Brexit: Energy Security (European Union Committee Report)

Lord Henley Excerpts

Wednesday 6th June 2018 Lords Chamber

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

The noble Lord has set me a rather large challenge in terms of how much he wants me to respond to in my comments—particularly as he strayed into the Smart Meters Bill, now the Smart Meters Act. I do not think we want to rehearse that. I may have to refer to the Nuclear Safeguards Bill, shortly to become an Act, because I think it will be important for this issue, but I am grateful for his mention that he will be tabling amendments to the price cap Bill—or whatever its proper name is. I look forward to seeing them as soon as possible to make it easier for us to respond to them in good time when we meet in Committee on Monday and Wednesday.

I join other noble Lords in offering my congratulations to the noble Lord, Lord Teverson, on chairing the EU Energy and Environment Sub-Committee and my thanks for producing the report. I am grateful that my right honourable friend was able to respond in good time—although I am not sure that I recognised her response in the remarks made by the noble Baroness, Lady Featherstone, and the noble Lord, Lord Rooker. I thought that she responded in a proper and timely manner.

I should also say that I hope that the noble Lord, Lord Teverson, has received a letter from my right honourable friend sent only today—if he has not, I have a copy—in response to the European Commission’s notices to stakeholders, referred to by the noble Lord, Lord Krebs. The noble Lord, Lord Teverson, nods, so I take it that he has received it. The noble Lord, Lord Krebs, referred to the various questions raised in that capacity. I shall ensure that a copy of the letter is placed in the Library so that the noble Lord can see the more detailed response. I apologise for the fact that it came out only today, but I think it was probably of use to him in his response.

Many points and questions have been put to me, some of which I will be able to respond to. As always, I give an assurance that I will write in due course to noble Lords to deal with other, more detailed points if I feel that I cannot answer them in the time allowed. The noble Lord, Lord Rooker, complained about the brevity of some of my right honourable friend’s responses. He will be the first to understand that it is not always possible in a short debate happening late at night to respond in the detail that he would like to some of the points that he has made.

We believe that the UK has a well-functioning, competitive and resilient energy system and that our energy market is one of the most liquid and developed markets in the world. As we have made clear, we also believe as regards costs that it is right to intervene where necessary. That is why we have brought forward the price cap Bill as a temporary measure.

As noble Lords will be aware, we have also commissioned the independent review of the cost of energy by Professor Dieter Helm. We are currently considering his findings and will be sorting out the next steps after further consultation with stakeholders. I hope that the noble Lord, Lord Davies, will accept that as a response to some of his points about costs and will be prepared to wait for it in due course.

At the heart of our plans for a reliable electricity system in Great Britain is the capacity market. It secures the capacity required to meet peak demand in a range of scenarios, and it will continue to do so after EU exit. To ensure long-term security, we are broadening GB’s power generation base, including through new nuclear generation and offshore wind. Several noble Lords referred to the building of Hinkley, including the noble Viscount, Lord Hanworth. He will also be aware of the announcement that my right honourable friend the Secretary of State made about Wylfa in Anglesey. For some reason, his noble friends did not want me to repeat that Statement in this House, but it is there in Hansard for him to see. I can further add that the latest contracts for difference round secured record renewable energy capacity—I say this to the noble Baroness, Lady Featherstone—at a record low price.

The GB gas market is highly diversified, with a variety of different sources of supply that do not depend on a relationship with the EU. We have domestic production, short-range and flexible gas storage facilities, gas pipelines from Norway, and three liquefied natural gas terminals, as well as gas interconnectors, about which I shall say something a little later, because they were raised by the noble Lord, Lord Grantchester and the noble Baronesses, Lady Featherstone and Lady Sheehan.

Whatever our future relationship with the EU, we remain committed to delivering dependable, secure and low-carbon energy. Our Clean Growth Strategy, published in October—again, the noble Baroness was faintly dismissive of it—set out plans to build further on our successful decarbonisation of the power sector, while looking across the whole of the economy and country, through the 2020s and beyond. The clean growth grand challenge in our industrial strategy sets out to maximise the advantages from the global shift to clean growth for UK industry. The grand challenge will require us to embed clean growth across government’s activities. We remain strongly committed to the Paris climate change agreement, and will satisfy our international obligations and seek to maintain the shared approach enshrined in the agreement. Leaving the EU will not change any of our domestic statutory commitments to reduce our emissions, as laid out in the Climate Change Act 2008; indeed, those targets are more ambitious and challenging than those set by EU regulation.

As set out in the Prime Minister’s Mansion House speech, we are seeking the broadest and deepest possible agreement, covering more sectors and co-operating more fully than any free trade agreement anywhere in the world today, for its future economic partnership with the EU. We have made significant progress on negotiations so far; we have agreed the terms of a time-limited implementation period, and on the wider withdrawal agreement have locked down entire chapters on the financial settlement and citizens’ rights. More recently, as was made clear at Question Time today by my noble friend Lord Callanan, we will produce a White Paper that will set out in detail the UK’s position on a future relationship.

With respect to energy, as was made clear in the evidence given by my honourable friend Richard Harrington, we seek broad co-operation with the EU, ensuring that energy trading continues as efficiently as possible with the EU to underpin our future economic relationship. This includes exploring options for the UK’s continued participation in the EU’s internal energy market, as was mentioned by many noble Lords but particularly by the noble Lords, Lord Teverson, Lord Davies of Stamford and Lord Grantchester. It also includes protecting the single electricity market across the island of Ireland, which was a concern to many noble Lords. The Irish Government and the rest of the EU share the UK Government’s intention to support the stability of energy supply on the whole of the island of Ireland.

The Government are also clear about the importance of continued efficient electricity and gas interconnection between the island of Ireland and Great Britain, which the committee’s report rightly highlights. In the ongoing negotiations with the EU, we are making good progress on agreeing a basis on which the single electricity market can continue, as part of the draft withdrawal agreement. We are confident that we will secure a UK-EU future partnership that will achieve that shared objective.

Can I say a little about electricity interconnection? The UK and the EU have a common ambition to make energy trading easier and more efficient by opening up national markets and by increasing the level of interconnection between them. Facilitating cross-border energy trade so that it is as efficient as possible will remain in the interests of not only ourselves in the United Kingdom but of the EU, following our exit. The UK is continuing to develop more electricity interconnection and to open up trade with neighbouring markets. In addition to the 4 gigawatts of existing interconnection capacity, a further 4.4 gigawatts is now under construction and, beyond this, 9.4 gigawatts of potential additional interconnection projects already have regulatory approval from Ofgem.

Positive investment decisions on new interconnectors have taken place since the referendum. There have been final investment decisions on two interconnector projects, with approximately €1 billion of construction contracts being awarded. The ElecLink interconnector awarded contracts worth approximately €400 million in November 2016, and the IFA2 interconnector awarded contracts worth approximately €600 million in April 2017. So progress is being made and we are working to ensure that we can continue trading as efficiently as possible over those assets. We also want to continue with the gas interconnectors—mentioned by other noble Lords—with Belgium, the Netherlands and Ireland, which support the gas markets in those regions.

Moving on to Euratom, I dealt with quite a lot of that earlier today and throughout the passage of the Nuclear Safeguards Bill. I do not want to repeat all the points that I made earlier today and at other times, but I assure the noble Lord, Lord Davies, that there is no threat to medical radioisotopes. We will still be able to import them from Europe and the rest of the world. Those assurances have been given by myself and by other Ministers on other occasions. The simple fact is that it has been agreed that we will leave Euratom when we leave the European Union; the two are interconnected. As stated in the Prime Minister’s Mansion House speech, the UK will continue to seek a close association with Euratom, which shows our commitment to maintaining close and effective arrangements relating to civil nuclear co-operation, safeguards and safety with Euratom and the rest of the world. Maintaining continuity for the nuclear sector is a key priority.

I say to the noble Lord, Lord Rooker, that we also recognise the importance of being able to attract the right workers and we recognise the challenges that he mentioned in relation to Hinkley Point. The noble Lord, Lord Teverson, mentioned those with a wonderful spoonerism when he talked about steel-fixers—I will not try to repeat it. We recognise the importance for the nuclear sector and we must remember that “skilled” is not always the same as “highly qualified”. We know that we need construction workers in that industry and we are working closely with the Home Office—a department that the noble Lord, Lord Rooker, knows well—to ensure that the needs of the nuclear sector are understood and will be addressed.

I repeat what I made clear earlier today—although I think the noble Viscount, Lord Hanworth, was not here at the time—that as part of developing our policies for coming out of Euratom, in Vienna today we received an agreement from the International Atomic Energy Agency which provides for the voluntary application of international civil nuclear safeguards. That was formally approved by its board of governors today. In addition, looking across the Atlantic, I am delighted that we have now signed a new nuclear co-operation agreement with the United States of America, which will go through the ratification process both there and here. Although the noble Lord, Lord Teverson, seems to think that it will take rather a long time, I am confident that that will come into play in due course.

In Brussels, our negotiations with the European Commission on separation issues have gone well. We have reached agreement with the EU on the majority of Euratom issues under discussion, including on the legal text to be included in the withdrawal agreement.

The noble Lords, Lord Krebs and Lord Hunt of Chesterton, and others expressed considerable concern about continuing collaboration on science and innovation. We have a strong history of collaborating with our European partners through the EU, pan-European, and other multilateral and bilateral initiatives on science and innovation, and we are committed to establishing a far-reaching science and innovation pact with the EU, facilitating the exchange of ideas and researchers. In her recent speech at Jodrell Bank the Prime Minister stated that she would like the option to fully associate with the excellence-based European science and innovation programmes, including the successor to Horizon 2020 and the Euratom Research and Training Programme.

Finally, on investment, we are very mindful of the need to give certainty to investors. The UK is a global leader in attracting investment, and there is still significant appetite to invest in UK renewables, including offshore wind, from developers and financial investors. The UK will remain a great place to do business after we leave the EU, and we expect the strong investment climate in the energy sector to persist, attracting inward investment from all over the world.

I do not think that the noble Baroness, Lady Featherstone, would expect me to end without saying just a little about shale gas and the opportunities it gives us. As stated in the government response, the UK Government are committed to ensuring we have secure energy supplies that are reliable, affordable and clean. As part of this, shale gas has the potential to be a home-grown energy source which can lead to jobs and economic growth, contribute to our security of supply, and help us to achieve our climate change objectives. The Government are clear that shale development in the UK must be safe and environmentally sound, and we have a strong regulatory system in place. I hope that the noble Baroness and her party will come round to my way of thinking in due course. She looks as though that is unlikely, but I live in hope.

I hope that I have dealt with most of the problems but, as I said, I will reply by letter in due course. I am grateful to the noble Lord, Lord Teverson, for taking the opportunity to bring this report before the House and for the hard work that he and his committee put into it.

Ffos-y-Fran Opencast Coal Mine

Lord Henley Excerpts

Tuesday 5th June 2018 Lords Chamber

[Baroness Humphreys]

To ask Her Majesty’s Government what assessment they have made of the report by the United Nations Special Rapporteur on the implications for human rights of the environmentally sound management and disposal of hazardous substances and wastes in relation to the Ffos-y-Fran opencast coalmine.

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

My Lords, environmental and planning issues are devolved matters. Responsibility for the setting of planning restrictions and the monitoring of their impact in relation to this site, which is located in south Wales, therefore falls to the Welsh Assembly Government and the local authority.

[Baroness Humphreys (LD)]

My Lords, Ffos-y-Fran near Merthyr Tydfil is the largest opencast coal mine in the UK and residents have led a long campaign against the effects of air pollution on their community. On his official visit last year, the UN special rapporteur accepted that this is a devolved matter but called on the UK Government to accept ultimate responsibility for it. He also called for an independent investigation into its potential health impacts. Will the Government accede to both those calls?

[Lord Henley]

My Lords, under the Government of Wales Act 2006, responsibility for planning and environmental protection, including nuisance and hazardous substances, was devolved to the Welsh Assembly Government. If there is a breach of someone’s human rights, that will obviously be affected by that responsibility and will be a matter for the Welsh Government. As such, Her Majesty’s Government have no powers to intervene.

[Baroness Randerson (LD)]

My Lords, over 50 years since the Aberfan disaster, the environmental problems associated with the coal industry continue to haunt the people of Wales. In the report that my noble friend mentioned, the rapporteur referred to,

“various layers of government shifting responsibility”.

He also said:

“Ultimately it falls to the UK central government”.


I fully understand and value the importance of devolution but the issue of air quality and overall environmental standards ultimately lies with the UK Government, so what discussions and meetings have been held between the Welsh Government and the UK Government, and at what level?

[Lord Henley]

My Lords, I do not think that I can take the noble Baroness any further. This is a devolved matter. It is a matter for the Welsh Government, who have responded to the special rapporteur’s report.

[Lord Hannay of Chiswick (CB)]

My Lords, will the Minister explain to the House how the UK Government fulfil their obligations to the United Nations if they cease to have any obligation for matters that have been devolved? Surely the responsibility of the British Government in the UN is to fulfil obligations they enter into. How are they going to do so?

[Lord Henley]

My Lords, the UK Government have responded to this report. The Question relates to one part of the report relating to the Ffos-y-Fran opencast coal mine. As I have made clear, that is a devolved matter and a matter for the Welsh Government, and the Welsh Government have responded to the UN rapporteur’s report.

[Lord Tebbit (Con)]

My Lords, is my noble friend not absolutely and completely right on this issue? If matters are devolved, they are devolved, otherwise there is no point in having devolution at all, is there?

[Lord Henley]

My noble friend is absolutely correct.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, up to 60,000 people die in this country every year from air pollution. I fail to see how the British Government do not have a responsibility for lowering air pollution in every part of the union.

--- Later in debate ---

[Lord Henley]

If the noble Baroness wants to put a Question down on that subject, she is perfectly entitled to do so. That is not what this Question is about. I will respond to that Question if the noble Baroness puts it down.

[Lord Foulkes of Cumnock (Lab)]

My Lords, the Minister will recall that I am a great enthusiast for devolution. However, can I point out that he is not correct in what he said? My understanding, as a long-time supporter and student of devolution, is that the UK Government would not normally intervene. That word “normally” is in the legislation. Perhaps the Minister could think again.

[Lord Henley]

My Lords, I am not going to think again. The 2006 Act is perfectly clear, as are the other Acts offering further powers to the Welsh Government. This is a matter for the Welsh Government, and they have responded.

[Lord Lennie (Lab)]

My Lords, were the Minister a protestor, who would he aim his protest at? Would it be the local authority or the Welsh Government?

[Lord Henley]

As I said, the Welsh Government have responded to this report. Obviously the original planning application was dealt with by the Merthyr Tydfil local authority.

Brexit: Science and Research Funding

Lord Henley Excerpts

Tuesday 5th June 2018 Lords Chamber

[Lord Fox]

To ask Her Majesty’s Government what steps they will take to ensure that there will be the same levels of funding for science and research if the UK withdraws from the EU.

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

My Lords, as set out in the Government’s industrial strategy, we are investing an additional £7 billion R&D funding by 2022, and aim to reach 2.4% of GDP by 2027. As my right honourable friend the Prime Minister made clear in her Jodrell Bank speech, we also want to continue our mutually beneficial relationship with the EU on research and innovation. This includes the option fully to associate ourselves with the excellence-based European science and innovation programmes.

[Lord Fox (LD)]

My Lords, I thank the Minister for that Answer. The numbers are to the Government’s credit: we are moving towards our research and development investment being close to where it should be. However, it has not necessarily answered my Question. In the event of the United Kingdom departing from the European Union, as the Minister alluded to, the cost of associating with a number of schemes with which, in his words, we wish to associate ourselves, will be very high. If we wish to participate—pay to play—in Horizon 2020 Future, if we wish to participate in the European defence fund, if we wish our students to participate in the Erasmus exchange programme, they alone will cost many billions of pounds. Will he undertake that there will be money additional to that number for those things to continue? If not, the United Kingdom’s science and technology industry and community will lose out. Will he make that commitment?

[Lord Henley]

My Lords, I am not going to make any commitment in advance of the negotiations. As the noble Lord is aware, it is important that we get a good deal here, and I think it is in the interests of both the United Kingdom and the EU. The noble Lord will be aware of what Pascal Lamy said only a year ago:

“Whatever Brexit modalities are agreed between the UK and the EU by 2019, full and continued engagement with the UK within the post-2020 EU R&I programme remains an obvious win-win for the UK and the EU”.


The UK has one of the strongest science bases of all European countries. We want to continue negotiating on that basis, and we think that the EU does as well.

[Baroness Wheatcroft (Con)]

My Lords, the European Medicines Agency is leaving the UK. Last month, the foundation-stone for its new headquarters in Amsterdam was laid. Cancer specialists and experts say that cancer patients and cancer research in the UK will be hit detrimentally by the departure of the EMA. Can the Minister please tell the House how the Government propose to alleviate that?

[Lord Henley]

My Lords, in answer to the original Question, I made it clear that we will continue to negotiate to make sure that we get the best deal on research. We want to be involved in all the research-based programmes with which we have been involved, and I think it is in the interests of the EU that we are involved in them. That is why I quoted Pascal Lamy on the subject. Obviously, the negotiations will continue. We will have more to say in due course.

[Lord Hunt of Kings Heath (Lab)]

My Lords, on the question of regulatory harmony on medicines licensing, surely the point is that, unless a medicine’s registered licence in this country is recognised in the EU, companies will no longer invest in R&D in this country, which has a direct impact on the question put to the noble Lord.

[Lord Henley]

My Lords, that is not happening at the moment, and it will not happen—

[Noble Lords]

Oh!

[Lord Henley]

It is not happening, and I think that we will get a deal that will be in the interests of the United Kingdom, because it is in the interests of the EU as well.

[Baroness Afshar (CB)]

My Lords, are the Government aware that this is already happening? I declare an interest as a member of the University of York, where already researchers who were invaluable in the Dorothy Hodgkin programme have left because they could not renew their visas and found that it was much easier to find a similar job in Europe. It is a matter of great regret, and the loss to this country is going to be considerable. Would the Government please reconsider?

[Lord Henley]

My Lords, we believe that EU students, researchers and staff and our own universities make a very important contribution to the United Kingdom. We believe that we have a very strong science sector, as I made clear earlier, and we want that contribution to continue. Given the quality of our higher education sector, which has something of the order of 10 universities in the top 100 world universities, we are confident that it will.

[Lord Cunningham of Felling (Lab)]

My Lords, is the Minister sanguine about the negotiations on our membership of the Galileo programme? Has he or his department done any calculation as to what the consequences will be for the United Kingdom if we are excluded from that very important programme?

[Lord Henley]

My Lords, we discussed the Galileo programme only a week or two ago, and I think from all sides of the House noble Lords are sanguine, as the noble Lord said, that we should continue to play a part in that. Government Ministers are doing all that they can to lobby their opposite numbers all around Europe to continue to take part in that. It is again in the United Kingdom’s interest but also in the interest of the rest of the European Union that we continue to play a part in Galileo.

[Lord Stevenson of Balmacara (Lab)]

In the Minister’s first response that the UK would continue to receive substantial funding from Her Majesty’s Treasury for research, he gave a gross figure—I think that it was £7 billion by 2022—and then a figure of 4% of GDP by 2027. I would be grateful if he could clarify what exactly that was. The real question was whether the gap that was going to happen would be matched by the Government. What level of science and research spending is guaranteed to the science community in the UK, and for how long?

[Lord Henley]

My Lords, as we set out in our industrial strategy, we want to see an increase in R&D, getting up to 2.4%, if I can correct the noble Lord—I think that he said 4%—by 2027. I reaffirm the other figure I gave to which the Prime Minister referred, that some £7 billion will be put into research and development by 2022.

Brexit: Competition and State Aid (EUC Report)

Lord Henley Excerpts

Thursday 24th May 2018 Lords Chamber

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

My Lords, I thank the noble Lord, Lord Stevenson of Balmacara. I will not say what my pay grade is in terms of what I can and cannot comment on in my response to this debate.

Like other noble Lords, I thank the noble Lord, Lord Whitty, for producing this report. I echo the words of his noble friend Lady Donaghy when she referred to him as a master of the universe for achieving a degree of consensus on his committee, particularly between herself and my noble friend Lady Noakes. I do not think that that is necessarily a difficult matter. More generally, I thank all those members of the committee who have spoken in this debate for their work. I also thank the other three speakers—my noble friend Lord Inglewood, the noble Viscount, Lord Chandos, and the noble Lord, Lord Hunt—who added their wisdom to this useful debate.

The noble Lord, Lord Hunt, reminded the House that in one of his former guises he was the director of the Met Office. I visited him once and I have the photographs to prove it. However, that was 23 or 24 years ago. We were both somewhat younger then and I do not know what colour my hair was in those days—I think probably darker than it is now.

As I have said, I thank the committee for producing this report. I thank the noble Lord, Lord Stevenson, for reminding the House that on this occasion the Government responded to it in a timely manner. I hope that has been useful to the debate. I am also grateful to the House authorities for ensuring that the debate took place at a convenient time.

This brings me on to the comments made by my noble friend Lady Noakes. She asked about the future role of the EU Committee and its various sub-committees. I obviously cannot comment on that matter—that is certainly, as the noble Lord, Lord Stevenson, would put it, beyond my pay grade. But I noted what the noble Lord, Lord Lea of Crondall, who is not in his place, said about that matter in his intervention. It is for the House authorities to take those comments on board. However, from a purely personal point of view I hope that we will continue to receive valuable reports such as this one because they provide a useful basis not only for debate but for the Government to set out their position; on this occasion it is their position on competition and state aid.

We take competition seriously. As all noble Lords would agree, competition encourages enterprise and efficiency and it benefits the consumer, who we must always keep at the forefront of our consideration, by lowering prices and increasing choice. Moreover, it improves international trade. It is a key mechanism for raising productivity and growth and for delivering an economy that works for everyone, which is a core aim of our industrial strategy that we set out late last year and are busy implementing at the moment. I think that we can also all agree that the United Kingdom has led the way globally in the field of competition law and enforcement, and that we have one of the strongest competition regimes in the world. Our law is transparent and its enforcement is based on economic reasoning which is carried out by the Competition and Markets Authority, an independent and specialist body that is recognised internationally.

I want to say a little about the authority later in response to some of the comments about governance made particularly by my noble friend Lady Noakes and the noble Lord, Lord Aberdare, because it is an important issue. We estimate that last year the CMA delivered in direct financial benefits some £18.60 to consumers for every £1 it spent, and I shall say a little more about the enhanced resources available to it.

I shall start with our EU exit and competition. We are committed to preserving the strengths of our competition regime during our exit negotiations with the EU and thereafter. Beyond the changes that are necessary to ensure that the regime is fully operational as soon as we have left the EU, we do not plan to make any fundamental changes. My right honourable friend the Prime Minister has set out our clear objectives for the exit negotiations with the EU. I shall make a point that has been made repeatedly at the Dispatch Box by others: the negotiations are ongoing and noble Lords will not expect me to be in a position to comment on them in detail. The aim is to restore our control over UK law, ending the jurisdiction of the ECJ, ensuring a smooth and orderly exit from the EU, preserving free trade with European markets without being a member of the single market and striking new trade agreements with other countries. We will continue to work closely with the CMA and sector regulators to meet those objectives while also preserving the strengths of our competition regime.

On competition law and state aid, perhaps I may make it absolutely clear again to the noble Lords, Lord Whitty, Lord German and Lord Wigley, and all other speakers who have mentioned this, that we will continue to be engaged with the devolved Administrations on these issues. Obviously it is not for me to speak for the devolved Administrations—the noble Lord, Lord Wigley, smiles, but he would not expect me to do so—but on the government side we can make it quite clear that we have already been having what can be described as meaningful discussions with the devolved Administrations. We have found significant common ground. For example, all the devolved Administrations believe that a UK-wide common framework is necessary, and we will continue to develop that regime. We will continue to engage with the devolved Administrations; for those who mentioned local authorities, that will be true for mayoral authorities and others as well. Dare I say it, the noble Lord, Lord Wigley, was being unfair when he said that there was a glaring failure to engage. I want to repeat that we are engaged and will continue to engage. I hope that we can make progress on that remit. The question of whether we go down the route of a joint ministerial committee—as the noble Lord, Lord German, suggested—and whether that is an appropriate mechanism should be dealt with in those discussions as a matter for future work.

We are also attentive to the views of business groups, legal professionals and academics. I think it was the noble Lord, Lord Whitty, who put in a plea for his and my learned friends; he was right to do so and we acknowledge their expertise. We are grateful to legal professionals and academics, including those who gave evidence as part of this inquiry. We plan to carry out further engagement in the future as we develop the legislation necessary to implement our departure from the EU.

A number of questions were asked about our priorities, both after we leave the EU and on competition. First, I should set out—as I think everyone will agree—that it is important to establish clarity on arrangements with the EU on the important separation issues, such as who has jurisdiction over live cases and new cases relating to pre-exit conduct. That will be crucial to delivering certainty and stability for businesses, enforcement authorities and consumers.

Secondly, it is important to ensure that the CMA has access to the financial resources and people it needs to take on the additional case load that we expect once we leave the EU. The CMA was recently allocated an extra £23.6 million to make essential preparations for its expanded role following the UK’s exit from the European Union. That money is not purely for the exiting work, as implied by the noble Lord, Lord German, but for the extra role that we are asking the CMA to take on in relation to state aid. We are confident in the CMA’s readiness to meet the demands and exploit the opportunities that will arise from our exit. We are confident that it has sufficient resources. We announced that money in the spring Budget and, as part of the Autumn Budget, the CMA was given an extra £2.8 million—as announced in the industrial strategy—to increase its enforcement activity. That will further enhance its impact on increasing competition in markets and cracking down on businesses that breach competition law.

Thirdly, the Government are keen to ensure that the CMA and its EU partners can continue to work closely together to avoid outcomes that may harm consumers. To do so, we aim to negotiate a strong, ambitious future co-operation agreement with the European Commission on competition matters. I assure the noble Lord, Lord Whitty, that we hope that it will continue with its strong record of co-operation with the national competition authorities through the European competition network. Obviously, our future relationship with that network will depend on exit negotiations with the EU.

Perhaps I may touch briefly on some of the points raised by the noble Baroness, Lady Donaghy, about the competition review, what form it will take and whether we would listen to the views of stakeholders. As I am sure the noble Baroness remembers, it is a statutory review required by the Enterprise and Regulatory Reform Act 2013 and it will lead to a report to Parliament. The noble Baroness asked when the consumer Green Paper would be published. I can assure her that it has already been published: it was on 11 April, so it is waiting for the noble Baroness to read and it will take account of a wide range of stakeholder reviews.

I acknowledge the committee’s request for further clarity on state aid. The regulation of state aid is an important pillar of competitive markets, but there is currently no domestic equivalent to the EU regime, unlike for competition. The committee will therefore have to accept my apologies that the Government were unable to clarify their position before the time of the government response to the committee’s report. Since my honourable friend Margot James gave evidence before the committee, which I think was late last year, the Government have developed their policy further on how state aid will be managed after we leave the EU. I want to take the opportunity to provide as much certainty as possible on this point, as requested by the noble Lord, Lord German, and others.

For the duration of the implementation period after we leave the EU, the UK will continue to apply the EU state aid rules, and the European Commission will be responsible, as now, for approving and monitoring aid. This will give businesses and public authorities that grant state aid certainty and continuity immediately following our exit from the EU. Longer-term decisions on the UK state aid regime are subject to further discussion with the EU as part of our negotiations on our future economic partnership, so I shall not comment on that.

It is right that a responsible Government work for all scenarios. This is without prejudice to future negotiations. The Government’s view is that the UK should be prepared to establish a full, UK-wide subsidy control framework at the point at which this is required. In line with this objective, the EU state aid rules will be transposed under the withdrawal Bill, as is the case for EU rules more broadly under the Bill. The transposition of the existing rules will apply to all sectors, including agriculture, fisheries and transport, and will replicate any existing exemptions from state aid rules.

To ensure the regime is operable, the Government have concluded that, at the point at which an independent UK state aid authority is required, the CMA would be best placed to take on this role. That reflects its experience and understanding of markets as the UK’s competition regulator, the independence of its decision-making from government and its excellent international reputation.

The EU has indicated the importance of state aid in its negotiating guidelines. We know that it is an area in which it would like to find common ground. As my right honourable friend said in her Mansion House speech:

“If we want good access to each other’s markets, it has to be on fair terms”.


Competition and state aid are areas in which we may accept binding commitments to remain in step with the EU.

My noble friend Lady Noakes raised a number of points about the CMA’s independence and about the appointment process in relation to the new activities that the CMA is taking on. One of the reasons that we selected it for this job was because of the very independence that it already has, as it is independent of the Government in its decision-making. My noble friend also raised a good point about appointments. The Government are considering those matters, specifically in relation to that new state aid function. I stress, however, that the strategic note to the CMA that my noble friend commented on is not binding but just sets out our priorities.

My noble friend Lord Wei said that he was looking for a new body. I think the CMA is a relatively new body as it is. We are asking it to take on new roles and I think that, from my noble friend’s point of view, it might be better to let it bed down in what it is doing, and doing very effectively, and leave such other matters as considering its future for another day. I believe I have touched upon the resources available to the CMA and that it is generally agreed that it has sufficient funds to do the job. We hope that, in taking on its new job, it will be able to continue to achieve what it has.

On the question of state aid, as I did on competition, I stress that we will continue our negotiations with the devolved Administrations to make sure that the new framework with the CMA works for the whole of the UK. We are committed, as always, to securing the best outcomes for businesses and consumers from EU exit.

We are grateful to the noble Lord, Lord Whitty, and his committee for its report, which has helped test the rigour of our thinking, dare I say, and identified areas for further consideration. If there are other points that I have not addressed in detail, I will, as always, write to noble Lords. I am grateful to the noble Lord—I hope his throat is up to it when he comes to respond—for bringing this to the House and allowing the Government to respond to it.

Package Travel and Linked Travel Arrangements Regulations 2018

Lord Henley Excerpts

Tuesday 22nd May 2018 Lords Chamber

Moved by

[Lord Henley]

That the draft Regulations laid before the House on 16 April be approved. Considered in Grand Committee on 16 May.

Motion agreed.

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Henley Excerpts

2nd reading (Hansard): House of Lords
Tuesday 22nd May 2018 Lords Chamber

Moved by

[Lord Henley]

That the Bill be now read a second time.

Relevant document: 27th Report from the Delegated Powers Committee

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

My Lords, the introduction of a price cap on standard variable and default-rate tariffs for domestic energy customers is a critical measure as the UK’s retail energy market is reformed. The price cap will ensure that UK consumers are protected from suppliers seeking to exploit the loyalty of their longest-standing customers by providing them with poor-value tariffs.

In June 2016, the Competition and Markets Authority identified that customers of the big six suppliers were paying £1.4 billion more than they should in a truly competitive market. What is worse, the consumers most likely to bear the burden of this huge detriment include some of the most vulnerable. Since the investigation by the CMA, the problem has not dissipated. Today, the difference between the cheapest available tariff and the standard variable tariff of a big supplier remains at around £300. I must reiterate that it is often some of the most vulnerable in society who pay the price of this disparity. There is an absence of behavioural change, particularly inside some of the large energy suppliers.

However, the Government believe that long-term state intervention in markets is neither desirable nor beneficial. Competition is the best way to drive value, service and innovation. Competition in the generation sector has brought forward significant investment and innovation, including new technologies. In the energy retail sector consumers now have a greater choice of supplier than ever before, with nearly 70 energy suppliers operating in the domestic market. More than one in five energy consumers are now with small and medium-sized suppliers, as more people switch to get a better deal. Despite the increase in the number of suppliers, however, the benefits of competition are not being felt by all consumers. That is why the Government are taking this action.

The Bill will ensure protection for consumers who find themselves on poor-value, standard variable or default-rate tariffs. In doing so, it will complement existing and recently expanded protections enacted during this Parliament. Following an order made by the Competition and Markets Authority, Ofgem has already provided protection for 4 million customers with the introduction of the price cap for customers on prepayment meters in April 2017. This has helped these households to save an average of £60 a year. Early analysis of suppliers who primarily supply prepayment customers shows that they are continuing to grow at a similar rate to the one that was in place before the price cap was implemented.

On 2 February this year, the prepayment meter cap was extended to include a further 1 million more vulnerable customers in receipt of the warm home discount. Five million customers are now protected by these measures. These protections are part of a package of measures being introduced by the Government and Ofgem to protect consumers and increase competition in the retail energy market. Other measures include support for faster and more reliable switching, initiatives to improve consumer engagement and the rollout of the next phase of smart meters. The Government believe that each of these measures will help forge the conditions for more effective competition and, in doing so, create a market in which a market-wide price cap is no longer required. It will be for Ofgem to carry out a review into whether the conditions for effective competition are in place. The Secretary of State will then make the decision on removing an extension of the cap.

I now turn to the Bill. Within its 13 clauses, it has one central aim: to give Ofgem the powers and duties to design and implement a tariff cap for standard variable and default-rate tariffs as soon as is practicable. Ofgem must design and implement the cap in a way that, first, creates incentives for suppliers to improve efficiency; secondly, enables suppliers to compete effectively; thirdly, maintains incentives for customers to switch; and, fourthly, ensures that efficient suppliers are able to finance their supply activities. The Bill will also require Ofgem to review the level of the price cap at least once every six months. Provisions in the Bill require Ofgem to consult on exempting tariffs which people choose to be on and which support the production of energy from renewable sources.

As I stated, market intervention is not something that the Government do lightly. The Bill is therefore a targeted and temporary intervention, with an initial end date of 31 December 2020. Subject to a report and recommendation from Ofgem, the Secretary of State can extend the cap one year at a time, with a hard deadline of 2023, after which the price cap must come to an end. The task of setting the cap is key. Ofgem has already started work with the publication of five working papers, to which stakeholders have had a chance to respond. Further consultation is planned as the Bill progresses through the House, and there will be a formal consultation on the final design of the price cap should the Bill receive Royal Assent.

As many of your Lordships will know, the merits of the Bill’s different components have been debated extensively in another place. As a consequence, the Bill arrives in this House unamended, which shows the strong cross-party support that it has. A draft version of the Bill underwent pre-legislative scrutiny by the Business, Energy and Industrial Strategy Select Committee, with a great deal of written and oral evidence weighing its merits. I am very grateful to the committee for its thorough scrutiny. Its final report was wholly supportive of the purpose, structure and effect of the Bill. The Government have accepted all the Select Committee’s recommendations to strengthen and improve the Bill and the outcomes it aims to achieve.

During our forthcoming debates, I look forward to hearing from noble Lords with a wealth of experience on a matter of such importance for consumers and for re-establishing trust in the domestic market. As regards when the price cap will be in place, there was significant consensus in another place that it should be implemented by the end of 2018. I note that Ofgem is already well under way with its consultation, including issuing a series of working papers on the design of the price cap.

In conclusion, I hope that our scrutiny will be both timely and harmonious so that this important measure may be implemented by the end of the year. I beg to move.

--- Later in debate ---

[Lord Henley]

My Lords, I am grateful to the noble Baroness for her intervention, and for what I think is the first authoritative statement from the Liberal Democrats in the course of this Bill through both Houses. I take note of her concerns about the Bill; she has made it quite clear that the cap should never have been necessary. However, as I understood by the end of her speech, she seems to think it right to put the cap in place. No doubt we will hear more from the Liberal Democrats, as I hope we will from other noble Lords, when the Bill is considered in Committee. It is possible that we will have rather a busy Committee stage because a number of concerns have been raised. I hope to be able briefly to address just some of them in my remarks winding up the debate. It probably falls to the noble Lords, Lord Stevenson and Lord Teverson, who have in effect provided me with a template for a number of questions to address in the brief time I have. However, other noble Lords, including my noble and learned friend Lord Mackay, have made it clear that we will have to devote considerably more time to the issue of the appeals process. As I say, I hope I will be able to touch on some of those points, but obviously we will leave the detailed discussion until Committee.

That brings me to another point that needs to be raised at this stage which has been touched on by a number of noble Lords, including the noble Lord, Lord Stevenson: the very important question of timing. If we are all in favour of a cap, and I am still not quite sure what the official Liberal Democrat position is on that, we must ensure that it will be of benefit to as many consumers—

[Baroness Featherstone]

I should make it clear to the Minister that we support the cap.

[Lord Henley]

I am grateful to the noble Baroness for making clear the Liberal Democrat policy on this, but she did start by saying that the cap should never have been necessary and that she did not like it. However, she then stated that she wanted the cap introduced. I want to make sure that we have it in place, and that is why I must go back to the timing. While I cannot guarantee that we will have it in place by the time the clocks change, we hope to have it by the winter. For that reason, perhaps I may remind noble Lords that it would be helpful if we could deal with the Bill and see it returned from the Commons with all the concerns having been dealt with in one way or another by the time we take up our buckets and spades at the end of term. I do not know what it is that noble Lords do in the holiday months. We should get the Bill on to the statute book with Royal Assent so that the processes can continue and, by the end of the year, we will have a cap that offers benefit to consumers. If the Motion that I shall move at the end of the debate is agreed, I look forward to a constructive Committee stage in the Moses Room so that we can go through these matters and then sort them out on Report. I hope noble Lords will bear in mind what I said about timing at this stage.

As I said, the noble Lords, Lord Stevenson and Lord Teverson, set out a template for a number of points that I want to deal with: vulnerable consumers, the absolute versus the relative, conditions for effective competition, the cost of an energy review and green tariffs—other noble Lords covered all these points so I hope that they will not mind if I do not pause to mention every name—as well as some of the network costs, the timing of the Bill, which I just have dealt with so I can cross that out, appeals and, finally, the cost of environmental levies, as mentioned by my noble friend Lord Ridley. I will refer to some of those at the end.

For now, I will run through some of those points; it might save a little time in Committee but I doubt it. I also want to say how grateful I was to my noble friend Lady Bloomfield for reminding us that bringing forward a Bill of this sort was very unusual for a Conservative Government, as I tried to make clear at the beginning of the debate. We believe, as she cited, that there are occasions where markets are not working and it is necessary to intervene. That is what we are doing; we are intervening temporarily. These are not rent controls. This is not about bringing back a prices and incomes commission. It is a temporary measure to deal with the current problem of markets not working. In time, we hope to be able to return to what I sensed the noble Baroness, Lady Featherstone, wanted to take the Liberal party back to—a glorious, 19th-century free market approach—although she reverted to something different later on. We will get there in the end and I look forward to that joyous Committee stage.

I begin with the crucial point about appeals made by my noble and learned friend Lord Mackay, my noble friend Lord Hunt—an eminent lawyer whom I have served under—and other eminent lawyers whose tongues I have borne the sting of, such as the noble Lord, Lord Carlile, and the noble Lord, Lord Redesdale. Obviously, we will debate this issue in much greater detail in Committee; as noble Lords know, it was raised in another place and considered by the Select Committee. We should all be grateful for the work done by that committee on the Bill and for our process of sending draft Bills to Select Committees or other committees. Having considered this issue, the committee concluded that,

“judicial review is a common and satisfactory appeal route for energy decisions, even highly technical ones”.

The Government hope that energy suppliers will focus on engaging with the regulator’s consultations on the design of the price cap, rather than the scope for appeals and legal challenges. I appreciate that noble Lords who spoke on this think otherwise. They think that an appeal to the CMA would be less burdensome than using judicial review. We can reflect on that and we will consider it, but I note what Members have to say at this stage. I think we will have considerable discussion on it in Committee.

Concerns about vulnerable consumers were raised by the noble Lord, Lord Carlile, the noble Baroness, Lady Featherstone, and others such as the noble Lord, Lord Whitty. Again, additional protections for vulnerable customers and the interaction of the cap with Ofgem’s existing safeguard tariff will be a matter for the regulator. The Bill provides for Ofgem to maintain a cap for vulnerable consumers that is separate from the prepayment meter cap imposed by the CMA. In addition to the duty imposed on Ofgem by Clause 1(6) to protect all existing and future domestic customers on standard variable tariffs, the Gas and Electricity Acts impose duties to protect the interests of customers. In carrying out this duty, Ofgem should have regard to all the points that noble Lords have raised. The noble Baroness mentioned the document produced by Scope, which I have seen. Obviously, Ofgem should take into account the interests of individuals who are disabled, chronically sick, of pensionable age—as the noble Baroness, Lady Featherstone, pointed out, there are many of that last group in this House—with low incomes or residing in rural areas and others. Again, these are matters that we can consider later.

The subject of the absolute versus the relative cap was raised by the noble Lords, Lord Stevenson and Lord Teverson. This matter was discussed at considerable length in another place; quite often, one needs a cold towel wrapped around one’s head to understand some of the technicalities. Again, it is a process that we will consider in great detail. The Government, Ofgem, the Select Committee and another place all believe that what we are doing is the right way to proceed. A relative cap might simply prompt the withdrawal of more competitive rates by larger companies while offering no protection to those on poorer-value tariffs. We will look again at this in greater detail but, on some occasions, I think noble Lords will find these matters difficult.

The noble Lord, Lord Stevenson, talked about the conditions we need for effective competition—it was the third point he raised. The legislation is framed so that consumers’ incentives to switch, which is what we want, and suppliers’ incentives to compete are maintained. I appreciate that the noble Lord, Lord Carlile, in his usual amusing way, pointed out how difficult it can sometimes be when we sit down with our computers and have all these messages appearing. We want to make it easier; we will try to do that. That is one reason why we hope that the cap will be just a temporary measure which is removed when the conditions for effective competition are in place. We have not provided in the Bill for what those conditions will be, as in a changing market we do not want to impose conditions that may not be met or tie the removal of the cap to measures that will not be in place by the time that the wider market has become competitive. It will be for Ofgem to report on whether those conditions are met, and the Secretary of State will then make that decision on removal or extension. Clause 8 makes provision for that to happen repeatedly over the years if we seek an extension.

The fourth point raised by the noble Lord was the Cost of Energy Review. We are aware of Dieter Helm’s comprehensive and fully independent review of the cost of energy: I think it arrived very soon after I became a Minister and it was probably the noble Lord who put down a question very soon after that, which I had to respond to despite the fact that the review was some 158 pages. I had to assure him, or someone, that I had not read the entire review in the time available, which was about four days. I have had more time. I cannot claim to have read it absolutely from beginning to end, but we are still considering those findings and we will in due course set out our next steps in light of the responses we have had from others to it.

The Government have already taken action that has helped reduce costs and helped consumers to manage their bills. The cost of offshore wind, as noble Lords will know, has halved over the last two years. We have paid compensation to eligible businesses in energy-intensive industries across the UK for the indirect costs of energy policies: that has totalled well over £500 million since August 2013. We are also seeking to do more by upgrading something like a million homes to meet our obligations to make them more efficient. The costs of those policies to deliver clean growth on bills are more than offset by savings from improvements in energy efficiency, saving on average in 2016 something of the order of £14 on household bills.

The noble Lord, Lord Stevenson, and others raised green tariffs. The Bill places a duty on Ofgem to consult on exemptions to the cap for green tariffs. I note in passing that while the noble Lord, Lord Redesdale, is perfectly happy to pay more, that will not be the case for everyone; but we leave that to him. Green tariffs are tariffs that support the production of gas or the generation of electricity from renewable sources.

[Lord Redesdale]

My Lords, I raised the example of myself but there are tens of thousands, if not hundreds of thousands, of consumers who are also prepared to take that route and would want that opportunity.

[Lord Henley]

I appreciate that that is the case and I have been on various websites that have offered me the choice of going either for a cheaper deal or what is termed a greener deal: that is an option for individuals to make. What we are looking at in this Bill is obviously to provide a cap to provide safeguards for people.

The Bill places a duty on Ofgem to consult on exemptions to the cap for green tariffs—those tariffs that support the production of gas or the generation of electricity from renewable sources. Having consulted, Ofgem will then have the power to implement exemption from the cap. That is for it; we are not opposed to green tariffs being exempt.

Moving on, network costs was another concern of the noble Lord, Lord Stevenson, and others. He asked, while being tougher in the future was all well and good, were customers being ripped off now? One could say that this is a matter for Ofgem: it is the independent regulator and responsible by law for setting the price controls. Ofgem reports that its assessment of network company business plans and the benefit-sharing arrangements in place in the price control is expected to save the consumers yet another £15 billion in the current price control Bill.

The seventh point the noble Lord raised was about timing. I repeat what I said at the beginning: it is important that we make good progress with the Bill, that we get it through to Royal Assent before the Summer Recess, and then we—or, rather, Ofgem—can get on with the process of bringing in a price cap, so that we will be ready with everything in place for the coming winter.

Lastly, I will touch on some of my noble friend Lord Ridley’s points. He referred to the “pachyderm in the parlour” and blamed the Government for putting up energy costs by imposing greenery, as I think he would put it, on household energy bills. I say to him that government policy costs make up only a relatively small proportion of the household energy bill—around 8% on average, according to Ofgem. Last year, as he will be aware, we published our Clean Growth Strategy, which outlined our commitment to supporting the growth of clean and renewable energy for all. Action to cut emissions can be a win-win for consumers: better insulated homes and more efficient vehicles mean less money spent on gas, electricity and other fuels. Our policies have helped reduce energy bills and costs overall: for example, my noble friend will be aware that we have seen the cost of solar cells come down by some 80% since 2008 and, as I said earlier, the cost of offshore wind has declined by about 50% over the past two years.

[Lord Teverson]

Does the Minister agree—I am sure he does—that when it comes to vulnerability and all the issues around keeping warm, it is important to note that the gas and oil that I have to use as a rural dweller to keep warm are not charged any environmental costs and so do not incur those additional costs?

[Lord Henley]

I am not aware of how the noble Lord heats his house—unless he was the Liberal who confessed the other day to having an Aga run on oil, which always struck me as a good Liberal policy: it is a thing others are accused of. I will find out about that in due course. I will look carefully at the noble Lord’s question and come back to him in writing in due course. I was trying to make clear that our policies have helped reduce energy bills for households in efficiency savings—

[Lord Teverson]

I am sorry to interrupt the Minister again, but I was trying to be helpful. I apologise that I clearly was not. Environmental charges are only on electricity: they are not on gas and oil. He can take it from me. I do not want a reply from him. I apologise for having put him off his stride when I was trying to be helpful.

[Lord Henley]

The noble Lord is always helpful, as are the Liberal Democrats. I look forward to the help they will be offering and providing in Committee and at later stages. I will end by making it clear—as I was trying to do before the noble Lord interrupted me twice—that our policies have helped reduce energy bills for households as, on average, energy efficiency savings have more than offset the cost of supporting the low-carbon investment. The Bill will help consumers in due course. I look forward to an interesting Committee and Report thereafter, and I hope that all noble Lords will bear with me in what I said about the importance of timing in relation to the Bill. I beg to move.

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

Package Travel and Linked Travel Arrangements Regulations 2018

Lord Henley Excerpts

Wednesday 16th May 2018 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Package Travel and Linked Travel Arrangements Regulations 2018.

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

My Lords, I beg to move that the Committee considers the draft Package Travel and Linked Travel Arrangements Regulations 2018, which were laid before the House on 16 April. The purpose of the draft regulations is to update and replace existing legislation by implementing the requirements set out by the 2015 European package travel directive. It may be helpful to give some background on consumer protection and the importance of consumer rights before I explain the changes in detail.

In this country, we have a long history of delivering high standards and strong protection for consumers. That history extends into our time as a member of the EU, where we have been influential in developing the EU’s consumer protections. Indeed, the current framework reflects UK priorities. But in some areas the UK has chosen to go further, providing additional protection for British consumers. For instance, through the Consumer Rights Act, we regulated for the supply of digital content, ensuring that there are clear rights for people buying things such as movies and music online. As e-commerce continues to grow, those protections give shoppers the peace of mind that they need to make a purchase, which is crucial to our prosperity. Household expenditure accounts for around 60% of the UK’s economy, more than a trillion pounds a year. Package holidays form an important part of households’ expenditure. Each household spends an average of £1,200 a year on package holidays, around one-third of their total spending on recreation and culture.

Our recently published impact assessment shows that the new rules we are proposing will protect an extra 10 million UK package holiday trips, bringing those who mix and match their holidays in line with those who opt for traditional prearranged combinations. Last summer we consulted on the idea of a light-touch approach to implementation of these proposals. We published the Government’s response to the consultation and the impact assessment last month. The EU’s deadline for transposing the requirements of the EU package travel directive into UK law was this January, with a further six months for these requirements to be brought into force. The travel industry is aware that we are copying out the directive, which has been in the public domain since 2015. We recognise the concerns raised that the Government are late in implementing the regulations. Therefore, we have engaged intensively in advance of laying the regulations to help the industry adjust, and will continue to work with businesses on implementation after the regulations come into force.

Package travel regulations have provided protection to travellers for many years, but they were introduced in 1992, and much has changed since then. Technical innovations have opened up new ways of buying and selling holidays. This has provided increased choice and flexibility in the travel market, allowing consumers to mix and match components of a holiday to suit their particular needs However, such rapid change has left new methods of packaging holidays outside the scope of the current regulations. The 2018 package travel regulations will address this gap. We are ensuring that people who book package holidays through travel sites online enjoy the same rights as those who book with a traditional travel agent. The draft regulations will introduce a broader definition of package holidays to capture modern booking models.

The regulations will also introduce a new concept of linked travel arrangements, or LTAs. These provide some level of protection for looser combinations of travel services than exist in a package holiday, so they have fewer requirements. We are also making it a requirement that package travellers are given clearer information on what they are agreeing to and what their rights are. In addition, we have strengthened the insolvency protection so that consumers can get their money back or be returned home if the company that arranged a package goes bust.

The United Kingdom is required to designate central contact points to supervise UK-established package organisers that are selling into other EU member states. After careful consideration, we have agreed that from July the Civil Aviation Authority will take on that role. With regard to the enforcement of the regulations, the arrangements will be as before, with the responsibilities being taken on by either the Civil Aviation Authority or trading standards.

The department’s impact assessment, which was published alongside the regulations, estimates a net cost to business of around £100 million a year. However, these changes will level the regulatory environment for all businesses selling travel packages. Businesses which have been providing packages not previously covered will now be subject to the full range of protections under the 2018 package travel regulations, including the organiser taking on liability for all the services provided under the contract and providing cover against insolvency.

All these measures will help to ensure that on the day we leave the EU we will maintain our high standards of consumer protection, delivering the stability and continuity that consumers need. It is also our objective to have effective protection in place for consumers purchasing goods and services cross-border in the future. The way that consumer protection will apply when buying across borders is still a matter for negotiation, but we are determined to co-operate closely with our EU partners on matters of consumer protection.

The regulations will enhance protections for consumers when buying package holidays either through the traditional method or online, and they have been welcomed as a positive step by the travel industry. Throughout the consultation process and the development of policy, we have sought to strike a balance between increased protection for consumers and minimised burdens on businesses. I commend the regulations to the Committee.

[Baroness Randerson (LD)]

My Lords, this updating of the 1992 legislation is welcome, as things have undoubtedly moved on a great deal since then. We now use computers and we travel a great deal more, particularly taking short breaks. The Minister has outlined how important holidays are to the UK public, so I welcome the fact that the definition of a package is to be expanded. Of course, we were prompted to do this by an EU directive, and we have only until 1 July to deal with it. The impact assessment makes it clear that these regulations—and the Minister said as much just now—do not go beyond EU requirements; rather, the EU directive has in effect been simply copied over.

When we discussed this issue last year, in the wake of the Monarch Airlines insolvency, the Minister at the time, the noble Lord, Lord Callanan, made it a point of great pride that we in the UK had the first laws to protect the purchasers of package holidays and that our laws go beyond the protections available in other countries. Given that, my first question is whether this is a conscious change of policy by the Government in terms of consumer law. The Monarch situation revealed again the differing levels of protection available to travellers, depending on how they purchase their holiday and the unfairness that existed between different sorts of purchase. It demonstrated that nowadays relatively few people buy traditional packages for their holidays, although I read recently that declining public economic confidence has started to reverse that trend. People are now looking for more security and are therefore more likely to buy a package. So it is to be welcomed that these regulations are specifically designed to cover other sorts of arrangements.

Just when I thought I had got my head around linked travel arrangements and what they mean, I find that there are two other categories as well. When we discussed this last year, the noble Lord, Lord Callanan, made it clear that the idea of a linked travel arrangement was still in the process of being divined. Looking at the categories, I see that there are prearranged packages, which is the traditional arrangement we are all used to, and dynamic packages, which have the features of a package but allow the consumer to pick and mix, to customise the content of their package, buying from one trader. As a further option, travellers can put together the components of a package themselves—one assumes online—based on specific offers from more than one trader. The Explanatory Memorandum says that, although this has elements of from more than one trader, it comes from a single point of sale. My second question to the Minister is this: what does a “single point of sale” mean?

Last night, I happened to be organising a weekend away. I booked my flight on a holiday package website and then up popped the offer of a car hire. But as I dealt with the car hire, I found myself on a separate website, although it had come to me via the first one. I am interested in how this option differs from other options. I quite understand that, if you walk into Trailfinders, you can buy a variety of things from one point of sale. But what is a “single point of sale” when you are dealing with this on the computer?

Apparently, in addition to and separate from the two forms of dynamic package and the simple prearranged package, there are linked travel arrangements. These are the combination of at least two different travel service for the same holiday but, unlike packages, they involve separate selection and payment for each services and separate contracts. Those are created with a trader and, according to the explanation, a linked travel arrangement is created where the,

“trader facilitates either … the selection and payment of two or more services for the same trip, under separate contracts with individual providers, upon a single contact with a point of sale, or … the separate selection and payment of two or more travel services for the same trip through targeted linked booking processes within 24 hours without transferring the travellers’ payment details. Conversely, if the traveller’s payment details, name and email address are transferred then this would count as a package”.

I understand the last sentence, but I got lost halfway through the rest of it.

The point I am making is that this is hugely complex. How is a person purchasing their holiday to know that it is linked by a trader rather than a link inspired by Google? I get extremely worried when I visit a restaurant, for example, and am then asked to rate it. I have not told anyone I am going there—I have simply carried my phone there—yet, somehow, Big Brother knows I have been there. We are all susceptible to having things promoted to us as a result of our choices, using the computer or simply carrying around a phone. This is so complex that publicity will be essential. It will affect a whole new cohort of traders—the Explanatory Memorandum estimates a one-off cost of £620 million to the industry and an annual cost of £48 million. This is a significant new thing for the industry. So my question is: how are the Government planning to raise awareness within the travel industry?

--- Later in debate ---

Finally, the worry I have about this in practice is that while the regulations for those who take flight bookings, which stem from the DfT, are being organised by one body—the CAA—the actual body that is charged with sorting this out for the package end in the regulations, as I understand it, is trading standards. Trading standards is under considerable pressure for all sorts of reasons, not least the fact that the pressure on local authorities is reducing the amount of money available. I would be grateful if the Minister could comment on that and whether additional resources will be available for those who will have to address any complaints that may come forward.

[Lord Henley]

I thank all three noble Lords for their comments on these regulations. In summary, I think all three were saying that they welcomed them but that the regulations were somewhat on the complex side and they needed some explanation and guidance. The noble Lord, Lord Snape, gave from his own history the example of the first SI that he dealt with in opposition, many years ago back in 1992. He and I do not have to remember it but that legislation was only five pages long and these regulations are somewhat longer. The first thing to say is that things have got more complicated. As the noble Lord knows, the way we buy things has got much more complicated than it was some years ago. The old, simple package holiday is no longer there; we all buy things in a completely different way.

The noble Baroness, Lady Randerson, gave an example of the way that, as families, we sit down in front of the computer and say, “Right, let’s get a flight”. We take many more short holidays and may suddenly think, “We’ve got a long weekend—let’s get a flight”, then up jumps the offer of car hire, hotels and other things. In a sense, we create a package. For that reason, things will obviously be more complicated when putting together the regulations. It is therefore quite likely that they will have to contain more than the five pages that the noble Lord, Lord Snape, remembers so well.

[Lord Stevenson of Balmacara]

I am sorry to interrupt the Minister but is not one of the Government’s aims here to make sure that people who buy things digitally have the same rights and experiences as those who might walk into a shop and buy them on the ground? I think the point that the noble Baroness, Lady Randerson, was making is that it is actually not being replicated here. There is not quite the same sense of buying, in a shop at a particular time, the package—even though it comes in slightly different forms. That is the issue which is causing concern.

[Lord Henley]

The noble Lord is quite right to highlight that as an issue. The point to make is that when you are buying something slightly different, as a package, it will be quite difficult to put together exactly the same regulations as those remembered so fondly by the noble Lord, Lord Snape, which covered only five pages. To try to give the same sort of coverage when something so completely different, which did not exist in the past, is being bought necessarily makes for more complicated regulations. It is not that we have become more verbose since 1992. It is just harder to do these things.

I was going to offer some thanks to the noble Lord, Lord Stevenson, for his thanks for the Explanatory Memorandum. It is very rare that we get praise of that sort but we are grateful for it.

[Lord Snape]

I am sorry to interrupt the Minister again but, regarding the question of what constitutes a package, set against linkage, it is not just about going on to a computer and booking a flight. What would happen if I went into a travel agent and said I wanted a weekend in Marbella, they had the perfect flight for me from Birmingham, my local airport, at 6 o’clock on a Friday evening, I booked it and paid for it there and then, but then said, “What about car hire at the other end?” Is that covered by the package, or is that regarded as a linked package and therefore not covered, in the way that getting the whole thing together and paying for it all at once would be? I am sorry if that is a bit complex, but I hope the Minister understands what I am getting at.

[Lord Henley]

I will deal with these points when I get on to the different sorts of coverage. I was broadly trying to get across that we were trying to give coverage where there was not coverage in the past. I believe it was the noble Lord who congratulated the Government on being the first to offer these protections, helping to get these regulations and trying to get a degree of protection for the consumer in them.

I will deal with some of the points raised, starting with the common commencement date. My advice is generally that common commencement dates do not apply to the implementation of EU legislation and, in this case, there was no compelling reason to diverge from that position. What we did—I appreciate that we have taken some time over it—was to give a degree of time. I think that has been useful for the industry and this is why we have gone up to the wire, going up to 1 July rather than doing it on 1 January.

The noble Lord, Lord Stevenson, also asked about the other regulations coming from the Department for Transport, which will be negative regulations. I remind noble Lords of how seamless the Government are in the way they operate, with no silos between departments. My advice is that the Department for Transport expects to publish its final ATOL regulations and the formal government response to the ATOL conversation in the coming weeks. At the same time, they will be laid before Parliament and come into force in line with the implementation deadline of 1 July, so the noble Lord has time and we will try to make sure that we can meet this.

I return to the questions, largely led by the noble Baroness, Lady Randerson, on the single point of sale and the complication of the LTAs. Put simply, it is when the same retail premises, the same website or the same telephone service is used to put those together. I appreciate there is a degree of complexity; that is why we hope to provide guidance that will help to explain the concept as far as possible, making it easy for the consumer so they know that they are buying an LTA. Although LTAs do not offer the same level of protection as a package, traders who facilitate putting together an LTA will be required to inform the traveller that they are not buying a package and therefore will not benefit from the protections associated with that package.

We want to make sure that there is appropriate guidance to assist the industry with that concept and, as a result, to assist the consumer and make sure that they are aware that they are buying an ATOL-protected product. The noble Baroness was correct to stress the importance of the initials ATOL.

[Baroness Randerson]

I am grateful to the Minister for his attempts at explanation. He clearly understands the subject a lot more deeply than I do. The problem with ATOL-protected packages is that they are something that the trader put together. All these other variations, whether it is either sort of dynamic package or a linked travel arrangement, are things you create for yourself. If you choose this car hire rather than that one, you may choose this car hire from the website, but that car hire would be from a different website. Given the average person’s knowledge and understanding of computers and sources of information—most of us are fairly hazy about where we get a lot of information and there will be no label saying, “This is protected”—my concern is how people will know that they are protected and what is the level of protection.

Briefly, because there are so many variations, we are talking about shades of grey. It is now difficult to justify having different levels of compensation depending on whether you create your own package or are given one by a tourism operator.

[Lord Henley]

The noble Baroness is stressing the complexity of what has come into existence over the years. Earlier, she stressed the need to ensure that the industry was properly informed, but she went on to say that it was important that we ensure that the consumer—I always stressed the importance of the consumer—is also protected. What it makes even clearer is that we in the department must ensure that we provide the appropriate protection and compliance. That is why we want to work with the industry and regulators to help them understand all the changes being introduced, develop some guidance and ensure compliance. We will also be working with Citizens Advice to ensure that the guidance helps. I hope that, as a result, we can ensure that consumers are fully aware of what protection they have.

I appreciate that I probably have not got this out as clearly as I should like to all three noble Lords who have spoken, and I will probably end up writing a letter setting it out in some detail—I see from nods that that would be popular and appreciated.

I end by dealing with the noble Baroness’s final point. She asked about the policy change and why, having been the leader in this, we were going only as far as the current directive suggests. We have always been the leader when it comes to the protection of holidaymakers. I was grateful for what the noble Lord, Lord Snape, said at the beginning. Obviously, we will continue to do that whether we are inside or outside the EU but, at the moment, it is vital that we bring the directive into force. That is what we are obliged to do by 1 July.

As the noble Baroness is fully aware, thereafter, it will be open for us to go further, should we wish. The United Kingdom recognises that there is a need at this stage to introduce that stronger consumer protection to address the gap that has been identified and it is important that we implement those changes at this stage irrespective of where we are with our exit from the EU.

The directive is the maximum harmonisation, so there is limited scope at this stage to go beyond it. As I said, I hope to write to noble Lords to set out some of this with slightly greater clarity to make clear what we are doing. I accept that the arrangements are complex, but life is more complex than it used to be and how we buy holiday packages certainly is. I think it is a great deal more convenient and a great improvement, but it means that protections have to be devised in a different way.

I again thank the noble Lord for his welcome for our Explanatory Memorandum—it is very rare that we get such praise, so when we get it, I always like to thank people for it. I commend the regulations to the Committee.

Motion agreed.

Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2018

Lord Henley Excerpts

Tuesday 15th May 2018 Lords Chamber

Moved by

[Lord Henley]

That the draft Regulations laid before the House on 7 February and 19 March be approved.

Relevant document: 21st Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 9 May.

Motions agreed.

Smart Meters Bill

Lord Henley Excerpts

Report stage (Hansard): House of Lords
Tuesday 15th May 2018 Lords Chamber

[Lord Campbell-Savours (Lab)]

My Lords, subsection (5)(b) of the new clause proposed by my noble friend states:

“an assessment of the future developments thought feasible and desirable for the smart meter programme, including monitoring of customer activity so as to deliver least cost tariff benefits combined with the maximum ability to engage with future appliance applications, inter-operability, compatibility with smart phones and tablets, and the encouragement of self-generated capacity in the home”.

I shall concentrate on the word “interoperability”, which I raised in Committee.

I was with some friends last weekend and we had a discussion about smart meters. The general view was that the problem with them is that you cannot switch suppliers. Although we are assured by Ministers that we can switch suppliers, the public believe that that is impossible without losing some information. My friends said that some suppliers refuse to have anything to do with the meters provided by others.

We need today from the Dispatch Box an undertaking that under whatever arrangements are ultimately in place, there will be absolute interoperability whereby, whoever is the supplier, the meter will work and provide information on the number of units consumed, the price per unit and the total paid to that point for the power consumed. The public need the assurance that if they get a smart meter, they can switch between suppliers quite liberally without losing any of the facilities available from an existing meter. I would like that assurance from the Dispatch Box, because I am sure that it would resolve many of the existing concerns in the country on the failure of the equipment to be interoperable.

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

My Lords, I thank the noble Lord, Lord Grantchester, and other noble Lords for introducing their amendments. I think that it was the noble Baroness, Lady Featherstone, who said that she came late to this debate. That is true of a great many of us—but she is right to say that it has been going on a long time, through a Labour Government, the coalition Government and now under this Government. I believe we are making progress, and I want to correct the noble Lord, Lord Teverson, who implied that only about 300 smart meters had been installed. I hope that was just a slip of the tongue and he was just referring to SMETS 2. As he is aware, some 10 million smart and advanced meters are operating across Great Britain, which are being installed at a rate approaching 500,000 a month—and I hope that figure will go up, as all those first-generation meters are expected to be enrolled within the national infrastructure from later this year.

I also thank the noble Lords, Lord Grantchester and Lord Stevenson, the noble Baroness, Lady Featherstone, and the noble Lord, Lord Teverson, for the way they have co-operated on this Bill, and the constructive approach they have taken to its scrutiny. I hope that, as a result, we will fairly quickly be able to move on to other matters and then, once the legislation is finished with, get on with the programme and meet the aims shared by the noble Lord, Lord Teverson, and I. We have heard concerns about how well the smart metering programme will deliver benefits for consumers. I hope that in due course we will be able to address the point made by the noble Lord, Lord Campbell-Savours.

I am convinced, perhaps because I am one of those eternal optimists, that the programme will be a success. The noble Baroness, Lady Featherstone, smiles at me because she thinks I am too much of an optimist—or too much of a Tigger—in these matters, but it is better to be a Tigger on this occasion than an Eeyore. I shall continue to do so, and I hope the noble Baroness will accept that progress is on the way.

I recognise the spirit in which the amendments have been proposed. While I cannot accept them, I want to set out several commitments that the Government are making, which I hope will address noble Lords’ concerns.

I turn, first, to the amendment moved by the noble Lord, Lord Grantchester, which would require the Secretary of State to establish and put into regulations a national plan for smart meters with associated implementation requirements. We believe we have the right strategy in place for ensuring that the smart metering programme is delivered cost-effectively and that consumer benefits are optimised. The Bill, in seeking an extension to the duration of the Secretary of State’s regulatory powers, recognises that the Government are accountable for delivering the benefits of smart metering and that we need to maintain close oversight of implementation.

There are various aspects of what is proposed that duplicate work that the Government already have in place, which we do not believe would ultimately work in the best interests of consumers. However, we have reflected closely on the concerns that the noble Lord, Lord Grantchester, has expressed regarding the programme, and have concluded that there is more we can do to address his concerns to help the programme succeed. We have identified three actions we are prepared to commit to as a result.

I recognise that there is an appetite for the Government to do more to ensure that we are transparent with consumers and Parliament in monitoring and tracking delivery. The programme already publishes quarterly rollout statistics, and we have committed in the other place to publish more substantial reports on programme delivery. I can further commit to publishing, by the end of 2018, as part of our annual report on progress, a forward plan of activity. This will show that the Government have a clear plan for resolving the remaining technical and operational challenges to delivering the programme. The report will be placed in the Library of the House.

I sympathise with noble Lords’ desire for further assurance that the Government have a firm hand on the tiller on all aspects of the programme. I therefore commit to publishing, by spring 2019, a report that will provide a stocktake of progress towards delivering the consumer benefits of the programme. We will take evidence from consumer representative bodies and Ofgem in preparing the progress report. The planned National Audit Office inquiry on the smart metering programme, which we currently expect to report by the end of this year, will be another important strand of evidence. It is right that Parliament should have an opportunity to scrutinise the report. The Government will therefore bring forward a ministerial Statement on the final report, allowing some sort of debate in both Houses of Parliament.

We believe that smart meters will be game-changing for how consumers engage with their energy use and the market. The amendment seeks an assessment of how well the programme is future-proofed and we recognise that there are merits in undertaking an assessment of the smart meter platform in support of this. I therefore commit to publishing a paper by the end of this year that will draw out and promote the potential of the data offered by smart meters for future innovative consumer technologies and services.

The noble Lord, Lord Campbell-Savours, raised interoperability and claimed that it is difficult to switch between suppliers. It will be important for suppliers to communicate to consumers that they can switch supplier without risk of losing services. From later this year, the enrolment of SMETS 1 meters is expected to take about a year. All SMETS 2 meters will be fully interoperable from the outset. If the noble Lord requires anything further, I am more than happy to write to him.

[Lord Campbell-Savours]

My Lords, in the event that a second supplier takes over, will the information on the meter provided by the first supplier be equally made available by the second?

[Lord Henley]

I think the noble Lord is correct, but if not I will write to him on that matter.

Amendment 2, in the name of the noble Lord, Lord Teverson, relates to SMETS 2 testing. I recognise that at the heart of the amendment is a concern that the Government are pushing ahead with transition to SMETS 2 meters without adequate checks and balances. We want to transition to SMETS 2 meters as they are better for energy consumers. As I made clear, they offer full interoperability from the outset, cost advantages and support for energy network planning and investment decisions, from which efficiencies and consumer energy cost savings can flow. This is why we will put in place a SMETS 1 end date to drive the transition to SMETS 2 meters.

I reassure the noble Lord that we are not driving this transition blindly. We have thorough and mature industry-wide monitoring and governance that allows us actively to scrutinise this transition. We closely monitor energy supplier and DCC operational capability, meter availability and reliability and supply chain maturity. That is underpinned by a robust testing regime across the end-to-end system set out in the regulatory framework via the Smart Energy Code. It requires, and provides assurance, that the DCC’s systems and services meet requirements; that suppliers and other DCC users are capable of using the services that are provided by the DCC; and that the metering equipment which suppliers enrol with the DCC is interoperable with the DCC’s systems and compliant with the relevant technical specifications. This is backed by device certification via the National Cyber Security Centre’s commercial product assurance scheme.

After undertaking their own thorough testing, leading energy suppliers are now rolling out SMETS 2 meters to real customers at low volumes, demonstrating their confidence in the preceding testing. We think it is right to continue to press other energy suppliers to make the same transition, on the back of their own testing. We are in close dialogue with the DCC and suppliers, and if it was shown not to be in the interests of energy consumers, we would provide further time for the transition.

In light of those assurances, and given the substantive commitments to further government action and information that will be made available to both Houses, I hope the concerns of the noble Lord and all other noble Lords who took part in the debate have been dealt with, and I hope the noble Lord will feel able to withdraw his amendment.

Prompt Payment Code

Lord Henley Excerpts

Thursday 10th May 2018 Lords Chamber

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

My Lords, I am grateful to the noble Baroness, Lady Burt, for securing this debate and for all the expertise and advice that has come from all other noble Lords who have spoken in it. I think particularly of the noble Lord, Lord Palmer of Childs Hill, and his account of some of the bullying practices used by some of the larger clients. I heard his desire that we should be not just naming and shaming but actively broadcasting the behaviour of some payers. These matters can certainly all be taken into account in the various consultations and decisions that we have to make in the future. As I said, I am grateful to all noble Lords for speaking, but I am sorry that we have lost my noble friend Lord Cope, who felt that he must be dragged away for another debate. I well understand that it was right that he should not speak if he was speaking in another debate.

As I hope to set out, we are actively taking steps to make the United Kingdom’s payment culture fairer while simultaneously providing a base of support for all our small and medium-sized businesses, which are the backbone of our economy. It is right that I should start with remarks about the Prompt Payment Code, the voluntary attempt by which the Government started the process of trying to ensure that companies should lead by example in paying their suppliers promptly and fairly. I am a great believer, as the Government are, in always trying a voluntary approach as a first step. We should not make a point of rushing into legislation but there are occasions, and enough examples have been given to me by all noble Lords in this debate, where the behaviour of certain companies—that of Carillion has been highlighted—leads us to a view that further action possibly needs to be taken. That will be considered and I hope I can set out just how we are going to consider all that.

However, I certainly take on board, for example, everything that the noble Lord, Lord Mendelsohn, said about these matters and what we ought to do in this field. I will certainly look at his Bill when he introduces it in due course; I cannot comment on it in advance of that, just as I would not want to comment in advance on what our attitude is to my honourable friend Mr Peter Aldous’s Bill. But any measure that is introduced to address the unjustified late payment or non-payment of retentions needs to be simple, consistent and transparent. It is premature to commit on those things but we will consider them in due course, as we will consider all the points that noble Lords have made.

I am grateful to the noble Baroness, Lady Burt, for highlighting the fact that there was Carillion. I rather expected that she would raise it and that if she did not, the next speaker would—and if not the next, then another. In fact, I think that nearly every speaker raised it.

[Baroness Burt of Solihull]

I am conscious of the fact that I talked quite a lot about Carillion. I restrained myself from naming and shaming any companies that are currently working still but there are plenty more that could have come under the aegis of this debate.

[Lord Henley]

The noble Baroness knows that she has considerable freedoms in what she can say in this House because of the various protections that she has. Perhaps she ought to take advice from her noble friend Lord Palmer of Childs Hill about not necessarily naming and shaming but broadcasting these points. I merely make that offer to her. My point was that I was pretty sure that Carillion would be mentioned because when one has a code of this sort, it is rather embarrassing that a large company which the Government have made use of, even if it no longer exists, quite obviously signed up to that code without—I will be polite—thinking about the consequences of what it had signed up to.

The fact is that we have a code and it performs a function. We should think about that function and not necessarily completely dismiss it as it is. We know that signatories to that code must pay 95% of invoices within 60 days, in all but exceptional circumstances, and work towards 30-day payment terms as the norm.

In recent years we have strengthened that code and all the Government’s strategic suppliers have signed up to it, as well as some of the UK’s largest businesses. That represents the 2,000 signatories that the noble Lord mentioned; as I understand it, that includes most of those that the Government deal with. This is an important step in moving towards a gold standard across the largest businesses in the United Kingdom, and I hope it will assist us in getting into the position that the noble Lord, Lord Aberdare, talked about, in being in a better state than other countries. If a business believes a signatory is not complying with the code it can challenge its status, and the compliance board will take that into account. I think that I have dealt with the point that the noble Baroness made about Carillion.

The Chartered Institute of Credit Management, which administers the code on behalf of the department, works with all the signatories and challengers to recover payment debt and educate businesses of all sizes on the importance of good credit management and a positive payment culture. The principles of the code are effective only if taken seriously both by signatories and by the suppliers of signatories, which is why we are now exploring how the code can be strengthened and enforced. The noble Lord, Lord Stevenson, and others were looking for more teeth. That is why we will be inviting views on this, as well as on wider payment matters, within the forthcoming call for evidence on unfair payment practices. The code is an important tool for setting best practice, but it is just one of the measures that the Government are using to promote fair payment.

In April last year we introduced a statutory duty for the UK’s largest businesses to report on their payment practices, policies and performance so as to increase transparency and provide small business suppliers with better information about those they intend to trade with. So far some 1,500 reports have been submitted on GOV.UK, and can be accessed easily by the public. Small business suppliers, journalists, academics and others can use that data to compare and contrast, and to hold large businesses to account for their payment practices.

As the noble Baroness and the noble Lord, Lord Aberdare, will be aware, we launched the Small Business Commissioner in December last year, following the appointment of Paul Uppal in October. I realise that the noble Lord, Lord Mendelsohn, had a debate on this subject in January, and I think I am right in saying that he has visited Paul Uppal and discussed these matters. Mr Uppal has an important role in supporting small businesses to resolve payment disputes with larger businesses, providing advice, and helping to bring about a culture change in payment practices and how businesses deal with each other.

The commissioner considers complaints by small businesses against their larger clients, but we also encourage businesses to report poor payment practice and cases of late payment in public sector contracts, including late payment through the supply chain, to the Cabinet Office’s mystery shopper service to investigate. I think that it was the noble Lord, Lord Aberdare, who referred to that. That service provides a further route for suppliers to raise concerns about public sector procurement issues, including payments. It works closely with all public sector contracting authorities to broker a resolution to cases, and makes recommendations to improve procurement. I can assure the noble Lord that the mystery shopper service has handled some 1,300 cases since it was established in 2011, and is widely used by small businesses.

The Government are alert to the specific difficulties, particularly in certain sectors: construction has been named. In October last year my department published two consultations on payment practices within the construction sector. We are actively considering the responses and options for future policy. We are also consulting on how we should exclude suppliers from major government procurements if they cannot demonstrate fair and effective payment practices with their subcontractors. The consultation, to which I believe the noble Baroness, Lady Burt, referred, will close early next month, on 5 June. The noble Baroness asked in her usual optimistic manner when we would respond to it, and I will give the usual response: we will respond shortly. I want to make it clear that we will consider the responses very carefully, and will respond in due course.

We believe that the voluntary approach is a good one, but sometimes it does not work as it should. The recent collapse of Carillion has shown there is still more that needs to be done to protect small businesses. It is with this in mind that a call for evidence is being launched by my department on how we can eliminate the continuing problem of unfair payment. The call for evidence will build on the Government’s existing late payment policies to drive an end to all the unfair payment practices that the noble Lord, Lord Palmer, highlighted when he talked about invoices and cheques being “in the post”, or getting lost in the post, or whatever.

All the steps I am announcing amount to a package of measures that will ultimately strengthen, as we need to, support for small and medium-sized enterprises. It is important, as we all agree, to do what we can to enable them to grow and create jobs by providing an environment in which they can flourish. I am grateful, as are the Government, for all the suggestions from those who have taken part in this short debate. Those suggestions too will be fed into the process. I hope that I have answered all the questions—or at least, I cannot answer them all, because these are matters that need to be considered. What I can say is that we accept that the voluntary approach is the right one to pursue, but it does not always get quite as far as it might, and there may be occasions when we have to look into taking things further in the future. I hope that that deals with all the points that have been made, so I will end my speech.