Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2018

Lord Henley Excerpts

Wednesday 9th May 2018 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2018 and the Renewable Heat Incentive Scheme Regulations 2018.

21st Report from the Secondary Legislation Scrutiny Committee

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

My Lords, the draft Renewable Heat Incentive Scheme Regulations 2018 were laid before the House on 23 March 2018, and the draft Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2018 were laid before the House on 7 February 2018. Just to save the noble Lord, Lord Stevenson, some trouble, I can let him know that the common commencement date rules do not apply to this type of regulation as they have no impact on business, so he need not raise that.

[Lord Stevenson of Balmacara (Lab)]

I am grateful to the Minister for raising the point before I had time to do so, but I just point out to him that that puts the score at 8-1 against.

[Lord Henley]

I am grateful to the noble Lord. As I said earlier on, I will endeavour to improve; I know that the noble Lord will keep a record on these matters.

The purpose of the draft orders is to implement reforms to the renewable heat incentive, or RHI. The reforms will deliver changes that will strengthen the focus on long-term decarbonisation, offer better value for money for taxpayers, increase protection for consumers and further support supply chain growth in the renewable heat sector. Heat accounts for around half of the UK’s energy use and one-third of total carbon emissions. Increasing the share of heat derived from renewable sources is a critical challenge, both to meet our renewable energy targets and to deliver the Government’s long-term carbon goals. Building a vibrant renewable heat sector is a key objective of my department’s clean growth strategy and the industrial strategy. The RHI is the main programme to deliver those goals over this spending period. Before the RHI started, only 1% of our heat came from renewable energy sources; that figure is now around 7% of total heat.

This type of tariff-based support for renewable heat is the first scheme of its kind in the world. Inevitably, there are lessons to be learned, and these reforms are a response to some of the lessons from the early years. The National Audit Office published a review of the RHI in February this year, which we were pleased to receive. Many of its comments related to issues covered by the draft regulations, which I hope will go some way towards addressing some of the issues raised by the NAO, which were also noted by the Secondary Legislation Scrutiny Committee. The draft orders will deliver a series of important reforms that will help us to deliver a more strategic mix of technologies and improve value for money over the next three years until the scheme closes in March 2021. I will highlight the main ones.

We will increase the tariffs available for biogas and biomethane technologies while introducing new restrictions on the feedstock that those plants use. That will encourage the increased use of food and agricultural waste and will reduce the use of energy crops, making better use of farmland for food production. Alongside changes already made last year, this will rebalance deployment away from biomass in favour of heat pumps, biogas and biomethane, which will all play a much stronger role in the scheme over the long term.

Another important change is that we will bring in tariff guarantees that will allow RHI applicants to secure their place on the scheme in advance of construction. This will support investments in larger plants that deliver better value for money. We will cap the amount of heat covered to 250 gigawatt hours per year to protect the scheme budget.

In the domestic scheme, take-up to date has been dominated by owners of larger homes. To promote wider uptake, we will introduce the assignment of rights. This will allow third parties to finance renewable technology and to be repaid directly from the RHI. Crucially, that will open up access to the scheme for those without up-front capital to pay for a new heating system.

Following consultation last year, we will limit the eligibility of certain heat uses. These provisions will remove most instances of wood-fuel drying and waste processing or drying. In addition, we will remove the use of heat for drying digestate in anaerobic digestion facilities as an eligible heat use. We consider that these processes are poor value for money and that many would not exist without RHI support. We will also remove support for heating swimming pools on the non-domestic scheme, unless the pool is for commercial or municipal use.

We are also introducing changes to allow more than one heat pump to use a common or shared ground loop. This should facilitate greater deployment of that important technology. The introduction of electricity metering for heat pumps across both schemes will allow participants to better monitor the efficiency of their plant and build confidence in the technology.

Following consultation, another change will be to increase the power efficiency threshold of combined heat and power technology from 10% to 20% to reduce the risk of overcompensation and to encourage plants to run more efficiently. There is also a whole series of mainly administrative changes to tighten cost control, reduce the risk of gaming and improve Ofgem’s delivery of both schemes, including by tightening its enforcement powers.

The Renewable Heat Incentive Scheme Regulations 2018 also consolidate all previous revisions to the original regulations, as recommended by the Joint Committee on Statutory Instruments. The RHI plays a central role in the Government’s programme to decarbonise heating. These regulations are an important step in refining the scheme and I commend them to the Committee. I beg to move.

[Lord Teverson (LD)]

My Lords, in general, I welcome this secondary legislation, in that the National Audit Office report from February certainly needed some reaction from the Government on the way that the scheme operates. Just to put it in a bit of context, the audit report included some very interesting figures: between 2012 and 2017, there have been some £1.4 billion-worth of payments, which should lead to commitments of some £23 billion. To me those sound like big numbers but, as we know from smart meters, they are absolutely piffling. There have been 78,000 installations already and there were expected to be 500,000 by 2020. It is estimated that we have got to about a fifth of that original target. To give the Government their due, they have responded to reality in this area and moved some of those targets.

Although the Minister made a strong point about this being a major contributor to our carbon targets, the point I want to make is that, in many ways, it is a small drop in the ocean of what we need to do to meet our carbon budgets in future. The renewable heat incentive is certainly nothing like sufficient to meet those budgets in the heating sector, nor was it ever meant to be. That sector is so important, but it is one in which we still have so few solutions for meeting our targets. In electricity generation, we are well on our way; in transport, we at least have the solutions on hand; but in space heating, we do not yet, and the RHI is never going to get us there. There are big challenges for this scheme.

I was quite surprised to see in the audit report that Ofgem, which is the manager of the scheme, had not really managed to tackle some of the gaming issues and was uncertain on the overpayments side. I guess that all auditors have to find something. Certainly, the report praises the GB scheme in comparison with that in Northern Ireland, where clearly the scheme got completely out of control and caused the political difficulties that we now have there. However, it is estimated that we still have some £3 million-worth of overpayments.

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[Baroness Featherstone]

I thank my noble friend.

[Lord Henley]

My Lords, I intervene just to say that I caught the noble Baroness’s noble friend’s eye and he was looking faintly sympathetic towards me. The noble Baroness is making some very valuable points, some of which I will be able to respond to. In relation to the point being made by the noble Lord, I will write to the noble Baroness in much greater detail and make the letter available in the Library, as she knows I always do.

[Baroness Featherstone]

I know that the Minister will always write to me. He writes to me often. I will leave that issue for him to ponder and, I hope, address in his response; I am happy to have in writing whatever he cannot address now.

I want to move on to other issues that need addressing or reviewing as soon as possible in the regulations. I thank Energy UK for drawing my attention to the assignment of rights, for which we are all grateful. Will the Government extend similar rights to small and medium-sized businesses and, if so, when? The changes to support household customers with high up-front costs are excellent, but small and medium businesses need a similar provision. The Secondary Legislation Scrutiny Committee report was clear that a comprehensive review of the RHI is needed and that BEIS needed to be,

“rigorous and ongoing if the deficiencies of the past are to be redressed”.

To be sure that money is being spent appropriately, this needs to happen before the end of 2018 to make sure that what is yet to be spent is spent efficiently. Moreover, it is extremely important to introduce a long-term low-carbon heat incentive going into the future, beyond the cliff edge.

The NAO pointed out the scheme’s failure to be cost-effective and essentially said that that was down to poor monitoring and targeting. Can the Minister tell us how the Government will address the NAO’s concerns in monitoring and ensuring the appropriate targeting of the RHI in future?

Energy UK has helpfully published a report that lays out a way forward for the industry, the Government and Ofgem in terms of actions and decisions needed in order to decarbonise heat. Given the gap between where we are and where we need to get to on decarbonising heat—I was going to go into fracking but I will spare the Minister that—I suggest that the Minister not only reads that report by Energy UK but acts on the very good advice that is in it.

[Lord Stevenson of Balmacara]

My Lords, I thank the Minister for his excellent introduction to these regulations and other speakers who have contributed. It is a truism to say that these regulations are an important part of decarbonising the economy and reducing greenhouse gas emissions in line with our international commitments and targets. The key question has to be whether these regulations before us will help us in our drive to achieve the Government’s stated aims, which include a,

“focus on long-term decarbonisation, promotion of technologies with a credible role to play in that transition, and offering better value for money for taxpayers”.

I couple that observation with a question to the Minister: does he agree that the evidence before us—which, as has just been said, is not complete by any means—seems to show that we have been less successful in reducing carbon from heat in this country than we have been in decarbonising electricity generation? It may be that that is a lesson that we need to learn and expand upon during this process.

The noble Baroness, Lady Featherstone, has just said that we are approaching a cliff-edge. Not only is this scheme time limited, but we have had very little information on how the Government are going to drive this policy through to 2030 and beyond and, indeed, on whether they are focusing sufficiently on decarbonisation or are falling into the trap of choosing some current technologies over others, which experience tells us is not the way to go. We need to go single-mindedly for the higher carbon-generating technologies and stick with that before we start playing around with too many other options that may well not be as efficient in getting us to the target.

Turning to the regulations, we do not disagree with the proposed changes. There have already been delays that have been far too long, revisions and seemingly endless consultations. The most important thing is to get on with delivering progress in renewable heat generation. However, we have to bear in mind, as the NAO report, which has already been mentioned, has brought into clear focus, that this reset of where we currently are translates into a very severe overall reduction in ambition. Can the Minister give us some indication of the longer-term plan that the Government have for renewable heat, and of what exactly the plan will consist? The ambition, which I thought all parties shared, of a substantial decarbonisation of heat cannot be achieved on the RHI alone. Indeed, as has been mentioned, these regulations are going to end, and will be closed to new entrants in March 2021. This is very short-term target and few, if any, new projects can be expected to be devised, tested and financed, or even introduced, in that timeframe. So, while we welcome what is being done, the Government need to answer some key questions: what is going to happen next and when will it happen? Where is the research on different heat-demand scenarios? What is the future for hydrogen, which recent reports have talked up? What changes will be needed in the grid, for example, if there is a large- scale uptake of heat pumps, and who will pay for that? What is the proper role of bioenergy, given its sometimes adverse impact on the natural environment? All we know is that the Government intend to publish a full report on the evidence by summer 2018, which is not, frankly, enough, and is, of course, already too late.

We have, as the Minister said, the benefit of a NAO report, which was picked up by the Secondary Legislation Scrutiny Committee. The key point that emerges from that is that the amount of renewable heating funded by the RHI will have reduced to 65% by 2020, and the lifetime carbon emission reductions achieved by the RHI, in terms of the current ambition compared with the original starting ambition, is a reduction of 44%. This is a substantial downgrading, which is very disappointing. As a country, we surely deserve better.

I have some specific questions for the Minister, some of which have been raised already. On the assignment of rights, which we agree is important, surely it is important for both domestic and non-domestic RHI, but the regulations restrict it to domestic. Can we have an explanation of why that is the case? On tariff guarantees, the regulations are sending the wrong signals; people need certainty, and making these TGs subject to closure if the guarantee amount is exceeded in any particular period is obviously helpful in capping the costs, but will be disastrous because they leave investors and operators uncertain about the likely financial return they will obtain from their investment. We welcome the geothermal element in the non-domestic scheme, but the funding identified seems very ineffective and insufficient. Can this be looked at again? Finally, I am surprised at the outturn position of 20% adopted on the CHP efficiency threshold, as 71% of the consultation responses disagreed that the level should be returned to 20%. The argument goes that CHP, because of its variable outputs, does not work on the basis of a known level of electricity certainty. By setting the level at 20% as if it were achievable across the board without exception, the scheme potentially undermines the viability of good CHP schemes that cannot operate entirely on that basis. I would be grateful for a comment from the Minister on that.

I look forward to the response from the Minister, but I echo what has just been said by the noble Baroness, Lady Featherstone: if he wants to add to his letter-writing, I am sure that we can wait for that.

[Lord Henley]

My Lords, as always, I make the offer of a letter to all noble Lords who took part in the debate, because obviously I will not be able to pick up all the points. I am grateful for noble Lords’ general welcome for the regulations and our response to the NAO report.

The noble Lord, Lord Teverson, talked about this being a drop in the ocean given the large sums of money that are involved—we all know that a billion here and a billion there soon adds up to quite a large sum. Take, for example, AD, which was mentioned by the noble Lord, Lord Teverson, and the noble Baroness, Lady Featherstone. We know that AD will never solve all our problems, but it can deal with a certain amount of waste. As was pointed out by the noble Lord, Lord Teverson, the important thing with any AD plant is to make sure that you have adequate waste as feedstock for the future. We do not want people producing waste for the sake of waste just to go into a plant. We want to use only genuine waste or, on occasion, to top it up with a certain amount of crops that are grown for that purpose. Principally, however, plants would be designed to deal with waste.

In my former life as a Defra Minister, I saw quite a number of AD plants taking in waste from very different sources. Where they were attached to a supermarket, one would see bucket loads of old yogurts or whatever else had gone past its sell-by date being tipped in. That was a good way of using it, and we want to devise schemes that will, as the noble Baroness rightly said, prevent that waste going to landfill. I saw excellent small schemes also. I remember one used by a salad producer, which took the waste from its own products—the stalks from tomatoes are actually rather difficult to break down—and used it to produce both heat and power to grow more tomatoes in due course, and used the digestate that comes out in the end to fertilise those tomatoes. It was, wonderfully, almost a closed loop. There are terrific advantages to AD, but, as we all know, it will not solve all the problems.

RHI will be an important step in helping to reduce carbon emissions and—I say this to the noble Lord, Lord Teverson—make progress towards the legally binding renewable energy targets that we have. As I made clear, we will certainly look very carefully at ensuring that there is suitable waste feedstock and that the scheme ensures current and future supplies to anaerobic digestion. If the noble Lord has a local problem in the south-west, it is important that he, and those in that world, brings it to the attention of the department when it is reviewing this matter. I assure the noble Baroness, Lady Featherstone, that my right honourable friend Claire Perry and the department will look constantly at these matters to make sure that there can be further tinkering to get it right.

The noble Lord, Lord Teverson, asked about solar thermal. My understanding is that it is eligible for both schemes, so it is already supported by RHI. If he wants to look at that for his own domestic arrangements, he is welcome to do so.

As I said, I very much welcome what the noble Baroness, Lady Featherstone, had to say. I made it clear that we will keep these matters under review. I cannot give a precise date for when and how my right honourable friend will respond. I will certainly respond to some of the noble Baroness’s more detailed questions, particularly those relating to electrolysis and other matters, most of which I shall make a complete hash of if I try to respond to them now. I think all those taking part in this debate would be far more grateful for a written response.

The noble Baroness is right to raise the whole question of detecting abuses and gaming—something touched on by other noble Lords and which the NAO was wary of. As she pointed out, with any changes that we make, there are always potential unintended consequences, and we keep that under review. It is a large and varied scheme, and the non-domestic scheme in particular has huge variation in size, heat and use and the technology used between projects.

Despite all those challenges raised by the NAO, the department—the former Department for Energy and Climate Change, which noble Lords on the Liberal Democrat Benches will know well because it was one of their great Secretaries of State who sat in that department, which is now within BEIS—is working with Ofgem and, I think, developing a better approach to identifying gaming. We will certainly respond to the NAO in due course.

The noble Lord, Lord Stevenson, also welcomed the changes, and I am again grateful. He particularly welcomed the assignment of rights, but was concerned that it might lead to a lack of access to loans or other finance for a number of businesses and that that could be a barrier for them. I can only say that we have no plans to widen the assignment of rights beyond the household sector at the moment, but we would always want to keep all matters under review.

[Lord Teverson]

What is the logic to that? The issue for small and medium-sized businesses is exactly the same as for domestic users: it is about high capital outlay, which is equally difficult for SMEs as for private, domestic householders. This has really got in the way. The Government have a great solution there now for the domestic sector; if the principle is being breached, I do not see why it is a difficulty to extend it to the SME sector.

[Lord Henley]

I appreciate what the noble Lord says about there being no logic to it. It is just that there is no evidence at the moment that lack of access to loans is a barrier to business. If the noble Lord thinks otherwise and can produce evidence, it can be looked at.

As I said, the order has largely been welcomed, and I am very grateful for that. These changes are necessary as a result of the NAO report. I think that we would all agree that there have been considerable successes this year. It is only part of the whole scheme of trying to decarbonise the system—again, we wish to pursue that even further.

I want to pick up on one final comment from the noble Baroness, Lady Featherstone. If I could persuade her and some of her Liberal friends of the benefits of what she referred to as fracking and of pursuing greater domestic production of gas—of which there is potentially a great deal in this country—in that it improves both our chances of a degree of decarbonisation and our energy security, I would feel that I had achieved a very great thing. That will no doubt come in the future. In the meantime, I will give way before I finally put these regulations to bed.

[Baroness Featherstone]

Without going into a detailed back and forth discussion on fracking, I simply want to add to the point I made about the Paris agreement. Bringing on stream another fossil fuel at this point might be a distraction from a real solution to our problems in the future.

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[Lord Henley]

I do not believe that it would be a distraction. It would have considerable benefits for the United Kingdom, bearing in mind what is available to us here. I hope one day to persuade the Liberal Democrats of the virtues of that approach. We might get there.

Motion agreed.

Product Safety: Freezers and Refrigerators

Lord Henley Excerpts

Tuesday 8th May 2018 Lords Chamber

[Baroness Donaghy]

To ask Her Majesty’s Government what plans they have to strengthen legal safety requirements for fridges and freezers sold in the United Kingdom.

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

My Lords, we believe that Britain’s product safety requirements are among the strongest in the world. Manufacturers have a legal responsibility to place safe products on the market. The UK is leading on proposals to enhance the standard for fridges and freezers at an international level.

[Baroness Donaghy (Lab)]

My Lords, the recent Which? report said that current safety standards are not fit for purpose and that its tests have resulted in “Don’t buy” recommendations for 250 models, most of them from household names accounting for 45% of the market. In particular, Which? advised not buying plastic-backed models. While we await the appropriate report on the Grenfell Tower blaze, what actions will the Government take to reassure consumers and support the findings of the Which? report?

[Lord Henley]

My Lords, I am of course aware of the Which? report. It made it quite clear that most or all of the fridge freezers it referred to did meet existing standards. The Which? report was looking at enhanced standards. The Government will certainly look at that and are working with Which? and other parties. This is why I stressed in my opening Answer that seeing whether even more stringent standards can be set has to be done internationally. But those products certainly meet existing standards—which, as I said in my original Answer, are among the safest in the world.

[Baroness Sherlock (Lab)]

My Lords, this worries me. I declare an interest in that a close friend of mine escaped with her life when she woke up in the night to find that her fridge was on fire. Although the brilliant London Fire Brigade was there within minutes, her entire flat was gutted. The firefighters who got her out and put her safely in the back of the ambulance guessed what make her fridge was and said, “Tell your friends never to buy one of those”. The firefighters know this; that is why the London Fire Brigade has been campaigning for the last five years for a ban on those kinds of fridges. If they know that, do the Government not know that, and will they not protect us?

[Lord Henley]

My Lords, all fires are potentially disastrous and it is right that the noble Baroness should highlight that point. The number of fires that have been caused by fridge freezers is very small indeed—something like 2% of all domestic fires—and the number is declining. We are aware of the concerns, which she rightly highlights, about products with plastic rather than metal backing. That is why we are looking at strengthening standards in that area. As I made clear, I think that our standards are already very high, and all the fridges meet those standards. The Which? report, rightly highlighted by the noble Baroness and her noble friend, said that we should possibly look at strengthening those standards. That is what we are doing.

[Baroness Neville-Rolfe (Con)]

My Lords, in view of what has been said, I am very glad that the Government have set up a new Office for Product Safety and Standards, and am grateful for my invitation to visit it. On from fridges, what is being done with the many hundreds of thousands of outstanding Whirlpool tumble driers, which also pose a fire safety risk? I believe that the Minister must be on the consumer’s side in these matters.

[Lord Henley]

My Lords, I think I have used the expression, “The consumer is always right” on other occasions. We are on the consumer’s side. My noble friend will be aware that my honourable friend Andrew Griffiths has already had discussions with Whirlpool and made his concerns clear. This question is related not just to fridge freezers but, as my noble friend is well aware from her experience as a Minister in this department, and I am grateful for the work she did, to other items as well. We want to look at all the standards and make sure that we continue to have the right standards and that they are as stringent as possible.

[Lord Razzall (LD)]

My Lords, the Minister is of course aware that his noble friend, the noble Baroness, Lady Neville-Rolfe, has led a continuous charge on this and related issues since she ceased to be a Minister. Does he accept that there is a suspicion that the failure to take proper action over this and related issues is an indication that, as a result of Brexit, government decision-making elsewhere is paralysed?

[Lord Henley]

My Lords, I totally and utterly reject that accusation. We are doing a great deal on this front. However, I agree that my noble friend has done a great deal on this—and not just since she left government. She led the charge on this as far back as November 2014, when she announced the original review of the UK product safety system.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I think one should share some of the credit. The Minister’s noble friend did a great deal of work, but the Opposition were also involved in trying to get the new Office for Product Safety and Standards set up. The Government are saying that we lead the world in terms of our standards, but, if these standards are linked to roughly 60 fires a week in the UK, how many deaths is it going to take to get them to change their mind on this? We have a new body, the Office for Product Safety and Standards. It has a wonderful website with a list of things it can do. When is it going to do something, and does it have the power to change the way people manufacture these dangerous machines today?

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[Lord Henley]

My Lords, I will echo the noble Lord in saying that it is not just the work of my noble friend and pay tribute to the Opposition Front Bench, other Members of this House and another place and, for that matter, Which? magazine for highlighting problems here. Obviously any electrical equipment has the potential for danger. That is why we want to get the right safety regulations in place and why we are looking at tightening them. That is why we want to make sure that proportionality is considered in all these matters and that is why I highlighted the fact that only about 2% of fires are caused by fridge freezers. There are other products that need looking at. We will continue to look at our safety standards, keep them under review and make sure that they continue to be the safest in the world.

[Lord Tomlinson (Lab)]

Will the Minister go back to the mantra that he gave to the House a few minutes ago? He said that the consumer was always right. That really is arrant nonsense if he begins to think about it. It is not right when it comes to unhealthy eating, which is why the Government seek to intervene. It is not right when people are forced to pay very high interest rates on loans. It is not right when it comes to alcohol consumption levels, and it is certainly not right when it comes to massive stakes on fixed-odds gambling machines—so can I persuade him not to issue that mantra again?

[Lord Henley]

No, I am afraid the noble Lord will fail in that, because I believe that the consumer should be provided with adequate information to make an informed decision on all these matters, whether they be excessive amounts of food, which might interest the noble Lord, alcohol or whatever. The consumer can then make their decision. Allied to that, there should be adequate protection in terms of goods of this sort, so that the consumer is not endangered in matters where they would not be able to make an informed decision.

Swansea Tidal Lagoon: Hendry Review

Lord Henley Excerpts

Tuesday 1st May 2018 Lords Chamber

[Baroness Finn]

To ask Her Majesty's Government what are their plans, if any, for the Swansea Tidal Lagoon, following the Hendry Review published in January 2017.

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

My Lords, work associated with the Hendry review and the proposed Swansea Bay tidal lagoon continues. The Department for Business, Energy and Industrial Strategy remains focused on it. Any decision will have to represent value for money for the United Kingdom taxpayer as well as the consumer.

[Baroness Finn (Con)]

I am grateful to my noble friend for his Answer. Given that the Hendry report said that the Swansea pathfinder would cost households less than the cost of a pint of milk per year, that no country in the world is better placed to be a hub for the development and export of tidal power technology, and that the tidal barrier could be a significant user of steel from the nearby Port Talbot steelworks, does my noble friend agree that it is now time to do what the late great Lord Crickhowell did with the Cardiff Bay regeneration project—cut through the procrastinating and just get on with it?

[Lord Henley]

I am grateful to my noble friend for paying tribute to our late friend Lord Crickhowell, who we all miss, and for setting out a number of arguments in favour of the Swansea Bay tidal lagoon. Obviously, there are a number of matters to consider, not just those that she mentioned but the costs and environmental concerns. We will take all of those into consideration, and, along with the Welsh Government, make an announcement when it is appropriate.

[Lord Anderson of Swansea (Lab)]

The review of this project, which is very close to my home, was completed well over a year ago and was positive. What further evidence do the Government need?

[Lord Henley]

My Lords, it is not a question of needing further evidence but of considering the evidence that is before us such as that relating to costs—obviously, it would be a very expensive operation—environmental considerations and all other matters. My right honourable friend the Energy Minister has spoken about this, as the noble Lord will be aware, to colleagues in the Welsh Government. All matters should be taken into consideration and an answer will be given at the appropriate time.

[Lord Stern of Brentford (CB)]

My Lords, will the Minister ensure that, in the economic analysis that lies behind the project, he considers the tremendous benefits in terms of recreation, much longer life and above all its use as a prototype? This could and should lead to the Cardiff lagoon, which would be highly competitive with other sources of energy, and could and should lead to tremendous exports. Countries around the world are following this very closely. If he needs any help with the economic analysis, as a professor at the LSE and former chief economist to the World Bank, I am happy to oblige.

[Lord Henley]

I am more than happy to take up the noble Lord’s offer but he has also raised other matters that must be considered.

[Lord Wigley (PC)]

My Lords, what on earth is taking so long with this decision? Is it not an appalling example for business and everybody else that the Government are so slow on this matter? Yes, the cost must be taken into consideration, but it is a matter of taking a decision based on the information. Surely we should be getting on with it.

[Lord Henley]

My Lords, the Government will not be rushed.

[Lord Bradshaw (LD)]

My Lords, it is reported that the Drax power station is supported financially by the Government with an ongoing subsidy to the tune of about £1 billion a year. To aid the consideration by this House and others of the merits of the Swansea scheme, will the Minister table the facts about Drax?

[Lord Henley]

I am more than happy to lay before the House any amount of information about the Drax power station and, if the noble Lord’s figures are correct, confirm them. Obviously, those matters can also be taken into account.

[Lord Morris of Aberavon (Lab)]

My Lords, I support the interests of the noble Baroness, Lady Finn. Because of the delay of this project and the delay in electrification, is there not an impression that, in the words of President Obama, south-west Wales is at the bottom of the queue?

[Lord Henley]

My Lords, south-west Wales—and the whole of Wales—is not at the bottom of the queue. As my right honourable friend the Minister for Energy made clear in another place this afternoon, she has been engaged in discussions with colleagues in the Welsh Government. A decision will be taken at the appropriate time but we do not want to be rushed into it.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, this iconic project would be a world first. It would power 120,000 homes, develop exportable technology and create a major tourist attraction for Swansea. Whatever the rights and wrongs of the subsidy—I acknowledge that a large one would be required to prove this pioneering form of energy generation—does the Minister agree that this decision has been in the long grass for long enough?

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[Lord Henley]

My Lords, I note what my noble friend says and the feelings of the House. As I said, the Government should not be rushed into an answer but I will make sure that my right honourable friend is fully aware of the concerns that have been raised.

[Baroness Finlay of Llandaff (CB)]

Have the Government compared the risk to the public health of the type of lagoon and pilot project as has been proposed with the long-term risk of a nuclear power plant and all the potential dangers from it? In terms of value for money and the environment, the public health risk must also be assessed.

[Lord Henley]

I do not think that I can take this much further but I note what the noble Baroness has to say.

[Lord Stevenson of Balmacara (Lab)]

Let me try the question the other way round. Is this project still open? Is it possible that we might get a positive response to all these requests? I draw the Minister’s attention to a letter sent to Mr Carwyn Jones by the Secretary of State in January, which described the tidal lagoon as,

“an untried technology with high capital costs and significant uncertainties”.

Is that not just the end?

[Lord Henley]

I think that the noble Lord is trying to put the wrong interpretation on that. As my right honourable friend made clear in responses earlier today in another place, she is still open on this matter, no decisions have been made and she still wants to continue those cordial relations with colleagues in the Welsh Government. I have not got a transcript of what she said but no doubt the noble Lord can look at Hansard tomorrow.

[Lord Teverson (LD)]

My Lords, the Minister could take this matter forward by telling us when the decision will be taken.

[Lord Henley]

The noble Lord is slightly more of an optimist than I am.

[Lord Rowe-Beddoe (CB)]

My Lords, I remind the Minister and the House that the Bristol Channel is the route of the second largest rise and fall of tide in the world. It is more than 40 feet every day. We have tried since 2012, if my memory serves me correctly, to harness the power awaiting us. Please will the Minister realise what is happening here, because we cannot go on? Whether it is Cardiff, the Bristol barrage, the Swansea lagoon or anything, we should take a decision to back renewable energy.

[Lord Henley]

My Lords, the noble Lord will find that the Government do back renewable energy. I can give him an assurance that I was aware of the figures he gave about the tidal variations in the Bristol Channel, but I cannot take him any further on when the decision will be made.

Proposed Merger of Sainsbury’s and Asda

Lord Henley Excerpts

Tuesday 1st May 2018 Lords Chamber

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

My Lords, with the leave of the House I should like to repeat in the form of a Statement an Answer to an Urgent Question given in another place yesterday by my honourable friend the Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy. The Statement is as follows:

“On 30 April, J Sainsbury plc and Walmart Inc announced that they had agreed terms in relation to a proposed combination of Sainsbury’s and Asda Group Ltd, a wholly owned subsidiary of Walmart, to create an enlarged business. There are no planned Sainsbury’s or Asda store closures as a result of the merger. The proposed deal is conditional on clearance by the Competition and Markets Authority.

The Competition and Markets Authority will hold pre-notification discussions with the parties and, when it has sufficient information, will commence its phase 1 investigation. Usually, a phase 1 investigation will last up to 40 working days before the authority decides whether to clear the merger or refer it on to a detailed phase 2 investigation. I understand that the parties have requested to fast-track straight to phase 2. As part of its competition inquiry, the CMA can look at the buying power of a merged company in relation to its suppliers and the impact that the merger would have on them. Decisions about mergers are taken independently of ministerial control and are subject to legal challenge. Under the Enterprise Act 2002, Ministers have the power to intervene in mergers only on public interest grounds covering national security, media plurality and financial stability.

Today the Secretary of State and I have spoken to Sainsbury’s chief executive officer, Mike Coupe, and Asda’s CEO, Roger Burnley, so that we can better understand their plans. Additionally, I have today spoken to the Union of Shop, Distributive and Allied Workers and the Unite union. I will speak to the GMB union immediately after leaving here. When I spoke to Len McCluskey this morning, I made it clear that I expect Sainsbury’s and Asda to conduct proper and thorough engagement with the unions. This afternoon, I have spoken to the Groceries Code Adjudicator, Christine Tacon, to reiterate the importance of ensuring that suppliers, particularly small and medium-sized enterprises, are treated fairly.

The UK’s merger regime is designed to offer clarity for businesses and to build investor confidence. Mergers are an important part of a dynamic economy, and the Government appreciate that they can bring real benefits to consumers and the economy as a whole by attracting inward investment. We will continue to monitor the situation closely”.

My Lords, that concludes the Statement.

--- Later in debate ---

[Lord Henley]

My Lords, the noble Lord’s first question was about semantics, whether this is a merger or a takeover. It is a merger, but I do not think we need bother about that. Secondly. he asked whether it will squeeze competition. I do not think it will. We are looking for benefits to consumers, but that is a matter for the CMA, and I am confident that the CMA, a body set up by the last Labour Government, has the ability and resources to do that job. Lastly, he asked about working with the Small Business Commissioner. The Statement makes it quite clear that my honourable friend had already spoken to the Groceries Code Adjudicator. If it is appropriate that he talks to the Small Business Commissioner, no doubt he will. I will pass that on to my honourable friend and ask him whether he has.

[Lord Fox (LD)]

Asda and Sainsbury’s both say their HQs will stay, no shops will close or be rebranded and jobs are safe, yet they promise price reductions of up to 10%. That can happen only through exerting their mass to squeeze the supply chain. We have talked about the role of the CMA, but what guarantees will the Government give the British food industry? What guarantees can British farmers expect from the Government?

[Lord Henley]

My Lords, we hoped that the first matter that noble Lords would want to address was savings for the consumer, and that is something that the supermarkets are looking for. The noble Lord said that they have stated that their headquarters will stay and all their stores will stay, and therefore savings can come only through squeezing the supply chain. I do not accept that, but that is a matter for the supermarkets to address. It is something that the CMA will look at when it addresses this matter properly, as was discussed when my honourable friend made his Statement yesterday in another place. Obviously, the CMA might want to look at individual stores and whether it is right and proper that some are kept. That is a matter for the CMA. As I have made clear, my honourable friend has already had discussions with the Groceries Codes Adjudicator and, to the extent that we can play a part in that, my honourable friend will continue to do so.

[Baroness McIntosh of Pickering (Con)]

My Lords, will my noble friend give the House an assurance that small growers of fruits and vegetables in particular will not be severely disadvantaged in this regard? There is real concern that when the Grocery Code Adjudicator’s powers were reviewed the opportunity was not taken to permit her to take up an investigation on her own initiative. I am sure my noble friend will agree that we all appreciate that there is no way that a small grower or farmer who has a contract with Sainsbury’s or Asda, or the bigger merged body, will put that contract at risk. It is very difficult to make a confidential complaint because they will be so easily identified and they will lose their part in the supply chain. Will my noble friend take this opportunity to review the powers of the Grocery Code Adjudicator to take up investigations on her own initiative if there is any proof at all, and will she be able to receive evidence in this regard from third parties such as any farm organisations like the NFU, the TFA or the CLA?

--- Later in debate ---

[Lord Henley]

My Lords, I note what my noble friend has to say. I do not want to rehearse all the arguments that we went through when the Grocery Code Adjudicator was established some years ago, but I accept that it is a very difficult question when we are dealing with the imbalance between the very big supermarkets on the one hand and, on the other, those further down the supply chain, particularly small producers and growers. However, I give an assurance to my noble friend that the powers of the Grocery Code Adjudicator will always be kept under consideration by my right honourable and honourable friends and by the department as a whole. Obviously we want to see fairness between the supermarkets and their suppliers, just as—this is equally important in all retail matters—we think it important to ensure that the interests of the consumer are kept first and foremost at hand. It is the consumer that we are most interested in.

[Lord Haskel (Lab)]

My Lords, we are still members of the single market. Is this a matter large enough to involve the Commission?

[Lord Henley]

No, my Lords, on this occasion the CMA will be doing this job. I think we can all say—even the noble Lord might agree—that, thankfully, the Commission will not be involved in any way at all.

[Lord Palmer (CB)]

My Lords, I have been involved in the food industry all my working life. Is this not in a way the thin end of the wedge? We already have completely deserted high streets. Are we shortly going to have completely deserted out-of-town shopping centres?

[Lord Henley]

My Lords, I am aware of the noble Lord’s involvement in the food industry. We have been eating biscuits bearing his name for some time, except I am not sure if we do eat those biscuits any more. The noble Lord will be aware that the retail world is changing, because that is what consumers require. It is not in our power to stop those changes; we must live with them. The retail sector itself must look at how the high street is changing and adapt accordingly.

Enterprise Act 2002 (Share of Supply Test) (Amendment) Order 2018

Lord Henley Excerpts

Tuesday 1st May 2018 Lords Chamber

Moved by

[Lord Henley]

That the draft Order laid before the House on 15 March be approved.

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

My Lords, these changes will extend the Government’s powers to intervene in mergers that might give rise to national security implications. The powers to make this secondary legislation are found in the Enterprise Act 2002.

The changes contained in the instrument will amend the share of supply test to allow the scrutiny of more mergers in three areas of the economy: military and dual-use technologies, and two parts of the advanced technology sector encompassing computing hardware and quantum technologies. Subject to parliamentary approval for this affirmative procedure statutory instrument, a second negative procedure statutory instrument will be laid to amend the turnover test to allow the scrutiny of more mergers in the same three areas of the economy.

Before I explain the changes in detail, I will say a few background words about the Government’s position relating to national security and mergers. The United Kingdom economy is open to the world. Core to our economic approach is to trade with and invest in other countries, and to welcome foreign investment into our economy. To facilitate this open economy, our framework of laws and policies on protecting national security and on the conduct of mergers must be continuously reviewed and updated. This tradition of periodic refinement has enabled the United Kingdom to remain a place where people can invest with confidence.

The Enterprise Act 2002 is the key legal means for the Government to examine mergers for the purposes of national security and other specified public interest criteria. In the light of technological advancements, economic developments and changes in the national security threat, it is now time for reform. Last year we set out a two-stage approach, beginning with action through this instrument and the proposed related instrument amending the turnover test.

I will briefly expand on the amendments. The changes made by this order and the proposed order amending the turnover threshold relate to mergers involving businesses active in three areas of the economy. First, the instrument covers businesses that produce military and dual-use technologies. Military technology includes such items as arms, and military and paramilitary equipment, while dual-use technology could have both military and civilian uses. These items can pose clear and immediate risks to the United Kingdom, our people and society. Furthermore, the acquisition of items that provide the UK with its military advantage can raise significant national security concerns. The instrument ensures that businesses involved in the development or production of goods that form parts of the UK’s export control regime will be in scope.

Secondly, the instrument addresses the risks created through advances in computing hardware, which now mean there are ubiquitous goods with the potential to be directed remotely should a hostile actor obtain access or control. Thirdly, it will bring quantum technology within scope. The huge technological potential offered by this area also presents national security challenges.

As a result of the changes made by the instrument, the Government will be able to intervene if the target business in a merger has a share of supply of at least 25% before the merger. The acquiring party will not need to have any share of the supply of the same goods or services for the test to be met.

We are making these changes because we are concerned about possible scenarios whereby a business with no existing share of supply in the UK buys a business in one of these three areas of the economy. Such a merger would not result in an increase in the share of supply in the UK and, therefore, the current share of supply test set out under the Enterprise Act would not be met. The changes will apply only to the areas of the economy that I have set out.

The amendments made by the second, negative statutory instrument will mean that the Government are able to intervene in a merger if the target firm or business being taken over has a UK turnover of more than £1 million, rather than the Act’s current £70 million threshold, in the same three areas of the economy covered by the first instrument. Microbusinesses are excluded from the scope of the revised thresholds, ensuring that the Government take as proportionate and focused an approach as possible to delivering our policy intention.

We have incorporated the constructive feedback from our consultation last October into the substance of these reforms. We have published an impact assessment and guidance to provide greater clarity to businesses and investors.

We will continue to assess risks in other sectors. If there is evidence to suggest that the Government should take action in additional areas of the economy, they will bring forward further legislation. In the longer term, the Government will bring forward primary legislation to make more substantive changes to how they scrutinise national security implications of foreign investment. We consulted on the proposals and are analysing the responses. A White Paper will follow in due course. I commend the order to the House.

[Baroness Burt of Solihull (LD)]

My Lords, as the Minister said, the United Kingdom prides itself on having an open economy—open to trade and open to takeover and mergers, in the UK as well as overseas.

However, in some areas, mergers may be open to threats to our national security in the fields referred to in this order of dual-use military technologies, computing hardware and quantum-based technology. Examples of such threats might be espionage, disruptive or destructive actions, or exploiting investment as inappropriate leverage in other negotiations. I therefore understand why the Government might want to strengthen their powers to scrutinise mergers and takeovers which fall into these areas.

However, I hope that the Minister will forgive me if I express a few concerns, and a number of questions are worth putting to him. First, some of the responses to the Government’s consultation were quite hostile. Why did the Government reject the opinion of several legal firms that the proposals were “inappropriate” or “disproportionate”? Why is the special public interest regime, meant to deal with mergers below the £70 million threshold, considered inadequate? Why have the Government decided on these three sectors specifically? Why does the order not cover other sectors that could have national security implications?

While the Government are not doing it at present, we need to be wary of significantly expanding the national security grounds for intervention because they could be used spuriously, as we see President Trump doing. We need to ensure that Parliament can keep the Government accountable for this power. We are currently far from the situation that exists in the USA, with President Trump using national security concerns spuriously to protect US economic interests, but will the Minister commit to coming to this House regularly, as the Secretary of State has done in connection with GKN, so that Parliament can hold the Executive to account for how these powers are used? In addition, we have been calling for a public interest test that could widen the grounds for ministerial intervention. However, this is controlled at EU level so would require EU agreement or would need to be done post Brexit. Does the Minister agree that the grounds for ministerial intervention in corporate takeovers, particularly by foreign companies, need to be expanded? For example, would he be prepared to work with the EU to consider the case for intervention in mergers to ensure that the UK’s research and innovation capacity is not restricted? I look forward to hearing what he has to say.

[Lord Stevenson of Balmacara (Lab)]

My Lords I am grateful to the Minister for his introduction to this SI. I shall start with a very obvious point that I am surprised he did not reach for as his first line, which is why it has not been brought in on a common commencement date. The noble Lord will have heard me speak about this before and I am sure that the department is tired by my questions about this. Such regulations will have a huge impact on certain sectors of the economy. Common commencement dates were meant to give people good warning about when regulations would come in. They are 6 April and 1 October: it would surely not have been impossible to arrange for them to come in, if the 6 April date could not be met, on 1 October. That would have given people plenty of time and knowledge that it was happening.

The Minister has been very good in responding to this and seems to get the point, but of course no action seems to be flowing from the decision. I have decided to keep a tally of his scores: we have had six statutory instruments so far, only one of which has landed on a common commencement date, and I had to rule that one out because it missed the common commencement date that was available to it and went for one further down the track, so it really does not count. So it is really 6-0. I really think that this is not a good standard and I am going to bring this up every time we have a chance to debate these issues until he is finally goaded into doing something about it.

More seriously—although I think that this is a serious point—I agree with a lot of what the noble Baroness, Lady Burt, said about the general approach taken here, particularly the very hostile response that was given to the consultation, which must have given somebody in the department some concern. Like her, we agree with the broad thrust of what has been happening here. There is a concern for the national interest if there are not sufficient regulations set up around hostile takeovers—or, indeed, takeovers that have been done with consent—if they threaten our national interest.

My worry, which I think is shared by the noble Baroness, is that while it is relatively straightforward to see what is meant by the national security interest in relation to military technologies, where the regulations will bite, as soon as there is an introduction of dual use a grey area opens up. It is true that most of the material will be listed as part of the UK’s export control regime, and there is some consolation in that, but I worry a bit about material that could be judged by BEIS to have dual-use technologies, even if the original intention was never for that to be the case. It would mean that the company involved in making it might well get caught by this.

The problems get worse in relation to computing hardware and, in particular, in relation to quantum technology, for which definitions are so obscure, or so general, that it is a very hard to see that those who are working in this area will know whether they are or are not in scope of this regulation. Computing hardware is, as the regulation says, ubiquitous. It is very difficult now to see any technology that does not involve some form of computing, whether it is at the simple level or whether it is more complex, in terms of writing instructions and making things happen in a way that could be carried out to be hostile or difficult. I think that the noble Baroness, Lady Burt, and I are saying the same thing here; that this is getting to the point where it is either such a broad list that it is going to include every company involved in technology and manufacturing in this country, or so wide that it will be useless, because it will be taking the Government’s control, through the merger process, into every sector of the economy, and I am sure that is not what is intended.

If it is bad in computer hardware, it is even worse in quantum technology, which is a phrase that is not well defined. As far as I can see, it certainly did not appear in any legislative document that we have seen in this House for some time. Of course, quantum could be restricted to mean very fast computing. Obviously, that is the sense in which the national interest is more likely to be at risk. But, again, in a short period of time it could include virtually every sector of our economy, and if it does not, it means that our economy will not be competitive across the world. The question underlying this is: is it not better for the Government to fess up and say that they will investigate every merger? In effect, every merger could be used as a way of breaching our national security. If that is the case, perhaps the Government ought to think again about the road being taken here.

My second point is about the change that is coming forward in the negative instrument, which is helpfully attached to the documents that have been circulated for this debate, which is to reduce the value of the target companies for the share of supply test from £70 million turnover per annum to £1 million. Again, it is a question of scale. Does that not suggest that virtually every company in the country will be subject to the share of supply test? If that is the case, how on earth will it reassure those who are carrying on a business which does not threaten the public interest to feel that any discussion or merger they may wish to do with their business—and many of them will be private companies—will be subject to call-in by the competition authorities? I wonder again if the Government are on the right track here.

It may be that the £70 million turnover provides a difficulty in relation to the companies the Government have concerns about, although it is true that according to the impact assessment that is attached to the regulation, we are talking about a very small number of companies—between nought and five. If it is the case that we are going for virtually every SME in the country—those with a turnover of more than £1 million—that probably excludes microbusinesses, but is that not another problem? Quite a lot of the innovative material that will be of concern to our national security may be being developed by two or three people with a very small turnover. If microbusinesses are excluded, the competition issues will not come to bear. I may be making too much of this, but I worry about the direction in which this is going.

My final point for the Government to respond to is that this was said by the Minister to be part of a longer-term project. This is the first stage: two statutory instruments, one of which we have to approve this evening and one of which is a negative and we will have to consider whether to pray against it. According to the Explanatory Memorandum, the second stage is:

“In the longer term, the Government will bring forward primary legislation to make more substantive changes to how it scrutinises national security implications of foreign investment”.


The noble Baroness, Lady Burt, made a number of points about how there may be other considerations here. Will this be restricted to national security or are we finally going to see some sense of the public interest test—which clearly the Secretary of State wished he had powers to address when he was looking at the GKN merger a few weeks ago—which would deal with questions about how research, employment and sensitive activities across the country will be looked at when there is an aggressive overseas takeover that is not particularly welcomed or wanted or which is subject to concerns for which there is currently no adequate remedy in our companies legislation? The Stock Exchange can make recommendations, but these are not statutory. What we need is a government commitment to go forward on this basis which will look at undertakings that will have to be given by the acquiring company for which there will be statutory redress should it be recalled. Is this what is referred to in paragraph 7.4 of the Explanatory Memorandum, and if it is not, can we know when that is going to happen?

[Lord Henley]

My Lords, I start with an apology to the noble Lord, Lord Stevenson, as I have done before, particularly about the common commencement date. I know that he considers this matter of considerable importance and I promised I would take it on board. I hope the message is getting through to the department. It has now also got through to my Whip, my noble friend Lady Vere, who is sitting next to me. She will kick me hard when it next happens. The noble Lord first gave me one out of six, but by his second count had reduced that to 6-0. We will see if we can do better in the future. I hope that I can deal with some of his concerns. I certainly hope we can get back to that point and, where it is important, stick to that common commencement date because I see the importance of what the noble Lord has said.

I forgot about this until I sat down in the Chamber; I then did a few quick sums and saw that the order had been laid on 15 March and comes into effect not 28 days after it is laid but 28 days after it is made. I imagine that it is made on the date when it goes through either this House or another place—I think it goes through another place tomorrow—and that is well off 5 April. I briefly thought, “Gosh, if it means laid then if I add this to that, I would only be a week out”, but I do not think I am as lucky as that.

Perhaps I may deal quickly with some of the points that the noble Baroness, Lady Burt, and the noble Lord, Lord Stevenson, raised. Some of them go wider than the order itself; no doubt someone will discuss some of them in due course if and when there is the primary legislation that I referred to in my opening remarks. The noble Baroness said that a number of legal firms felt, in the consultation, that these reforms were disproportionate or inappropriate. We considered the legality of the reforms carefully and they have gone through significant legal scrutiny by internal and external legal advisers. The reforms have of course been looked at by the JCSI, which we take very seriously. The JCSI certainly said that it believed that the reforms are within the powers granted under Sections 28 and 123 of the 2002 Act.

The noble Baroness, Lady Burt, also asked why the special public interest intervention regime is not enough. That regime is limited to mergers involving relevant government contractors. This statutory instrument takes us a little further and will enable the Government to scrutinise mergers involving an acquirer with no share of supply of the relevant good or service, in the case before a transition, in those three key areas of the economy that I mentioned. She asked why it was those three sectors and not others. Again, the Green Paper set out just how hostile actors’ takeover of certain businesses could raise risks to our national security. We will obviously keep our powers under review but we are acting only under the powers in the 2002 Act. We will not hesitate to take further steps, if necessary, to protect our national security.

The noble Baroness, Lady Burt, then took us wider. Perhaps I may link my response with that to some of the questions raised by the noble Lord, Lord Stevenson. He was looking at the long-term project and how we manage to address it. I can really only take them both back to what I said: we had a Green Paper earlier this year and we are now in the process of looking at a White Paper. Following that, we will need to bring forward primary legislation, which will certainly give the noble Baroness the chance for any amount of parliamentary scrutiny that she wishes. Failing that, I can give an assurance that either my right honourable friend or a Minister here at the Dispatch Box will report to the House if and when it is necessary. As I said, we will want to bring forward primary legislation at some stage to make more substantive changes to how we scrutinise the national security implications of foreign investment. Whether we would want to go wider and look at further grounds for intervention—I noted what the noble Baroness had to say about research and innovation—is a matter that should be left for that occasion.

Finally, the noble Lord, Lord Stevenson, asked about how respondents reacted to the changes to the share of supply test proposed in the consultation. Some respondents raised concerns that the test is subjective and that the threshold is complex and therefore involves complex assessments and would lead to disproportionately high costs for smaller businesses. Some businesses recognised that the proposed changes are necessary to prevent hostile states taking over smaller companies working in sensitive areas of the economy without due diligence being provided. Therefore we are clear that the amendments that the two orders make to the share of supply test are necessary to safeguard national security, as they ensure that our powers to intervene will cover deals involving a buyer with no footprint in specific markets.

I hope I have answered most of the questions put to me by the noble Baroness and the noble Lord. I again apologise to the noble Lord for failing to meet his requirements on the common commencement date. That point is getting through to me, and I have taken it on board. Other than those questions, I think there was a broad welcome for the limited measures proposed in this order and the associated negative instrument.

Motion agreed.

Brexit: Galileo Space Project

Lord Henley Excerpts

Thursday 26th April 2018 Lords Chamber

[Lord Haskel]

To ask Her Majesty’s Government what steps they are taking to continue United Kingdom participation in the Galileo space project after Brexit.

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

My Lords, the United Kingdom has made clear to our European partners our desire to continue the United Kingdom’s involvement in EU space programmes, including Galileo, provided that the UK and UK companies can continue to participate on a fair and open basis. The Government are engaging with the EU to this end.

[Lord Haskel (Lab)]

My Lords, the Government have threatened to withdraw their support if we are not a fully participating member and not trusted with all the security arrangements. Does the Minister agree that that saying “If you do not trust us, we will go elsewhere and we want our money back” is an empty threat unless we have a practical alternative? What is that alternative and does it deal with the worrying lack of trust, which could extend to other matters relating to security, defence and our safety?

[Lord Henley]

My Lords, given our history, I find the lack of trust very confusing, but certainly we can look at other options. We have made it clear in a letter that my right honourable friend has sent to all appropriate Ministers in the other 27 countries that we wish to continue to participate in this programme. So far, we have had only a letter from the Commission itself setting out its view that we should not take part. In our view, that would be folly of the worst sort: it would increase costs for the whole programme by €1 billion and possibly delay it for three years.

[Lord Hannay of Chiswick (CB)]

My Lords, have negotiations begun on the Prime Minister’s proposals for a security treaty with the European Union? If they have begun or are about to begin, will they cover the security aspects of the Galileo programme and perhaps provide a way of avoiding what can be described only as mutually assured damage?

[Lord Henley]

My Lords, I am not aware of whether they have begun but certainly they would provide a way to deal with this matter. The noble Lord is right to stress that there would be mutually assured damage if the Commission was to continue with its suggestion that we should not participate in this programme.

[Lord McNally (LD)]

My Lords, as with the FSA question, is this not a case of where Brexit bravado comes up against the brick wall of reality? If we leave the EU and then have an associate agreement with it of one kind or another, which the Minister cannot define at the moment, it will be weaker than full participation in the Galileo programme. Airbus has already taken its Galileo project out of this country in advance. We will be left for both security and space reasons either seeking such agreements with the United States or the European Union, or, we are now told, going it alone—with a minimum cost of £5 billion. They did not put that on the side of a bus.

[Lord Henley]

My Lords, if not anything else, it suggests the folly of the Commission in making this suggestion. Other countries have not said that they would not like us to participate. That is why my right honourable friend is engaging with other countries. There are benefits to the UK and to the whole EU with us continuing to participate. I repeat that if we do not participate—we are one of the lead players in this—the extra costs of this programme would be €1 billion and it would delay what is a good programme by up to three years.

[Lord Soley (Lab)]

Following on from that question and answer, is the Minister aware that the digital security factor involved in this is crucial? The French are already making major efforts across the board to take work from British satellite and aerospace companies because we have a lead in such manufacturing. We will lose that lead to particularly France and Europe generally unless we can sign up to some digital security deal. That is vital and the Government need to say so, otherwise we will lose out massively.

[Lord Henley]

My Lords, the noble Lord makes a perfectly good point. My right honourable friend has made these points in his letter to the other Ministers involved in this country. That is why the other Ministers— certainly in my department, and in others—have already started engaging on this and will continue to do so. This is a proposal from the Commission but we want to see what the other countries feel about it as well.

[Lord Wallace of Saltaire (LD)]

My Lords, the Minister referred to the Government investigating co-operation with other partners. If we are talking about other Governments with satellite programmes, I imagine it is a choice of China, Russia, India and the United States. Are the Government investigating all of those as options?

[Lord Henley]

My Lords, all I said—I am not going to go much further than this—is that we are looking at other options. I also stress that we have the capability to do quite a lot ourselves. I am not suggesting that we will engage with Russia and other similar countries.

[Lord West of Spithead (Lab)]

My Lords, the Minister will be aware that we work closely with America in this field—most of the work is so sensitive we cannot talk about it—and that we were so far ahead of anyone else in the world in satellite coverage and intelligence that we used to help other countries. It is extraordinary that Europe is now playing silly games about the use of satellites when we have been so generous in the past in the giving of intelligence and working with it. It is also extraordinary, given the skills that we have in this area, that it is not keen to keep us fully involved.

[Lord Henley]

The noble Lord could hardly have put it better, particularly in stressing the capabilities that we have in this country. Only recently I visited an American company making micro-satellites in Glasgow. It could have invested anywhere in the world but it chose Glasgow because it knew Glasgow has the right people with the right skills here in the United Kingdom. We have a great capability and I am sure other people will recognise this.

[Lord Howell of Guildford (Con)]

My Lords, just for the record, I say that we already co-operate with the Russians in the Soyuz and space station programme, in which Tim Peake flew and which is highly successful. Does the Minister agree that, if we can co-operate with the Russians despite everything, surely we should not have too many problems with the European Union?

[Lord Henley]

I am sure that the Commission will note my noble friend’s point.

High Street Retailers

Lord Henley Excerpts

Wednesday 25th April 2018 Lords Chamber

[Lord Naseby (Con)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest in that a member of my family works in the retail trade.

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

My Lords, we understand that some high street retailers are facing difficulties in a changing retail environment. We shall work closely with the newly established Retail Sector Council to bring government and industry together to support the sector.

[Lord Naseby]

Is my noble friend aware that this is the 12th Question I have asked on this broad area? Is he further aware that the rates review was a singular tragedy for the retail trade and, even worse, the rates appeal system today is sadly shambolic?

Secondly, I have asked Questions previously about the unfair competition from online trade, particularly with Amazon now controlling 40% of that trade—worth over £1 billion. Is not it time that that unfair situation was corrected?

Finally, I have raised Questions on providing parking for our shoppers two hours a day, 365 days a year in every local authority. I am pleased to report that Northampton Borough Council provides two hours every day for a whole year. Against that background, with chain after chain failing, will my noble friend sit down with colleagues, look at the crisis and recognise that action is needed and a review of rates in 2021 is not acceptable?

[Lord Henley]

My Lords, I was not aware that it was my noble friend’s 12th Question, but it appears that the House was. I appreciate that the rates review affects quite a number of businesses, but our estimation is that some 70% of businesses will see either no change or a reduction. Obviously, it affects different areas differently; in London it has affected businesses more severely, whereas in the north-west, where I come from, there have been some considerable gainers.

As for the unfair competition my noble friend talked about, particularly in relation to the wider question of taxing the digital economy, as he is aware, my right honourable friend the Chancellor is looking at that issue to make sure that things are fair between different types of retailer, whether they are digital or store-based.

On his final point, about parking, I note what he says and hope that other local authorities note what he says. From my personal experience, I have noticed that some local authorities reduce their parking charges, which has a beneficial effect on retail in that area. I have similarly noticed that in other areas the effect of parking charges can be to the detriment of the high street.

[Lord Watts (Lab)]

My Lords, I know that the Government like reviews, but may I suggest that this problem has been with us for some time now and it is action we want, not reviews? Secondly, would the Government consider helping local authorities to downsize some of their town centres, because empty shops just make the situation even worse?

[Lord Henley]

I agree that empty shops make the situation worse. It is up to local authorities to look at what can be done, but we are in a changing environment. Some 10 years ago, 4.5% of retail was online; it is now 17%. That is what the consumer wants and, in the end, the consumer has to be king in a sector such as retail. It is up to the sector itself—that is why the Government want to talk to the sector—to look at the changing nature of what is happening and adapt to that change.

[Lord Fox (LD)]

My Lords, it is not just about empty shops in the high street; it is about people. We are seeing a migration of good retail jobs, some of which had pensions and many of which had long-term prospects. It is an erosion of people’s lives. The replacement jobs are warehouse jobs on zero-hour contracts. The Minister mentioned that his right honourable friend the Chancellor is conducting a review of the situation. Given that shops are going out of business every day, when might we hear the result of this review?

[Lord Henley]

I will leave that to my right honourable friend and he will respond as is appropriate. The point I want to stress—as I did in my original Answer and in the one I just gave—is that this is a changing environment. The noble Lord no doubt buys things online. There is an increase in people buying things online; that is quite simply what is happening. I cited the figures: 4.5% of retail was online 10 years ago and the figure is now 17%. That trend will continue. The retail sector must look at ways of adapting. Having said that, the noble Lord should not think that all online trade is necessarily going to Amazon and other warehouses; a lot of online business is conducted by the shops themselves. It is a varied picture, but it is up to the sector itself to adapt to those changes.

[Lord Skelmersdale (Con)]

My Lords—

--- Later in debate ---

[Lord Henley]

My Lords, this is something that local authorities, which are best placed to look at these issues, can do. I would commend them to look at all possible uses for spare retail space, if there is such space.

[Baroness Rebuck]

My Lords, none of us wants our high streets to become ghost towns. I declare an interest, but bookshops, through activities such as book festivals, World Book Day for kids and signings, drive up footfall that benefits all retailers. Bookshops are also cultural hubs and play a vital role as community and learning spaces. Will the Government now consider giving bookshops the same rate relief that is given, rightly, to many community pubs, and thus avoid an estimated one in four closures in future?

[Lord Henley]

I do not have precise figures for sales of books. I think the noble Baroness probably does, and she will find that book sales are increasing again. Whether the sales are happening in the shops is another matter, because obviously a lot of those sales will be online. That is how people want to buy books, as often as not. I note what the noble Baroness said about the successes that part of the sector is achieving through book fairs and other means, and I commend pursuing that type of thing to other sectors. Her final point is one that can be considered.

Smart Meters Bill

Lord Henley Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 24th April 2018 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, I support my noble friend Lord Grantchester in his Amendment 4 and reiterate his important suggestion. He accepts that his amendment is not necessarily the definitive way forward and is inviting the Government to engage with him and others to try to find a form of words, process and activity that would enable a national plan to come forward that we could all get behind. I hope that when the Minister responds he might signal that this is something he will consider.

Like the noble Baroness, Lady Featherstone, I have come to this relatively late. Those who have not been living the ups and downs of this over the past few years are completely and utterly shocked that it could have got to this stage without some very serious consequences. At a superficial level—I know it is more complicated than this—the initial programme has had to be restarted and reset but is now about to stop, and people are being laid off and made redundant because there is no guarantee that the SMETS 1 meters will be continued after October 2018. A completely new, untested and uncertain scheme involving SMETS 2 will be brought in on top of that and will therefore go back over ground already covered in a way that is as yet unforeseen.

At the same time, the whole costs of this are hidden and difficult to ascertain. The process under which levers can be exercised on people is not clear and the role of Ofgem, the regulator, is very passive in relation to the capacity it has now. It all smacks of being a complete and utter train crash of enormous proportions, and the only solution appears to be to keep ploughing on. British pluck is all very well but it has not always been the most successful way forward, particularly in matters involving technology.

I urge the Minister, when he comes to respond, to think very carefully about the way in which the Opposition are proposing this and about the support we have received from others. If we do not come out of this with a clear and approachable process—whether it is this national plan or not—the real danger is that consumers will literally be switched off in the sense that they will not wish to be involved in this. As a result, the huge upside of this, the benefits of bringing in a new technology, opening up innovation and bringing in new thinking about how we manage our energy supply—which was the point made by the noble Lord, Lord Teverson—will be lost if consumers are not prepared to walk along. This is not about individual customers having a better time; it is about how we as a country can cope with the energy demands that we will face, and minimising them while strengthening our approach as we go through. This is a terrific chance to get this right in a proper and positive way.

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

My Lords, the noble Lord, Lord Teverson, used the examples of the length of a number of wars. I will not follow him down that track because I think one could come up with some longer wars as examples. He mentioned that this had started under a Labour Government, continued under a coalition Government and was now being dealt with by a Conservative Government. I have been a member of two of those—obviously I was not a member of the Labour Government. It has been going some time but we want to get it right.

When things have been going some time I am always faintly surprised when Oppositions put forward amendments to suggest that we should take even longer. I suppose that is why the noble Lord, Lord Grantchester, prefaced his remarks with, “Unusual as it may seem”. I take note of that. I will not rise to his bait to make any comments about the likely outcome of the next election. Quite rightly, he wants whoever is in government at the time, whomsoever that may be, to be helpful, possibly referring to the remarks on the word “helpful” made by the noble and learned Lord, Lord Goldsmith, in yesterday evening’s debates. We will try to avoid “helpful” in the future.

To continue on the helpful theme, I would obviously like to be helpful. The noble Lord asked whether we could have further meetings. I will make myself available when the noble Lord, the noble Lord’s colleagues and the noble Baroness, Lady Featherstone, and others want to have meetings between now and Report if we feel that we can discuss things further and take things forward.

In the meantime, I will respond in a little detail to the specific amendments—Amendments 1, 2 and 4 in the first group. As I said, the first amendment proposes to extend certain powers that the Secretary of State has to develop, amend and oversee regulations relating to smart meters until November 2026, although in this Bill we have sought only the powers that we think are justified, which extend to 2023. Extending the powers to 2023 would allow the Government to continue to oversee the programme, while suppliers meet the obligation on them to take all reasonable steps to install smart meters in homes and businesses by the end of 2020.

The noble Lord referred to my letter where I talked about them offering rather than installing—we are trying to make sure that they have at least offered something to everyone. Obviously no Government can guarantee that one can be installed in every home because it is quite possible that a number of individuals will refuse to have a meter for whatever reason. It also allows the Government to undertake a post-rollout review once the programme has been operating in a steady state and then implement any of the recommendations that emerge. We hope this will help to ensure that the smart metering programme is fit for purpose—whether SMETS 1 or SMETS 2—for decades to come.

[Lord Stevenson of Balmacara]

I am sorry to interrupt, but on the narrow point, what specification are the Government adhering to? Is it the obligation on energy suppliers to take all reasonable steps to install smart meters or not?

[Lord Henley]

We hope that they will offer—and if they do, obviously they must then install. There is no point offering to install one unless they do so. So we hope that all of them will have offered and installed by that date.

[Lord Stevenson of Balmacara]

It is important that we get this right, because there is a world of difference between making an offer to install and having an installation completed. My noble friend Lord Grantchester, in making his proposal, would give an additional three years because the understanding we had from the first paragraph of the Minister’s letter was that it was about the completion of that process. If the noble Lord is saying that the licence obligation placed as a condition of licence on energy suppliers is only to offer, does he not accept that that completely changes the process?

[Lord Henley]

No. I wanted to make clear that there is no obligation to have got to a 100% rate of installation because we know we can never get to that target. What we are looking for is that they must make the offer and then make the installation—that is the undertaking—by the appropriate date. We do not think that extending the time is necessary. Does the noble Lord follow me?

[Lord Stevenson of Balmacara]

I will try one more time and then I will stop. The obligation placed statutorily on companies operating as energy suppliers is, as I understand it, to have made an offer to take all reasonable steps to install smart meters in homes covered by the mandate by the end of 2020. That will be considered to have been completed if they have written to and received information back from all those who would be eligible to receive these things, and, where there has been an acceptance, have completed the installation. Obviously, as the Minister said, you cannot install a meter if somebody says that they do not want one, so those people are taken out of it—but must everyone else, if they say that they want a meter, have had one installed by 2020? That seems extraordinary.

[Lord Henley]

It is not simply a matter of writing a letter to the individuals concerned. One letter would not be enough. The energy suppliers must show that they have made reasonable efforts with all their customers while allowing a degree of flexibility in certain circumstances. The rollout obligation puts that onus on them. Ofgem has made it publicly clear in an open letter that it will need to adapt its approaches to consumer engagement, using other approaches where necessary. It is not merely a letter, but it must make a genuine attempt—merely making a solitary offer is not sufficient—to get hold of those people to make an installation.

[Lord Grantchester]

I shall interject very quickly to follow up on my noble friend’s comments. There has been a lot of confusion about what sort of meter will be installed. The Government have backed away from SMETS 1, but I am also hearing industry commentators suggesting that if SMETS 1 meters can be interoperable, the process should continue beyond October as they will then be interoperable as though they were SMETS 2 meters. So if, as we are hearing from other commentators, people are standing down staff from being able to put meters into premises where they have said yes because of the unavailability of SMETS 2 meters, that in itself will mean there will be a considerable delay to implementation. In the circumstances, it is rather unclear to the consumer what exactly their expectations will be and what will be delivered by what date—hence my argument. The Minister needs to appreciate that there is probably still a lot of confusion out there regarding what meters will be done by what date, when they might be installed and when any benefits will be appreciated.

[Lord Henley]

As the noble Lord is aware, SMETS 2 meters are now being installed. I cannot remember the figures given at Second Reading, but so far there have been very few. However, we expect to see a fast increase over the coming months.

We have also made clear—the noble Lord alluded to this—is that SMETS 1 will no longer count by October, the date to which he referred, and thereafter SMETS 2 will be installed. If a SMETS 1 is installed after that date and is upgraded to a SMETS 2, obviously that will count as a SMETS 2. I will take advice and write to the noble Lord if I am wrong on that. However, as the noble Lord knows, from October SMETS 2 will count in meeting that commitment.

With that, with the changes and with the gradual rise in the number of SMETS 2 installed, no suppliers will have problems in finding work for their staff, and so will not have to lay people off and bring them back on during this process.

[Baroness Featherstone]

My understanding is that there are so few SMETS 2 meters out there—mainly in supplier homes—that their testing with the DCC cannot be relied upon at this stage. Surely it cannot be done with fewer than 50,000. I am not a technician—I do not know what the number is—but 300 or fewer is not enough to ramp up the rollout of SMETS 2 in the way the Minister is suggesting.

[Lord Henley]

Again, I will take advice on that. We will come back to it on a later amendment. The noble Lord, Lord Teverson, has spoken about not moving further until we have a large number rolled out. However, my understanding is that this process is beginning to happen and that numbers are going up. The noble Baroness is looking at me in disbelief, as she so often does. We often disagree.

[Baroness Maddock (LD)]

In defence of my noble friend, we have had briefings which tell us what she has just said to the Minister. I do not know where he gets his briefings, but the industry has briefed us and it is clear that SMETS 2 is not at the stage that he thinks it is.

[Lord Henley]

My Lords, I am not sure whether, strictly speaking, the noble Baroness is correct. My understanding is that the number of SMETS 2 installations will go up over the coming months, in which case it will be possible to test them, and therefore that by October we will be at a stage where we can go ahead. We have time on our hands on this matter and, as I said, I would like to have further meetings with the noble Baroness and others between now and Report. We could then go through some of these particular points.

At the moment perhaps I may get on with these amendments and come back to my point. As I said in response to the noble Lord, Lord Grantchester, there will be this change in October. SMETS 1 meters will no longer count, but suppliers will still be able to make use of their workforce in the installation process.

On the extension that the noble Lord is generously seeking on behalf of the Government, we do not think it can be justified. It would not send out the right signals and could even have—dare I say it?—an unhelpful impact. It could suggest that the Government would play an active role in leading the programme well beyond the point at which the self-sustaining industry model overseen by Ofgem is due to take over. It also risks undermining industry momentum in progressing the rollout just as suppliers are accelerating deployment with the new generation of meters being brought in. Delay to investment decisions and deployment would also bring delay to the benefits that accrue to consumers from receiving smart meters. In turn, that could impact on the pace of moving to a smart meter system with dynamic time-of-use tariffs made possible by smart meter installation. That is why we are firmly committed to the programme’s timetable as reflected in Clause 1.

The noble Lord referred to the NAO report. We welcomed it and the follow-up study on smart meters, and will work closely with the NAO to help review the progress of the programme, but I do not believe that the report necessarily means that we need a pause in the rollout. As the noble Lord knows, it is routine for the NAO periodically to examine every major government programme, as it did on smart metering in 2011 and 2014. We will take note of the report and discuss it with the NAO, but I do not think that the programme needs a pause.

Amendment 2 relates to the power to remove licensable activities. This amendment seeks to limit the extension of the Secretary of State’s power, so that beyond 1 November 2018 he would not be able to exercise the power to remove any licensable activities in respect of smart meter communications. The Government have so far used the power only to establish the provision of a smart meter communication service as a licensable activity. That ensures that we have a communications and data system that supports secure, reliable and interoperable services for smart meters. The DCC is playing a fundamental role in driving smart metering benefits, and we do not currently consider that we will exercise this power to remove the provision of a smart meter communication service as a licensable activity.

However, we cannot rule out that evidence could emerge to suggest that the removal of at least some elements of this licensable activity to the market could be justified. Retaining the power to remove licensable activities in respect of smart meter communications is therefore necessary as a backstop and is consistent with the Secretary of State’s principal objective of protecting the interests of energy consumers. The Secretary of State may also determine that it is appropriate and in energy consumers’ best interests to introduce further licensable activities in support of smart metering by 2023.

As detailed in our delegated powers memorandum, the smart metering programme continues to develop policy in a number of discrete areas, including overseeing the development of technical solutions delivering smart benefits to the small number of premises which are currently not expected to be served by the smart meter communications network as to do so would be disproportionately expensive. This is typically due to location and surroundings. For example, this can affect premises in highly built-up areas with many tall buildings as well as remote or mountainous areas.

One of the tools we may wish to use to deliver the policy is requiring activity to be licensed. For example, it might be considered appropriate to create a licensable activity that relates to arranging the establishment of communications to these properties. Should we introduce a new licensable activity here that is subsequently found no longer to be justified or needed, we would need to have retained until 1 November 2023 the ability swiftly to remove that licensable activity.

As the noble Lord will be aware, we have used the affirmative resolution procedure. We have also referred it to the Delegated Powers and Regulatory Reform Committee. It did not raise any issues with it. Further—I shall read this out because it is not often that one gets praise of this sort—the memorandum from the committee, in the part that I have highlighted, states:

“There is nothing in this Bill we would wish to draw to the attention of the House. We do, however, wish to commend the helpful and well-drafted memorandum about the delegated powers in the Bill, provided by the Department for Business, Energy and Industrial Strategy”.


We do not often get praise, so I think that it is worth repeating it on this occasion to make sure that it is properly on the record. Obviously, it was already on the record, as it was in the committee’s 17th report—but I am grateful for the opportunity to repeat it.

Amendment 4 is the big amendment tabled by the noble Lord, Lord Grantchester, and principally supported by the noble Baroness, Lady Featherstone, and the noble Lord, Lord Teverson. I am grateful to the noble Lord, Lord Grantchester, for what he said about it. He talked about there being confusion on a number of points, which I hope I can help deal with. He also spoke about moving from rollout by suppliers to rollout by DNOs, as happens in another country. I suggest to him that making such a change might bring more confusion and chaos than absolutely necessary. Let us first deal with the amendment and no doubt we can talk about that later.

The amendment would task Ofgem with consulting stakeholders and publishing a national plan for smart meters by 31 December 2018. It would then require the Secretary of State to specify the final version of such a plan in regulations. The large-scale rollout of smart meters across Great Britain by 2020 is a substantial technical, logistical and organisational challenge. As we have made clear, meeting that challenge depends on collective and co-ordinated delivery. I think that that programme should be led by the Government, who set the policy and regulatory framework for the realisation of the benefits. The rollout is delivered by energy suppliers, networks and others. Ofgem’s role is to make sure that consumers remain protected during the rollout, to monitor energy suppliers’ compliance with their obligations and potentially to enforce against any non-compliance. The Government have provided strong leadership and established governance frameworks, with clear roles and responsibilities, across all these parties. Under this leadership, the smart metering programme has already made substantial progress.

Given the scale of the challenge, I understand and welcome the noble Lord’s appetite for information and reassurance on progress. I remind him of the commitments that the Government made earlier in the passage of the Bill—namely, that we will publish an annual report on the progress of the smart metering implementation programme as well as an updated cost-benefit analysis in 2019, to reflect the state of play after the transition from SMETS 1 to SMETS 2 meters has taken effect.

In that context, it is not clear what the additional value of a national plan of the type proposed by the noble Lord would be. The purpose seems to be to task Ofgem with the oversight of smart metering implementation and to reduce the Government’s role. Such a change in approach would simply divert attention and resources from the rollout delivery and associated consumer benefits. The Government are rightly accountable for safeguarding the benefits of smart metering. The new clause would duplicate existing efforts to deliver an efficient rollout and would put an undue burden on Ofgem. Furthermore, requiring the Secretary of State to specify the final version of the national plan in regulations would limit his ability to use the Section 88 power, of which the noble Lord will be aware, to modify the smart metering framework in future. The purpose of the Bill is to enable the Government to respond to the operational realities of the rollout and to adjust the monitoring framework as may be required. The new clause would undermine that intent.

In summary, a high-level plan for the rollout of smart meters was set by the Government in their 2011 prospectus document, which establishes the framework for the rollout.

[Lord Campbell-Savours (Lab)]

I was engaged in debates on these matters with the noble Lord, Lord Teverson, 10 years ago, when the original legislation was put through. I am unable to understand what pressure is on the Government to get on with this before the National Audit Office produces its report. I would have thought that that report was critical in all this, as it may well make recommendations that do not fit within the proposals of this legislation. What is the pressure? Could we not have waited for another six months? What would have happened if we had?

[Lord Henley]

I have been criticised for the Government going rather slowly on something that was introduced in 2006 by the Government of whom the noble Lord was a supporter. As the noble Lord, Lord Teverson, said, this has continued through the length of two world wars and a bit more; I asked him not to specify any further wars. The NAO has already reported three times. As I said, we will respond to the NAO’s report, but I do not see why we should not continue with what we are doing at the moment. As far as I know, we are all in full agreement on the general benefits of a smart metering programme and of getting as many people as possible on to it, so that they will be wiser about their use of energy and more able to consider which energy supplier to choose—I am just giving all the benefits of smart meters. I do not think that there is any need to pause for the NAO report. As I said, we will consider it and respond as appropriate.

[Lord Campbell-Savours]

Has the NAO expressed a view on whether the legislation should have been delayed? It will have a view. Is it happy for us to proceed with legislation without its report?

[Lord Henley]

I am not aware that the NAO has asked for any delay, but the noble Lord can look at its three reports, including the most recent one, which I have referred to. I will leave that to him.

As I said, we published our prospectus document in 2011, which established a framework for the rollout and was the basis for the regulatory framework through which the rollout is now being delivered. It is right that we have progressed from planning to implementation. Both the Government and Ofgem are focused on monitoring the rollout to ensure that it delivers in a timely way—albeit, as the noble Lord, Lord Teverson, put it, slightly less timely than he would have liked. Where our monitoring activity identifies areas where the course of the rollout needs to be adjusted, we will of course take action.

In due course, we want smart metering to be business as usual in a competitive retail market. The Government will then be able to step back when it is right so to do. However, in the short to medium term, the Government do not intend to step back from their leadership role. Through the powers in the Bill, we will sustain our active engagement with the industry to ensure that any risks to meeting the 2020 deadline are identified and addressed as quickly as possible. I repeat what I said about hoping to have ongoing discussions with the noble Lord and others, but I hope that in the meantime he will feel able to withdraw his amendment.

[Lord Grantchester]

Before the noble Lord sits down, could I just come back to the NAO report, just to be clear in my mind about exactly what is happening? Am I to understand that the NAO is still planning to report by July 2018 on the cost-benefit analysis of introducing smart meters? The noble Lord has correctly said that the NAO has already done two reports—in 2011 and 2014. It is now four years since the report of 2014 and I understood that the general consensus was that it was about time to do another cost-benefit analysis, in order to prove to consumers that what is happening is for their benefit, even though the costs are going up. However, if the review is being shelved, it is important to know that. We understand that it was not part of any legislative programme but that it was going to improve consumers’ perspectives on accepting an offer that would be beneficial to them. Can the Minister be precise: is the NAO report going ahead in July 2018 or not?

[Lord Henley]

I do not know about the precise timing of that report. Obviously, that has to be a matter for the NAO. We will respond at that moment, but I do not think it is necessary for the Government to delay what we are proposing to do. As the noble Lord, Lord Teverson, said, there has already been too much delay. We will await with interest the report from the NAO.

[Lord Grantchester]

I do not think that the NAO wants to cause any delay. I understood that it did not have the resources to undertake this work and therefore that it would not happen, although it is crucial for the continuing rollout that consumers can easily see the benefit over and above the cost of the programme. It is not easy to understand it within their own bills, but if the NAO produced a report showing that overall it was beneficial to consumers that this was going ahead, it could be very constructive in allaying some people’s fears that this is not for them because of the cost. I want only to understand whether the NAO still has a commitment to produce the report this year.

[Lord Henley]

Again, I do not know about this year. I understand that the NAO still plans to undertake a review. It has not confirmed its timetable. Obviously, that is a matter for the NAO. When there is a new cost-benefit analysis, obviously we will look at it—but I cannot go into the NAO’s timetable.

[Lord Teverson]

Perhaps it might be useful if we could meet the NAO and go through this and make sure that the audit is broad enough in scope without it taking longer. I realise that this question is not completely to do with these amendments, but I did ask the Minister about the transferability of SMETS 1 meters, which is different from interoperability—SMETS 1 meters are surprisingly interoperable generally—and the problem of taking one out and replacing it with one that is almost identical but is from a different supplier. Is the Minister aware of that? Do his officials see that as a significant problem? Is there a solution so that we can stop this almost immediately, if it is happening?

[Lord Henley]

I think I had better take advice on that and possibly write to the noble Lord, or deal with it in any meeting that we have. I understand that some SMETS 1 meters can be upgraded. But I do not want to put on the record anything that I might have to make a personal statement about and correct the following day. Perhaps we could leave that to a letter or a discussion with the noble Lord.

[Lord Teverson]

I am very happy with that. I stress that it is an asset and financing issue, rather than an interoperability issue.

--- Later in debate ---

[Lord Grantchester]

I support Amendments 6 and 11 which are also in this group. In Amendment 6, the noble Baroness, Lady Maddock, seeks a review of the code of practice energy suppliers must follow in the installation of smart meters. We agree with that as a necessary and constant reassessment of best practice should become part of any post-rollout review.

Similarly, Amendment 11, also in the names of the noble Baronesses, Lady Maddock and Lady Featherstone, calls for a review of the use of data from the operation of smart meters. I am grateful to them and my noble friend for highlighting some of the problems that could arise if we are not careful in this operation. We agree that it should be kept under constant review by the department to make sure that the risk of errors and non-compliance is kept to a minimum.

[Lord Henley]

Like the noble Lord, Lord Grantchester, I take it that we are dealing with Amendments 3, 6 and 11. The noble Baroness, Lady Maddock, caused me some confusion when she said Amendment 7. However, I am sure she meant Amendment 6 if she did say Amendment 7. I take it she was speaking to Amendment 7, and I will come to it in due course. I will deal with the amendments in the order in which the three leads took them and so I will deal first with Amendment 3, then Amendment 11 and then Amendment 7. If I get confused in my note I hope the noble Lord, Lord Grantchester—who is always quick on these things—will stop me.

I will also take note of the points raised by the noble Lord, Lord Campbell-Savours, and his general remarks about service charges in flats and the consumption of water by himself and others. Obviously that is wide of the Bill. I am sure the noble Lord uses appropriate amounts of water and comes to the House as clean as he always should be. We will read nothing into the amount of water that appears on his service charge. However, he makes a perfectly good and valid point about what people can understand from information about the use of a particular flat or residence by the consumption of gas, electricity or whatever. I hope that can be partly dealt with in what I have to say about security but it might also be helpful if I write to the noble Lord and others about it in due course.

Amendment 3 asks GCHQ to undertake an annual risk assessment of smart metering’s vulnerability to cyberattacks. Considerable effort has been invested by the energy industry as a whole and by government—including the National Cyber Security Centre, which is part of GCHQ—in designing security protection into the end-to-end, trust-based security architecture. Robust security requirements have been developed for smart metering equipment, the DCC and participating organisations, as well as assurance on the implementation of these requirements. These are a fundamental part of the smart metering regulatory framework.

In April 2016, the NCSC technical director published a blog on the security of smart meters in which he stated,

“we’re confident that the Smart Metering System strikes the best balance between security and business needs, whilst meeting broader policy and national security objectives”.

The NCSC continues to be fully engaged on smart metering, providing an annual threat report and practical guidance.

Underpinning the security requirements, assurance and governance arrangements currently in place is a security risk assessment. This has been through a number of iterations on the back of public consultation to ensure emerging and future security threats are appropriately addressed. This is in turn informed by the annual threat assessment that the NCSC provides. Additionally, each organisation must carry out an assessment of its processes for the identification and management of risk at least annually.

The end-to-end security model is also subject to ongoing monitoring and review. Smart metering regulations require that a review of the end-to-end security model is undertaken at least annually. This is undertaken by industry in the form of the Smart Energy Code security sub-committee, which is independent of government and composed of security experts from industry. Industry is also subject to an independent security assessment prior to using systems and annually thereafter. This assessment is set against a security controls framework, which is detailed in regulations. This is the basis for a consistent level of review across all organisations and provides a guide to the types of evidence that should be provided to demonstrate compliance.

Based on the detail I have just outlined, an additional security assessment annually by GCHQ, most likely by the NCSC, is unnecessary given the existing and ongoing risk management and security assessment arrangements and the close engagement GCHQ and the NCSC have had and continue to have in relation to smart metering. I hope that the noble Lord will feel that his amendment is largely dealt with.

I move to Amendment 11, tabled by the noble Baroness, Lady Featherstone, which deals with data privacy. It refers to data obtained by energy suppliers, both as a result of half-hourly settlement and due to smart metering in general. This data has the potential to deliver benefits for consumers, suppliers and the energy system, but we recognise again that appropriate safeguards are required on who has access to data, in which circumstances and for which purposes.

--- Later in debate ---

[Lord Campbell-Savours]

I ask a consumer question: if someone wanted to know now whether it was possible for their meter to be hacked, who would they ask? Who could tell them?

[Lord Henley]

The first people to ask would be the suppliers of that meter, to ask them what evidence they have and to take it from there. The same is true for any IT equipment that the noble Lord buys for any purpose. None of us can give any absolutely cast-iron guarantees as to what can and cannot be done by nefarious people.

[Lord Campbell-Savours]

This is one of the reasons why the amendment asking for this sort of national plan would have been interesting. Those are the kinds of questions that the consumer would expect to find in a report of that nature. I would not ask my supplier; I would ask the manufacturer whether its equipment could be hacked. If it said that it could be, I would want assurances as to how that would be dealt with. I am not altogether convinced that manufacturers have been asked, or whether GCHQ has been asked that question for it to appraise separately. It is on the list; I presume it too has been asked about the system that is being introduced.

[Lord Henley]

The point I am making to the noble Lord is that it would be wrong for anyone to give an absolute cast-iron guarantee of any sort with equipment of this sort. I can think of a whole range of other questions on other subjects. I remember that it used to be said that if you went to a school and asked about its policy on bullying and were told there was no bullying, you should immediately reject that school because quite obviously it had no idea of what was going on. Similarly, if someone offered a cast-iron guarantee that their equipment was unhackable, I would have some doubts about it. They could say that they had done everything possible to make sure it was unhackable, but we have the right processes in place with suppliers and others to make sure that checks can be done—which is what I have set out—to make metering as secure as possible. In response to the noble Baroness, Lady Featherstone, who dealt with privacy, that is why we have also had consultations with the privacy commissioner. I think that we have all the appropriate checks in place—but if I offered the noble Lord the guarantee he is asking for, he would know that I was a charlatan.

[Lord Campbell-Savours]

There is another question that would have been answered in this report. It is the question that the public ask all the time. If I have a supplier and I have a piece of equipment installed, will I be able to change supplier? Most people in this Room probably know the answer about retaining that equipment, but the great public outside do not know the answer, and that is what they worry about. So it is essential to the Government’s case to make it clear when and in what circumstances that problem will no longer arise.

[Lord Henley]

I fully understand what the noble Lord is saying and the need to provide the public with as much reassurance as possible, and clearly to explain the range of steps that the Government have taken with security experts, including GCHQ, which I mentioned earlier, to provide robust security for the smart metering system. We worked in partnership with GCHQ on the blog on smart metering infrastructure. We will continue to support Smart Energy GB, among others, to provide a clear and reassuring message to the public on smart metering security. We will do all we can. Everyone else will do all they can. All I am saying is that one can never get beyond that 99.9% security up to 100%.

[Lord Campbell-Savours]

The noble Lord, Lord Teverson, drew a distinction between transferability and interoperability. The question I am asking is what the public are asking. When will they be given assurances that it will be possible to change supplier and retain their smart meter? It is a very simple question, and I do not think you will find the answer anywhere at the moment as far as the public are concerned.

[Lord Henley]

The noble Lord is moving on to another question.

[Lord Campbell-Savours]

This is one of the amendments.

[Lord Henley]

The noble Lord asked what assurance we can give to the public about security, and I think I have given as much assurance as I can. I acknowledge that it is important for the Government to continue to give as much assurance as possible. That is why we talked to GCHQ and others. With regard to changing supplier—is it changing the meter or changing supplier? They are two different matters.

[Lord Campbell-Savours]

One is the consequence of the other, as I understand it. That is the problem. When you change your supplier, I understand that on occasion you have to change the meter. Am I not correct?

[Lord Teverson]

Unfortunately, probably after the First World War, the Second World War and the Korean War, the phoney war bit during the coalition Government was around the whole process more or less coming to a halt because this whole security issue came up, which was a major delaying factor at the time. I do not want to talk on behalf of the Government of that time, but security was given huge focus. From a personal point of view, I feel that that area has been dealt with enough at the moment. It clearly needs an ongoing security look, but it was one reason why the whole programme pretty much ground to a halt during part of the period of the coalition Government—if that is at all helpful.

[Lord Henley]

We will get on to “helpful” again later on. I do not know whether I can take the noble Lord much further. We have talked about security, and I have made it clear that we must give the public as much assurance as possible. I think that the noble Lord is happy about that and the involvement of GCHQ and others.

The noble Lord raised the question about consumers in effect losing functionality when switching supplier. When installing a smart meter, it is necessary for energy suppliers to take reasonable steps to inform the consumer that they may lose some of the functionality when switching supplier—but only some. There is also the question of whether those with SMETS 1 meters can switch supplier. The noble Lord’s question started on one level and moved to quite different levels at different moments, but I think that that was what he was talking about. Consumers with the first generation of SMETS 1 can still switch energy supplier, and they are often in a better position to do so. That is a matter for them, and they can continue to do that.

I shall now move on to the second in this block of amendments—the amendment tabled by the noble Baroness, Lady Maddock, Amendment 6, which suggests that there should be a review of the code of practice by the Secretary of State. Receiving a positive installation experience that leaves consumers satisfied and well informed is vital to ensuring that they can engage with their smart meter and take control of their energy use. Energy suppliers were required by their licence to develop and adhere to an installation code of practice when installing in domestic and microbusiness premises. In developing this code, energy suppliers were required to ensure that it both supported the delivery of overarching objectives and, in a number of key areas, met detailed requirements. Those requirements include providing energy efficiency guidance, not charging consumers up front for the installation, and meeting the needs of vulnerable domestic consumers. Energy suppliers were also required to take into account the views of consumer groups and other interested parties when developing the code.

The code was consulted on in draft in 2013 and subsequently approved by Ofgem in its capacity as the authority in this area. It is overseen by a code governance board composed of representatives from large, small and microbusiness energy suppliers. It also includes representatives from Citizens Advice. Any of those representatives has the ability to propose amendments to the code, which are then presented to Ofgem for consideration. This governance framework ensures that consumer interests are represented on an ongoing basis across all elements of the code’s operation.

Energy supply licence conditions supporting the code of practice also require energy suppliers to put in place monitoring arrangements and procedures for reviewing and updating the code. As part of this activity, energy suppliers are required to obtain views from consumers on the installation process and conduct of their installers. To achieve this, the code requires all energy suppliers installing more than 5,000 smart meters a year to undertake a survey of their customers. These surveys are conducted regularly, the results are anonymised, and reports are provided to the code governance board on a quarterly basis, enabling any areas of concern to be identified and rectified, including through amendment to the code.

As a further backstop, in the event that significant concerns are raised regarding the suitability of the code, Ofgem also has the power to require energy suppliers to review specific features of the code and can direct modifications if necessary. The amendment here would require a one-off review of the code to be undertaken, but I hope that in outlining the governance and monitoring requirements already in place I have demonstrated that the code is already subject to ongoing review and continues to evolve to meet consumer needs.

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[Baroness Maddock]

I made two points about gas. When it is turned off, I certainly do not expect them to allow things that are unsafe. My point was that there is no provision for somebody in poor circumstances—say they are elderly and they have a smart meter put in and it is the middle of winter and they cannot use their boiler—to get a new boiler. I think the Government need to look at this. It is a very small point but there will be several people affected by it.

The Minister has explained how the process works at the moment and how the code of conduct works and how it can be amended. Can he tell us how it has been amended as the process has gone along?

[Lord Henley]

I would prefer to write to the noble Baroness regarding any amendments that have taken place. I, like others involved in this, but not all, am relatively new to the subject—but it has been going for some time, so I imagine that amendments have been taking place.

I think the noble Baroness suggested earlier—just in terms of the travails on the telephone—a degree of aggression.

[Baroness Maddock]

It was the lack of understanding of the person who was trying to persuade to have a meter of how it worked and what the options were and whether they were interoperable.

[Lord Henley]

If the operator could not cope with the noble Baroness, obviously they probably need further training. I think that is probably a matter for that particular supplier. There is guidance for them and they should take every opportunity to treat all domestic customers fairly and to be as transparent and accurate as possible in their communications. I hope that they will continue to do so. I note what the noble Baroness said.

I hope I have dealt with the three amendments in sufficient detail and I hope that the noble Lord will feel able to withdraw Amendment 3.

[Lord Grantchester]

I thank the Minister for his comprehensive reply. Initially I was slightly alarmed when he talked about the national infrastructure having to be a balance between security and business needs. I would have thought that our national infrastructure is critical and must be entirely secure at all times. However, he went on in his reply to further elaborate that energy threats are assessed each year and I was very satisfied that the situation is under constant review, so I am very happy to withdraw my amendment.

--- Later in debate ---

[Lord Teverson]

My Lords, may I correct something I said about Hinkley Point C? EDF’s latest estimate is actually £19 billion to £20 billion. Preventing that sort of capital expenditure on energy generation is what this programme should be about. I apologise to the Committee that it is a rather larger sum than even I thought.

[Lord Henley]

My Lords, £1 billion here, £1 billion there and pretty soon we are talking real money. I will deal with the amendments in the order they came: that is, Amendments 5, 7, 12 and 13. Amendments 12 and 13 go together. Actually, all three go together, but there was some confusion.

Starting with Amendment 5, which was tabled by the noble Baroness, Lady Maddock, on energy efficiency and fuel poverty, I ought to say in passing that I very much support the spirit behind these amendments but I am concerned that they could undermine the efficient delivery of the rollout and could lead to unintended consequences and costs for consumers. But I will deal with the amendments one by one, starting with Amendment 5.

One of the main objectives of the smart meter rollout in Great Britain—it does not apply to Northern Ireland—is to put consumers in control of their energy use so that they become more informed and efficient, and save themselves money. Smart metering will reduce the costs for prepayment customers and enable remote topping-up, meaning that some of Britain’s hardest-pressed energy consumers will have access to more competitive deals and more convenience in paying for their energy. I was grateful for what the noble Baroness said about people with prepayment meters and the price cap. We will get on to the price cap for others more generally, but it is already in existence for people with prepayment meters and I think that it has been working with some success.

If I heard her aright, the noble Baroness said that she had heard that SMETS 2 meters posed a problem for some prepayment customers. We believe that SMETS 1 meters provide significant smart functionality to consumers, but SMETS 2 will provide them with additional benefits and will allow consumers always to retain smart functionality when they switch suppliers. SMETS 2 meters will also allow consumers, if they choose, to share data with third parties, and those third parties may be able to offer, for example, tailored energy-efficiency advice, which could be of use to certain customers.

Amendment 5 would introduce a new clause requiring the Secretary of State to commission a review to consider how the extended use of powers would impact energy use in the United Kingdom, with a particular focus on the impact on fuel poverty and energy efficiency.

With in-home displays offered to households as part of the installation, low-credit alerts are more visible, giving consumers an early warning. The ability for consumers to set a budget and to see exactly how much they are using, in pounds and pence, is giving prepayment consumers control over their energy use and contributing to greater levels of satisfaction among prepayment consumers. Certainly, the research that we have done shows that 84% of smart prepayment customers are satisfied with their smart meters and 88% are likely to recommend them. Government research shows that eight out of 10 would recommend them to family or friends, and 82% of people with a smart meter have taken at least one step to reduce their energy use. British Gas is reporting that its dual fuel customers with smart meters are making sustained 4% annual energy savings.

To some extent, that brings me on to the question about accessibility of meters raised by the noble Baroness. As she is well aware, the accessibility of existing meters can be pretty difficult, as I discovered in London the other day as I lay down on the floor trying to read a meter. I realised that I did not have my reading glasses with me but then realised that reading glasses would not help as I was wearing my contact lenses. It is a minor problem for someone in a reasonably fit state, but we accept that reading meters can be difficult for certain people, depending on where the meters are put.

The technical specifications for IHDs require them to be designed to enable the information on them to be easily accessed and presented in a form that is clear and easy to understand, including by consumers with impaired sight, memory, learning ability or dexterity. Energy suppliers, led by Energy UK, have been working together to develop a fully accessible IHD, and we expect that device to be available shortly. If it can be made available to those who have problems, the noble Baroness and I will also find it a great deal easier.

[Baroness Maddock]

The thing that surprises me—and I have not really had an answer to it—is why, when the Government planned the programme, it was not part of the plan that everybody with a smart meter should have an in-home display. It would be an obvious enhancement and would not be difficult. I do not know why it was not thought that this should be insisted on from the beginning.

[Lord Henley]

This is going back in history. The past is another country. I do not think I want to go there just for the moment. I do not know the answer to that. If I can find out more, I will certainly let the noble Baroness know.

The noble Baroness also raised the question of smart meters working with solar panels and spoke about the information she had received from one of her noble friends. As I understand it, all SMETS-compliant electricity meters must be capable of both measuring the amount of energy the household consumes or imports from the grid and recording the electricity generated by solar panels or other microgeneration technologies that is fed back or exported to the grid. We are not aware of any technical reasons why smart meters cannot be installed in premises with microgeneration technologies. However, some suppliers may start installing for these customers later in the rollout. If the noble Baroness would like to go back to her unnamed noble friend—perhaps it was not a noble friend, perhaps it was someone misleading the noble Baroness—and get back to me, I will take this up and find out what the real answer is. The initial response is that we feel that this should not be the case, but I will respond when the noble Baroness gives me more information.

Amendment 7 was spoken to by the noble Lord, Lord Teverson, and the noble Baroness, Lady Featherstone. The rollout of smart meters offers an opportunity for consumers to take control of their energy use and realise significant savings as soon as the meter is installed. Like any infrastructure project, the smart metering programme involves some investment, but it will enable a net reduction in consumers’ energy bills over time. Amendment 7 would give the Secretary of State power to modify licence conditions and industry codes so as to require energy suppliers to pass the savings they make from the rollout on to consumers.

We expect that competitive pressures will encourage energy suppliers to pass on the cost savings they make from the rollout of smart meters. If energy suppliers do not pass on the savings to their customers, their customers, as we all know, can switch to a better deal among an increasing number of competitors. As noble Lords will be aware, there is an increasing number of competitors and it is quite simple to switch. We recognise that the market is not working for all customers. That is why we have introduced to Parliament the Domestic Gas and Electricity (Tariff Cap) Bill—it is in another place at the moment—which will require Ofgem to set a cap that protects existing and future domestic customers who pay standard variable and default rates. The cap will last until 2020, and it may be extended annually, up until 2023, if it is assessed that the conditions for effective competition are not yet in place. In setting the cap, we expect Ofgem to take into account the benefits that energy suppliers will achieve from the rollout.

Smart meters are themselves an enabler to greater competition in the energy retail market. Smart meters provide near real-time information to consumers on their energy consumption and how much it is costing them, giving consumers greater awareness, which in turn is expected to further increase consumer switching. The signs on this are encouraging. According to a report on consumer engagement in the energy market, published by Ofgem in 2017, 23% of consumers who say they have a smart meter have switched supplier in the past 12 months, compared with 17% of those who say they do not have a smart meter. It is worth pointing out that we would expect the level of engagement from consumers to help inform Ofgem’s review into whether the conditions for effective competition are in place.

I turn now to the final two amendments in the name of the noble Lord, Lord Teverson—Amendments 12 and 13. The Government want consumers to benefit as soon as possible from the advantages of smart meters. That is why we continually review the rollout and take action to remove any barriers to effective delivery. The amendments would require, as a condition of extending powers that the Secretary of State has to amend or introduce new regulation for the purposes of smart metering, one of two conditions are met first before those powers can commence. The noble Lord suggested either 500,000 second generation—SMETS 2—meters must have been installed or a review of the programme, focused on consumer satisfaction and value for money, must be complete. We do not believe that either of those conditions for commencing the extended regulatory powers are warranted or necessary. We are also concerned that the effect of those amendments would be to leave the Government without powers to intervene to unlock delivery barriers and ensure consumer benefits are being realised.

I will take each condition in turn. I shall deal, first, with the noble Lord’s SMETS 2 target of 500,000. Like the noble Lord, we want to see the SMETS 2 meter installation accelerated. It is very small at the moment, but in the near term this should happen only if it is in the best interests of consumers. Setting a target would remove suppliers’ flexibility to plan and manage the rollout efficiently in order to serve their customers effectively in a competitive market and could lead to unintended consequences. We are assured that larger energy suppliers have commercial and financial incentives to drive them to install SMETS 2 meters as soon as is practicable. SMETS 2 meters unlock more of the customer base, supporting more cost-effective marketing approaches. They also include capability for load control and additional support for consumer access devices, thereby supporting service offers in line with energy suppliers’ potential future business strategies. These incentives align with regulatory imperatives to make progress, not least that our current expectations are that from later this year the installation of SMETS 1 meters will no longer count towards an energy supplier’s rollout obligations. We intend to include in future quarterly statistical publications—subject to sufficient supplier anonymisation—information about the number of SMETS 2 meters that have been installed, allowing for progress to be tracked and transparent.

We agree with the noble Lord that the programme should understand its impact during operations, in terms of consumer satisfaction and value for money. As regards consumer satisfaction, the department commissions and receives, including via Smart Energy GB, regular survey updates on smart meter consumer satisfaction. I have referred to some of them, and the satisfaction levels that have been achieved. In terms of value for money, my right honourable friend the Minister for Business and Energy, Claire Perry, has committed, as part of the Bill’s passage in another place, to undertaking and publishing an updated cost-benefit analysis in 2019, which will reflect, among other things, the real benefit for consumers. On this basis, the noble Lord’s condition would be duplicative and risks undermining the powers that the Government need to ensure the rollout is progressed smoothly and in consumers’ best interests.

[Lord Campbell-Savours]

Can I just ask again a rather simple question? I understand that we are not the only country in Europe with a smart meter installation programme. The French claim that they have done it for half the price of the programme in the United Kingdom. They claim it is going to cost them €5.5 billion, whereas we are potentially spending £11 billion. Is there any truth in that? Is our equipment the same as what the French are introducing? Is there some explanation for this suggestion that we are paying rather a lot for our equipment?

[Lord Henley]

I do not necessarily take all claims from France as seriously as the noble Lord does. I will certainly have a look at that claim being made by the French, but I believe we are doing reasonably well. Obviously, I will have a look at what they are doing and, if there are things that we can learn from that, we should do so. Just as we will continue to monitor delivery in this country, we will study and look at what is happening abroad. I have received advice about what is happening and whether we are sharing our experience with other countries and whether other countries have shared their experience with us. We have looked not just at what is happening throughout Europe—we have met representatives from Ireland, Sweden, Spain, Malta and, I understand, France—but we have looked further afield to India, Australia and the United States. Lessons we have learned include the importance of consumer engagement. That is why I emphasised earlier what we have done on consumer engagement.

On the actual costs, the advice I have received is that the EU average comes in at £181, compared with our figure of around £155 for a single-fuel electricity installation. So that is somewhat lower. On that front we are doing better. If there is anything further I can add about gas distribution grids in Malta or Italy that might be of use or even of interest to the noble Lord, I will pass it on. Another matter that came up was a concern about privacy, which is something that the noble Lord is concerned about and we discussed earlier.

In conclusion, we will continue to monitor the delivery of the programme and will continue to provide updates in annual reports and an updated cost-benefit analysis. I do not think the amendments add much. They risk duplicating those processes and could result, as I said, in unintended consequences that might delay getting the benefits to the consumer. I hope, therefore, that the noble Baroness, Lady Maddock, will feel able to withdraw her amendment.

[Lord Teverson]

The purpose of my amendment—I accept a lot of what the Minister said about its effects—was to get to understand what the test will be. What criteria will the department use to say, “SMETS 2 meters will work, they will integrate with the systems they have to integrate with, so we will give them the green light”? How will the assessment be made that SMETS 2 works—not just the individual meters but as a system—before we invest the other £8 billion?

[Lord Henley]

My Lords, we have started. The noble Lord gave his figure for how many SMETS 1 meters have been installed—I think it was about 10 million, which I do not dispute. I do not have the precise figure in front of me. We feel it is likely that we will be ready to cease to count the SMETS 1 meters towards the target in about October and therefore the suppliers will move on to SMETS 2, which brings further benefits. Over this year, we will see a growth in the number. I am not going to give a precise figure now for how that will grow, but we are likely to see the benefits from that. There is no point sticking with SMETS 1 when we can move on to SMETS 2.

[Lord Teverson]

I agree entirely with that, but it is not the point I am trying to make. SMETS 2 operates through DCC in a different system. It has different software and capabilities; otherwise, there is no point in doing this. SMETS 1 machines work on different systems. They work through the suppliers in bespoke ways. I understand the difference between the two. We need to stop operating SMETS 1 as soon as possible and we want to roll out SMETS 2. What is the test so that we can be happy that SMETS 2 functions correctly and confident that it is all systems go? I do not understand the test.

[Lord Stevenson of Balmacara]

I suggest that the test has already been passed and we are doing SMETS 2 come what may.

[Lord Henley]

We are going ahead to SMETS 2. The noble Lord is right there. We will see benefits from that, just as we have seen benefits from SMETS 1. That process will continue. I am suggesting to noble Lords and the rest of the Committee that we will provide appropriate reports back as to how that goes in due course, but I cannot provide any figures on exactly how fast that is likely to go, particularly in the initial stage this year.

[Lord Campbell-Savours]

I shall put it another way: what would happen if, having fitted 500,000, we found that there was a problem?

[Lord Henley]

My Lords, I do not believe in crossing bridges until we get to them. When we get to that stage, if there is a problem, I will come back to the noble Lord.

[Lord Stevenson of Balmacara]

Let us put the noble Lord, Lord Teverson, to bed happily. There is no further testing. The Government have accepted this, on the basis of what we understand to be the evidence of 300 SMETS meters placed into the homes of employees of the companies commissioning them. The network is said to be working, and may or may not be, at two different levels in the north—I am not quite sure where—and the south because there are two different arrangements, with an imperfect but satisfactory, to all intents and purposes, gas approach based on the idea that the SMETS 2 meters that go on to the gas equipment have to be shut down for most of the time that they are there because otherwise they will use up the batteries, which they are restricted to using because you cannot use electricity near gas since it might blow up. Therefore, they are battery-driven and the batteries cannot last forever. It would be ridiculous to have a situation where you had to have teams of people coming in right across the country replacing the batteries all the time because that is what we are trying to stop them doing when they have to read all the meters. The Government are going ahead with this—this is the point I still do not quite get—on the basis of very imperfect testing on a scale of £8 billion to be spent over the next few years, which is effectively a voluntary tax paid by people who did not know that they were being asked to pay it. It is bonkers.

[Lord Henley]

I am afraid I do not recognise what the noble Lord has offered. I suggest that we continue discussions on this. What the noble Lord is putting to me is not what has been put in front of me in other places. As I said, we will continue to monitor matters and to provide information. That will be sufficient to deal with the amendments. If the noble Lord would like to continue to make these strange allegations about what is happening, we can continue to do that in the discussions that I offered when dealing with the first amendment.

[Baroness Maddock]

My Lords, I am grateful to the Minister for his full response to me on Amendment 5. I am still not totally convinced that the Government always look very carefully at how their different policies interact. I am grateful that he has asked for extra information about the photovoltaics. It was new to me and I will come back to him with a bit more detail. Let us hope that it is just a one-off—that the supplier was just not very interested in doing this particular person’s house and that there is nothing more to it than that. I was quite shocked: lots of people have photovoltaics and if that really was the case we really need to do something about it. As I said, it was a probing amendment to try to open up discussion on these issues that I am concerned about. At this stage, I beg leave to withdraw Amendment 5.

--- Later in debate ---

[Lord Henley]

My Lords, as the noble Lord, Lord Teverson, says, there is always a lot to be said for asking questions to which one already knows the answer. In fact, I was told that that was one of the firm rules—that one should only ask questions to which one knows the answer.

My noble friend Lord Young will respond to the UQ on Capita debated today in another place—in time, I hope, for noble Lords to go through and listen to it. We do not believe that any of our strategic partners, including Capita, are in anything like a comparable position to Carillion. The current licensee is wholly owned by Capita but is required to operate at arm’s length from it. There are provisions in its licence to prevent Capita from taking working capital out of the licensee. Together those provisions mean that DCC would continue to operate while Ofgem, as regulator, sought to appoint a new licensee or for a new owner to be secured. I shall not say anything further on that subject at the moment but I hope I have dealt with the points raised by the noble Lord, Lord Teverson, and his noble friend Lady Featherstone. If necessary, I shall write to them in greater detail.

Energy Security: Gas Production

Lord Henley Excerpts

Tuesday 17th April 2018 Lords Chamber

[Baroness Featherstone]

To ask Her Majesty’s Government what is their assessment of the extent to which indigenous gas production is needed for energy security.

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

My Lords, indigenous gas production plays an important role in meeting the United Kingdom’s energy needs, meeting 46% of the country’s gas demands in 2016. We also benefit from a diverse and flexible system of gas sources, including from Norway and continental Europe, and LNG terminals that can source gas from around the world.

[Baroness Featherstone (LD)]

I thank the Minister for his Answer, but I have three recommendations for him.

[Baroness Featherstone]

Well, I will see at the end if he agrees with my recommendations. First, does he agree that it would be good to end the ugly and unnecessary distraction of fracking? Secondly, stepping up support for renewable gases, given the trouble the Government are in on decarbonising heat, might be a very good idea. Thirdly, making energy efficiency a national infrastructure priority would contribute to indigenous energy security. Does the Minister agree?

[Lord Henley]

Up to a point, my Lords. Renewable gas is all well and good, but it is never going to meet all our demands. As far as energy efficiency is concerned, yes, that is wonderful and it does make a considerable difference to what we are doing. As regards production of domestic shale gas, I think we should do everything we can to tap into this potential resource. I am very sorry that the Liberal party is opposed to it. Particularly at the moment, with problems with Europe’s dependency on gas from Russia and other places, there is a lot to be said for making us less reliant on imports, looking at domestic shale gas and at the opportunities that are available there.

[Lord Lawson of Blaby (Con)]

My Lords, is my noble friend aware that the strongest opponents of fracking, both in this country and in mainland Europe, are the Russians, whose economy is wholly or very largely dependent on exports of gas? Is it not much more sensible for us to develop our own resources, be free from this threat of dependence on Russia, have cheaper gas—because gas transport is expensive—and provide a real boost to the north-west of England, where the richest shale seams exist?

[Lord Henley]

My Lords, my noble friend makes the very point I would have made if I had been able to develop even further my Answer to the three recommendations from the noble Baroness on the Liberal Benches. He is quite right: other countries are overdependent on imports from Russia, and it is not surprising that Russia opposes our attempts to look at the opportunities available through domestic shale gas.

[Lord Rooker (Lab)]

Can the Minister therefore explain why the Government reduced our storage capacity by closing storage in the North Sea? There was three weeks’ capacity of storage there. Given the vagaries of gas supply, notwithstanding the interconnectors, to lose that much storage and reduce us to, I think, less than a week’s capacity for storage is, frankly, irresponsible.

[Lord Henley]

My Lords, I do not accept that. Levels of gas storage in the United Kingdom are often compared unfavourably with those on the continent. Direct comparison between countries does not reflect the amount of our indigenous gas production or the other storage that we have available. If all that is taken into account, our storage is broadly in line with that of the rest of Europe.

[Baroness McIntosh of Pickering (Con)]

My Lords, if the Government proceed to frack, will they undertake the commitment, given at the time that the energy Act was passed in the House of Commons, that there will be no fracking in or near an area of outstanding natural beauty or a national park?

[Lord Henley]

My Lords, I am not going to comment on any individual application that might or might not come forward for the exploration of domestic gas. But I repeat that there are considerable opportunities for this country in production and exploration, and I think we should look at those opportunities.

[Lord Cunningham of Felling (Lab)]

My Lords, is not the lesson of previous Governments, both Conservative and Labour, that energy security comes from being as self-sufficient as possible in energy production? In the present circumstances, given climate change and air pollution problems, that means that we should rely on gas, nuclear power and energy conservation as the bedrock of our policy.

[Lord Henley]

I am in total agreement with the noble Lord and I am glad that he is in agreement with me and my noble friend Lord Lawson.

[Lord Polak (Con)]

My Lords, the Institute of Directors says that shale gas could cut gas imports by half. National Grid says that shale gas could heat every home in the UK—notwithstanding that there could be 60,000 jobs with that. What are the Government doing to help the shale gas industry?

[Lord Henley]

My Lords, I hope that we are giving every possible encouragement to the shale gas industry. We think that the economic impact of shale, both locally and nationally, could be very large indeed. There will be opportunities for jobs and energy security, and in a great many other areas, through supporting that industry.

[Lord Lea of Crondall (Lab)]

My Lords—

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[Lord Stephen]

My Lords, I first declare my interest in renewable energy, as declared in the register of interests. Can I return to the issue of gas storage and storage in general? Given in particular the current international uncertainties and the severe—some would say critical—shortages of gas that have occurred over recent years, should the Government not be doing more to review the situation in relation not only to gas storage but to battery and hydro storage? These are crucial issues that require the Government’s greater attention.

[Lord Henley]

My Lords, I will stick to gas at the moment, but I believe that we are doing everything necessary on this front. In October 2017, we published Gas Security of Supply: Strategic Assessment and Review. That work looked closely at our gas security over the next 20 years and concluded that the United Kingdom’s system was robust.

Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) (No. 2) Order 2018

Lord Henley Excerpts

Monday 16th April 2018 Lords Chamber

Moved by

[Lord Henley]

That the draft Order laid before the House on 8 February be approved.

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

My Lords, the order was laid in the other place on 8 February 2018.

Providing workers with transparency over their employment rights underpins good work. It leads to a motivated and productive workforce. In the Government’s response to the Taylor review of modern working practices, we welcomed the principle of increasing transparency to workers.

The order goes beyond the recommendations made in the review. It was laid alongside a separate order, entitled the Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) Order 2018. Together the two orders will provide workers with more information about their pay and help them to spot any cases of underpayment.

Specifically, the orders will give all workers in all sectors the right to regularly receive a payslip—addressing the current anomaly that only employees, a sub-category of workers, are legally entitled to receive a payslip. It will require all employers to provide clear information on the number of hours that workers are paid for in their payslips. This will ensure greater transparency over how their pay is calculated and what they are paid for.

Although a significant number of employers already provide their workers with a payslip, up to 30,000 workers do not receive one. They will once the order comes into force. The other order is subject to the negative resolution process. That order will require employers to clearly record the number of hours that time-paid employees are paid for in their payslips. This means that up to 1.6 million people will be entitled to receive hourly information in their payslips.

It is important to note that the hours recorded in employees’ payslips are the hours they are paid for—not hours for national minimum wage purposes as defined by the National Minimum Wage Act. This information will therefore assist workers in spotting and addressing incidences of underpayment—including, but not limited to, national minimum wage underpayment.

When a worker thinks they may have been underpaid, I encourage them to raise this with their employer. However, where this is not possible, workers should contact ACAS for free and confidential advice.

I thank the independent and expert Low Pay Commission, which first recommended the need to provide greater transparency over pay in staff payslips. Its recommendation proposed that the Government,

“considers introducing a requirement that payslips of hourly-paid staff clearly state the hours they are being paid for”.

To develop our policy, the Government engaged with a wide range of stakeholders. They included worker and employer representatives and payroll and software providers. The majority of stakeholders supported an initiative that would encourage greater transparency and ensure that information is shared more widely with workers. The majority of employers are already compliant with this proposal and already provide all their workers, not just their employees, with a payslip. Some employers also already provide a breakdown of the hours worked. However, a significant minority do not. The order that I move today will ensure that all employers converge to the good practice evident during our consultation with stakeholders.

The Government are committed to creating an economy that works for everyone in terms of fair pay and fair working conditions. Bringing these orders into force is one of many government interventions to tackle non-compliance and ensure that workers are paid fairly. We are clear that anyone entitled to the minimum wage should receive it. This month, the national living wage and national minimum wage all increased above inflation. Those increases benefited over 2 million workers.

A rising minimum wage means a higher risk of non-compliance. Therefore, investment in minimum wage enforcement has nearly doubled. We now spend over £25 million annually on ensuring that employers meet their legal responsibilities, up from £13 million in 2015-16. When employers pay workers under the minimum wage rate, they face returning all back pay they owe to their staff, paying a fine of up to 200% of the underpayment, and being publicly named under the Government’s naming scheme.

I am proud to lay these employment rights before the House. We all expect a basic fairness in the workplace. The right to receive clear payslips is just one element of the Government’s good work agenda, which was published in February, following the review of modern employment practices. It underpins our vision for a workforce with fairer and more transparent employment practices, whereby workers can hold their employers to account for being paid fairly and for all hours worked. It will form an integral part of our efforts to prevent underpayment of the minimum wage. I commend the order to the House.

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab)]

My Lords, I join other noble Lords in congratulating the Government on bringing forward these two SIs for consideration today. This one is affirmative and the other will go through on a negative basis. At a time when the gig economy and zero-hours contracts are growing, it is right to raise the issue of treating workers differently from employees—and what can be more important than pay? I thank the Minister for his contribution to this debate, and for opening up the issues in the round. I also thank his department for its work on the impact statement.

I have noticed that a considerable amount of work has been put into recent SIs. Those who have looked at this will not be surprised that it is of the high standard that we now expect. Not only does it run to over 20 pages but it includes, for the first time, Venn diagrams and flow charts. However, I reiterate a point I have made before: it is quite hard to read them if they are not in colour. Can we at last invest in a machine that would allow noble Lords on these Benches, who see them in mere black and white, to read them in the same glorious technicolour as Ministers? Maybe that is just the status of being in opposition.

Noble Lords who have listened to me talking before about statutory instruments from the department for business, enterprise and training will know that I have a fixation about the dates on which regulations come into effect. It has been agreed by all parties that we should work to common commencement dates, and I have been punctilious in picking up every one of the orders coming forward that does not comply with that—and there are rather a lot of them. Last time we debated this, only a month ago, the Minister was gracious enough to say that he agreed with me that we should think harder about the impact that regulations made in this House have on people and businesses who have to implement them, and that he would do his best to ensure that the department paid more attention to that in future. There are occasions when it is necessary to do things in a different way, but this is not one of them. My point is not that they have selected a common commencement date—they have—but 6 April 2019 is almost a year away, for something which is clearly beneficial to a lot of people. I am surprised that the department did not wish to use the other common commencement date of 1 October, and I would be grateful for the Minister’s comments.

I will make two points in passing. The first is on the way the Explanatory Memorandum is set out. It takes a line which is primarily about the advantages that will flow to the policing of the implementation of the national living wage—or, in this case, the national minimum wage, as it is defined. However, the Minister in his introduction took a much stronger line, which is that there is a principle of equity here: people who receive a payment should understand the basis on which that payment is made. The Minister made that clear. We are talking about transparency, and this simple change here will make a huge difference to a lot of people who have difficulty in following that through. It should be welcomed on that ground alone.

It may be—and I am sure will be—effective as regards policing the national minimum wage and rooting out the very small number of employers now who do not pay the national minimum wage as they should do. Of course it will help, and I am not against that, but the important thing here is the question of transparency and helping all workers to understand the benefits that flow from the employment and what is part of it.

However, it seems that the Government’s decision to move on this issue at this time, welcome though it is—and perhaps necessary as it is because of the changes in the economy, such as gig jobs and zero-hour contracts—raises wider questions about why we continue to differentiate between workers and employees. As the Government themselves say on their website, everybody is a worker—if they take out a certain number of issues that are tested in what they do—but not everybody is an employee. Employment rights, normally delivered under contract, are significantly better than workers’ rights. Can the Minister comment on whether further consideration might be given to that in future work on the good work agenda?

It is bad enough that we still have difficulty in trying to work out what a person’s employment status is in relation to taxation, and it is bad that we retain that in these regulations and that no attempt has been made to move that forward. It is very difficult; the onus is on the employer to ensure that the taxation arrangements are applied properly and correctly. However, the guidance given on the GOV.UK site is vague almost to the point of obscurity. It does not clarify—rather, it confuses. You are warned as you read it, as a possible employer, that you have to go through a checklist of nearly 15 bullet points which you test, and the answer to the question of whether an employee should be taxed as a self-employed or an employed person is the probability that most of the statements you are checking are true. That is not right for a modern economy that is looking to try to get people into work and to work productively and well. We should be better at it than that. Perhaps that might be part of the agenda.

To go back to my earlier point—which the noble Lord, Lord Fox, made as well—if we are to see a growth in workers as opposed to employees, we also need to think a bit harder about what we are saying to those in the worker category, which is the lesser of the two categories, as regards statutory sick pay, maternity pay, minimum notice periods, protections against unfair dismissal, the right to request flexible working and time off for emergencies. At the moment something like 290,000 people in the economy are workers and not employees, and it seems odd that in this world we still discriminate against them. I do not have an easy solution, but perhaps the Minister might respond to it and take it forward in the agenda and in the department that is moving it forward. However, we support this statutory instrument.

[Lord Henley]

My Lords, I am grateful to the noble Lord, Lord Monks, and to all other noble Lords for the very constructive approach they have taken to this order. I trust that this constructive approach will be noticed by the House and will be continued throughout the week on all business that comes before us.

I hope to deal with some of the questions that have been raised by noble Lords. However, I start off by correcting some of my earlier words to save myself making a Personal Statement tomorrow. In my opening remarks I said that some 30,000 workers did not receive a payslip. The paragraph I read out stated: “Although a significant number of employers already provide their workers with a payslip, up to 30,000 workers do not receive one”. I should have said that, “up to 300,000 do not receive one”. They will now receive one. I just want the House to be aware: for “30,000”, please read “300,000”.

Perhaps I may deal briefly with some of the questions put by noble Lords. First, the noble Lord, Lord Anderson of Swansea, asked whether it might be appropriate to have uniform payslips. That sounds very attractive, but this order is designed to ensure convergence with best practice, and I think that it would be right to leave employers with a degree of flexibility in how they continue to provide that. However, I note what he said.

I also noted what the noble Lord, Lord Stevenson, had to say about common commencement dates. He has criticised me in the past, so I was grateful that he spotted that on this occasion we have observed the rules on having a common commencement date, although he regretted that it would not be until April 2019. We could have gone for the other common convergence date in 2018, but that would have given employers considerably less time to prepare for this matter, and we therefore decided that 2019 would be better.

The noble Lord, Lord Fox, asked whether hourly rates could be included in payslips. We listened to arguments for including even greater detail on payslips, which is what this would amount to. I accept that he makes a perfectly valid point and we notice that UNISON provided input on this to the Government. However, we tested the idea of requiring employers to include a full disaggregation of hours, including those on employees’ payslips, but the costs of doing so for employers would be high and, we reckoned, disproportionate. However, again, I note the arguments put forward by the noble Lord.

The noble Lords, Lord Fox and Lord Stevenson, made a number of comments about the difficulties faced by independent contractors involving the definitions of “employee” and “worker”. We all know the difficulties of managing the distinction between “employee” and “self-employed”—a matter that has only recently gone to the Supreme Court and one that we have discussed in this House. This goes slightly beyond what we are discussing today. I accept that these are very difficult matters and obviously they will be taken into account in continuing to deal with the Taylor review. I certainly remember from my Bar exams some 40 years ago the difficulties around the definitions of “self-employed” and “employee”. The fact that it is going to the Supreme Court indicates that it is a very difficult matter. We also know that, as the noble Lord, Lord Fox, said when talking about the gig economy, times are changing. Again, these are difficult issues—but we have the Taylor review, which we will continue to consider.

I am grateful for all the remarks that have been made about this order and its relevance, and I think that I have had a degree of support from around the House. As I said, long may that continue. I commend the order to the House.

Motion agreed.