduce emissions of pollutants harmful to the environment and human health and implement two EU directives. Without additional powers to monitor air pollutants at the individual plant level, it is difficult to accurately quantify the emissions and ensure compliance. The regulations will contribute to our aim of ensuring that offshore hydrocarbon activities are carried out in a safe, clean and environmentally sound manner.

In conclusion, the object of the regulations is to control atmospheric emissions from offshore combustion plant which are harmful to the environment and human health, in line with EU directive requirements. This will be achieved through permits for qualifying combustion plant to set emission limit values, monitoring and reporting conditions; conducting offshore inspections and investigation of breaches; and the use of enforcement notices to instruct operators to take action to address breaches within specified timescales.

The regulations will enter into force 21 days after being made. The requirements will take effect immediately for large combustion plant, but there is a phased implementation for medium combustion plant. I commend these draft regulations to the House.

[Lord Bruce of Bennachie (LD)]

My Lords, I thank the Minister for that introduction. He has touched on my concerns, but I want to press him a little further. I appreciate that this is the implementation of an EU directive and we want to maintain compliance with EU regulations, but it is a fact, nevertheless, that the largest volume of offshore installations are in the UK or the Norwegian continental shelf. I am not denying that there are other installations in Germany, the Netherlands and Denmark, but the big ones in the most exposed conditions are in the UK and Norway.

Of course, in the past the EU has attempted to have more direct involvement in the regulation of the North Sea, which has been resisted, I think correctly, by the UK. What I want to explore, and the Minister did touch on this, are the concerns, particularly with some of the mature investments we have in the North Sea, that the difficulty or the disproportionate cost that might be involved in meeting these could affect future production. The Minister has indicated that the Government want to work with the industry, but how sure are they that we will not reach a situation in which significant production or investment will be compromised?

I say that with some hesitation. I know the environmentalists tend to want to shut everything down, or be resistant, and I certainly do not wish to give the impression that I am not keen to ensure that we operate the highest possible standards. But we have to operate within realities and it is true that large installations in really difficult conditions such as the northern North Sea are likely to have larger requirements for generating capacity, which could cause them problems.

My final questions are: given that it is an EU regulation, is Norway applying the same conditions? Is there any question that UK installations would be at any cost disadvantage compared with Norway, or do we have an assurance that Norway is operating at least the same standards?

--- Later in debate ---

[Lord Grantchester (Lab)]

My Lords, once again I thank the Minister for his explanation of the regulations before the House. This instrument widens the scope of the 2013 regulations to include both the industrial emissions directive, IED, which applies to large combustion plant over 50 megawatts, and the medium combustion plant directive, MCPD, which applies to plant with an individual thermal input of up to 50 megawatts.

Previously, the control of pollutant emissions from large combustion plant was not seen to be relevant for offshore facilities. Controls from the MCPD need to be extended to regulating emissions harmful to human health and the environment. The objective of these regulations is to control atmospheric emissions from offshore combustion plant that previously had been limited to onshore facilities under the Department for Environment, Food and Rural Affairs. The Explanatory Memorandum explains:

“The amending of the existing Regulations and widening of permit requirements are already familiar to offshore operators, who will receive a single permit covering all the qualifying combustion plant for each installation”.


We welcome this rationalisation. The memorandum further explains that OPRED, the offshore regulator mentioned in the previous regulations, will have its duties extended to implementing the instrument and will be able to recover its costs through fees charged for permits. Rather like the noble Lord, Lord Teverson, I assume from the previous regulations that OPRED will have the sanctions we have just approved to ensure compliance.

I understand that there are two large offshore plants over 50 megawatts, as the Minister explained, and 13 smaller offshore plants covered by the MCPD. However, the memorandum explains that implementation will apply to plants covered by the MCPD according to a timetable, whether they are new or already in existence. Further expanding on the words of the noble Lord, Lord Teverson, new plants will need a permit from 20 December 2018. However, if they are already in existence, implementation is phased according to whether they are greater or smaller than 5 megawatts. Those greater than 5 megawatts will require a permit from 1 January 2024 and those less than 5 megawatts will require a permit from 1 January 2029—five years later. This begs several questions. First, for what reason are existing plants given this grace period of five or 10 more years? I would be grateful if the Minister explained. Secondly, why is a distinction made between plants over or under 5 megawatts? Of the 13 plants covered, how many will fall each side of the line? What is the significance of that, and does it lead to a discrepancy on costs or to competitive distortion between the various plants? The consultation did not give rise to any comments on this point.

The consultation merely gave rise to issues regarding the ease of monitoring and access to exhaust stacks on existing facilities. I am glad to see that the department is aware of this and that OPRED will be taking a pragmatic approach. However, there could well be issues regarding the monitoring of carbon monoxide for its effects on human health. Can the Minister assure the House that this pragmatic approach will not give rise to possible monoxide risks to human health? With the assurance that these issues are not material, I am content to approve the regulations today.

[Lord Henley]

My Lords, I thank noble Lords for their comments and interventions, and I hope I can deal with most of the points raised. I can give an assurance yet again to the noble Lord, Lord Teverson, that OPRED will continue to be the enforcing authority for the offshore oil and gas sector, but the emissions will be monitored by the operators, which have a duty to report them annually to OPRED. OPRED will then take note of them.

The noble Lord, Lord Bruce, intervened with his concerns about the industry, which he voiced in a Question earlier this week on the position of oil and gas in the UK. We understand his concerns about the industry, which is why in the consultation we wanted to know about the concerns of the offshore operators and how they are getting on. As I made clear earlier, when we originally transposed this directive there were no combustion plants of the size we are talking about, but the nature of the extraction of oil and the sort of oil that is being extracted, some of it being much thicker, has meant that there are bigger, heavier machines. That is why we have to bring in these regulations—to deal with that growth. That is what we are doing and why we want to consult on it.

I can assure the noble Lord that Norway will be following us in doing that as this directive applies to EEA states. It is difficult to say how the costs of compliance for us and for Norway may differ, but it is possible that they will be broadly similar, given that its approach to transposition should essentially be the same.

I think the noble Lords, Lord Bruce and Lord Teverson, asked why we were allowing some plant to operate in a non-compliant mode and why we were phasing implementation. This obviously follows the consultation, and OPRED appreciates that it would be difficult for some operators to ensure that some plant, with safety and environmentally critical elements, continued to comply with the relevant deadlines. OPRED certainly wishes to work with the operators in these circumstances on a case-by-case basis in line with the regulations.

Plant plays a critical role in the safe operation of stabilising and processing hydrocarbons by providing the heat and power I referred to in dealing with oil. Should one or more of those plants be prohibited from operating, it could result in implications for safety in processing the hydrocarbons, with the consequence of hydrocarbons then being lost. One has to balance pros and cons in that field, and for that reason it is clear that a degree of phasing has to come in. That is why we made it clear that further medium combustion plants and phased implementation will apply where prescribed for new plant after December 2018, for existing plant with megawatt thermal input of greater than 5 megawatts but less than 50 megawatts from January 2024, and so on.

Lastly, the noble Lord, Lord Grantchester, asked whether the civil sanctions regulations would apply to these regulations. Yes, civil sanctions regulations will apply to these offshore combustion insulation requirements.

I hope I have dealt with all the questions.

Motion agreed.

Scotland Act 2016 and Wales Act 2017 (Onshore Petroleum) (Consequential Amendments) Regulations 2018

Lord Henley Excerpts

Thursday 21st June 2018 Lords Chamber

Moved by

[Lord Henley]

That the draft Regulations laid before the House on 30 April be approved.

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

My Lords, in line with the Smith and Silk commission agreements, the Scotland Act 2016 and Wales Act 2017 provide for the devolution of onshore oil and gas licensing to the respective Governments.

Today’s debate will focus on the devolution of Section 45A of the Petroleum Act 1998 to the Governments of Scotland and Wales. Section 45A provides the means of assurance to the relevant authority that the relevant person will be able to plug and abandon a well or otherwise provide the necessary funds for it to be done. As such, Section 45A is a key part of the licensing regime and needs to be devolved to enable Scottish and Welsh Ministers to ensure that licence obligations can be met and wells can be plugged and abandoned as appropriate. We intend to transfer Section 45A powers to Scottish and Welsh Ministers for their respective territories, using powers to make consequential amendments under the Scotland Act 2016 and Wales Act 2017.

As recommended by the Smith and Silk commissions, it was agreed that powers related to onshore oil and gas licensing, aside from those relating to royalties, would be devolved to Scotland and Wales. The Scotland Act 2016 and Wales Act 2017 will transfer legislative competence for onshore petroleum to the Scottish and Welsh Governments when fully commenced, with the exception of matters relating to setting and collecting licence rentals.

To aid devolution, in February this year we commenced Sections 47 and 48 of the Scotland Act 2016, which transferred the existing UK onshore licensing regime as it applies in Scotland to Scottish Ministers. This means that Scottish Ministers have the powers to administer the existing onshore oil and gas licensing regime in Scotland and to create a bespoke licensing regime if they wish. It has been agreed between Welsh Ministers and the Secretary of State for Wales that provisions that enable Welsh Ministers to administer the existing onshore oil and gas licensing regime in Wales, or to create a bespoke regime if desired, will commence on 1 October 2018. Therefore, we intend to make and lay negative regulations necessary to deliver this in early September.

I turn now to the detail of the affirmative regulations that we are debating today. The proposed consequential amendments included in this statutory instrument will make amendments to Section 45A of the Petroleum Act 1998. These amendments are consequential on the devolution of onshore petroleum licensing functions to Scottish Ministers under Section 48 of the Scotland Act 2016, and to Welsh Ministers under Section 23 of the Wales Act 2017.

The consequential amendments that these affirmative regulations make reflect the role of Scottish Ministers as the licensing authority in Scotland, and allow the licensing regime to work as intended in relation to onshore areas in Scotland. The regulations provide for the position both before and after commencement of the Wales Act 2017, which makes equivalent provision for devolution of onshore oil and gas licensing to Wales.

As I set out at the beginning, Section 45A is a power that allows the relevant authority to issue a notice requiring a person, once they have begun to drill a well, to provide information regarding their financial affairs. If the authority is not satisfied that the person will be capable of plugging and abandoning the well following the submission of financial information, Section 45A allows the relevant authority to issue a notice requiring the person to take action. This notice could include the provision of security to the relevant authority, to ensure that the costs of plugging and abandoning the well are covered. Although this provision has not to date been used onshore, we consider that the power applies onshore, and therefore Section 45A forms part of the regime which should be transferred.

A negative statutory instrument will follow these affirmative regulations to make consequential amendments to the onshore licensing regime in Wales. Transferring powers from the UK Administration to a devolved Administration does not count as a regulatory provision, so we are not required to do a regulatory impact assessment. Furthermore, there has been no specific consultation on these technical amendments as they are necessary to the effective operation of the provisions set out in the Scotland Act 2016 and Wales Act 2017, which were consulted on separately.

The regulations assist in giving the Scottish Parliament, the National Assembly for Wales and Scottish and Welsh Ministers greater control over their onshore oil and gas resources, complementing the provisions of the Scotland Act 2016 and Wales Act 2017. These affirmative regulations are an important step towards delivering a recommendation of the Smith and Silk commission agreements and to ensure a smooth devolution of powers for onshore oil and gas licensing in Scotland and Wales to Scottish and Welsh Ministers.

I commend the regulations to the House.

[Lord Bruce of Bennachie (LD)]

My Lords, of course I support the instrument, not least because, as the Minister said, it fulfils a pledge of the Silk and Smith commissions to transfer these powers to Scotland and Wales, but I have one question and a bit of context, because the transfer of these powers has generated a lot more heat than light in Scotland, where the Scottish Government claim that this gives them the power to ban fracking or any other form of onshore exploration, which the Court of Session says does not exist. In other words, the First Minister says that fracking is banned in Scotland, but the Court of Session says that it is not and is simply subject to normal planning considerations, so we are in a state of confusion, which is no responsibility of the Minister or the UK Government, having transferred that power.

This will become a significant issue only if there is a commercial desire to do significant onshore drilling or shale activity in Scotland, which Ineos has been preparing the ground for. It is entirely hypothetical, but it has been stated that if the future of Grangemouth, for example, depended on being able to extract shale oil that exists right underneath the plant, the issue would become politically more real, because you would be banning something that had a significant impact for Scotland, as opposed to current theological arguments about whether we should be doing that.

The only question I have for the Minister relevant to the regulations is on the section that says that everything is devolved except for the consideration—which is presumably the fee that might be involved. I completely understand that the administration and licensing of oil and gas energy is a reserved matter and therefore entirely for the UK Government, but I wonder, given the context that I have just outlined, whether adding to the pot the economic benefit of a licence—not only the commercial benefit but the revenue and royalties that might accrue to the Scottish Government—could change the tenor of the debate.

I have to make it clear that my party is not in favour of fracking and supports a ban. I personally do not agree with that; I think we should wait and look at the facts and the science rather than take a decision before it becomes a reality. Right now, it is purely theoretical; the whole thing is a power to do something that no one commercially is seeking to do and which the Scottish Government and public say that they do not want to happen. However, I can anticipate a situation in which reality will say that it is material and significant—that there are jobs and investment that matter—and the devolution of this power will become a problem, albeit one for Scottish politicians, not UK politicians. But I repeat what I said about transferring the consideration as well—not necessarily the licence, but the consideration. That would just be another factor that might realistically be put into the mix.

[Lord Grantchester (Lab)]

I thank the Minister for his explanatory introduction. As he says, this instrument devolves Section 45A of the Petroleum Act 1998 to the devolved Administrations of Scotland and Wales. As obligations for plugging and abandoning wells are included in the licence conditions, Section 45A, relating to the financial ability of the relevant party, is a key part of the licensing regime that needs to be devolved.

I have only one curiosity to be satisfied in agreeing to the regulations. The territories of Scotland and Wales are defined in area according to the Territorial Sea Act 1987, which defines the onshore area to include up to 12 nautical miles offshore. Could there be a situation whereby an offshore activity could be undertaken under onshore petroleum legislation? I am sure the Minister may reply that up to 12 nautical miles offshore is, in fact, onshore territory. May I follow that up with a further question? Should there be a well or field that straddles the border both within and without the 12-mile limit, who would have to apply the wisdom of Solomon to adjudicate on whether it was onshore or not? While the Minister puzzles over the question, I am happy to approve the regulations.

[Lord Henley]

My Lords, I thank the noble Lord, Lord Grantchester. I certainly puzzled over the question, and I imagine that those who advise me in these matters are also puzzled. The simplest thing would be to say that I will write to him in greater detail on the Territorial Sea Act 1987—an Act we all wish to know more about. I am grateful to the noble Lord for his assiduous study of it.

I am also grateful for the comments of the noble Lord, Lord Bruce. As he rightly says, there is not much that I can do in the way of commenting on this—I certainly cannot engage in theological discussions between the Executive north of the border and the judiciary. It will be a matter for them to resolve. All I can say is that, like him, and unlike his party—I have had this discussion with his noble friend, the noble Baroness, Lady Featherstone, on a number of occasions—I am a great believer in looking at the facts on these matters, and a great believer in the possible economic benefits to this country and north of the border for the extraction of shale gas. I hope he will continue to do his work within his party. I did not quite discover what the views of the noble Lord, Lord Teverson, were on this; he indicates that he wishes to remain silent on these matters. He can discuss that with the noble Baroness, Lady Featherstone, in due course.

There are great opportunities in the extraction of shale gas, and we should look at the facts when it comes to that. Obviously, with the passing of these regulations, that and all the other activities will become a matter for the Scottish Government, but I hope they will listen to the noble Lord, Lord Bruce, and not other siren voices, on this matter.

I think I have dealt with all the questions, other than the rather technical ones from the noble Lord, Lord Grantchester, on the Territorial Sea Act 1987.

Motion agreed.

Brexit: Creative Sector

Lord Henley Excerpts

Wednesday 20th June 2018 Lords Chamber

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

My Lords, the UK has one of the best intellectual property regimes globally. The creative industries’ concerns focus on copyright, where reciprocal protections are underpinned by international law, and unregistered designs, which the UK will continue protecting. Some EU-derived copyright provisions and the reciprocal EU-UK protection of unregistered designs will be a matter for our future relationship.

[Baroness Neville-Rolfe (Con)]

My Lords, copyright is of fundamental importance to the creative sectors. They range from music to TV to art to the written word and, indeed, increasingly to traditional businesses, as the digital revolution gathers pace. It has been established, for example, by UK Music that around 17% of music is accessed illegally. At present, the EU provides important protections for copyright. As the UK leaves the EU, could the Minister reassure the House that this protection will be maintained and, if possible, enhanced, for example by online services taking a greater degree of responsibility for clamping down on copyright infringement?

[Lord Henley]

My Lords, my noble friend is right to highlight the importance of this sector, and I want to emphasise just how big the creative industries are as an exporting sector and in terms of what they produce in this country. I stress, as I did at the beginning, that much of our reciprocal copyright protection is underpinned by international law, but obviously there are parts that need protection that involve EU-UK law. That will obviously be a matter for our future relationship, and that is a matter for the ongoing negotiations taking place at the moment.

[Lord Clement-Jones (LD)]

My Lords, has the Minister read the document from the Intellectual Property Office entitled IP and Brexit: The Facts? There are no facts in it. It says that the Government recognise the concerns of IP professionals, and recognise that owners of registered community design rights “want clarity”. On trademarks, it says that the Government,

“is looking at various options”,

and similarly on the exhaustion of rights. Is it not high time that the Government showed some leadership on IP matters and delivered some certainty to those who need it?

[Lord Henley]

My Lords, the noble Lord and I, and others in the House, debated this matter when the noble Lord had a Question on it, I think, back in March. As I said then and as I repeat now, this is obviously a matter for the ongoing negotiations. The noble Lord will have to wait for the White Paper, which will be coming out shortly. We can then deal with these matters in the negotiations, but as I made quite clear, much of our protection that is already there is underpinned by international law. As I also stressed, we have a pretty good intellectual property regime in this country as it is.

[Lord Griffiths of Burry Port (Lab)]

My Lords, that was March and it is now June. Has the Minister really nothing that he can say to suggest that there has been progress in the affairs to which he has just referred in that intervening period?

[Lord Henley]

My Lords, as I made clear, the negotiations continue. The noble Lord will have to be patient.

[The Earl of Clancarty (CB)]

My Lords, the Minister should be aware, as the DCMS is, that the creative sector has a number of wide-ranging concerns over Brexit, not least those facing freelancers, who make up a significant proportion of the creative industries and IT. What assurances can the Government give to the self-employed, including those running businesses with clients in Europe? They have a real concern that that work will be lost due to reduced access and increased red tape if we do not remain in the single market.

[Lord Henley]

My Lords, I am not going to rehearse all the arguments that we might debate later or on other occasions about the single market or whatever. I have to make it clear to the noble Earl that the negotiations continue. As I said, we have a pretty good intellectual property regime, but there are areas where we need to get things right. We will pursue that in the negotiations.

[Lord Foulkes of Cumnock (Lab)]

My Lords, is the Minister aware that, notwithstanding his replies and the squalid stitch-up taking place down the Corridor, we are on our way to disaster if we continue down the road to Brexit?

[Lord Henley]

My Lords, I am not going to waste my time answering the noble Lord’s question.

[Lord Naseby (Con)]

Is my noble friend aware that the forthcoming White Paper will be extraordinarily welcome not just to the creative sector but to small and medium-sized enterprises in particular? Against that background, will my noble friend double-check that that sector plays a role in the forthcoming White Paper?

[Lord Henley]

My Lords, I can give an assurance to my noble friend that the White Paper will be comprehensive in what it covers. I cannot offer a precise guarantee that I will be able to make sure that SMEs are covered, but I am pretty sure that they are there.

[Lord Foster of Bath (LD)]

My Lords, the strength of our creative industries is illustrated by the fact that 1,400 television channels produced in this country are shown across many other European countries, using the country of origin principle to enable them to do so. A third of them are licensed by Ofcom. Is the Minister aware that a number of those channels have already chosen to move from this country and base themselves in other European countries? What are the Government doing to give them the confidence that there will a proper deal that enables them to stay in this country and help our creative industries?

--- Later in debate ---

[Lord Henley]

My Lords, in advance of the negotiations being completed, I obviously cannot give the guarantees that the noble Lord asks for, but he is right to stress the importance of the creative industries sector in this country and its sheer size. For that reason, it will go on being an attractive place for people to come, just as it has in the past.

[Lord Cashman (Lab)]

My Lords, is the Minister aware of the wide and deep concern across the creative industries? This is not only about rights holders, and I say that as a rights holder. Companies—small, medium and large; orchestras also—fear for their future because of the wide talent pool that comes from across the 27 other countries? Is the Minister aware of those concerns and are the Government addressing them in their negotiations?

[Lord Henley]

My Lords, I thought that I made it very clear at the beginning that we are aware of the concerns of the whole of the creative industries. This goes across government. Obviously, we will take those concerns into account in all our negotiations on our future relationship with the EU when we leave, which we have said we are going to do.

Oil and Gas: UK Continental Shelf

Lord Henley Excerpts

Monday 18th June 2018 Lords Chamber

[Lord Bruce of Bennachie]

To ask Her Majesty’s Government what steps they will take to promote new exploration and enhanced recovery of oil and gas from the United Kingdom’s continental shelf.

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

My Lords, the Maximising Economic Recovery of UK Petroleum strategy sets out the steps that the industry and the Oil and Gas Authority must take to secure that the maximum value of economically recoverable oil and gas is recovered from the strata beneath UK waters. Most recently, the Government have provided £45 million for seismic surveys in underdeveloped areas, and data from those will support the forthcoming 31st offshore licensing round.

[Lord Bruce of Bennachie (LD)]

I thank the Minister for that reply. As noble Lords will be aware, the industry has had a pretty traumatic two or three years, but nevertheless it accounts for hundreds of thousands of jobs and billions of pounds of benefit to the balance of payments. However, not enough exploration, development and enhanced recovery investment is taking place. Will the Government ensure that there are sufficient incentives, not subsidies, to make this happen rather than just encourage it to do so? We should recognise that if we do not look, we do not find, and we cannot produce.

[Lord Henley]

I agree with the noble Lord that the industry has had a pretty traumatic time but I think things are picking up. As he said, this is very important for energy security, jobs, the economy and—dare I say it—the Exchequer. As I said in my original Answer, we are providing funds for seismic surveys to help in the next round. As the noble Lord will be aware, some 61 companies got licences in the previous round, with the potential to produce some 320 million barrels of oil equivalent. I hope something similar or better will come from the next round.

[Lord West of Spithead (Lab)]

My Lords, the Minister will be aware that oil and gas platforms on the continental shelf, undersea cables and fisheries are all part of what was once called the “offshore tapestry”, with a small fleet of ships to look after that tapestry. We no longer have that; post Brexit, there may be some issues. Does the Minister not believe that we should perhaps look at investing in more ships to look after that highly valuable offshore tapestry?

[Lord Henley]

The noble Lord makes a very important point, which I will certainly pass on to my colleagues in other departments.

[Lord Goddard of Stockport (LD)]

My Lords, I draw attention to my interests in the register; I am a vice-chairman of the All-Party Parliamentary Group on the British Offshore Oil and Gas Industry. Does the Minister agree that one way to enhance the recovery of oil and gas from the United Kingdom continental shelf, increase tax revenues and create valuable jobs in the industry—which has lost 150,000 jobs since 2014—would be to focus simply on extended production of late-life fields and promote early development of known proven resources?

[Lord Henley]

The noble Lord is correct: we should do that. As his noble friend said, we should also continue with explorations. There is much that we can do, that the Government are doing and that the industry is doing.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, is the Minister aware of the carbon bubble—the possibility that the bottom could fall out of the market in oil and gas and general fossil fuel investment? Will the Government therefore give some advice on these risks to anyone who would like to look further at oil and gas? I raised this with the Bank of England a few years ago and it has since said some quite enlightened things.

[Lord Henley]

The noble Baroness makes a point but it is important that we continue to look at all available resources. The noble Baroness knows we are moving towards a low-carbon economy but we also want a balanced energy mix. It is important that we make use in the medium—and possibly long—term of the fossil fuels that we have.

[Lord Berkeley (Lab)]

My Lords, who is responsible for removing the redundant platforms in the North Sea and elsewhere? I believe they are all privately owned. What happens if the company no longer exists? Who is responsible for putting the seabed and everything else back to what it was originally?

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[Lord Henley]

As I understand it, although I will no doubt have to write in greater detail to the noble Lord, removing the platforms is a matter for those who put them in place. When we talk about jobs and available exploration jobs, it is worth pointing out that there will be jobs in decommissioning and removing those platforms in due course, which will make use of the expertise in north-eastern Scotland that put the platforms in and operated them.

[Lord Krebs (CB)]

My Lords, what is the Government’s estimate of the length of time for which we can continue to burn fossil fuels while meeting our legally binding carbon reduction commitments, as agreed up to the fifth carbon budget and beyond?

[Lord Henley]

I am not sure I can give the noble Lord those figures but I can assure him that there are opportunities to continue to meet our obligations in that respect, particularly by making use of shale gas exploration if we move onshore. We certainly reckon that current production represents some 65 % of UK oil demand and 50% of UK gas demand, but there is much more to be found.

[Baroness Deech (CB)]

My Lords, can the Minister explain what plans there might be to exploit the continental shelf around the Falkland Islands and whether there are any issues relating to the legal position of that shelf?

[Lord Henley]

The noble Baroness is moving on to a different continental shelf and rather a different question —one that I do not think I am qualified to answer at this stage. I will no doubt be prepared to write to the noble Baroness.

Trades Union Congress 150th Anniversary

Lord Henley Excerpts

Thursday 14th June 2018 Lords Chamber

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

My Lords, I echo other noble Lords in offering my thanks and congratulations to the noble Baroness, Lady Prosser, on introducing the debate, and the noble Lord, Lord Sawyer, in paying tribute to her union record. I also offer my congratulations to the noble Lord, Lord Monks, on being the oldest living former general secretary of the TUC—long may he continue to be so—and thank him for welcoming my noble friend Lord Hunt to these Benches. Perhaps I may deal with the complaint that has been made that there seems to be a lack of representation on these Benches. It is worth pointing out to the House that the debate was tabled only two days ago. It is often difficult, as I am sure that representatives of the trade union movement would acknowledge, to make people available at short notice. The noble Baroness had similar problems in that two of her speakers seem to have dropped out.

I do not complain about this, but much of the debate has been spent raising and addressing points that might have been best addressed by the noble Lord, Lord Monks, as a former general secretary—or perhaps we could pass them to Frances O’Grady, the current general secretary, as much of the debate has been directed at the problems that trade unions themselves face, as suggested by the noble Lord, Lord Brooke, when he talked about technological change and the need to get people into unions. The noble Lord, Lord Sawyer, also talked about problems of recruiting. I must say that those are not problems for the Government to address, but for the unions themselves to address.

[Lord Lea of Crondall]

To avoid misunderstanding here, we are not asking the Government to do the job but to get rid of some of the obstacles. One example is the right of unions to go to a workplace to talk to representatives and others.

[Lord Henley]

My Lords, recruiting is a problem for trade unions to address; I do not believe that there are the obstacles that the noble Lord suggests.

There has also been considerable reminiscence—again, I make no objection to this. We went back to 1968 and heard about the activities of the noble Lord, Lord Lea, who was involved in the 100th anniversary. Those were the years, I seem to remember, of In Place of Strife. We have had much trade union legislation since then, although In Place of Strife did not get as far as it might have. The noble Lord, Lord Hunt of Chesterton, remembered his time as chief executive of the Met Office, negotiating with the unions there. I can add my own memories as a Defence Minister in the 1990s, chairing jointly with Jack Dromey—before he was an MP, when he was working for the unions—one of what used to be called the Whitley councils. I think it was the last one to be co-chaired by a Minister. I pay tribute to Jack Dromey for guiding me through that process in my short time there.

The debate has been useful. It gives us all, including the Government, a chance to express our appreciation of the important work that the Trades Union Congress does and to celebrate those 150 years. On behalf of the Government, I offer my congratulations to the TUC on its achievements and recognise the importance of its contribution. I restate our commitment to continue close working with the TUC and unions more generally.

My right honourable friend Greg Clark, the Secretary of State for Business, Energy and Industrial Strategy, was at the reception on 6 June to mark the 150th anniversary of the TUC. He said:

“It’s absolutely fantastic to be here this evening to celebrate 150 years of the TUC. While it’s true to say that—from the beginning—the TUC has been associated with ‘that other party’. It’s also true that the appreciation of what the TUC does transcends what side of the House we sit on or the colour of the membership card in our pocket”.


I echo the words of my right honourable friend on that occasion.

That first-ever Trades Union Congress was a historic moment. It brought together delegates representing nearly 120,000 workers to discuss issues, including working hours, apprentices and technical education. Those topics are just as relevant today, and so too, is the TUC. It has shaped our society over those 150 years. The TUC and union campaigning provided the impetus for the National Health Service. It drove the Equal Pay Act in the 1970s, and the introduction of the national minimum wage in the 1990s.

In 2007, the TUC said that smoking in public was a risk to workers’ health. Whatever our view on the ban on smoking in public, it was something we strived to do, so we can be grateful for that. The TUC’s arguments led to the subsequent smoking ban. In 2011, following a TUC campaign, agency workers gained the right to receive the same treatment as permanent staff carrying out the same work. The TUC, as many noble Lords said, works in international fora, and the training and assistance it provides to trade union organisations around the world has earned it international respect.

It is not just workers who have benefited from 150 years of the TUC. The Trades Union Congress has been essential to the democracy that we recognise today, particularly, as the noble Lords, Lord Lea and Lord Monks, made clear, through the founding of the Labour Party at the beginning of the last century. But democracy is not just about political parties and elections. Trade unions have represented their members and lobbied for wider changes in society. They have campaigned on other issues, such as equality for women and other groups, combating modern-day slavery or tackling child poverty—again showing how they can effect change to the benefit of us all.

Of course, since the beginning, the central focus for unions has been work and the workplace. Over the decades they have improved the working lives of their members, and—I want to make this clear—this Government hope to see that continue. I believe that unions have been most successful when they have engaged constructively with employers, the Government and other parties. For example, the success of our car industry has been built on good industrial relations. I am sure that many in this House will remember what it was like before.

Many employers and their representative bodies, such as the CBI, have also recognised the constructive role that unions have played. Throughout the country, trade union health and safety representatives have made our workplaces safer. Not only does this benefit workers, it contributes to our economy through reduced accidents. I believe that we now have an enviable safety record in which we should all take pride, and I want to thank the unions for their role in achieving that. They have also invested in people, working to develop the skills of their members.

Unionlearn, mentioned in a previous debate some years ago on this very subject, is an excellent example of this. It has helped to engage more than 50 trade unions in more than 700 workplaces. It has helped establish 600 union learning centres, where its representatives help those with low literacy and numeracy. Unionlearn projects have also helped recruit and support thousands of apprentices. For these reasons, the Government will continue to support Unionlearn with over £8 million pounds in the next two years.

Today, we continue to work closely with the TUC, and we listen to its advice on a range of issues. I want to thank the TUC, and in particular its current general secretary, Frances O’Grady, for the co-operative approach that it has shown over the years. We should congratulate the TUC on following the Conservative Party in electing its first female general secretary. Perhaps the Labour Party could follow suit in due course; there are lessons to be learned from both the TUC and the Conservative Party. I stress that we have engaged with Frances O’Grady. The noble Baroness, Lady Prosser, complains that there has been only one meeting between my right honourable friend and Ms O’Grady, but my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy met her as recently as April. My right honourable friend David Davis also met her in April, and there have been other meetings with Ministers over the course of this year.

I have to confess that I have not yet met her since I moved to that department, but I did meet her briefly in my time in the Home Office, in a previous incarnation in government, when she was assistant general secretary. I shall certainly pass on concerns that she would like—or noble Lords would prefer—another meeting with my right honourable friend. There might be slightly too many tanks parked on too many lawns at the moment, and other matters to attend to. However, we will certainly continue to engage with the TUC and the general secretary, and we are grateful for the chance to do that.

Obviously, there will continue to be disagreements, in the spirit of general debate. But in the spirit of this debate, I do not want at this stage to dwell on them. I shall move on to the TUC’s significant concerns about the changing nature of the world of employment. It made significant contributions to the Matthew Taylor review and supported the work of the Low Pay Commission. Again, my right honourable friend the Secretary of State has highlighted the importance of the worker voice in the industrial strategy. The noble Baroness, Lady Prosser, regretted that there was no mention of the trade union side. We will continue to develop work on the Matthew Taylor report. As noble Lords will be aware, we made our first response to it in February, and we will continue to develop it over the course of the coming months.

Frances O’Grady has also attended the task force that has advised on the impact of Carillion’s insolvency on small firms and employees, making as always very useful and insightful contributions. Again, on behalf of my department, I thank the TUC and the wider union movement for their help in putting our industrial strategy into place.

I do not want to go over all the arguments, but I appreciate that not all noble Lords in this House are happy with the Trade Union Act 2016. The noble Lord, Lord Fox, mentioned it, as did noble Lords from the Labour Benches. I do not think that now would be the right time to rehearse all those arguments again, but it has ensured that, from now on, when strikes take place they will have the support of a reasonable proportion of the workforce. It is not right that public services are disrupted by strikes that have little support from the workforce. No doubt, there will be other opportunities and moments to discuss that and other changes in due course.

Today we have celebrated the achievements of the TUC and the wider movement. As Frances O’Grady has recently said, this anniversary is not just about the past. It was she who said that the unions themselves need to look to the future. Our economy and our society, as the noble Lord, Lord Fox, made quite clear, are constantly changing, and unions—like the rest of us—will need to adapt in order to maintain relevance in the future. I have every confidence that the TUC will adapt to the future and that the cart-horse from the Low cartoon mentioned by the noble Lord, Lord Lea, when he went out to try to find one to take part in the 100th anniversary, will be able to adapt itself into whatever type of horse is necessary to deal with the future.

I think the TUC also has the right approach. Under Frances O’Grady, the first woman general secretary of that great movement—I am sure that the noble Baroness, Lady Prosser, is very pleased that the TUC has reached that stage—the TUC has led on constructive engagement with both employers and the Government, which I believe must be the way forward for the union movement as a whole. Again, I thank the noble Baroness for introducing this debate—I do not think I have to beg to move, so I will sit down at this stage.

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Henley Excerpts

Committee: 1st sitting (Hansard): House of Lords
Monday 11th June 2018 Grand Committee

[Lord Grantchester (Lab)]

Good afternoon and welcome to Committee stage. Amendment 1 would ensure that the cap is introduced as soon as possible and proposes that, from the passing of the Bill, Ofgem should seek to bring in its provisions within five months. We all realise the importance that Ofgem attaches to the time it needs to get going with the provisions and the modifications to the licence conditions that need to be in place for this to happen.

The amendment would make sure that there is no drift in that process. It is very important for various reasons. First, fuel poverty is of great importance to an awful lot of people who struggle with their energy bills. The UK has the second-worst rate of excess winter deaths in Europe. Two-fifths of those aged over 65 surveyed by comparethemarket.com said that they would ration their energy use over the winter because of increasing costs.

The other aspect of which we must be cognisant is the change in energy use as British Summer Time comes to an end. First Utility’s analysis of energy usage data around daylight saving from the last three years revealed an average 18.7% rise in electricity use as we move from British Summer Time into Greenwich Mean Time. Cold weather payments are very effective for each seven-day period of very cold weather between 1 November and 31 March. We therefore place great emphasis on Ofgem maintaining the process and having all the necessary conditions in place for the Act to commence. I beg to move.

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

My Lords, I hope we shall make rapid progress on the Bill. I thank the noble Lord, Lord Grantchester, for moving his amendment so quickly. I shall just point out that it refers to,

“28 October 2018 or five months after this Act is passed (whichever is the sooner)”.

As it is already June and Royal Assent is unlikely to be before July, whatever happens, the amendment could mean only 28 October because five months from Royal Assent would obviously be after that date. However, I share the noble Lord’s desire to see the cap in place as soon as possible. Certainly, we would like to see it in place before the end of the year so that millions of families have protection for the worst of the winter.

The noble Lord referred to the fact that the nights start drawing in on 28 October. Actually, they start drawing in from the middle of this month, in a couple of weeks’ time, which is rather depressing. As he suggested, that means bills start climbing in those months. That is why we are pressing on with the legislation and I am grateful for the co-operation of all Members in getting this on the statute book as quickly as possible. We are aiming, subject to the will of Parliament, for the Bill to be passed before the Summer Recess.

The Bill already requires Ofgem to put the cap in place as soon as is practicable. Ofgem’s chief executive, Dermot Nolan, has committed to imposing the cap in the minimum timeframe that it can manage without risking the integrity of the process of consultation, notification and modification of supplier licences. Mr Nolan said as much in his evidence to the BEIS Select Committee.

Good progress has already been made. Ofgem has published a number of working papers setting out its emerging thinking. This culminated in a consultation on the design of the cap, which was published recently. The consultation sets out a clear timetable for implementation of the cap by December 2018. Ofgem will be ready, after the Bill is passed, to undertake the relevant statutory consultations and make the licence modifications that the Bill requires.

We appreciate the desire to hold Ofgem to a date by which the cap will have to be in place. However, the amendment potentially risks the integrity of the cap if it means that, to meet that date, Ofgem may have to radically speed up its design and consultation processes. Doing that would hugely increase the risk of a successful legal challenge—something that we will discuss later on—and that is likely to delay the implementation of the cap.

As I said, I agree with the noble Lord that the aim must be to get the price cap in place as early as possible before the cold weather arrives. However, there is nothing to be gained by making this a statutory deadline and it potentially creates new risks for the implementation of the cap. I hope that with that explanation the noble Lord will feel able to withdraw his amendment.

[Lord Grantchester]

I thank the Minister for his explanation of the timing behind the Bill. We certainly agree that the schedule is a very tight timetable for everything—all the consultations—to take place. However, we feel that the Bill has been very well flagged up to all the companies concerned and to Ofgem. I am sure it is making progress even now on what needs to be done to get the Bill enacted as soon as possible. I agree that, looking at the scheduling of the amendment with where we are now, 28 October would be the default. Nevertheless, we are keen that we keep a tight look, as we go through the Bill and when we come back for Report, at all the progress that has been made. With that in mind, I beg leave to withdrawn the amendment.

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[Baroness Featherstone (LD)]

Is it all right if I speak to Amendment 7 now?

[Lord Henley]

My Lords, these amendments are grouped and it is open to any noble Lord to speak to any of them as they wish. I would suggest that the noble Baroness speaks to her amendment.

[Baroness Featherstone]

I thank the noble Lord. This amendment is about the duty on energy companies to communicate properly with their customers. I raised concerns at Second Reading that there is a possibility that energy companies might not be totally up front and honest with customers about the circumstances surrounding the introduction and execution of an energy price cap. I am particularly concerned that some companies may not be up front about the facts: this is a temporary cap, ordered by Parliament, the level of which is set by Ofgem to protect consumers on standard and default tariffs from excessive charging. Companies must not seek to absolve themselves from blame for the fact that a cap is being introduced—an action that they have necessitated. Nor must they be able to play it off as some sort of benevolence introduced by them to help their customers. I am also concerned that companies might imply that the cap brings about the best deal for customers and indicates in some way that they need not shop around.

Communications from suppliers have not always been totally clear, but they need to be. The last thing we need in setting and executing the cap is for communications to confuse, entice or entrap customers into any false beliefs or misunderstandings. The amendment seeks to ensure that suppliers cannot use the setting of a cap as a marketing opportunity. Companies are very clever in their use of marketing language to seduce customers into perhaps believing that the cap is protecting them in more ways than it was created for. We should not provide any opportunity for suppliers to mislead consumers, accidentally or otherwise, into believing that the price cap is beneficial in any other way or being put in place for any purpose other than that for which it was intended; namely, that it is as a temporary cap until such time as circumstances dictate that it must be lifted. It must not allow the supplier to appear to be the instigator of the cap. Nor must the cap be called anything other than what it is: a temporary cap. I am concerned about the wording being used to describe the cap. A company might say that it is a beneficial cap or a protective cap, but there should not be anything to indicate a benefit in the name of the cap.

The amendment is very dictatorial, particularly for a Liberal. It states that the term used should be simply that it is a temporary cap and that, once it has been implemented, all companies should use that phrase in reference to it. There cannot then be any dodging around it. Since writing the amendment, I think it needs to go further and perhaps disallow any words around the name too so that suppliers cannot add adjectives to it. I am not sure how particular we can get on this, but I refer to words such as “beneficial” or “protective” temporary cap. It may seem picky and dictatorial, but my background pre-politics was in marketing and design, and it takes one to know one. Communications are hugely important. There can be no objection to calling it what it is: a temporary cap. In that way, no supplier will be able to use the name of the cap or its description inappropriately.

In the same vein, it should also be obligatory for suppliers to make it clear that the cap does not mean that the price under the cap will necessarily be the best price or the cheapest price. In any communications, suppliers must include clear and accessible information about switching energy suppliers.

Amendment 22 from us and Amendment 23 from Labour concern the provisions in the Bill surrounding the publication of information regarding variations in the cap. Clause 4 states that if the authority is thinking about modifying the price cap, it must notify holders of supply licences, but there is no requirement once a decision is made for companies to inform customers. These amendments put this requirement into the Bill.

Lastly in the group, Amendment 38 is in the name of my noble friend Lord Teverson, who cannot be here today. He wanted Ofgem to have powers to regulate the websites of energy suppliers and energy price comparison site operators. The purpose of that power would be to ensure that consumers are presented with objective information on immediate and future costs and matters of customer service sufficient to make informed decisions about energy supplier choice. I know he wanted a specific requirement for all such sites to list the immediate cost of energy to the consumer, together with, and in the same format, future costs when the initial contract term ends. This would protect consumers from being seduced by a good offer and a good price only to be shortly disappointed to find a huge hike when the first contract ends. He wanted a requirement also that, for each tariff, the terms under which price variations can be applied are clearly shown. However, much of that was out of scope, so Amendment 38 is a lesser version. It requires the authority to modify the supply licence conditions to ensure that the information presented on energy companies’ websites is “sufficiently objective” and to modify the Ofgem Confidence Code so that only price comparison websites that are similarly objective can be accredited by the code.

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[Lord Stevenson of Balmacara (Lab)]

My Lords, three issues are being raised now. The last two speeches and the introduction were about communication and the points were well made, but we are probably all asking, “What is this all for?” We are missing a dog that has not barked, which, in its most recent form is, saving the presence of my noble friend Lord Whitty, Consumer Focus. Previous regimes have had national consumer councils and other bodies. There was an active and statutorily supported consumer interest that was also part of the process, from which the problems which we are now talking about seem to have emerged. We do not have that; we have a different structure in place and it is, perhaps, too soon to make judgments on it. However, an issue has been raised that should not be allowed to go away simply because the system does not currently encourage it. Like the noble Lord, Lord Carlile, I have also tried to change my rather complicated fuel arrangements. The house I am in has been brought together from three separate properties and I have three gas and three electricity suppliers. I recognise that this issue exists on the other side of the divide here. It is not simply a doubling: this is an exponential difficulty for those providers who are not able to cope with the issue. That is my problem, but it exemplifies the difficulty of trying to get information.

I have three points of concern. First, it is a problem that there is no statutory body to which you can go that will take this issue on and act on your behalf. Citizens Advice, for all its merits, is not that body and we miss Consumer Focus. Secondly, there is a case—even though there may be costs—for looking very critically at the information flow from the companies at the moment. They may well be trying their best; they may be saddled with statutory responsibilities, but the end product is more pages of more and more complicated, structured things that do not give you the information you require in a way that you can use. For most individuals looking to exercise the market power that consumers should have in this area, this would be a clear statement of the unit cost per kilowatt hour of energy consumed. We do not want a mixture of consumption and fixed costs and to then discover that there are all sorts of fixed costs that are never brought forward, such as network costs, smart meter costs and other things that exist below the line but are never provided in a sensible way. There is a direct issue of communication between the provider and the consumer.

My third point is raised in Amendment 38. The way in which the market has to operate in these rather asymmetric arrangements is for there to be comparison sites and other information providers, which we all tend to go to when we can. There is another problem here, which has not been touched on yet but which we must think about. To what extent are these truly independent? It has been said, by those who have given evidence to us, that many of the comparison sites are only there because they take a commission on the provision of information about the companies by which they are retained. I find it difficult to see how consumers are supposed to work out what is the best deal. This may not be limited to the energy area, but if it exists there then some action needs to be taken, whether by statute or regulation, to make sure that this is a proper aid to consumer choice, not an additional complication.

We were also looking for a way of getting an amendment in this area. I am impressed that the noble Baroness and the noble Lord, Lord Teverson—who cannot be with us—were able to find a form of words. It does not take the trick but it is certainly in the right field. I hope that when the Minister responds he will give the Committee some information about where we might take this issue. It is not dealt with properly in the Bill; it is effectively out of scope in terms of what the Bill currently does. Perhaps, with a little offline discussion, we can bring a bit more focus to it. That would be worth while.

[Lord Henley]

My Lords, before I respond to the amendments, I will assist my noble friend Lady Neville-Rolfe by answering one of her questions. We are now up to 70 suppliers. She talked about it possibly having got to the high 40s or 50s, but one should be grateful that the number is higher and rising.

[Lord Stevenson of Balmacara]

I am grateful to the noble Lord for that information. It would not be right to accept that figure at face value. It may well be 70, but there is a huge discrepancy in size and capacity in that number. We are talking about the big six and then a very large number of small companies with perhaps 1% or 2% of the market. It is not quite as has been said.

[Lord Henley]

I fully accept that, but the big six is six out of 70 companies. There are another 64, and that number is growing. It might be a small tail but it is good to know that those alternatives are available as suppliers.

I am grateful to the noble Lord, Lord Berkeley, for moving his amendment and to other noble Lords for speaking to theirs. The general message is that everyone is seeking more information and information of the right sort, which should be—I forget where the noble Lord was quoting from—on a durable medium. He took that to be paper, but it might be extended to vellum, if we remember our debates on other occasions about what Acts of Parliament ought to be printed on.

I am grateful to the noble Baroness, Lady Featherstone, for her amendment and her frank admission that, for a Liberal, she was being somewhat dictatorial. It is not unusual for Liberals to be somewhat dictatorial; in fact, I find them very prone to banning things and ordering us around, but that is the nature of the beast.

I am also grateful to the noble Lord, Lord Carlile, for mentioning his difficulties in trying to get information and change his supplier online. I also know how difficult that can be. One gets online and has problems, then that dreaded expression comes up: “Frequently asked questions”. One can always guarantee that the one question you want to ask will not be one of the frequently asked questions. I was grateful for the analogy he gave of the very good advertisement he saw for a credit card setting out interest rates of some 56%. I take it that he did not bother to take up such an offer. I will ignore what he said about train fares, only to say that I am grateful not to have to respond for the Department for Transport on this occasion. However, as someone who, like him, travels a great deal, I agree that fares can be difficult to follow.

It is very important that we make sure that energy companies not only are as transparent as possible with consumers but provide as much information as is necessary. I am happy to report that Ofgem’s standard licence conditions require—they are dictatorial, you see—suppliers to communicate information about cheaper tariffs to a customer with a “Could you pay less?” label on the first page of bills and statements of account. It is a requirement that the information on cheaper tariffs is included, along with a message saying, “Remember, it might be worth thinking about switching your tariff or supplier”. That required information includes details of the estimated savings that could be achieved by switching to a cheaper tariff.

As I made clear, customers can also continue to specify whether they wish to receive this information electronically or in a hard copy. I noted the percentages given by the noble Lord, Lord Berkeley, on how much people know what is happening in their bank accounts, whether they receive information on paper or online. The simple fact is that a great many people wish to receive this information online. We do not want to prevent that, but Ofgem is imposing a condition that customers must be offered the right choice. Ofgem is also leading a programme of work across industry, including detailed trials of different problems to engage people. Early information from these trials suggests that they can be effective at improving switching rates, however difficult some noble Lords might find that to achieve.

The Government are also working to improve consumer engagement. We provided a little over £1 million in funding for the Big Energy Saving Network and the Big Energy Saving Week last winter. We are also progressing midata in the domestic retail energy market. Midata is the method of electronically transferring customers’ data from a company system to a third party, such as a price comparison website, and should open the door to innovative third-party switching services.

The Government take transparency and ensuring that customers have the information available to switch very seriously, so although I agree with the spirit of these amendments, the processes and policies are in place for consumers to have the appropriate information that they need. It is also worth remembering the warnings that my noble friend Lady Neville-Rolfe gave about trying to insist on too much. Perhaps we should bear in mind the acronym KISS: keep it simple, stupid. There is a limit to the amount of information that should be provided and what is provided should be kept simple. I hope that with that explanation—

[Baroness Featherstone]

Has the Minister considered my argument about controlling how the cap might be referred to—perhaps as the “temporary cap”? That goes to the heart of the matter.

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[Lord Henley]

I am more than happy to look at that and I hope Ofgem will note what the noble Baroness has said in Committee. It might be that it would want to change the advice it offers to suppliers about what they do. It is important we make sure that the right information is provided in the right format—I think we are all agreed on that—and that, as I said, it is kept simple.

[Lord Carlile of Berriew]

Can the Minister help us to understand why he referred to midata? The midata vision of consumer empowerment, as it was called at the time, has been in existence since November 2011. What will the midata vision provide to help consumers following the enactment of this Bill? What specifics will the consumer be able to use?

[Lord Henley]

What it will do, as I thought I had made clear, is make it easier to open the door to innovative third-party switching devices, such as the devices I referred to, I think, during the debate on the Smart Meters Bill. These will allow the consumer to find himself automatically shifted from one supplier to another if he says, “I always want the cheapest tariff”, or, “I always want the greenest tariff”. Such things are being developed and midata will help towards that.

[Baroness Neville-Rolfe]

I now understand why the letter I received is so difficult to understand. It reflects the provisions that the Minister has explained that Ofcom has imposed about having to show how you could pay less even if you cannot in fact pay less, which is the situation in my letter. That leads me to make a small request. It would be great if the Minister were able, between now and Report, to look at how communication is actually decided in the Ofcom area. Is there proper communication with consumers who might be recipients of these letters? We tend to be policy-driven rather than customer-driven, and I heartily endorse what the Minister said about keeping it simple. Talking to consumers about what they are going to be sent might be very helpful.

[Lord Henley]

I am more than happy to consider that and to write to my noble friend so that we can perhaps consider this again on Report. As I was saying in winding up, we all have the same desire: we want to make sure that the consumer has the right information to make the appropriate decisions that they wish to make. With that in mind, we hope that Ofgem—not Ofcom—will continue to develop its work in that field.

[Lord Lennie]

Before this comes to an end, would the noble Lord repeat what he said about midata having the ability to steer customers to the cheapest tariff available to them in association with smart meters? When does the noble Lord think this will become available? This is quite revolutionary. It is exactly what is needed, and it was suggested in the Smart Meters Bill, if the noble Lord recalls, that the smart meter could provide that kind of information. Is that how it would be communicated—through a smart meter—or directly to customers?

[Lord Henley]

Midata is a method of electronically transferring customers’ data from a company system to a third party, such as a price comparison website. I was saying that that could lead to innovative third-party switching devices. I think I might have said at Second Reading of the Smart Meters Bill that some apps were already available that could do that for an individual. Therefore, the noble Lord, Lord Lennie, could sign up to something that said, “Always shift me to whatever is the cheapest tariff”. I cannot remember the name of the one already in existence. The noble Lord might then find that two or three times a year he was changing supplier without knowing it, always going to a cheaper one. It might be that the noble Lord, being very virtuous, wanted a greener one or something else, and other such things could be arranged. I hope that is what midata will help the noble Lord and others to do.

[Lord Young of Norwood Green (Lab)]

I hesitate to enter the debate because I do not want to prolong it. My understanding of the current generation of smart meters is that that is their problem: you cannot simply switch to any other provider because they do not yet have the technology to enable you to do that. The next generation will. That is my information and I have not yet heard anything to refute that. I have been talking to energy companies and to people who are heavily involved who say, “I am not signing up to this generation of smart meters”, because they cannot switch you to the complete range of suppliers. They do not yet have that flexibility.

[Lord Henley]

The noble Lord is absolutely right about the SMETS 2 meters. I will write to him about SMETS 1 meters and it might be that he is correct about that. I was only mentioning that as an advantage that will be available in the future to customers.

[Lord Lennie]

On that basis, I beg leave to withdraw Amendment 3.

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[Lord Whitty (Lab)]

My Lords, I apologise for not being here for the previous debate. Clearly, there are crossovers between that group of amendments and this one. I declare an interest in that I have been appointed chair of the commission on vulnerability set up by Energy UK. We have not started our work yet so I am not pre-empting that and I am not speaking on behalf of the commission. But it has caused me to look at the complexity of the vulnerability of consumers in this sector and how that is compounded by the difficulty that people experience in getting around to switching, despite the emphasis on switching in public policy, and the attempts—legislatively and by the regulator—to encourage people to find a better tariff.

The fact of the matter is that while we have had a significant increase in the competition at one end, the competition between and within companies to attract and retain vulnerable groups in their own best interests has not ended up being very effective. I am sure we all know of groups in our own community which have had grave difficulty, either by being stuck on a tariff or by attempting to change their tariff, with consequences that were detrimental or at least incomprehensible to them. That remains the position.

When we are talking about vulnerability, we need to recognise that not all of that is obvious. It is not just the elderly, or physically or mentally disabled people, who are vulnerable. It is also people on small incomes, particularly those on irregular incomes, who fail to pay at some point and suddenly become vulnerable because they build up debt and get into the company’s bad books.

The industry is well aware of all this. Indeed, in some ways, it has attempted to address it, but it has not come through. This top-down approach of a cap, which may be necessary at the moment to drive future competition will not help the differential impact on the more vulnerable members of our society. If it does, it will do so inadvertently. That is the not the central theme of this approach. The issue has to be explained to people in a way that does not make life more complicated and that will enable them, at least to a degree, to be more proactive in switching to a lower tariff.

Communication between energy companies and their consumers is therefore vital. The increase in competition through the number of companies in the field has not necessarily led to a dramatic change in this situation. It is important that not just the big six but all companies in the sector take steps to ensure that they take this into account after we have legislated for the cap to address the interests of different groups of vulnerable people. We will return to this issue—amendments have been tabled on it at various points in the Bill—but unless we somehow crack this and make it clear that the cap must address issues of vulnerability at the same time, the social problems that are the outcome of the current dysfunctional and inadequately competitive market will simply continue.

For a number of these groups of people, although I am in favour of smart meters, I do not think that the smart meters rollout will occur in the timescale to match what is in the Bill for a cap. Also, many of those groups will be the last to benefit easily from the information and techniques that smart meters ought to give to consumers. The benefit will be to those who have already made the switch and, quite rightly, stimulated a new market, but they are not necessarily the most vulnerable in the market—in most cases they are quite the opposite. Unless we cater for all aspects of this market, with central objectives improving the position of those various groups of vulnerable consumers, we as legislators, and Ofgem as the regulator, will have failed.

[Lord Henley]

I thank noble Lords for what they said on these various amendments. I hope to set out what we are doing to protect the more vulnerable and disabled consumers in due course, but I will start by dealing with the point made by the noble Lord, Lord Stevenson, about what is referred to as “tease and squeeze”. We believe that the best way to end this practice is the detailed work that Ofgem is undertaking to test better ways to secure customer engagement and make switching quicker and more reliable, as well as many other programmes to make the market work better. Recent changes mean that suppliers can make their default tariff a fixed-rate deal rather than a variable-rate tariff; many have done so.

The amendments would require Ofgem to have specific regard to vulnerable and disabled consumers when setting the level of the cap, but they are unnecessary because Clause 1(6) already places a duty on Ofgem,

“to protect existing and future domestic customers who pay standard variable and default rates”.

That of course includes vulnerable and disabled customers. Further, the amendments tabled by the noble Baroness, Lady Featherstone, to Clause 7 would require Ofgem and the Secretary of State to consider whether effective competition is in place in the domestic energy supply market as a whole, and again this will include effective competition for all domestic consumers, including vulnerable and disabled customers.

As noble Lords will be aware, in addition to the duty imposed on Ofgem by the Bill to protect all existing and future domestic customers on SVTs and default tariffs, the gas and electricity Acts place a duty on Ofgem to protect the interests of existing and future consumers. In carrying out this duty, Ofgem should have regard to the interests of individuals who are chronically sick, disabled or of pensionable age on low incomes, and those residing in rural areas. With the protections for SVT and default tariff customers in this Bill and the specific duties in existing legislation for vulnerable people, there is no need to place additional duties on Ofgem to protect the interests of those consumers.

Ofgem and the Government are taking a number of steps to support vulnerable consumers. For instance, Ofgem has extended the prepayment meter cap to around 1 million vulnerable consumers in receipt of the warm home discount, mentioned by the noble Lord, Lord Stevenson. The Government have laid regulations that, among other things, will enable data sharing between government bodies such as the Department for Work and Pensions and energy suppliers for the purpose of fuel poverty, including safeguard tariffs. Clause 3 of this Bill enables Ofgem not to apply the market-wide price cap to customers who benefit from another cap by reason of them being or appearing to be vulnerable.

I believe that these amendments broadly repeat the provision which is already set out in the Bill so they are an unnecessary duplication, but it is worth me going through some of the existing government support for vulnerable consumers. There is the payment of £140 a year to 2 million low-income households through the warm home discount scheme, along with £100 to £300 a year for all pensioner households through winter fuel payments. Some £25 a week is available to low-income and vulnerable households during a cold snap through cold weather payments. There is also the priority services register, which is a free service provided by suppliers for people of pensionable age, those who are sick or have a chronic medical condition, and those in vulnerable situations. That register includes priority support in an emergency by, for example, providing alternative heating and cooking facilities in the event of a supply interruption.

I thank the noble Lord for moving his amendment and I am grateful to the noble Lord, Lord Whitty, for his intervention. I note that the commission he is to chair has been set up by Energy UK and we look forward to seeing its work in due course. However, I believe that the Government are taking appropriate action, including through this Bill, which is all about making the market work properly, to protect consumers from paying too much for their energy. The amendment would therefore be an unnecessary duplication and I hope that the noble Lord will feel able to withdraw it.

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[Lord Henley]

I am not sure that I can give an absolute assurance on that now but I will certainly make sure it is in the letter that the noble Lord has requested from me.

[Lord Stevenson of Balmacara]

I am not looking for an immediate answer but I am trying to make sure that we are not missing anything out. I think the winter fuel payment and the cold weather payment are in different statutes and I cannot see them being affected by this but, again, confirmation that they will not be affected by anything in the Bill would be helpful.

I declare an interest that I am on the priority services register, being of that age. I am looking to see if anyone else is nodding. It was a rather scary moment when someone rang and asked, “Do you want to go on the register, you poor, shivering old person living alone in your house?”—which was certainly not how I felt at the time. But it actually turned out to be quite nice because when there was—inevitably—a power cut within the next couple of weeks, someone rang up and said, “There is a power cut”. I said, “I know that”. They said, “But you are on our register, we have to tell you”. There were various other things I could bore your Lordships with but it was quite amusing.

I have the same question about the warm home discount: will that fit into the way the Bill is being brought in and can we be assured that it will continue and will not be affected?

In summary, I think all the speakers were interested in getting an unambiguous overarching statement from the Minister that the safeguard tariff will not be withdrawn prematurely and will be extended to fit in with the recommendations. If we could get that, I would be very grateful. I beg leave to withdraw the amendment.

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[Lord Young of Norwood Green]

That is a given! I will not go through the arguments again. I concur with them. The case has been made and I hope the Minister is listening. I, too, look forward to his alternative response—or perhaps there has been an epiphany and he will accept the validity of the arguments that have been so ably put.

I want to make a few points that have not been made. It is important to understand the context within which price caps are going to be set. A number of times in the debate reference has been made to the introduction of smart meters. That is not going to happen by chance, it is going to happen because the major suppliers have been told that they have to be introduced. The cost is not insignificant: 50 million smart meters will need to be installed at a cost of something like £7 billion. There is a long way to go: only about 12% of the smart meter installation has been completed.

An independent analysis by an energy sector expert points out:

“An energy price cap that pushes the industry as a whole to break-even or losses has significant implications on the smart meter roll-out programme”,


and that it is,

“absolutely essential to secure the cost-effective deployment of electric vehicles in addition to enabling the reduction of switching times to 24 hours”.

That will be one of the benefits of the smart meter rollout. If we want to encourage electric vehicles—which we do, as we know—smart meters need to be a key part of that.

I was also interested to see that the report talked about the incentives to switch. It said:

“The cap is intended to be set at a level that provides customers incentives to switch. When the CMA surveyed customers to understand the level of savings from switching that would encourage them to switch, it found that the median amount of savings”,


for customers was £120. It went on:

“At savings of £50, only 7% of customers were interested in switching … The survey did not find any meaningful variation in the level of savings required by different demographic groups”.


That is a really interesting bit of analysis, ironically by the Competition and Markets Authority.

I will go on to what we expect from our major energy suppliers, which are vital to the UK economy and the day-to-day lives of British citizens. They account for something like 2.3% of gross domestic product and £100 billion of investment has been earmarked to 2020-21 to ensure that the lights stay on and customers have reliable, affordable and low-carbon energy. There are 600,000 people employed in the sector—even more, if you include indirect jobs—and it is at the forefront of essential new technology, as I have said, such as the smart meter rollout. That will facilitate the rollout of electric vehicles, which will be a £200 billion global market in 2019.

Energy companies are at the forefront of training apprentices. For example, Centrica has six training academies, employs 27,000 people in the UK and has trained 1,000 apprentices a year in recent years, including 2,500 smart apprentices. These are no mean considerations and they do not just happen. I hope there is recognition of this. Energy companies supply households with their gas and electricity, and the market is more open and competitive than it has ever been. Some of this statistical evidence is interesting. We have had an argument about suppliers but the fact is that there are more suppliers than before. I do not disagree with my noble friend about concentration but there has been significant switching. Nearly 400,000 customers switched during January 2018, a 14% increase on the same period last year, while 5.5 million customers—one in six—switched supplier in 2017. Awareness of the ability to switch is high; I have already given the Committee that information. It is interesting that in the BEIS tracker polling, public concern about energy bills does not rank higher than it does about other household bills.

I want to make my position clear. I am not in hock to the energy companies—I will finish in a minute—and I am in favour of a price cap, but it has to be administered in a way that takes cognisance of the role that energy companies play. It also has to be done in an appropriate way. Unfortunately, my quote from the Green Paper was anticipated by the noble Lord, Lord Hunt, so I will not go through that again but I believe that the evidence to support this amendment is overwhelming and, on those grounds, I support him.

[Lord Henley]

My Lords, the noble Lord, Lord Carlile, spoke of his trepidation in following my noble and learned friend Lord Mackay of Clashfern. That is as nothing compared to the trepidation that I feel in following my noble and learned friend, the noble and learned Lord, Lord Brown of Eaton-under-Haywood, with all his expertise in judicial review, my noble friend Lord Hunt of Wirral, at whose feet I sat many years ago at the Department for Employment, with his great legal knowledge, the noble Lord, Lord Carlile, himself and all the others who have spoken.

I am also grateful to my noble and learned friend Lord Mackay for mentioning that my right honourable friend Claire Perry had written to him at some length on this matter to set out the details. I will probably have to set out similar arguments, which I hope he will listen to. However, having listened carefully to the debate and to the concerns raised by all, I think we may have to have further discussions on this in due course.

Just before I come to the substance of the matter, I ought to make a brief point to my noble and learned friend. I believe that his amendment does not quite work. I advise that we would probably need to import all the CMA appeal provisions if we took up his amendments from the gas and electricity Acts and adjusted them so that they applied to Ofgem’s decisions under the Bill. It could add something of the order of 12 new clauses and a schedule to the Bill. Any amendment could also place a new duty on the CMA; I think the noble Lord’s amendment would also require the CMA to consider conducting a review under a compressed timetable. In the light of that, I would certainly want to seek the CMA’s view on those points; obviously, we will let your Lordships know the outcome of that.

I will come to the amendment because it is important that we deal with the arguments, as my right honourable friend did in her letter to my noble and learned friend. This amendment gives us an opportunity to consider the idea a little further than we did at Second Reading. As I mentioned—I will mention it again during the course of the Committee—the Bill is a temporary and targeted measure to protect consumers from excessive energy prices until the conditions for effective competition are in place. It is important not to lose sight of this fact, nor of the 1.4 billion consumer detriment figure that was established by the CMA in its 2016 investigation into the energy market when considering the route of challenge for suppliers.

For temporary and targeted interventions such as this price cap, the CMA, as an appellate body, is not a “well-established right”, as has been suggested by some stakeholders. In fact, CMA appeals usually exist only for permanent, if periodically updated, price control regimes. The Bill does not replicate an existing price control regime, setting allowed revenues for entire businesses. It is, as I said, a targeted and temporary intervention to deal with a specific problem in part of the market. In fact, we are unaware of any temporary price-related interventions that have included the right to appeal to the CMA. There are also other examples of price interventions by regulators that do not include a CMA appeal right, such as the payday loan interest rate cap introduced by the Financial Conduct Authority in 2015.

Some stakeholders have sought to emphasise the differences between the FCA’s measure and the one we are considering here today. I suggest that these measures are not so different at all. Both measures are direct, targeted interventions operating in the retail end of their respective sectors; both originate from the sovereign will of Parliament via primary legislation; and both have the same express intent to protect consumers from exploitation. Like Ofgem, the FCA also has discretion in the setting of the cap and, as Ofgem has started to do, it carried out its own consultation weighing a list of concerns it should have regard to in a similar vein to the conditions set out in Clause 1(6).

Obviously, decisions relating to the prepayment meter cap are subject to challenge by way of judicial review. Therefore, there is precedent for a direct, price-related measure stemming from the will of Parliament to protect consumers that does not have a CMA appeal right. What is wrong, dare I ask, with judicial review? It provides a sufficient means of challenge to ensure the provision of a fair and public hearing within a reasonable time by an independent and impartial body established by law.

Again, the noble and learned Lord, Lord Brown, and others have made the point that judicial review is focused on process. A judicial review will consider the lawfulness of a decision, but there is also scope for the court to consider issues around the proportionality of any decision. They rule on many highly complex cases each year, so I am afraid I do not agree with the argument that in this area alone the issues are so complex that the courts simply would not be able to cope. The price cap is for Ofgem to determine in accordance with its duties and the court would not need any particular expertise to review that. As was made clear by my right honourable friend in her letter, if it did need particular expertise, which would be rare, it could still sit with assessors.

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[Lord Young of Norwood Green]

The Minister said that the route of an appeal to the CMA could be abused by the major suppliers. What would prevent them seeking a judicial review at that point? What is the difference?

[Lord Henley]

My Lords, as I made clear, they would be using the CMA to delay this process, and we do not think that that would be right. I do not think that that would be the case with judicial review, but, as I said, I am more than happy to discuss these matters later. We have set out our position here and in the letter that my right honourable friend sent to my noble and learned friend.

[Lord Mackay of Clashfern]

My Lords—

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[Lord Henley]

My Lords, I am grateful to the noble Lord for explaining that his Amendments 8, 10 and 11 are probing amendments. I hope I can answer the points he raised.

Clause 2(1)(e) is a technical provision which allows Ofgem to give itself the power to do things through the licence conditions for the tariff cap. Amendment 8 would remove that ability for Ofgem to confer functions on itself when putting in place tariff cap conditions. The provision could be used, for example, to give Ofgem a discretion to decide what information to request from suppliers to inform its decisions on the design of the price cap. The subsection is designed to provide Ofgem with the requisite flexibility for the specific purpose of designing and implementing the price cap. It is not a green light for the regulator to self-design new functions in unrelated areas. As such, I believe it is a sensible and necessary provision that will cease to have effect when the price cap ceases to apply in 2020, or later if it is so extended.

Amendments 10 and 11 appear to be designed to enable Ofgem to exempt particular suppliers from the price cap or set the cap differently for different suppliers. The Government’s aim is that the price cap will apply across the whole of the market. Its impact will depend on the level of each supplier’s standard variable or default tariff and how many customers are on such tariffs. The Government’s aim is to protect consumers from high prices until the conditions for effective competition are in place. Clause 3 enables certain tariffs to be exempt from the price cap, such as green tariffs or tariffs for vulnerable customers who benefit from a different cap, as I mentioned earlier. I do not understand why it would be necessary or helpful for particular suppliers to be treated differently, and I fear that such a situation might create the risk of the cap being gamed.

I hope those explanations are helpful and useful for the noble Lord and that he will feel able to withdraw his amendment.

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I think that my honourable friend in another place said that the evidence of the market is that when bulk energy supply conditions increase, prices increase; when they reduce, prices increase. That seems to have been the effect on the consumer for many years. This is a chance to cap that, look at it and find out why the market does not work and what needs to be done to make sure that in the long term it works in the interests of the consumer. We ask that the Government take on board these suggestions and pass them to Ofgem as part of the review.

[Lord Henley]

I am sorry that the noble Lord, Lord Lennie, is having problems getting to meet Ofgem, but I am sure that it is an assiduous reader of our debates and will have noted what he said. In case it is not, I will pass on his message to Ofgem to say that he would be grateful to have that meeting—obviously, I want to be as helpful as possible.

That may assist our discussion on Amendments 25, 26 and 28, which would amend Clause 7 to include matters that Ofgem must have regard to when carrying out its review of the conditions for effective competition. As the noble Lord is aware, the Bill purposely does not define what the conditions for effective competition should be, although, as a major government programme, it requires Ofgem to consider the progress that has been made in rolling out smart meters.

It is right that Ofgem considers the market as it evolves over the next few years. Setting out now in the Bill the factors that it must consider would not be helpful. The BEIS Select Committee agreed with that approach in its report, which states:

“We believe that setting a definition of ‘the conditions for effective competition’ before setting the cap could create incentives for suppliers to game the system or treat the cap as a box-checking exercise rather than going above and beyond their obligations. It would also risk creating unnecessary opportunities for legal challenges”.


The factors set out in the noble Lord’s amendment appear to be broadly sensible. But this is a job that is best left to the regulator and is something that has to be considered in the light of the market as it is at the point that it is being reviewed, not now. Obviously we will have to consider that on different occasions if we have to extend the Bill. I do not see how binding Ofgem to a set of factors would be helpful.

As I made clear earlier and as my noble friend has made clear, Ofgem recently published a paper on the setting of the cap, which is out for consultation at the moment. It includes a consideration of the factors that indicate that the conditions for effective competition are in place and the extensive programme of work aimed at making it easier for customers to engage in the market and encourage them to switch suppliers. Ofgem also set out in its annual report on the state of the energy market an assessment of issues such as barriers to market entry or exit, the level of competition between firms, and the range and quality of service offerings. In its work on future supply market arrangements, it is assessing whether more fundamental changes to the structure of the retail energy market may be needed to allow disengaged consumers to get a good deal. Ofgem has said that it will need to assess which, if any, of these it considers to be crucial to lifting the cap.

Ofgem has said in its consultation paper that it expects to keep these factors under review as the market develops and that it will report on progress in creating the conditions for effective competition, alongside its annual reports on the energy market. It has also said that in order to recommend that the cap should not be extended for another year, it would expect to see sustained progress that would allow it to be confident that currently disengaged consumers could gain a reasonable deal from the energy market without price protection.

I hope that the noble Lord will accept that his amendment is possibly overly prescriptive. Ofgem will consider what is relevant and necessary at the time. I hope, therefore, he will be able to withdraw his amendment. I repeat what I said earlier: I hope he manages to have his meeting with Ofgem and, if he has any problems, he should get in touch with my office.

[Lord Lennie]

I am grateful to the Minister for his offer of support for my meeting with Ofgem. I am sure it will happen soon—I am sure Ofgem has ears and eyes and can read, so I expect a call fairly soon. I am also grateful that he welcomed the suggestions we have laid out in the amendment and finds them useful as a steer that Ofgem may choose to use. I am not sure that they are the be all and end all, but it is a range of suggestions. I will certainly read the consultation paper Ofgem has put out and respond to it. In the meantime, I am happy to beg leave to withdraw the amendment.

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[Baroness Featherstone]

I am somewhat in sympathy with the noble Baroness, Lady Neville-Rolfe, on ending the scheme in 2020. She also raised the issue of the political element. With an election in 2022, if not before, I would not want to see a race on who could cap the most as a part of political manifestos. What the energy market needs is a real resolution.

[Lord Henley]

My Lords, I hope that I can deal with this group of amendments in the two, three or four-dimensional manner that the noble Lord, Lord Stevenson, has asked me to. Given that my noble friend Lady Neville-Rolfe moved the first amendment, I should say that, like her, generally speaking the Government are not convinced about price caps. We have our doubts and we made it clear at Second Reading that we do not like to go down this route and we said that it had to be temporary, albeit with an ability to extend the cap for a short while, year by year, but no more than that.

The aim of my noble friend’s amendment is to end it in 2020. The noble Baroness, Lady Featherstone, also has some sympathy with that, as she returns her party to classic, 19th-century liberalism—a wonderful development. We believe that it should be a temporary measure and that 2020 is the right time to end it, with the ability to extend it to a final, absolute sunset in 2023. I do not think that removing the possibility of extending would provide consumers with protection if the conditions for effective competition were not in place at the same time. As I said, we prefer to do it that way. I rather dread the thought of further primary legislation each year if we wanted to extend it or do it for another year. We have already had that with other Bills.

My noble friend asked if I could report a little on the prepayment meter cap and the effect it has had. The evidence seems to be that, since the cap, prices have come down to below it. There has been some bunching of prices, but there is competition below the cap in the prepayment market. That shows that these things can occasionally work. However, as I said to my noble friend, philosophically we do not like the idea of caps. I rather agree with her.

I turn to the other amendments in the group. The noble Lord, Lord Stevenson, spoke to Amendment 32, the purpose of which appears to be to create a firm link between the price cap’s removal and the completion of the rollout of smart meters. It seems to suggest that the cap can be extended in circumstances where the smart meters programme has been completed, but the conditions for effective competition are not in place. The rollout of smart meters is but one of many possible indicators that define a competitive market. There will be other indicators of the conditions for effective competition. Ofgem’s consultation points towards other factors that might indicate that the conditions for effective competition are in place, including ways of improving customer engagement and increasing switching. I am sure that the amendment aims to be helpful, but I believe it is simpler and safer to leave it to Ofgem to assess the conditions for effective competition, rather than put provisions on the face of the Bill that would link statements about the future of the price cap to particular programmes.

The noble Lord also spoke to Amendments 33 and 35. The Government would not wish to see an inversion of this Bill’s policy intention by removing the price cap’s sunset clause. I repeat that we have no intention of delivering an indefinite price cap. As I have made clear on a number of occasions, this is a targeted and temporary intervention until the conditions for effective competition are in place. I think that is why the Bill achieved broad, cross-party consensus in another place and was endorsed by the BEIS Select Committee. Amendment 35 would also increase the risk of transforming this temporary measure into a permanent feature of the retail energy market. Again, we do not believe that that would be appropriate.

Finally, I turn to Amendment 37, which is a probing amendment seeking to understand the purpose of Clause 9. Clause 9 empowers Ofgem to modify the standard supply licence conditions following the removal or cessation of the tariff cap as specified under Clause 8. The clause allows Ofgem to modify the standard supply licence conditions as it considers necessary or expedient, but with the requirement that Ofgem publishes the modifications to alert all stakeholders as to the impact of the modifications. The publication of the Secretary of State’s decision will alert stakeholders to the cap coming to an end. This provision would enable the licence conditions to be tidied up to reflect the cap being lifted. Otherwise, they would remain in the licence but would be redundant.

We have been clear that the price cap is a necessary intervention in the market, but one that should only remain until the conditions for effective competition are in place. The decision on extending or removing the cap will be made in the light of the report and recommendation from the expert regulator. The Government are not prepared to enable this price cap to be a permanent feature as it could risk distorting the market, but noble Lords will wish to note that Ofgem has enduring powers to protect consumers and specific duties regarding vulnerable consumers. Indeed, Ofgem has indicated that it may be necessary to have in place price protection for a narrower set of consumers once the price cap under this Bill has ceased to be in place.

I hope I have provided the appropriate assurances. Though the amendments are coming from rather different directions, I hope first of all that my noble friend will withdraw her amendment with the assurance I have given and, secondly, that the noble Lord, Lord Stevenson, will not feel it necessary to move his amendments.

[Baroness Neville-Rolfe]

I thank my noble friend for his philosophical reassurance. Certainly, I would not want to add a link to smart meters because, as he said, it is only one factor that we will need to take into account. The extension power in Clause 8 gives the Executive too much power and I ask the Minister to give the matter further thought before Report, but I withdraw my amendment with great pleasure.

--- Later in debate ---

[Baroness Neville-Rolfe]

Noble Lords will know that I am not in favour of extending the cap, in whatever way. However, I am interested to hear about the relative tariff differential and would like to understand further how that works. I think the proposal here is that it should be imposed as well as a cap—it seems to me that that gives you a double regulation and I am not convinced that that is necessary. It would, however, be good to understand—the Minister may well be able to comment on this—what the advantages are of a relative cap in relation to the end I think we all seek, which is a more competitive market.

The noble Baroness mentioned retailers. As I was a retailer, I know that 19% to 20% of customers changing their supplier annually is quite a high figure, but the key point is that the underlying dynamics in the market are encouraging players to reduce prices and to innovate. That is what we want to see in energy. It would be good to hear from the Minister how he sees that happening in a situation where we have a cap, whatever its nature.

[Lord Henley]

I welcome the noble Baroness, Lady Kennedy of Cradley, to our discussions. Amendments 36 and 36A are broadly similar in asking the Secretary of State to develop an ongoing relative tariff differential. However, Amendment 36 says:

“The relative tariff differential shall take effect on the termination of the tariff cap conditions”,


while Amendment 36A, in the name of the noble Baroness, Lady Kennedy, to which a Liberal, the noble Lord, Lord Teverson, has joined his name—it must have good free-market credentials—says:

“The relative tariff differential is to take effect on the commencement of the tariff cap conditions and to be ongoing after the tariff cap conditions cease”.


They are broadly similar but would come into effect at different times. They would cap the most expensive advertised variable and default rate tariffs as a proportion of the cheapest, and Ofgem would set the differential.

There may be a need for further protections once the cap has ended, particularly for vulnerable consumers. Ofgem has indicated as much and has enduring powers to operate protections but I do not think it would be sensible to seek to determine the precise form that any protection takes, if it is needed at all. The energy market is likely to change significantly between now and then. Smart meters are just one part of that. The new clause inserted by these amendments would seem to introduce an indefinite relative price cap. It is not the intention of the Bill or the Government to put in place such a permanent cap.

We have come back again to tease and squeeze, which the noble Lord mentioned earlier. I briefly responded to that. I appreciate that the aim is to get rid of the practice of tease and squeeze. However, there is the risk that under the amendments suppliers would raise their least expensive standard variable and default tariffs, rather than decrease their most expensive. That is the Government’s fundamental concern about any kind of relative price cap. The Government and others, including the BEIS Select Committee, believe that a relative price cap would not work. I do not see how the outcome of a relative price cap would be any different, whether it was in place alongside an absolute cap or after the absolute price cap had been removed. A relative cap as a permanent feature of the market risks undoing the work of the temporary absolute cap.

The best way of ending the practice of tease and squeeze will be the detailed work, as I said, that Ofgem is undertaking to test better ways to secure customer engagement; the work to make switching quicker and more reliable; and the many other programmes to make the market work better. Recent changes mean suppliers can now make their default tariff a fixed-rate rather than a variable-rate deal, and many have done so. The Government believe that better engagement and better switching that leads to more effective competition is a proportionate and sustainable solution, rather than concurrent and permanent relative price caps. I hope that my explanations will satisfy noble Lords and my noble friend. I hope, therefore, that the noble Lord will feel able to withdraw his amendment.

[Lord Stevenson of Balmacara]

I am grateful to the Minister for his response. I also pay tribute to my noble friend Lady Kennedy for a powerful speech, trying to root the approach we are taking in a much deeper analysis—a richer and more enduring issue about what is going on in the marketplace as far as consumers are concerned, which is a theme we have developed throughout the Committee.

We would all be much happier with the Government’s approach if we could see real evidence that things were changing in the market. The thing that gives the lie to a lot of what the Government’s position is based on is that, for many years now, we have all seen the appalling behaviour on the part of semi-monopolies, operating virtually as they will against a regulator which does not have the powers. The Minister said that Ofgem had enduring powers. If it has them, why has it not acted before now to get rid of some of these appalling behaviours such as tease and squeeze, which has been so disruptive, and making super-profits out of a natural monopoly? I thought the whole point about regulatory structures was to prevent that. Therefore, I do not think the action has lived up to the rhetoric.

My noble friend said that she thought it was time to say good riddance to the bad rubbish we are being served up by these committees. The judgment we have to make is whether we are prepared to wait and see whether the latest round of the approach taken by the Government will have any effect at all. If, indeed, it has an effect, will it be in time? I have my doubts about that. We are relying on smart meters and customers, who may be in significant numbers in relative terms, but if it is all the same people switching regularly and 80% of people are not switching—and those 80% are the sort one would expect to get the message and switch—then the market is broken. If it is broken, it will need much more serious measures than we have currently to see how it may be taken forward. We will think carefully about this but may want to come back to it on Report. In the interim, I beg leave to withdraw the amendment.

Nuclear Safeguards Bill

Lord Henley Excerpts

Ping Pong (Hansard): House of Lords
Wednesday 6th June 2018 Lords Chamber

Moved by

[Lord Henley]

That this House do not insist on its Amendment 3, and do agree with the Commons in their Amendment 3A in lieu.

3A: After Clause 3, insert the following new Clause—
“Request for continuation of existing arrangements
(1) The Secretary of State must make a relevant request to the European Council if neither of conditions 1 and 2 is met at the beginning of the period of 28 days ending with exit day.
(2) Condition 1 is that all of the principal international agreements have been signed.
(3) Condition 2 is that—
(a) one or more of the principal international agreements have not been signed, but
(b) in respect of each agreement that has not been signed, arrangements for the corresponding Euratom arrangements to have effect in relation to the United Kingdom after exit day—
(i) have been made, or
(ii) will, in the Secretary of State’s opinion, have been made before exit day.
(4) A “relevant request” is a request, in relation to each principal international agreement that has not been signed and in respect of which subsection (3)(b) does not apply, for the corresponding Euratom arrangements to continue to have effect in relation to the United Kingdom after exit day until—
(a) the principal international agreement comes into force, or
(b) arrangements have been made for the corresponding Euratom arrangements to have effect in relation to the United Kingdom until further notice.
(5) The “principal international agreements” are—
(a) agreements relating to nuclear safeguards to which only the United Kingdom and the International Atomic Energy Agency are parties;
(b) agreements relating to nuclear safeguards to which the United Kingdom is a party with, respectively, the governments of Australia, Canada, Japan and the United States of America (and for this purpose “agreement” includes an agreement or other arrangement that modifies or supplements an existing agreement).
(6) A reference in this section to “the corresponding Euratom arrangements” is a reference—
(a) in the case of an agreement referred to in subsection (5)(a), to whichever of the Safeguards Agreement and the Additional Protocol corresponds to the agreement;
(b) in the case of an agreement referred to in subsection (5)(b), to whichever of the agreements to which Euratom is a party with the government of Australia, Canada, Japan or the United States of America corresponds to the agreement (and for this purpose the reference to an agreement to which Euratom is a party includes any agreement or other arrangement that modifies or supplements the agreement).
(7) In this section—
“exit day” has the same meaning as in the European Union (Withdrawal) Act 2018 (and references to before or after exit day are to be read accordingly);
“the Safeguards Agreement” and “the Additional Protocol” have the same meaning as in the Nuclear Safeguards Act 2000;
“signed”, in relation to a principal international agreement, means signed by both parties to the agreement.”

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

My Lords, as the House is aware, the amendment in lieu was proposed by the Government in the House of Commons in response to Amendment 3 made on Report in this House. Although the Government opposed Amendment 3 on Report, my honourable friend Richard Harrington and I have listened very carefully to the arguments and concerns put forward in both this House and another place about ensuring continuity for the nuclear industry. I hope that this amendment in lieu exemplifies the commitment to compromise and to engaging with Parliament that I believe the Government have demonstrated throughout the passage of the Bill.

Amendment 3 would have required that, where particular agreements relating to nuclear safeguards were not in place on 1 March 2019, the Government would have to request that the UK’s withdrawal from Euratom be suspended until those agreements, or continuation arrangements, were in place. This amendment in lieu would, like Amendment 3, apply 28 days before exit day, on 1 March 2019. Under this amendment, if any principal international agreement were not signed and no other equivalent arrangements in respect of unsigned agreements had been made or would be made before exit day, the Secretary of State would have to ask the EU for,

“corresponding Euratom arrangements to continue to have effect”,

in place of the unsigned agreements. The relevant agreements are those on safeguards between the United Kingdom and the International Atomic Energy Agency—the voluntary offer agreement and the additional protocol—and the four priority nuclear co-operation agreements with the United States, Canada, Japan and Australia.

Although the Government were not able to agree to Amendment 3, the House of Commons has made this amendment in lieu, which I hope the House will agree addresses its concerns on this matter. I beg to move.

[Lord Broers (CB)]

My Lords, as one whose name was on Amendment 3, it gives me pleasure to support the replacement of that amendment with Commons Amendment 3A. The Commons amendment supports the basic proposals that we put forward in the Lords amendment but is more detailed and will better ensure that, if adequate agreements are not in place 28 days before exit day, the Secretary of State must request the continuation of the present Euratom arrangements. Amendment 3A more tightly defines the request that the Secretary of State must make and the relevant principal international agreements, and seeks to eliminate other possible ambiguities.

I would also like to say how much I welcome the Government’s acceptance of other Lords amendments, particularly the one that specifically points out that civil nuclear activities for peaceful purposes include production, processing or storage activities, electricity generation, decommissioning, research and development—a particular interest of mine—and any other peaceful nuclear activities.

Overall, I observe that the way this Bill has been handled is an excellent example of what can be achieved when there is constructive collaboration between the political parties, we Cross-Benchers and even between the Lords and the other place. Our parliamentary system has really worked well in this instance and it is my sincere, if naive, hope that this admirable spirit of collaboration continues throughout the consideration of all of the other Brexit-related Bills.

--- Later in debate ---

[Lord Grantchester (Lab)]

My Lords, it is a moment to be enjoyed when a Government Minister brings back to your Lordships’ House an amendment that all sides can resoundingly support. This amendment in lieu is in essence the amendment agreed on Report—admittedly, more deftly drafted—to ensure a responsible, less risky and more certain transition from the Euratom-monitored safeguarding regime to a uniquely robust regime operated by the ONR to full international recognition. The final version of the Bill is a vindication of the work of your Lordships’ House and the Government are to be congratulated on finally getting the legislation correct in the other place. While some noble Lords would contend that the Government had no need to trigger withdrawal from Euratom, given the difficulties around the notification letter and the Article 50 Bill, the House was right to focus this Bill on securing that the withdrawal from Euratom should proceed on a sound basis, satisfying all the contingencies that could arise during the process. This amendment in lieu allows the House to reflect on the fact that it has fulfilled its role successfully. Let us examine that in detail.

First, the Bill strengthens Parliament’s oversight and improves transparency by putting the Government’s reporting commitments on a statutory basis. Secondly, on the recommendations of your Lordships’ Delegated Powers and Regulatory Reform Committee, the Bill puts a further definition of “civil activities” on the face of the Bill and sets a time limit on the Government’s use of so-called Henry VIII powers. Thirdly, the Bill provides further information to the report that the Government will be making periodically. It may include arrangements with Euratom relating to nuclear research and development, as well as the import and export of qualifying nuclear material such as medical isotopes. The facility at Culham and the JET programme will be pleased with this outcome.

Finally, in this amendment in lieu the Government are agreeing that the practical realities of the UK’s withdrawal from Euratom will need to be recognised. The Euratom arrangements will cover all the conditions and standards to allow a continuation of trade and non-proliferation certification without disruption, interruption or dilution. At all times, whether phased or not, the UK’s withdrawal will not be put at risk and will not jeopardise the present status of operating within fully recognised international IAEA standards in place. The implementation period is still to be fully agreed and put on a statutory basis. It will qualify under Section 3(b) as a corresponding Euratom arrangement. This will allow a further period in which the Government can recruit and train inspectors. In addition, from exit day, we are satisfied that, where needed, the amendment would cover the six vital agreements necessary to maintain the status quo. Two of them cover agreements with the IAEA and there is one for each of the four countries with nuclear co-operation agreements: namely, the USA, Canada, Japan and Australia.

I am grateful to the Minister for his letter following our meeting to discuss the amendment. Together with the Minister in the other place, Richard Harrington, and the noble Baroness, Lady Vere, he has put considerable effort into recognising and addressing valid concerns in both Houses throughout this process. I thank him and his team for co-operating with us on the Bill. The nuclear industry can be reassured that it may not need to face a cliff-edge moment and that the UK will continue to work constructively with Euratom. All sides recognise that the UK still has some way to go, yet we now have the right framework to bring that about.

In conclusion, I thank the House for its support and those who have participated so persistently and decisively in the Bill, namely the noble Lords, Lord Broers, Lord Warner, Lord O’Neill, Lord Carlile, Lord Teverson, Lord Hutton and Lord Fox, the noble Baronesses, Lady Featherstone and Lady Neville-Rolfe, and the noble Viscount, Lord Hanworth. I certainly cannot forget my noble friend Lord Hunt on the Front Bench, with the expert assistance of Grace Wright in Labour’s support team. This Bill has been a fusion of all the talents: it is a job well done.

[Lord Henley]

My Lords, I thank the noble Lord, Lord Broers, for both his support for the amendment and for setting such a good and welcoming tone for the debate. I thank all other speakers for their positive remarks—although I accept that there are still challenges ahead, as the noble Lord, Lord Teverson, put it. As I made clear during the passage of the Bill, I want to continue to provide information to the House as we proceed to make sure that everyone is happy with what we are doing to ensure that the right arrangements—or the appropriate insurance policy, as my noble friend Lord Inglewood and the noble Baroness, Lady Featherstone, put it—are in place.

The House will be aware that the passing of this Bill is just one of the steps needed to establish new nuclear safeguards arrangements for the United Kingdom. It is only one aspect of the Government’s efforts to maintain close and effective arrangements on civil nuclear co-operation, safeguards and safety with Euratom and the rest of the world. To that end, we have made good progress both at home and abroad. The Office for Nuclear Regulation has enhanced its organisational capacity and capability to deliver the future safeguards regime. I assure the noble Lord, Lord Hunt, that we have increased its available funding to £10 million, which includes the procurement of the new IT system. I assure the noble Lord, Lord Teverson, that we will do all that we can to make sure that the system is appropriate. We are also recruiting and training a large number of new inspectors and strengthening the institutional capacity to deliver the project within budget.

We will soon consult on nuclear safeguards regulations. An early draft of that was provided to this House. The department and the Office for Nuclear Regulation will continue to engage stakeholders individually and through wider events. I assure the House that only this morning, in Vienna, the IAEA board of governors formally approved new bilateral international safeguards agreements with the United Kingdom to replace the current agreements, which include Euratom. We expect that they will be signed tomorrow. The conclusion of these agreements, which will take effect once Euratom arrangements cease to apply to the UK, once again demonstrates this Government’s sustained commitment to the civil nuclear sector, international safeguards and nuclear non-proliferation.

I can further reassure the noble Lord, Lord Teverson, that on 4 May, as I think he is aware, the Government signed a new nuclear co-operation agreement with the United States of America. That will be ratified by Congress and laid before Parliament before ratification in the UK. Again, I will make sure that the House is kept informed of that process. On further NCAs, good progress continues to be made to put in place respective arrangements with Australia, Canada and Japan ahead of March 2019. Again, I will inform the House when that happens.

As part of EU exit negotiations the UK and the EU have agreed the terms of an implementation period, as the House will be well aware, running until the end of December 2020. That means that existing Euratom arrangements, including international agreements, would continue during this period.

I hope that I have given all appropriate assurances to noble Lords who have taken part in the short debate on this Motion. I beg to move.

Motion agreed.